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As filed with the Securities and Exchange Commission on November 1
7
, 2021
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Li-Cycle
Holdings Corp.
(Exact Name of Registrant as specified in its charter)
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Ontario
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4955
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Not Applicable
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(State or other jurisdiction of
incorporation or organization) |
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(Primary Standard Industrial
Classification Code Number) |
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(I.R.S. Employer
Identification Number) |
Li-Cycle
Holdings Corp.
207 Queen’s Quay West,
Suite 590, Toronto, ON, M5J
1A7
Canada
(877) 542-9253
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Li-Cycle
Holdings Corp.
207 Queen’s Quay West, Suite 590, Toronto, ON, M5J
1A7
Canada
(877)
542-9253
Puglisi & Associates
850 Library Avenue, Suite 204
Newark, DE 19711
(302)
738-6680
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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Paul M. Tiger
Andrea M. Basham
Freshfields Bruckhaus Deringer US LLP
601 Lexington Avenue
New York, NY 10022 (212)
277-4000
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Jonathan Grant
Fraser Bourne
McCarthy Tétrault LLP
66 Wellington Street West, Suite 5300, TD Bank
Tower Box 48
Toronto, Ontario M5K 1E6
Tel: (416)
362-1812
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.
Emerging growth company ☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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. ☐
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†
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The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of
Securities to be Registered
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Amount
to be
Registered(1) |
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Proposed
Maximum
Offering Price
Per Share
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Proposed
Maximum
Aggregate
Offering Price(2)
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Amount of
Registration Fee |
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Common shares without par value(3)
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11,021,923
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$13.29
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$146,481,356.67
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$13,578.82
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(1)
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The common shares being registered hereunder are being registered for sale by the selling shareholder named in the prospectus or its permitted assignees. Under Rule 416 of the Securities Act of 1933, as amended, the shares being registered include such indeterminate number of common shares as may be issuable with respect to the shares being registered in this registration statement as a result of any stock splits, stock dividends or other similar event.
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(2)
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The proposed maximum offering price per share and the proposed maximum aggregate offering price have been estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended, using the average of the high and low prices as reported on The New York Stock Exchange on November 12, 2021.
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(3)
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Represents common shares issuable upon conversion or redemption of an outstanding unsecured convertible note or pursuant to any other term of the unsecured convertible note, including as a result of any of the
payment-in-kind provisions
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The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
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PRELIMINARY PROSPECTUS
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SUBJECT TO COMPLETION, DATED NOVEMBER 17, 2021
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Li-Cycle
Holdings Corp.
11,021,923 Common Shares
This prospectus relates to the offer and sale from time to time by the selling shareholder named in this prospectus (the “selling shareholder”) of up to 11,021,923 common shares issuable upon conversion of an outstanding unsecured convertible note issued to the selling shareholder (the “Spring Creek Capital Convertible Note”) or pursuant to any other term of the Spring Creek Capital Convertible Note, including as a result of any of the
(“PIK”) provisions. This prospectus covers any additional securities that may become issuable under the Spring Creek Capital Convertible Note by reason of share splits, share dividends and other events described therein.
payment-in-kind
We are registering the offer and sale of the shares covered by this prospectus to satisfy certain registration rights we have granted to the selling shareholder. The selling shareholder or its permitted assignees may offer all or part of the shares covered by this prospectus for resale from time to time through public or private transactions, at either prevailing market prices or at privately negotiated prices. The selling shareholder or its permitted assignees may sell shares through ordinary brokerage transactions or through any other means described in the section entitled “
” herein. In connection with any sales of shares offered hereunder, the selling shareholder and any underwriters, agents, brokers or dealers participating in such sales may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended (the “
”).
Plan of Distribution
Securities Act
We are not selling any shares covered by this prospectus and we will not receive any of the proceeds from the sale of shares by the selling shareholder or its permitted assignees.
We will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section entitled “
.”
Plan of Distribution
Our common shares are currently listed on The New York Stock Exchange under the symbol “LICY”. On November 12, 2021, the last reported sale price of our common shares as reported on The New York Stock Exchange was $13.30 per common share.
We may amend or supplement this prospectus from time to time. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision.
We are an “emerging growth company” as that term is defined in the Jumpstart Our Business Startups Act of 2012 and, as such, are subject to reduced public company reporting requirements.
Our principal executive offices are located at 207 Queen’s Quay West, Suite 590, Toronto, ON, M5J 1A7, Canada.
Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of material risks of investing in our securities in the section titled “Risk Factors” beginning on page 16 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Prospectus dated , 2021
TABLE OF CONTENTS
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F-1
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i
Neither we, nor the selling shareholder, have authorized any other person to provide you with different or additional information from the information contained in this prospectus or any free writing prospectus prepared by us or on our behalf. Neither we, nor the selling shareholder, take responsibility for, nor can we provide assurance as to the reliability of, any other information that others may provide. The selling shareholder is not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus or such other date stated in this prospectus, and our business, financial condition, results of operations and/or prospects may have changed since those dates.
Except as otherwise set forth in this prospectus, neither we nor the selling shareholder has taken any action to permit a public offering of these securities outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of these securities and the distribution of this prospectus outside the United States.
IMPORTANT INFORMATION ABOUT IFRS
Our financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and referred to in this prospectus as “IFRS.”
INDUSTRY AND MARKET DATA
In this prospectus, we rely on and refer to industry data, information and statistics regarding the markets in which we compete from research as well as from publicly available information, industry and general publications and research and studies conducted by third parties. We have supplemented this information where necessary with our own internal estimates, considering publicly available information about other industry participants and our management’s best view as to information that is not publicly available. This information appears in “
,” “
” and other sections of this prospectus. We have taken such care as we consider reasonable in the extraction and reproduction of information from such data from third party sources.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business
Industry publications, research, studies and forecasts generally state that the information they contain has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and uncertainties as the other forward-looking statements in this prospectus. These forecasts and forward-looking information are subject to uncertainty and risk due to a variety of factors, including those described under the section titled “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the forecasts or estimates from independent third parties and us.
FREQUENTLY USED TERMS
As used in this prospectus, unless the context otherwise requires or indicates otherwise, references to “we,” “us,” “our,” or the “Company” refer to
Li-Cycle
Holdings Corp., an Ontario corporation, and its consolidated subsidiaries; references to
“Li-Cycle”
refer to our wholly-owned subsidiary
Li-Cycle
Corp., an Ontario corporation.
In this document:
“Amalgamation” means the amalgamation of Peridot Ontario and NewCo in accordance with the terms of the Arrangement.
ii
“Arrangement” means the plan of arrangement (including the Business Combination) in substantially the form attached as Annex C to the proxy statement/prospectus forming a part of the registration statement on
Form F-4,
filed by the Company with the SEC on July 6, 2021.
“Business Combination” means the transactions contemplated by the Business Combination Agreement.
“Business Combination Agreement” means the Business Combination Agreement, dated as of February 15, 2021, as amended, by and among Peridot,
Li-Cycle
and NewCo.
“Closing Date” means the closing date of the Business Combination.
“common shares” means the common shares of the Company, without par value.
“Continuance” means the continuance of Peridot from the Cayman Islands under the Companies Act to the Province of Ontario, Canada as a corporation existing under the OBCA.
“EV” means electric vehicles.
“Hub” means centralized facilities for large-scale production of specialty materials that achieve economies of scale in recycling.
“Incentive Plan” means the Company’s 2021 Incentive Award Plan.
“Investor Agreement” means the Investor and Registration Rights Agreement, dated as of August 10, 2021, by and among the Company, the Peridot Class B Holders and the
Li-Cycle
Holders.
“Li-Cycle
Holders” means the prior shareholders of
Li-Cycle
that entered into the
Li-Cycle
Transaction Support Agreements in connection with the Business Combination.
“Li-Cycle
Shares” means the issued and outstanding common shares of
Li-Cycle
prior to the Business Combination.
“Li-Cycle
Transaction Support Agreements” means the Transaction Support Agreements, each dated as of February 15, 2021, among Peridot and the
Li-Cycle
Holders, entered into in connection with the Business Combination Agreement.
“NewCo” means
Li-Cycle
Holdings Corp. prior to the Amalgamation.
“Note Purchase Agreement” means the Note Purchase Agreement, dated as of September 29, 2021, between the Company and Spring Creek Capital, LLC.
“NYSE” means the New York Stock Exchange.
“OBCA” means the Ontario Business Corporations Act.
“PIPE Financing” means the issuance and sale to the PIPE Investors, following the Amalgamation and prior to Closing, of an aggregate of 31,549,000 common shares for a purchase price of $10.00 per share, for aggregate gross proceeds of $315,490,000.
“PIPE Investors” means those certain investors, including an affiliate of Peridot’s Sponsor, who entered into Subscription Agreements to purchase common shares in the PIPE Financing.
iii
“Peridot” means, before the Continuance, Peridot Acquisition Corp., a Cayman Islands exempt company and, after the Continuance, Peridot Ontario.
“Peridot Class B Holders” means the holders of Peridot Class B Shares immediately prior to the Business Combination.
“Peridot Class B Shares” means the Class B common shares of Peridot.
“Peridot Ontario” means Peridot as continued under the OBCA following the Continuance.
“private placement warrants” means 8,000,000 warrants to purchase common shares that were issued to the Sponsor in exchange for outstanding warrants of Peridot in connection with the Business Combination.
“Product Recovery Percentage” means (a) the quantity of a given constituent in the feed
lithium-ion
battery materials (e.g., lithium, nickel, cobalt, other constituents) that is returned from the process and is available for sale after the process has taken place, divided by (b) input quantity of the given constituent, measured as a percentage.
“public warrants” means 15,000,000 warrants to purchase common shares that were issued in exchange for outstanding warrants of Peridot that were issued in Peridot’s initial public offering.
“Recycling Efficiency Rate” means (a) the mass of recycled materials exiting the recycling process and returned to the economy, divided by (b) the mass of materials entering the recycling process, measured as a percentage.
“SEC” means the U.S. Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“selling shareholder” means Spring Creek Capital, LLC.
“Spoke” means decentralized facilities that mechanically process batteries close to sources of supply and handle the preliminary processing of
batteries and battery scrap.
end-of-life
“Sponsor” means Peridot Acquisition Sponsor, LLC, a Delaware limited liability company.
“Spring Creek Capital Convertible Note” means the means the unsecured convertible note issued to Spring Creek Capital, LLC pursuant to the Note Purchase Agreement on September 29, 2021.
“Subscription Agreements” means the subscription agreements entered into with the PIPE Investors, in connection with the PIPE Financing.
“warrants” means the public warrants and the private placement warrants.
References to “dollar,” “USD,” “US$” and “$” are to U.S. dollars and references to “C$” and “Cdn. $” are to Canadian dollars.
iv
PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our securities. Before making an investment decision, you should read this entire prospectus carefully, especially the section titled “Risk Factors” and the financial statements and related notes thereto. Some of the statements in this prospectus constitute forward-looking statements that involve significant risks and uncertainties. See “Forward-Looking Statements” for more information.
As used in this prospectus, unless the context otherwise requires or indicates, references to “we,” “us,” “our,” “NewCo” and the “Company” refer to
Li-Cycle
Holdings Corp., an Ontario corporation, and its consolidated subsidiaries; references to
“Li-Cycle”
refer to our wholly-owned subsidiary
Li-Cycle
Corp., an Ontario corporation.
Our Company
We are an industry leader in
batteries to produce “black mass” and other intermediate products, and (b) at our Hubs, to process black mass to recover raw materials, including but not limited to lithium carbonate, nickel sulphate and cobalt sulphate.
lithium-ion
battery resource recovery and the leading
lithium-ion
battery recycler in North America. When we refer to ourselves as the leading
lithium-ion
battery recycler in North America, we are referring to our status based on installed permitted capacity for
lithium-ion
battery recycling measured in tonnes per year. Our proprietary “Spoke & Hub” recycling process is designed (a) at our Spokes, to process battery manufacturing scrap and
end-of-life
Li-Cycle’s
process enables an up to 95% Recycling Efficiency Rate, as compared to what we believe to be a 50% traditional industry average. Unlike the traditional revenue model for recycling that relies primarily on waste or tipping fees, our model is focused on generating revenue from sales of the raw materials we produce. We expect that our future facilities will achieve similar Recycling Efficiency Rates.
Lithium-ion
batteries are increasingly powering products and solutions in a range of industries, including consumer electronics and electric vehicles (“EVs”). An overview of the industries in which
lithium-ion
batteries are utilized is set forth below:
Source: Expert Interviews, Secondary Research, and BIS Research Analysis
1
We estimate that by the end of 2020 there were 465,000 tonnes annually of
lithium-ion
batteries available for recycling globally. The number of mobile devices operating worldwide is expected to reach 17.72 billion by 2024, an increase of 3.7 billion devices compared to 2020 levels, according to Statista. The number of EVs is expected to reach 137.8 million annual sales by 2030, as compared to 7.6 million in 2020, according to the International Energy Agency’s 2020 Global EV Outlook.
We currently have over 70 commercial contracts with suppliers of
stage and are available for recycling, we expect to source a larger percentage of our
end-of-life
lithium-ion
batteries and battery-related manufacturing scrap. As the market for EVs grows and the batteries from those vehicles reach
end-of-life
lithium-ion
recyclables from EVs.
Under our
batteries and battery-related waste are first shipped to Spoke locations, where the materials are mechanically processed into several intermediate products, including black mass. Black mass is a powder-like substance, which contains a number of valuable metals, including lithium, cobalt and nickel. Black mass from several Spoke locations is then collected at a Hub location, where it is put through a hydrometallurgical (or “wet chemistry”) process to produce end products, such as lithium carbonate, nickel sulphate and cobalt sulphate, which can be sold back into the battery supply chain and used in the manufacturing of new
two-part
“Spoke & Hub” process,
end-of-life
lithium-ion
batteries. We expect to operate two types of Hubs as we construct and develop additional Hubs. A ternary Hub is a Hub that will process all types of black mass using our technology. An LFP Hub is a Hub that will have the capacity to process all types of black mass using our technology but that will be dedicated to processing lithium iron phosphate (“LFP”) black mass derived from LFP
lithium-ion
batteries, LFP
lithium-ion
battery materials, and third
party-LFP
black mass to produce LFP cathode pertinent
end-products
(e.g., lithium carbonate). LFP
lithium-ion
batteries have historically been viewed by the market as more difficult to recycle than other
lithium-ion
batteries; we are targeting to change this ethos in the
lithium-ion
battery recycling industry and to transform
LFP-containing
lithium-ion
batteries into a valuable resource.
We have a market-leading position in North America through our two operational commercial Spokes in Kingston, Ontario, and Rochester, New York, and we are developing our first commercial-scale ternary Hub in Rochester, New York. We have also announced the development and construction of our third Spoke in Gilbert, Arizona and our fourth Spoke located near Tuscaloosa, Alabama. We are also evaluating additional opportunities to scale our operations with a range of potential partners and expansion opportunities that may include acquisitions, joint ventures or other commercial arrangements in North America, Europe, and Asia.
We believe that our recycling process can make a valuable contribution to the world’s transition to renewable energy sources, by diverting
manufacturing phases in both an environmentally and economically sustainable manner.
end-of-life
lithium-ion
battery materials from landfill sites, by offering an environmentally-friendly alternative to energy-intensive pyrometallurgical processing methods, and by providing a steady source of recycled content into the battery supply chain. We believe our production costs are on average lower than the mining and processing costs otherwise incurred by suppliers to produce these materials because we are able to produce multiple materials from a single process and because our process yields minimal waste and no displaced earth or tailings, as compared to traditional mining processes. By
re-inserting
critical materials back into the
lithium-ion
battery supply chain, we are able to effectively close the loop between the beginning and
end-of-life
Our Strengths and Strategy
At the Intersection of Three Core Trends
We benefit from sitting at the intersection of three core trends: the electric vehicle revolution, the supply shortage of strategic battery materials, and the need for a truly sustainable environmental, social and governance (“ESG”)-friendly
lithium-ion
battery recycling solution, which we believe is currently a critical missing step in the battery supply chain.
2
Well-Positioned to Benefit from Proprietary Technology
We have established proprietary technology that we believe sets us apart from competitors because our technology has the ability to respond to changes in battery chemistries and adapt to change in inputs to the battery recycling process. Our process produces the fundamental building blocks of
recycling produce
lithium-ion
batteries – cathode precursor input chemicals, cathode input chemicals and raw materials that can be reused in batteries or the broader economy. By contrast, competitive emerging technologies such as
cathode-to-cathode
end-products
that have a high risk of obsolescence due to continuous cathode technology advancement.
Well-Positioned to Comply with Government Mandates
Due to our high recovery rates and sustainable, environmentally friendly processes, we believe we are well-positioned to comply with heightened battery regulations across the globe as highlighted.
Superior to Other Forms of Recycling
Through our Spoke & Hub Technologies
batteries to produce “black mass” and other intermediate products, and (b) at our Hubs, to process black mass to recover raw materials, including but not limited to lithium carbonate, nickel sulphate and cobalt sulphate.
™
, our recycling process is designed (a) at our Spokes, to process battery manufacturing scrap and
end-of-life
Li-Cycle’s
process enables an up to 95% Recycling Efficiency Rate. We expect that our future facilities will achieve similar Recycling Efficiency Rates.
Our
batteries and reduces waste.
wet-chemistry
method is able to extract valuable battery-grade chemicals from black mass that are directly
re-usable
in the manufacturing of new battery technologies. In the short term, this greatly increases the value that we derive from battery manufacturing scrap as well as
end-of-life
Minimal Human Operating Risk
Unlike smelting, thermal
processes, our processes have minimal human operating risk. Our Spokes can safely process
pre-treatment
refining, or
cathode-to-cathode
lithium-ion
batteries at any state of charge, without any manual sorting, discharging, or dismantling required. Spoke plants reduce the size of battery mass in an automated fashion, minimizing human operating risk.
Strong Commercial Supply Contracts
Our commercial supply contracts include leaders in the EV and
lithium-ion
battery ecosystem, including consumer electronics, manufacturing scrap, energy storage, and auto OEMs/transportation companies. We believe we have approximately 30% North American market share based on our total addressable market forecast, which in turn is developed using independent inputs from Benchmark Mineral Intelligence and our estimate of contracted
lithium-ion
battery supply based on information derived from our communications with secured battery supply customers. We have supply contracts with over 70 customers. As a percent breakdown based on tonnage as of 2020, our existing supply network comprises of
lithium-ion
batteries and
lithium-ion
battery materials that derive approximately 50% from consumer electronics, 29% from manufacturing scrap, 16% from auto OEMs/transportation, and 5% from energy storage systems.
Well Positioned to Benefit from Pricing Tailwinds
We stand to benefit from expected increases in pricing for lithium carbonate, nickel sulphate and cobalt sulphate, all of which are in high demand due to growing electrification.
3
Governmental Partnerships
We have partnered with New York State, which offers financial incentives for investors in clean energy businesses. We have located a Spoke facility in the Eastman Kodak Business Park in Rochester, New York, and we plan to locate our first commercial-scale ternary Hub in Rochester, New York.
We have historically built strong relationships with various Canadian government agencies and have received grant funding and access to other
scale-up
support initiatives. We have primarily worked with Sustainable Development Technology, Ontario Centres of Excellence, GreenCentre Canada, and the Industrial Research Assistance Program. In 2018, we received funding of C$2.7 million from Sustainable Development Technology Canada for the development of our process to recover material in
lithium-ion
batteries. In 2021, we received approval for additional funding of C$4.0 million from Sustainable Development Technology Canada for the
scale-up
of our Hub technology.
Future
Off-Take
Opportunities
We expect to complete construction and begin to ramp up production at our first commercial-scale ternary Hub facility (the “Rochester Hub”) in early 2023. We have entered into a marketing, logistics and working capital agreement with Traxys, covering one hundred percent (100%) of the lithium carbonate, nickel sulphate, cobalt sulphate, manganese carbonate and graphite concentrate end products from the Rochester Hub. We intend to seek customers to purchase the copper sulphide, sodium sulphate and gypsum produced by the Rochester Hub and not currently covered by the Traxys contract.
Continuous Enhancement of Research and Development Efforts
We continue to conduct Research & Development (“R&D”) focused on various aspects of our business. R&D work continues in support of the Rochester Hub project, the Arizona Spoke project and the Alabama Spoke project, specifically focused on optimizing operating parameters and preparing for operations. We expect the Arizona Spoke and the Alabama Spoke to have the capability to process entire vehicle battery packs, without dismantling. We also continue to develop and evaluate new concepts with an eye to the future, including processing nickel metal hydride, LFP and solid-state batteries.
Regional Presence and Global Footprint
We are focused on growing our regional presence across various markets while furthering our global footprint. We intend to construct a global network of Spokes located at regionally optimized locations that reduce safety risk and costs associated with battery transport to our Spokes. We intend to construct centralized, large-scale Hubs to maximize economies of scale and efficiencies. Hub facilities will process intermediate products from a network of global Spokes, as intermediate products, particularly black mass, are significantly easier and safer to transport than batteries. Our current global growth strategy includes, in addition to the Rochester Hub, Arizona Spoke and Alabama Spoke, plans to add additional Spokes in Europe and additional Hubs in the Asia Pacific region (including China) over the next five years. We are in discussions with multiple partners in each geography in some cases for the development of Spokes and Hubs and in others in connection with supply and
off-take
agreements. We may scale our operations through acquisitions, joint ventures or other commercial arrangements.
Recent Developments
Closing of the Business Combination
On August 10, 2021,
Li-Cycle,
Li-Cycle
Holdings Corp. (a wholly-owned subsidiary of
Li-Cycle
prior to the Business Combination) (“Old
Li-Cycle
Holdings”) and Peridot Acquisition Corp. (“Peridot”) completed the
4
Business Combination pursuant to a plan of arrangement under the Business Corporations Act (Ontario) (the “Arrangement”).
Pursuant to the terms of the Business Combination, on the closing date of the Business Combination (the “Closing Date”), (i) Peridot and Old
Li-Cycle
Holdings amalgamated, and in connection therewith, the Class A common shares and warrants to purchase Class A common shares of Peridot converted into an equivalent number of shares and warrants of the amalgamated entity,
Li-Cycle
Holdings, and the common share in Old
Li-Cycle
Holdings held by
Li-Cycle
was exchanged for a share of
Li-Cycle
Holdings; (ii) the share of
Li-Cycle
Holdings held by
Li-Cycle
was purchased for cancellation by
Li-Cycle
Holdings for cash equal to the subscription price for the common share in Old
Li-Cycle
Holdings for which such share was exchanged pursuant to the amalgamation; (iii) the preferred shares of
Li-Cycle
converted into common shares of
Li-Cycle;
and
(iv) Li-Cycle
Holdings acquired all of the issued and outstanding common shares of
Li-Cycle
from
Li-Cycle’s
shareholders (including
Li-Cycle
common shares issued upon exercise, cancellation, exchange or settlement of all issued and outstanding equity awards (whether vested or unvested), including pursuant to the Business Combination, but excluding any equity awards that were cancelled and exchanged for equity awards of
Li-Cycle
Holdings and remained outstanding on the day following the Closing Date of the Business Combination) in exchange for common shares of
Li-Cycle
Holdings. Pursuant to the Business Combination,
Li-Cycle
became a wholly-owned subsidiary of
Li-Cycle
Holdings.
Upon the closing of the Business Combination and a concurrent $315 million private placement of common shares (the “PIPE Financing”), the combined company received $582 million of gross transaction proceeds, before the deduction of $55 million of transaction costs.
New Alabama Spoke
On September 8, 2021, the Company announced the development and construction of the Alabama Spoke. We expect the Alabama Spoke to have an initial recycling capacity of 5,000 tonnes per year, bringing
Li-Cycle’s
total recycling capacity to 25,000 tonnes per year. The location can also accommodate a future second 5,000 tonne per year processing line, which would increase capacity at the Alabama Spoke to 10,000 tonnes per year, and
Li-Cycle’s
total North American recycling capacity to 30,000 tonnes per year. Each Spoke recycling line is constructed in a modular format and subsequently installed at the designated site.
The Alabama Spoke is located near Tuscaloosa, Alabama, in a region where we expect there will be continued growth of
lithium-ion
battery materials available for recycling due to the growing EV industry in Alabama and the U.S. Southeast.
We expect
Li-Cycle
to invest approximately $10 million to construct, commission and commence operations at the Alabama Spoke.
The Alabama Spoke project is currently in the detailed engineering and facility construction stage. We expect that the detailed engineering and facility construction will be completed in 2022, at a cost of approximately $2 million. We expect the processing line at the Alabama Spoke to be constructed, commissioned and commence operations in 2022, at an estimated cost of approximately $8 million, in addition to the $2 million of expenses during the engineering and facility construction phase.
Rochester Hub
Li-Cycle’s first
revenue-generating Hub will be located in Rochester, New York, and is currently in late-stage development. The location for the Rochester Hub was specifically selected due to the nature of the infrastructure available at the site, including utilities, logistics, and other physical infrastructure. The
pre-feasibility
study for the Rochester Hub provided that the facility would have the capacity to process 25,000
5
tonnes of black mass annually (equivalent to approximately 60,000 tonnes of
lithium-ion
battery feed equivalent annually). Based on the
pre-feasibility
study, the Company had previously determined that the Rochester Hub would require an estimated investment of at least $175 million
(+/-30%,
based on the scope as at
the pre-feasibility study).
The Rochester Hub is currently in the definitive engineering phase. As the Rochester Hub project has progressed through the definitive engineering
phase, Li-Cycle has
identified a range of potential scope additions, covering items such as
infrastructure tie-ins and
systems to achieve zero liquid discharge from the
plant. Li-Cycle is
also pursuing optimization strategies throughout the definitive engineering phase, including with respect to an increase in the processing capacity of the Rochester Hub above the 25,000 tonnes per annum level set forth in the
pre-feasibility
study, in response to market developments (such as increasing EV battery manufacturing volumes in North America and trends around battery chemistries in EV applications). Such scope additions and changes in processing capacity of the Rochester Hub would be expected to result in a significantly greater estimated capital investment than that set forth in the
pre-feasibility
study.
Li-Cycle
expects to complete the definitive engineering phase of the Rochester Hub project in late 2021, at a cost of approximately $10 million. As of July 31,
2021, Li-Cycle had
spent approximately $7.5 million on the definitive engineering phase for the Rochester Hub. The board of directors is expected to make final determinations regarding the Rochester Hub, including with respect to the project scope, processing capacity and budgetary approvals, following the completion of definitive engineering, and the receipt of applicable regulatory and other approvals. We expect construction at the Rochester Hub site to begin in late 2021, with commissioning of the plant expected to commence in early 2023.
Coronavirus Pandemic:
COVID-19
On January 30, 2020, the World Health Organization declared the outbreak of coronavirus
(“COVID-19”)
to be a public health emergency of international concern. The coronavirus outbreak has severely restricted the level of economic activity around the world. In response to the coronavirus outbreak, the governments of many countries, states, cities and other geographic regions have taken preventative or protective actions, such as imposing restrictions on travel and business operations and advising or requiring individuals to limit or forego their time outside of their homes.
COVID-19
continues to have a materially adverse impact in North America. The United States is one of the largest markets for
lithium-ion
battery recycling. The continuous spread of
COVID-19
has caused lockdowns and shutdowns of manufacturing facilities. Therefore, many industry sectors, including the automotive sector, have been negatively impacted and continue to be unable to produce vehicles at capacity. The continued impact of
COVID-19
on manufacturing production may lead to less demand for
lithium-ion
batteries, impacting the resulting contribution of batteries and battery-related scrap material to the recycling market over the
short-to-medium
Li-Cycle’s
operations have been impacted by the
COVID-19
pandemic. Because
Li-Cycle’s
operations have been considered an essential service in both Canada and the United States,
Li-Cycle’s
plants have continued operations during the pandemic, albeit with the implementation of appropriate measures to ensure employee safety.
Li-Cycle
shut down its commercial headquarters in March 2020 and has enforced a work-from-home mandate since that time. The Kingston Spoke experienced some battery supply related issues in the second fiscal quarter of 2021 due to
COVID-19
related shutdowns in Ontario, Canada which were alleviated in the third fiscal quarter of 2021. In the coming months, and depending on government guidelines,
Li-Cycle
may
re-open
its office facilities but with a robust plan to ensure compliance with all recommended actions to ensure employee safety. Management continues to monitor the impact that the
COVID-19
pandemic is having on the Company, the
lithium-ion
battery recycling industry and the economies in which the Company operates.
6
We anticipate that our future results of operations, including our 2021 results, will be negatively impacted by the
.”
COVID-19
pandemic, but the impact is difficult to quantify. Given the speed and frequency of continuously evolving developments in the pandemic, we cannot reasonably estimate the magnitude of the impact to our results of operations, and such impacts could grow in a way that is material to our results. See “
Risk Factors — Unfavorable economic conditions, such as consequences of the global
COVID-19
pandemic, may have a material adverse effect on
Li-Cycle’s
business, results of operations and financial condition
Implications of Being an Emerging Growth Company and a Foreign Private Issuer
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As an emerging growth company, we may take advantage of certain exemptions from specified disclosure and other requirements that are otherwise generally applicable to public companies. These exemptions include:
| • |
not being required to comply with the auditor attestation requirements for the assessment of our internal control over financial reporting provided by Section 404 of the Sarbanes-Oxley Act of 2002;
|
| • |
reduced disclosure obligations regarding executive compensation; and
|
| • |
not being required to hold a nonbinding advisory vote on executive compensation or seek shareholder approval of any golden parachute payments not previously approved.
|
We may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of (i) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by
non-affiliates;
(iii) the issuance, in any three-year period, by our Company of more than $1.0 billion in
non-convertible
debt securities; or (iv) the last day of the fiscal year ending after the fifth anniversary of the date of the first sale of common equity securities pursuant to an effective registration statement.
We are also considered a “foreign private issuer” and will report under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as a
non-U.S.
company with foreign private issuer status. This means that, even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
| • |
the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
|
| • |
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and
|
| • |
the rules under the Exchange Act requiring the filing with the Securities and Exchange Commission (the “SEC”) of quarterly reports on Form
10-Q
containing unaudited financial and other specified information, or current reports on Form
8-K,
upon the occurrence of specified significant events.
|
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We would cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by U.S. residents and any of the following three circumstances applies: (i) the majority of our executive officers or directors are U.S. citizens or residents, (ii) more than 50% of our assets are located in the United States or (iii) our business is administered principally in the United States.
We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be
7
different from the information you receive from our competitors that are public companies, or other public companies in which you have made an investment.
Summary of Risk Factors
Investing in our securities entails a high degree of risk as more fully described in the “
” section of this prospectus beginning on page 16. You should carefully consider such risks before deciding to invest in our securities. These risks are discussed more fully in the section titled “
.”
Risk Factors
Risk Factors
Corporate Structure
The following diagram depicts the organizational structure of the Company and its subsidiaries as of October 30, 2021.
Corporate Information
Li-Cycle
Holdings Corp. was incorporated on February 12, 2021 under the laws of Ontario as a corporation solely for the purpose of effectuating the Business Combination, which was consummated on August 10, 2021. It is governed by Articles of Amalgamation dated August 10, 2021.
Our principal executive office is located 207 Queen’s Quay West, Suite 590, Toronto, ON, M5J 1A7, Canada and our phone number is (877)
542-9253.
Our agent for service of process in the United States is Puglisi & Associates located at 850 Library Avenue, Suite 204, Newark, DE 19711.
Our principal website address is http://www.li-cycle.com. The information contained on our website does not form a part of, and is not incorporated by reference into, this prospectus.
Background of the Offering
This prospectus relates to the offer and sale from time to time by the selling shareholder of up to 11,021,923 common shares issuable upon conversion of the Spring Creek Capital Convertible Note or pursuant to any other term of the Spring Creek Capital Convertible Note, including as a result of any of the PIK provisions of the Spring Creek Capital Convertible Note.
On September 29, 2021, the Company entered into the Note Purchase Agreement with the selling shareholder and issued to the selling shareholder the Spring Creek Capital Convertible Note in the principal amount of $100,000,000, in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
The Spring Creek Capital Convertible Note matures five years from the date of issuance and accrues interest from the date of issuance at the London Interbank Offer Rate (LIBOR) plus five percent (5%) per annum. Interest
8
on the Spring Creek Capital Convertible Note is payable on a semi-annual basis, either in cash or by
(“PIK”), at the Company’s option, beginning on December 31, 2021. Interest on PIK amounts accrues at LIBOR plus six percent (6%) per annum. Under the terms of the investment, LIBOR has a floor of 1% and a cap of 2%.
payment-in-kind
The principal and accrued interest owing under the Spring Creek Capital Convertible Note may be converted at any time by the holder into the Company’s common shares, without par value, at a per share price equal to $13.43 (the “Conversion Price”). If the closing price per share of the Company’s common shares on the New York Stock Exchange is above $17.46 for 20 consecutive trading days, the Company may elect to convert the principal and accrued interest owing under the Spring Creek Capital Convertible Note, plus a make-whole amount equal to the undiscounted cash interest payments that would have otherwise been payable through maturity (the “Make-Whole Amount”) into common shares at the Conversion Price.
The Company may redeem the Spring Creek Capital Convertible Note at any time by payment in cash of an amount equal to 130% of the principal amount of the Spring Creek Capital Convertible Note and all accrued interest owing under the Spring Creek Capital Convertible Note, plus the Make-Whole Amount. Upon a change of control transaction, the Company will be required to redeem the Spring Creek Capital Convertible Note by payment in cash of an amount equal to the outstanding principal amount of the Spring Creek Capital Convertible Note and all accrued interest owing under the Spring Creek Capital Convertible Note, plus the Make-Whole Amount.
In connection with the issuance of the Spring Creek Capital Convertible Note, the Company granted certain registration rights under the Note Purchase Agreement. The Company agreed to file with the SEC within 30 days a registration statement covering the resale of the common shares issued or issuable upon conversion of the Spring Creek Capital Convertible Note. The Company is required to use commercially reasonable efforts to have such registration statement declared effective by the SEC as soon as practicable and no later than the earlier of (A) 60 days after the issuance of the Spring Creek Capital Convertible Note (or 90 days after the issuance of the Spring Creek Capital Convertible Note if the SEC notifies the Company that it will review the registration statement) or (B) 10 business days after the SEC notifies the Company in writing that it will not review the registration statement. The Company agreed to keep the registration statement (or another shelf registration statement covering the common shares issued or issuable upon conversion of the Spring Creek Capital Convertible Note) effective until the earlier of (x) the third anniversary of the issuance of the Spring Creek Capital Convertible Note or (y) the date on which the holder of the Spring Creek Capital Convertible Note ceases to hold any common shares issued or upon conversion of the Spring Creek Capital Convertible Note.
We are registering the offer and sale of securities covered by this prospectus to satisfy certain of our registration obligations under the Note Purchase Agreement. There are no contractual transfer restrictions or
lock-up
arrangements on the common shares issuable upon conversion of the Spring Creek Capital Convertible Note.
9
Summary Terms of the Offering
The summary below describes the principal terms of this offering. The “Description of Securities” section of this prospectus contains a more detailed description of our common shares.
|
Issuer
|
Li-Cycle
Holdings Corp.
|
|
Securities that may be offered and sold from time to time by the selling shareholder
|
Up to 11,021,923 common shares issuable upon conversion of the Spring Creek Capital Convertible Note or pursuant to any other term of the Spring Creek Capital Convertible Note, including as a result of any of the PIK provisions of the Spring Creek Capital Convertible Note, which was issued to the selling shareholder in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act. |
|
Offering prices
|
The securities offered by this prospectus may be offered and sold at prevailing market prices, privately negotiated prices or such other prices as the selling shareholder may determine. See “
Plan of Distribution
|
|
Common shares outstanding before this offering
|
163,179,555 common shares (as of October 18, 2021). |
|
Common shares outstanding after this offering
|
174,201,478 common shares (as of October 18, 2021). |
|
Registration rights granted to the selling shareholder
|
We are registering the offer and sale of securities covered by this prospectus to satisfy certain registration rights we have granted to the selling shareholder. See the section titled “
Description of Securities — Registration Rights
|
|
Dividend policy
|
Our board of directors will evaluate whether or not to pay dividends and, if so, whether to pay dividends on a quarterly, semi-annual or annual basis, depending on our results, financial condition, market conditions, contractual obligations, legal restrictions and other factors deemed relevant by the board of directors. See “
Dividend Policy
|
|
Use of proceeds
|
We will not receive any proceeds from the sale of shares by the selling shareholder. See “
Use of Proceeds
|
|
Market for our common shares
|
Our common shares are listed on the New York Stock Exchange under the symbol “LICY”. |
|
Risk factors
|
Investing in our securities involves substantial risks. See “
Risk Factors
|
10
SELECTED CONSOLIDATED HISTORICAL AND OTHER FINANCIAL INFORMATION
The following table sets forth selected historical financial information derived from
” and the consolidated financial statements and the related notes appearing elsewhere in this prospectus.
Li-Cycle’s
audited consolidated financial statements included elsewhere in this prospectus for the years ended October 31, 2020, 2019 and 2018, and
Li-Cycle’s
unaudited financial statements included elsewhere in this prospectus as of and for the three and nine months ended July 31, 2021 and 2020. The selected historical financial information in the following tables is presented in U.S. dollars and in accordance with IFRS. You should read the following selected financial information in conjunction with “
Management’s Discussion
and Analysis of Financial Condition and Results of Operations
Consolidated statements of loss and comprehensive loss data
|
Three Months Ended
July 31, |
Nine Months Ended
July 31, |
Year Ended
October 31, |
||||||||||||||||||||||||||
|
2021
|
2020
|
2021
|
2020
|
2020
|
2019
|
2018
|
||||||||||||||||||||||
|
(dollar amounts in thousands, except
share and per share data) |
||||||||||||||||||||||||||||
|
Revenues
|
$ | 1,709 | 182 | $ | 2,984 | $ | 323 | $ | 792 | $ | 48 | $ | 6 | |||||||||||||||
|
Operating expenses
|
$ | 7,929 | 1,905 | 20,819 | 4,968 | 9,934 | 4,112 | 881 | ||||||||||||||||||||
|
Other (income) expenses
|
$ | 676 | 88 | 3,756 | 197 | 134 | 37 | 34 | ||||||||||||||||||||
|
Net loss
|
$ | (6,897 | ) | (1,811 | ) | (21,591 | ) | (4,842 | ) | (9,276 | ) | (4,101 | ) | (909 | ) | |||||||||||||
|
Basic and diluted loss per share of
Li-Cycle
Corp.
|
$ | (2.88 | ) | (0.86 | ) | $ | (9.10 | ) | $ | (2.35 | ) | $ | (4.48 | ) | $ | (2.28 | ) | $ | (0.53 | ) | ||||||||
|
Weighted average number of common shares of
Li-Cycle
Corp. outstanding
|
2,394,475 | 2,100,603 | 2,732,731 | 2,057,723 | 2,068,952 | 1,801,338 | 1,700,751 | |||||||||||||||||||||
Consolidated statements of financial position data
|
As of
July 31, 2021 |
As of October 31,
|
|||||||||||
|
2020
|
2019
|
|||||||||||
|
(dollar amounts in
thousands) |
||||||||||||
|
Current assets
|
$ | 15,021 | $ | 2,698 | $ | 4,983 | ||||||
|
Non-current assets
|
34,391 | 9,461 | 1,061 | |||||||||
|
Total assets
|
49,412 | 12,159 | 6,044 | |||||||||
|
Current liabilities
|
21,917 | 6,596 | 2,304 | |||||||||
|
Non-current liabilities
|
25,154 | 4,122 | 479 | |||||||||
|
Total liabilities
|
47,070 | 10,719 | 2,783 | |||||||||
|
Shareholders’ equity
|
$ | 2,342 | $ | 1,441 | $ | 3,261 | ||||||
11
Consolidated statements of cash flows data
|
Three Months
Ended July 31, |
Nine Months Ended
July 31, |
Year Ended
October 31, |
||||||||||||||||||||||||||
|
2021
|
2020
|
2021
|
2020
|
2020
|
2019
|
2018
|
||||||||||||||||||||||
|
(dollar amounts in thousands)
|
||||||||||||||||||||||||||||
|
Cash flows used in operating activities
|
$ | (5,245 | ) | $ | (2,161 | ) | $ | (16,567 | ) | $ | (7,654 | ) | $ | (7,429 | ) | $ | (4,568 | ) | $ | (686 | ) | |||||||
|
Cash flows used in investing activities
|
$ | (5,298 | ) | $ | (836 | ) | (12,050 | ) | (1,748 | ) | (5,108 | ) | (998 | ) | (244 | ) | ||||||||||||
|
Cash flows from financing activities
|
$ | 6,568 | $ | 294 | 30,304 | 9,502 | 9,417 | 7,164 | 3,111 | |||||||||||||||||||
|
Net change in cash
|
$ | (3,975 | ) | $ | (2,703 | ) | $ | 1,687 | $ | 100 | $ | (3,120 | ) | $ | 1,598 | $ | 2,181 | |||||||||||
Selected Historical and Financial Data of Peridot
The following table sets forth selected historical financial information derived from Peridot’s audited financial statements included elsewhere in prospectus for the period from July 31, 2020 (inception) through December 31, 2020 and as of December 31, 2020, and Peridot’s unaudited condensed financial statements included elsewhere in this prospectus as of and for the three and six months ended June 30, 2021. The selected historical financial data of Peridot is presented in U.S. dollars in accordance with GAAP. The unaudited condensed financial data presented have been prepared on a basis consistent with Peridot’s audited financial statements. You should read the following selected financial data in conjunction with “
” and the financial statements and the related notes appearing elsewhere in this prospectus.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Three
Months Ended June 30, 2021 |
Six
Months Ended June 30, 2021 |
For the Period
from July 31, 2020 (inception) through December 31, 2020 |
||||||||||
|
Unaudited
|
Unaudited
|
|||||||||||
|
Statement of Operations Data:
|
||||||||||||
|
Operating costs
|
$ | (1,809,124 | ) | $ | (6,079,798 | ) | $ | (460,977 | ) | |||
|
|
|
|
|
|
|
|||||||
|
Other income (expense):
|
||||||||||||
|
Interest Income
|
8,286 | 80,300 | 74,412 | |||||||||
|
Offering costs allocated to warrant liability
|
— | — | (693,847 | ) | ||||||||
|
Change in fair value of warrant liability
|
(23,690,000 | ) | (21,390,000 | ) | (22,540,000 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Total Other Income (expense)
|
(23,681,714 | ) | (21,309,700 | ) | (23,159,435 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
Net loss
|
$
|
(25,490,838
|
)
|
$
|
(27,389,498
|
)
|
$
|
(23,620,412
|
)
|
|||
|
|
|
|
|
|
|
|||||||
|
Weighted average shares outstanding of Class A redeemable ordinary shares
|
30,000,000 | 30,000,000 | 30,000,000 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Basic and diluted net income per share, Class A
|
$
|
0.00
|
|
$
|
0.00
|
|
$
|
0.00
|
|
|||
|
|
|
|
|
|
|
|||||||
|
Weighted average shares outstanding of Class B
non-redeemable
ordinary shares
|
7,500,000 | 7,500,000 | 7,500,000 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Basic and diluted net loss per share, Class B
|
$
|
(3.40
|
)
|
$
|
(0.26
|
)
|
$
|
(3.16
|
)
|
|||
|
|
|
|
|
|
|
|||||||
12
|
As of
June 30, 2021 |
As of
December 31, 2020 |
|||||||
|
Unaudited
|
||||||||
|
(dollars in thousands)
|
||||||||
|
Balance Sheet Data:
|
||||||||
|
Cash
|
$ | 563 | $ | 971,607 | ||||
|
Prepaid expenses
|
303,958 | 381,749 | ||||||
|
Investments in Trust Account
|
300,154,668 | 300,074,392 | ||||||
|
|
|
|
|
|||||
|
Total Assets
|
$
|
300,459,189
|
|
$
|
301,427,748
|
|
||
|
|
|
|
|
|||||
|
Total Liabilities
|
|
78,216,827
|
|
|
51,795,888
|
|
||
|
|
|
|
|
|||||
|
Commitment and Contingencies
|
||||||||
|
Class A ordinary shares subject to possible redemption, 24,724,236 and 24,463,185 shares at $10.00 per share as of June 30, 2021 and December 31, 2020, respectively
|
$ | 217,242,360 | $ | 244,631,850 | ||||
|
|
|
|
|
|||||
|
Total Shareholders’ Equity
|
|
5,000,002
|
|
|
5,000,010
|
|
||
|
|
|
|
|
|||||
|
Total Liabilities and Shareholders’ Equity
|
$
|
300,459,189
|
|
$
|
301,427,748
|
|
||
|
|
|
|
|
|||||
|
Six Months
Ended June 30, 2021 |
For the Period
from July 31, 2020 (inception) through December 31, 2020 |
|||||||
|
Unaudited
|
||||||||
|
Statement of Cash Flows Data:
|
||||||||
|
Cash Flows used in Operating Activities
|
$ | (971,044 | ) | $ | (481,818 | ) | ||
|
|
|
|
|
|||||
|
Cash Flows used in Investing Activities
|
— | (300,000,000 | ) | |||||
|
Cash Flows provided by Financing Activities
|
— | 301,453,425 | ||||||
|
|
|
|
|
|||||
13
SELECTED UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following selected pro forma financial information as of July 31, 2021 is derived from the unaudited pro forma condensed combined statements of operations for the nine months ended July 31, 2021 and for the fiscal year ended October 31, 2020, which give pro forma effect to the Business Combination as if it had occurred on November 1, 2019. The unaudited pro forma condensed combined balance sheet as of July 31, 2021 gives pro forma effect to the Business Combination as if it was completed on July 31, 2021.
The unaudited pro forma condensed combined financial information is based on and should be read in conjunction with the historical financial statements of each of Peridot
.”
and Li-Cycle and
the related notes thereto, as well as the information contained in the section titled “
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the Company’s financial condition or results of operations would have been had the Business Combination occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the Company. The actual financial position and results of operations may differ significantly from the pro forma information reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.
The Business Combination resulted in the combination
of Li-Cycle and
the Company, which have a fiscal year end of October 31, with Peridot, which has a fiscal year end of December 31. The pro forma income statements for the nine months ended July 31, 2021 and for the year-ended October 31, 2020 present the combination of financial information of the Company, Peridot
and Li-Cycle, after
giving effect to the Business Combination and related adjustments described in the accompanying notes. The unaudited pro forma interim income statement
includes Li-Cycle’s
nine months ended July 31, 2021 and Peridot’s income statement results for the six months ended June 30, 2021. The unaudited pro forma annual income statement
include Li-Cycle’s
year ended October 31, 2020 and Peridot’s income statement results for the period from July 31, 2020 (inception) through December 31, 2020. The unaudited pro forma balance sheet is based on a historical Company balance sheet as of May 31, 2021,
historical Li-Cycle balance
sheet as of July 31, 2021 and a historical Peridot balance sheet as of June 30, 2021.
Selected Unaudited Pro Forma Condensed Combined Balance Sheet Data
As of July 31, 2021
|
Final
Redemption US$ |
||||
|
Total assets
|
$ | 571,390,810 | ||
|
Total liabilities
|
$ | 99,964,624 | ||
|
Total equity
|
$ | 471,426,186 | ||
14
Selected Unaudited Pro Forma Condensed Combined Statements of Operations Data
Nine months ended July 30, 2021
|
Final
Redemption US$ |
||||
|
Revenue
|
$ | 2,983,747 | ||
|
Net loss
|
$ | (48,980,281 | ) | |
|
Loss per common share — basic and diluted
|
$ | (0.30 | ) | |
|
Weighted average shares outstanding, basic and diluted
|
163,179,553 | |||
Selected Unaudited Pro Forma Condensed Combined Statements of Operations Data
Year ended October 31, 2020
|
Final
Redemption US$ |
||||
|
Revenue
|
$ | 792,254 | ||
|
Net loss
|
$ | (187,306,071 | ) | |
|
Loss per common share — basic and diluted
|
$ | (1.15 | ) | |
|
Weighted average shares outstanding, basic and diluted
|
163,179,553 | |||
15
RISK FACTORS
An investment in our securities carries a significant degree of risk. You should carefully consider the following risks and other information in this prospectus, including our consolidated financial statements and related notes before you decide to purchase our securities. If any of the events described below occur, our business and financial results could be materially adversely affected. This could cause the trading price of our securities to decline, perhaps significantly, and you therefore may lose all or part of your investment. The risks set out below are not exhaustive and do not comprise all of the risks associated with an investment in the Company. Additional risks and uncertainties not currently known to us or which we currently deem immaterial may also have a material adverse effect on our business, financial condition and results of operations.
References in this section to “we,” “us” or
“Li-Cycle”
refer to
Li-Cycle
Corp. and its subsidiaries prior to the consummation of the Business Combination and the Company and its subsidiaries subsequent to the Business Combination, unless the context otherwise requires or indicates otherwise.
Risks Relating to
Li-Cycle’s
Business
Li-Cycle’s
success will depend on its ability to economically and efficiently source, recover and recycle
lithium-ion
batteries and
lithium-ion
battery manufacturing scrap, as well as third-party black mass, and to meet the market demand for an environmentally sound, closed-loop solution for manufacturing waste and
end-of-life
lithium-ion
batteries.
Li-Cycle’s
future business depends in large part on its ability to economically and efficiently recycle and recover
lithium-ion
battery materials (including
end-of-life
end-of-life
lithium-ion
batteries. Although it currently recycles and recovers using its Spoke facilities in Ontario and New York State,
Li-Cycle
will need to scale its recycling capacity in order to successfully implement its global growth strategy and plans to do so in the future by, among other things, successfully building and developing additional Spoke and Hub facilities, including its first commercial Hub facility in Rochester, New York and Spoke facilities in Gilbert, Arizona and near Tuscaloosa, Alabama. Although
Li-Cycle
has experience in recycling
lithium-ion
materials in its existing facilities, such operations are currently conducted on a limited scale, and
Li-Cycle
has not yet operated developed or operated a Hub facility on a commercial scale to produce and sell end products.
Li-Cycle
does not know whether it will be able to develop efficient, automated,
low-cost
recycling capabilities and processes, or whether it will be able to secure reliable sources of supply, in each case that will enable it to meet the production standards, costs and volumes required to successfully recycle
lithium-ion
batteries and
lithium-ion
battery materials and meet its business objectives and customer needs. Even if
Li-Cycle
is successful in high-volume recycling in its current and future facilities, it does not know whether it will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond its control, such as problems with suppliers, or in time to meet the commercialization schedules of future recycling needs or to satisfy the requirements of its customers.
Li-Cycle’s
ability to effectively reduce its cost structure over time is limited by the fixed nature of many of its planned expenses in the near-term, and its ability to reduce long-term expenses is constrained by its need to continue investment in its global growth strategy. Any failure to develop and scale such manufacturing processes and capabilities within
Li-Cycle’s
projected costs and timelines could have a material adverse effect on its business, results of operations or financial condition.
Li-Cycle
may not be able to successfully implement its global growth strategy, on a timely basis or at all.
Li-Cycle’s
future global growth, results of operations and financial condition depend upon its ability to successfully implement its growth strategy, which, in turn, is dependent upon a number of factors, some of which are beyond
Li-Cycle’s
control, including its ability to:
| • |
Economically recycle and recover
lithium-ion
batteries and
lithium-ion
battery materials and meet customers’ business needs;
|
16
| • |
Effectively introduce methods for higher recovery rates of
lithium-ion
batteries and solutions to recycling;
|
| • |
Complete the construction of its future facilities, including the Rochester Hub, the Arizona Spoke and the Alabama Spoke, at a reasonable cost and on a timely basis;
|
| • |
Invest and keep pace in technology, research and development efforts, and the expansion and defense of its intellectual property portfolio;
|
| • |
Secure and maintain required strategic supply arrangements;
|
| • |
Effectively compete in the markets in which it operates; and
|
| • |
Attract and retain management or other employees who possess specialized knowledge and technical skills.
|
There can be no assurance that
Li-Cycle
can successfully achieve any or all of the above initiatives in the manner or time period that it expects. Further, achieving these objectives will require investments that may result in both short-term and long-term costs without generating any current revenue and therefore may be dilutive to earnings.
Li-Cycle
cannot provide any assurance that it will realize, in full or in part, the anticipated benefits it expects to generate from its growth strategy. Failure to realize those benefits could have a material adverse effect on
Li-Cycle’s
business, results of operations or financial condition.
Li-Cycle
may be unable to manage future global growth effectively.
Even if it can successfully implement its global growth strategy, any failure to manage its growth effectively could materially and adversely affect
Li-Cycle’s
business, results of operations and financial condition.
Li-Cycle
intends to expand its operations globally, which will require it to hire and train new employees across all divisions; accurately forecast supply and demand, production and revenue; control expenses and investments in anticipation of expanded operations; establish new or expand current design, production, and sales and service facilities; and implement and enhance administrative infrastructure, systems and processes. Future growth may also be tied to acquisitions, and
Li-Cycle
cannot guarantee that it will be able to effectively acquire other businesses or integrate businesses that it acquires. Failure to efficiently manage any of the above could have a material adverse effect on
Li-Cycle’s
business, results of operations or financial condition.
The development of
Li-Cycle’s
Rochester Hub, Arizona Spoke, Alabama Spoke and other future projects is subject to risks, including with respect to engineering, permitting, procurement, construction, commissioning and
ramp-up,
and
Li-Cycle
cannot guarantee that these projects will be completed in a timely manner, that its costs will not be significantly higher than estimated, or that the completed projects will meet expectations with respect to their productivity or the specifications of their end products, among others.
Li-Cycle’s
Rochester Hub, Arizona Spoke, Alabama Spoke and other future projects are subject to development risks, including with respect to engineering, permitting, procurement, construction, commissioning and
ramp-up.
Because of the uncertainties inherent in estimating construction and labor costs and the potential for the scope of a project to change, it is relatively difficult to evaluate accurately the total funds that will be required to complete the Rochester Hub, Arizona Spoke, Alabama Spoke or other future projects. Further,
Li-Cycle’s
estimates of the amount of time it will take to complete the Rochester Hub, Arizona Spoke, Alabama Spoke or other future projects are based on assumptions about the timing of engineering studies, permitting, procurement, construction, commissioning and
ramp-up,
all of which can vary significantly from the time an estimate is made to the time of completion.
Li-Cycle
cannot guarantee that the costs of the Rochester Hub, Arizona Spoke, Alabama Spoke or other future projects will not be higher than estimated, or that it will have sufficient capital to cover any increased costs, or that it will be able to complete the Rochester Hub, Arizona Spoke, Alabama Spoke or other future projects within expected timeframes. Any such cost increases or delays could negatively affect
Li-Cycle’s
results of operations and ability to continue to grow, particularly if the
17
Rochester Hub, Arizona Spoke, Alabama Spoke or any other future project cannot be completed. Further, there can be no assurance that the Rochester Hub, Arizona Spoke or Alabama Spoke will perform at the expected production rates or unit costs, or that the end products will meet the intended specifications.
Failure to materially increase recycling capacity and efficiency could have a material adverse effect on
Li-Cycle’s
business, results of operations or financial condition.
Although
Li-Cycle’s
existing facilities in Ontario and New York State currently have total processing capacity of 10,000 tonnes of
lithium-ion
batteries and
lithium-ion
battery materials per year, the future success of
Li-Cycle’s
business depends in part on its ability to significantly increase recycling capacity and efficiency as part of the incremental/additional facilities.
Li-Cycle
may be unable to expand its business, satisfy demand from its current and new customers, maintain its competitive position and improve profitability if it is unable to build and operate any future facilities and otherwise allow for increases in scrapping output and speed. The construction of future global facilities will require significant cash investments and management resources and may not meet
Li-Cycle’s
expectations with respect to increasing capacity, efficiency and satisfying additional demand. For example, if there are delays in any future planned Hub, such as its current development and construction of the Rochester Hub, future construction of the Arizona Spoke, Alabama Spoke and/or other Spoke and Hub facilities, or if its facilities do not meet expected performance standards or are not able to produce materials that meet the quality standards
Li-Cycle
expects,
Li-Cycle
may not meet its target for adding capacity, which would limit its ability to increase sales and result in lower than expected sales and higher than expected costs and expenses. Failure to drastically increase recycling and processing capacity or otherwise satisfy customers’ demands may result in a loss of market share to competitors, damage
Li-Cycle’s
relationships with its key customers, a loss of business opportunities or otherwise materially adversely affect its business, results of operations or financial condition.
Li-Cycle
may engage in strategic transactions, including acquisitions, that could disrupt its business, cause dilution to its shareholders, reduce its financial resources, result in incurrence of debt, or prove not to be successful.
From time to time,
responsibilities, increase
Li-Cycle
may enter into transactions to acquire other businesses or technologies, to enter into joint ventures or to develop additional commercial relationships, and its ability to do so successfully cannot be ensured.
Li-Cycle
is currently considering certain joint ventures and acquisitions to support its growth strategy, including but not limited to the development of new Spoke and Hub facilities, but it does not currently have any binding commitments for such transactions other than as described herein. One or more of these transactions could include the payment of the purchase price in whole or in part using
Li-Cycle’s
common stock, which would have a dilutive impact on existing shareholders.
Li-Cycle
may also decide to incur debt in connection with an acquisition or any other strategic transaction. Even if
Li-Cycle
identifies suitable opportunities for strategic transactions,
Li-Cycle
may not be able to make such transactions on favorable terms or at all. Any strategic transactions
Li-Cycle
makes may not strengthen its competitive position, and these transactions may be viewed negatively by customers, suppliers or investors.
Li-Cycle
could incur losses resulting from undiscovered liabilities of an acquired business that are not covered by any indemnification
Li-Cycle
may obtain from the seller. In addition,
Li-Cycle
may not be able to successfully integrate the acquired personnel, technologies and operations into its existing business in an effective, timely and
non-disruptive
manner. Strategic transactions may also divert management attention from
day-to-day
Li-Cycle’s
expenses and reduce
Li-Cycle’s
cash available for operations and other uses. In addition,
Li-Cycle
may not be able to fully recover the costs of such acquisitions or be successful in leveraging any strategic transactions into increased business, revenue or profitability.
Li-Cycle
also cannot predict the number, timing or size of any future transactions or the effect that any such transactions might have on its operating results. Accordingly, although there can be no assurance that
Li-Cycle
will undertake or successfully complete any acquisitions or other strategic transactions, any transactions that
Li-Cycle
does complete may be subject to the foregoing or other risks and may have a material adverse effect on
Li-Cycle’s
business, financial condition, results of operations and prospects.
18
Expanding internationally involves risks that could delay our expansion plans and/or prohibit us from entering markets in certain jurisdictions, which could have a material adverse effect on our results of operations.
International operations, such as those we intend to establish, are subject to certain risks inherent in doing business abroad, including:
| • |
political, civil and economic instability;
|
| • |
corruption risks;
|
| • |
trade, customs and tax risks;
|
| • |
currency exchange rates and currency controls;
|
| • |
limitations on the repatriation of funds;
|
| • |
insufficient infrastructure;
|
| • |
restrictions on exports, imports and foreign investment;
|
| • |
increases in working capital requirements related to long supply chains;
|
| • |
changes in labor laws and regimes and disagreements with the labor force;
|
| • |
difficulty in protecting intellectual property rights; and
|
| • |
different and less established legal systems.
|
Expanding our business in international markets is an important element of our strategy and, as a result, our exposure to the risks described above may be greater in the future. The likelihood of such occurrences and their potential effect on our business and results of operations will vary from country to country and are unpredictable, but could have an adverse effect on our ability to execute our strategy and accordingly on our business, results of operations or financial condition.
Li-Cycle
is and will be dependent on its recycling facilities. If one or more of its current or future facilities become inoperative, capacity constrained or if operations are disrupted,
Li-Cycle’s
business, results of operations or financial condition could be materially adversely affected.
Li-Cycle’s
revenue is and will be dependent on the continued operations of its Kingston, Ontario and Rochester, New York Spoke facilities as well as its future facilities, including its planned Rochester Hub, Arizona Spoke and Alabama Spoke facilities and any other facilities it develops in the future. To the extent that
Li-Cycle
experiences any operational risk including, among other things, fire and explosions, severe weather and natural disasters (such as floods and hurricanes), failures in water supply, major power failures, equipment failures (including any failure of its information technology, air conditioning, and cooling and compressor systems), failures to comply with applicable regulations and standards, labor force and work stoppages, including those resulting from local or global pandemics or otherwise, or if its current or future facilities become capacity constrained,
Li-Cycle
may be required to make capital expenditures even though it may not have sufficient available resources at such time. Additionally, there is no guarantee that the proceeds available from
Li-Cycle’s
insurance policies will be sufficient to cover such capital expenditures.
Li-Cycle’s
insurance coverage and available resources may prove to be inadequate for events that may cause significant disruption to its operations. Any disruption in
Li-Cycle’s
recycling processes could result in delivery delays, scheduling problems, increased costs or production interruption, which, in turn, may result in its customers deciding to send their
end-of-life
lithium-ion
batteries and battery manufacturing scrap to
Li-Cycle’s
competitors.
Li-Cycle
is and will be dependent on its current and future facilities, which will in the future require a high degree of capital expenditures. If one or more of
Li-Cycle’s
current or future facilities become inoperative, capacity constrained or if operations are disrupted, its business, results of operations or financial condition could be materially adversely affected.
19
Li-Cycle
may in the future need to raise additional funds to meet its capital requirements and such funds may not be available to
Li-Cycle
on commercially reasonable terms or at all, which could materially adversely affect
Li-Cycle’s
business, results of operations or financial condition.
The closed loop resource recovery, logistics management, secure destruction and
add-on
services of
Li-Cycle’s
lithium-ion
battery recycling are capital-intensive. Although
Li-Cycle
believes that it will have sufficient funds to meet its short- to medium-term capital requirements, it may in the future need to raise additional funds, including through the issuance of equity, equity related or debt securities or through obtaining credit from government or financial institutions, and the availability of additional funds to
Li-Cycle
will depend on a variety of factors, some of which are outside of its control. Additional funds may not be available to
Li-Cycle
on commercially reasonable terms or at all, which could materially adversely affect its business, results of operations or financial condition. If additional funds are raised by issuing equity or equity-linked securities, shareholders of
Li-Cycle
may incur dilution.
Li-Cycle
has a history of losses and expects to incur significant expenses for the foreseeable future, and there is no guarantee it will achieve or sustain profitability.
Li-Cycle
was until 2020 a development stage company with no commercial revenues, and incurred a net loss of approximately $4.1 million for the year ended October 31, 2019 and a net loss of $0.9 million for the year ended October 31, 2018. For the first half of 2021, it incurred a net loss of $14.7 million. In 2020,
Li-Cycle’s
revenue was $0.8 million and it recorded a net loss of $9.3 million. Prior to the Business Combination,
Li-Cycle
had financed its operations primarily through: (i) private placements of
Li-Cycle
common and preferred shares; (ii) loans from BDC Capital and certain
Li-Cycle
shareholders and (iii) various government funding initiatives.
Li-Cycle
expects both its capital and operating expenditures will increase significantly in connection with
Li-Cycle’s
ongoing activities.
Li-Cycle
believes that its performance and future success is dependent on multiple factors that present significant opportunities for
Li-Cycle
to increase revenues, but also pose risks and challenges.
Li-Cycle
believes it will continue to incur losses in the short term and there is no guarantee it will achieve or sustain profitability in the future.
Problems with the handling of
lithium-ion
battery cells that result in less usage of
lithium-ion
batteries or affect
Li-Cycle’s
operations could materially affect
Li-Cycle’s
revenues and business.
On rare occasions,
lithium-ion
battery cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other
lithium-ion
battery cells. Negative public perceptions regarding the safety or suitability of
lithium-ion
battery cells for automotive applications, the social and environmental impacts of cobalt mining or any future incident involving
lithium-ion
battery cells, such as a vehicle or other fire, even if such incident does not involve
Li-Cycle
directly, could have a negative impact on the market for
lithium-ion
batteries, reducing the number of batteries in the market and
Li-Cycle’s
revenue.
In addition, recycling of
lithium-ion
batteries requires
Li-Cycle
to store a significant number of
lithium-ion
battery cells at its facilities. Any mishandling of
lithium-ion
battery cells could cause disruption to the operation of
Li-Cycle’s
current or future facilities. While
Li-Cycle
has implemented safety procedures related to the handling of the cells, a safety issue or fire related to the cells could disrupt
Li-Cycle’s
operations. Any impact on revenue resulting from reduced demand for
lithium-ion
batteries or on
Li-Cycle’s
operations from perceived or actual safety or security issues at its own facilities could materially adversely affect
Li-Cycle’s
business, results of operations or financial condition.
Li-Cycle’s
revenue depends on maintaining and increasing feedstock supply commitments as well as securing new customers and
off-take
agreements.
Li-Cycle
must maintain and gain feedstock supply commitments as well as new customers (including through entry into
off-take
agreements). Feedstock suppliers may change or delay supply contracts for any
20
number of reasons, such as force majeure or government approval factors that are unrelated to
Li-Cycle.
Customers may fail to perform under their contracts for similar reasons. As a result, in order to maintain and expand its business,
Li-Cycle
must continue to develop and obtain new feedstock supply and customer contracts. However, it is difficult to predict whether and when
Li-Cycle
will secure such commitments and/or contracts due to competition for suppliers and customers and the lengthy process of negotiating supplier and customer agreements, which may be affected by factors that
Li-Cycle
does not control, such as market and economic conditions, financing arrangements, commodity prices, environmental issues and government approvals.
A decline in the adoption rate of EVs, or a decline in the support by governments for “green” energy technologies, could materially harm
Li-Cycle’s
financial results and ability to grow its business.
The demand for
Li-Cycle’s
recycling services and end products is driven in part by projected increases in the demand for EVs (including automobiles,
e-bikes,
scooters, buses and trucks). A decline in the adoption rate of EVs could reduce the demand for
Li-Cycle’s
recycling services and end products. A decline in volume under existing contracts or an inability to source new supplier relationships could also have a negative impact on
Li-Cycle’s
operating results.
Decreases and fluctuations in benchmark prices for the metals contained in
Li-Cycle’s
products could significantly impact
Li-Cycle’s
revenues and results of operations.
The prices that
Li-Cycle
charges for its products are generally tied to commodity prices for their principal contained metals, such as lithium, nickel and cobalt. Fluctuations in the prices of these commodities will affect
Li-Cycle’s
revenues and declines in the prices of these commodities could have a material adverse impact on
Li-Cycle’s
revenues. Any significant decline in
Li-Cycle’s
revenues will have a material impact on its results of operations.
In addition to commodity prices,
Li-Cycle’s
revenues are primarily driven by the volume and composition of
lithium-ion
battery feedstock materials processed at its facilities (including manufacturing scrap, spent batteries and third-party purchased black mass) and changes in the volume or composition of feedstock processed could significantly impact
Li-Cycle’s
revenues and results of operations.
Li-Cycle’s
revenues depend on processing high volumes of feedstock at our Spokes and Hubs, and its revenues are directly impacted by the chemistry of the feedstock processed, particularly as market chemistries shift. Certain feedstock chemistries produce raw materials such as cobalt for which
Li-Cycle
receives higher prices than others. A decline in overall volume of feedstock processed, or a decline in volume of chemistries with higher priced content relative to other chemistries, could result in a significant decline in
Li-Cycle’s
revenues, which in turn would have a material impact on its results of operations.
The development of an alternative chemical
make-up
of
lithium-ion
batteries or battery alternatives could adversely affect
Li-Cycle’s
revenues and results of operations.
The development and adoption of alternative battery technologies could impact
Li-Cycle’s
prospects and future revenues. Current and next generation high energy density
lithium-ion
batteries for use in products such as EVs use nickel and cobalt as significant inputs. Cobalt and nickel tend to be in lower supply and therefore command higher prices than certain other raw materials. Alternative chemical makeups for
lithium-ion
batteries or battery alternatives are being developed and some of these alternatives could be less reliant on cobalt and nickel or use other lower-priced raw materials such as lithium-iron phosphate chemistries, which contain neither cobalt nor nickel. A shift in production to batteries using lower-priced raw materials could affect the value of the end products produced by
Li-Cycle,
lowering its revenues and negatively impacting its results of operations.
21
Li-Cycle’s
projected revenues for the Rochester Hub are derived significantly from a single customer and the loss of that customer could have a material impact on its results of operations.
Li-Cycle
has entered into a strategic global marketing relationship with Traxys, a company that provides financial and logistics solutions to the metals, mining and energy industries.
Li-Cycle
has entered into two Marketing, Logistics and Working Capital Agreements with Traxys, covering (i) 100% of its production of black mass, until such time as this material is integrated by
Li-Cycle
into the supply chain for
Li-Cycle’s
Hubs, and (ii) 100% of its production of certain end products from
Li-Cycle’s
Hubs, being lithium carbonate, nickel sulphate, cobalt sulphate, manganese carbonate and graphite concentrate. If these contracts were breached or terminated, then
Li-Cycle
would need to restructure its marketing, commercial and logistics arrangements (by completing such functions
in-house
or through other service providers) and
Li-Cycle
could experience a decline in revenues that could have a material adverse impact on its results of operations.
Li-Cycle’s heavy
reliance on the experience and expertise of its management may cause adverse impacts on it if a management member departs.
Li-Cycle
depends on key personnel for the success of its business.
Li-Cycle’s
business may be severely disrupted if it loses the services of its key executives and employees or fails to add new senior and middle managers to its management.
Li-Cycle’s
future success is heavily dependent upon the continued service of its key executives.
Li-Cycle
also relies on a number of key technology staff for its continued operation.
Li-Cycle’s
future success is also dependent upon its ability to attract and retain qualified senior and middle managers to its management team. If one or more of its current or future key executives or employees are unable or unwilling to continue in their present positions,
Li-Cycle
may not be able to easily replace them, and its business may be severely disrupted. In addition, if any of these key executives or employees joins a competitor or forms a competing company,
Li-Cycle
could lose customers and suppliers and incur additional expenses to recruit and train personnel.
Li-Cycle’s
relies on third-party consultants for its regulatory compliance and
Li-Cycle
could be adversely impacted if the consultants do not correctly inform
Li-Cycle
of the legal changes.
Li-Cycle
depends on third-party consultants to work with it across all of its projects to ensure correct permitting, regulatory compliance and keep
Li-Cycle
apprised of legal changes.
Li-Cycle
may face
non-compliance
challenges if the third-party consultants do not inform
Li-Cycle
of the proper compliance measures or if
Li-Cycle
fails to maintain its engagement with third-party consultants. If
Li-Cycle
is not in compliance with the current regulations, it could face litigation, sanctions and fees, which could adversely impact its business, results of operations and financial condition.
Li-Cycle
may not be able to complete its recycling processes as quickly as customers may require, which could cause it to lose supply contracts and could harm its reputation.
Li-Cycle
may not be able to complete its recycling processes to meet the supply it receives from its customers. Operating delays and interruptions can occur for many reasons, including, but not limited to:
| • |
equipment failures;
|
| • |
personnel shortage;
|
| • |
labor disputes; or
|
| • |
transportation disruptions.
|
The recycling process for
lithium-ion
batteries and
lithium-ion
battery manufacturing scrap material, as well as black mass, is complex. If
Li-Cycle
fails to complete its recycling processes in a timely fashion, its reputation may be harmed. Any failure by
Li-Cycle
to complete its recycling processes in a timely fashion may also jeopardize existing orders and cause
Li-Cycle
to lose potential supply contracts and be forced to pay penalties.
22
Li-Cycle
operates in an emerging, competitive industry and if it is unable to compete successfully its revenue and profitability will be adversely affected.
The
lithium-ion
recycling market is competitive. As the industry evolves and the demand increases,
Li-Cycle
anticipates that competition will increase.
Li-Cycle
currently faces competition primarily from companies that focus on one type of
lithium-ion
material recycling, some of which have more expertise in the recycling of that material than
Li-Cycle.
Li-Cycle
also competes against companies that have a substantial competitive advantage because of longer operating histories and larger budgets, as well as greater financial and other resources. National or global competitors could enter the market with more substantial financial and workforce resources, stronger existing customer relationships, and greater name recognition, or could choose to target medium to small companies in
Li-Cycle’s
traditional markets. Competitors could focus their substantial resources on developing a more efficient recovery solution than
Li-Cycle’s
solutions. Competition also places downward pressure on
Li-Cycle’s
contract prices and profit margins, which presents it with significant challenges in its ability to maintain strong growth rates and acceptable profit margins. If Li-Cycle is unable to meet these competitive challenges, it could lose market share to its competitors and experience an adverse impact to its business, financial condition and results of operations.
Increases in income tax rates, changes in income tax laws or disagreements with tax authorities could adversely affect
Li-Cycle’s
business, financial condition or results of operations.
Li-Cycle
is subject to income taxes in the United States, Canada and in certain foreign jurisdictions in which it operates. Increases in income tax rates or other changes in income tax laws that apply to its business could reduce
Li-Cycle’s
after-tax
income from such jurisdiction and could adversely affect its business, financial condition or results of operations.
Li-Cycle’s
operations outside the United States generate a significant portion of its income. In addition, the United States has recently made or is actively considering changes to existing tax laws. Additional changes in the U.S. tax regime or in how U.S. multinational corporations are taxed on foreign earnings, including changes in how existing tax laws are interpreted or enforced, could adversely affect
Li-Cycle’s
business, financial condition or results of operations.
Li-Cycle
is also subject to regular reviews, examinations and audits by the IRS and other taxing authorities with respect to income and
non-income-based
taxes both within and outside the United States. Economic and political pressures to increase tax revenues in jurisdictions in which it operates, or the adoption of new or reformed tax legislation or regulation, may make resolving tax disputes more difficult and the final resolution of tax audits and any related litigation could differ from its historical provisions and accruals, resulting in an adverse impact on its business, financial condition or results of operations. In addition, in connection with the Organization for Economic
Co-operation
and Development Base Erosion and Profit Shifting project, companies are required to disclose more information to tax authorities on operations around the world, which may lead to greater audit scrutiny of profits earned in various countries.
Li-Cycle’s
operating and financial results may vary significantly from period to period due to fluctuations in its operating costs and other factors.
Li-Cycle
expects its
period-to-period
Li-Cycle’s
control.
Li-Cycle
expects its
period-to-period
Li-Cycle
believes that
quarter-to-quarter
Li-Cycle’s
financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on quarterly financial results. If any of this occurs, the trading price of our common shares could fall substantially, either suddenly or over time.
23
Fluctuations in foreign currency exchange rates could result in declines in reported sales and net earnings.
Li-Cycle
reports its financial results in U.S. dollars and a material portion of its sales and operating costs are realized in currencies other than the U.S. dollar. For the year ended October 31, 2020, approximately 100% of
Li-Cycle’s
revenues were realized in Canada.
Li-Cycle
is also exposed to other currencies, such as the Euro, and may in the future be exposed to additional currencies. If the value of any currencies in which sales are realized, particularly the Canadian dollar, depreciates relative to the U.S. dollar,
Li-Cycle’s
foreign currency revenue will decrease when translated to U.S. dollars for reporting purposes. In addition, any depreciation in foreign currencies could result in higher local prices, which may negatively impact local demand and have a material adverse effect on
Li-Cycle’s
business, results of operations or financial condition. Alternatively, if the value of any of the currencies in which operating costs are realized appreciates relative to the U.S. dollar,
Li-Cycle’s
operating costs will increase when translated to U.S. dollars for reporting purposes. Although these risks may sometimes be naturally hedged by a match in operating costs denominated in the same currency, fluctuations in foreign currency exchange rates, particularly the U.S.-Canadian dollar exchange rate, could create discrepancies between
Li-Cycle’s
operating costs in a given currency that could have a material adverse effect on its business, results of operations or financial condition.
While
Li-Cycle
actively manages its exposure to foreign-exchange rate fluctuations and may enter into hedging contracts from time to time, such contracts hedge foreign-currency denominated transactions and any change in the fair value of the contracts could be offset by changes in the underlying value of the transactions being hedged. Furthermore,
Li-Cycle
does not have foreign-exchange hedging contracts in place with respect to all currencies in which it does business. As a result, there can be no assurance that
Li-Cycle’s
approach to managing its exposure to foreign-exchange rate fluctuations will be effective in the future or that
Li-Cycle
will be able to enter into foreign-exchange hedging contracts as deemed necessary on satisfactory terms.
Unfavorable economic conditions, including the consequences of the global
COVID-19
pandemic, may have a material adverse effect on
Li-Cycle’s
business, results of operations and financial condition.
Li-Cycle
has been impacted by the
COVID-19
pandemic, and
Li-Cycle
cannot predict the future impacts the
COVID-19
pandemic may have on its business, results of operations and financial condition. Beginning in March 2020, numerous government regulations and public advisories, as well as shifting social behaviors, temporarily and from time to time limited or closed
non-essential
transportation, government functions, business activities and
person-to-person
Li-Cycle
to reduce operations at its commercial headquarters and establish work-from-home policies for certain of its employees, and some of its suppliers have been subject to similar limitations and may also have been required to shut down production. Although
COVID-19
has had an immaterial impact on
Li-Cycle’s
business of yet,
Li-Cycle
cannot predict if current restrictions and limitations to its or its customers’ and suppliers’ operations will be maintained, or if new measures will be implemented.
Li-Cycle’s
operations and timelines may also be affected by global economic markets and levels of consumer comfort and spend, including recessions, slow economic growth, economic and pricing instability, increase of interest rates and credit market volatility, all of which could impact demand in the worldwide transportation industries or otherwise have a material adverse effect on
Li-Cycle’s
business, operating results and financial condition. Because the impact of current conditions on an ongoing basis is yet largely unknown, is rapidly evolving and has been varied across geographic regions, this ongoing assessment will be particularly critical to allow
Li-Cycle
to accurately project supply and demand and infrastructure requirements globally and allocate resources accordingly. If current global market conditions continue or worsen,
Li-Cycle’s
business, results of operations and financial condition could be materially adversely affected.
Natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, boycotts and
geo-political
events could materially adversely affect
Li-Cycle’s
business, results of operations or financial condition.
The occurrence of one or more natural disasters, such as hurricanes and earthquakes, unusually adverse weather, epidemic or pandemic outbreaks, such as the ongoing
COVID-19
pandemic, boycotts and
geo-political
24
events, such as civil unrest and acts of terrorism, or similar disruptions could materially adversely affect
Li-Cycle’s
business, power supply, results of operations or financial condition. These events could result in physical damage to property, an increase in energy prices, temporary or permanent closure of one or more of
Li-Cycle’s
current or planned facilities, temporary lack of an adequate workforce in a market, temporary or long-term disruption in the supply of raw materials, construction delays at the Rochester Hub, the Arizona Spoke, the Alabama Spoke or other facilities being developed, temporary disruption in transport from overseas, or disruption to
Li-Cycle’s
information systems.
Li-Cycle
may incur expenses or delays relating to such events outside of its control, which could have a material adverse impact on its business, operating results and financial condition.
Failure to protect
Li-Cycle’s
intellectual property could adversely affect its business.
Li-Cycle’s
success depends in large part on its proprietary technology.
Li-Cycle
relies on various intellectual property rights, including patents, copyrights, trademarks, and trade secrets, as well as confidentiality provisions and contractual arrangements, and other forms of statutory and common law protection to protect its proprietary rights. If
Li-Cycle
does not protect and enforce its intellectual property rights adequately and successfully, its competitive position may suffer, which could adversely affect the Company’s business, prospects, financial condition, and operating results.
Li-Cycle’s
pending patent or trademark applications may not be approved, or competitors or others may challenge the validity, enforceability, or scope of its issued patents, the scope of its copyrights, the registrability of its trademarks or the trade secret status of its proprietary information. There can be no assurance that additional patents will be filed or issued or that any of
Li-Cycle’s
currently issued patents will provide significant protection for
Li-Cycle’s
commercially relevant intellectual property or for those portions of its proprietary technology that are the most key to its competitive positions in the marketplace. In addition,
Li-Cycle’s
patents, copyrights, trademarks, trade secrets, and other intellectual property rights may not provide us a significant competitive advantage. There is no assurance that the forms of intellectual property protection that
Li-Cycle
seeks, including business decisions about whether, when and where to file patents and when and how to maintain and protect copyrights, trade secrets, license and other contractual rights, will be adequate to protect
Li-Cycle’s
business.
Not all countries offer the same types, standards for registrability or level of protection for the Company’s intellectual property as Canada and the United States, and
Li-Cycle
may not pursue the same intellectual property filings or obtain the intellectual property registrations of the same scope in all of its commercially-relevant markets. As
Li-Cycle
expands its international activities, its exposure to unauthorized copying and use of its technology and proprietary information will likely increase. Despite the Company’s reasonable precautions, its intellectual property is vulnerable to unauthorized access and copying through employee or third-party error or actions, including malicious state or state-sponsored actors, theft, hacking, cybersecurity incidents, and other security breaches and incidents, and such incidents may be difficult to detect or may remain undiscovered or unknown for a significant period of time. It is possible for third parties to infringe upon or misappropriate the Company’s intellectual property and to use information that
Li-Cycle
regards as proprietary to create services that compete with those of the Company. Effective intellectual property protection may not be available to
Li-Cycle
in every country in which it operates. In addition, many countries limit the enforceability of patents against certain third parties, including government agencies or government contractors, or make patents subject to compulsory licenses to third parties under certain circumstances. In these countries, patents may provide limited or no benefit.
Intellectual property laws, procedures, and restrictions provide only limited protection and any of the Company’s intellectual property rights may be challenged, invalidated, circumvented, infringed, or misappropriated. Further, the laws of certain countries do not protect proprietary rights to the same extent as the laws of Canada and the United States, and therefore, in certain jurisdictions, the Company may be unable to protect its proprietary technology.
25
The Company enters into confidentiality and invention assignment or intellectual property ownership agreements with its employees and contractors and enters into confidentiality agreements with other third parties. The Company cannot ensure that these agreements, or all the terms thereof, will be enforceable or compliant with applicable law, or otherwise effective in controlling access to, use of, reverse engineering, and distribution of
Li-Cycle’s
proprietary information or in effectively securing exclusive ownership of intellectual property developed by its current or former employees and contractors. Further, these agreements with the Company’s employees, contractors, and other parties do not prevent other parties from independently developing technologies, products and services that are substantially equivalent or superior to the Company’s technologies and services.
Li-Cycle
may need to spend significant resources securing and monitoring its intellectual property rights, and it may or may not be able to detect infringement by third parties.
Li-Cycle’s
competitive position may be adversely impacted if it cannot detect infringement or enforce its intellectual property rights quickly or at all. In some circumstances,
Li-Cycle
may choose not to pursue enforcement of its valid intellectual property rights for a variety of legal and business considerations, including (i) because an infringer has a dominant intellectual property position, (ii) because of uncertainty relating to the scope of the Company’s intellectual property or the outcome of an enforcement action, (iii) because of the financial and reputational costs associated with enforcement or (iv) for other business reasons. In addition, competitors might avoid infringement by designing around the Company’s intellectual property rights or by developing
non-infringing
competing technologies. Litigation brought to protect and enforce the Company’s intellectual property rights could be costly, time-consuming, and distracting to management and
Li-Cycle’s
development teams and could result in the impairment or loss of portions of its intellectual property. Further, the Company’s efforts to enforce its intellectual property rights may be met with defenses, counterclaims attacking the scope, validity, and enforceability of the Company’s intellectual property rights, or with counterclaims and countersuits asserting infringement by the Company of third-party intellectual property rights.
Li-Cycle’s
failure to secure, protect, and enforce its intellectual property rights could adversely affect its brand and its business, any of which could have an adverse effect on the Company’s business, prospects, financial condition, and operating results.
Li-Cycle
may be subject to intellectual property rights claims by third parties, which could be costly to defend, could require us to pay significant damages and could limit the Company’s ability to use certain technologies.
Third parties may assert claims of infringement of intellectual property rights or violation of other statutory, license or contractual rights in technology or data against the Company. Any such claim by a third party, even if without merit, could cause
Li-Cycle
to incur substantial costs defending against such claim and could distract the Company’s management and its development teams from its business.
Although third parties may offer a license to their technology or data, the terms of any offered license may not be acceptable and the failure to obtain a license or the costs associated with any license could cause the Company’s business, prospects, financial condition, and operating results to be adversely affected. In addition, some licenses may be
non-exclusive,
and therefore the Company’s competitors may have access to the same technology or data licensed to the Company. Alternatively,
Li-Cycle
may be required to develop
non-infringing
technology or data which could require significant effort and expense and ultimately may not be successful. Furthermore, a successful claimant could secure a judgment or the Company may agree to a settlement that prevents it from selling certain products or performing certain services in a given country or countries or that requires the Company to pay royalties, substantial damages, including treble damages if it is found to have willfully infringed the claimant’s patents, copyrights, trade secrets or other statutory rights, or other fees. Any of these events could have an adverse effect on the Company’s business, prospects, financial condition, and operating results.
26
Li-Cycle
has identified material weaknesses in its internal control over financial reporting. If its remediation of such material weaknesses is not effective, or if it fails to develop and maintain a proper and effective internal control over financial reporting, its ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.
Li-Cycle
has identified material weaknesses in its internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements may not be prevented or detected on a timely basis.
Li-Cycle
did not have in place an effective control environment with formal processes and procedures or an adequate number of accounting personnel with the appropriate technical training in, and experience with, IFRS to allow for a detailed review of complex accounting transactions that would identify errors in a timely manner.
Li-Cycle
did not design or maintain effective controls over the financial statement close and reporting process in order to ensure the accurate and timely preparation of financial statements in accordance with IFRS.
These material weaknesses resulted in misstatements in
Li-Cycle’s
condensed consolidated interim financial statements as of and for the three months ended January 31, 2021 relating to (1) incorrect capitalization of certain amounts that should have been expensed and (2) underaccrual of certain accounts payable. The misstatements have been corrected through the restatement of those financial statements.
Li-Cycle
has taken significant steps to address these material weaknesses and expects to continue to implement its remediation plan, which
Li-Cycle
believes will address their underlying causes.
Li-Cycle
expects to engage external advisors to provide assistance in the areas of information technology, internal controls over financial reporting, and financial accounting in the short term and to evaluate and document the design and operating effectiveness of its internal controls and assist with the remediation and implementation of its internal controls as required.
Li-Cycle
is evaluating the longer-term resource needs of its various financial functions. These remediation measures may be time consuming, costly, and might place significant demands on
Li-Cycle’s
financial and operational resources. Although
Li-Cycle
has made enhancements to its control procedures in this area, the material weaknesses will not be remediated until the necessary controls have been implemented and are operating effectively.
Li-Cycle
does not know the specific time frame needed to fully remediate the material weaknesses identified.
While
Li-Cycle
is designing and implementing measures to remediate its existing material weaknesses, it cannot predict the success of such measures at this time.
Li-Cycle
can give no assurance that such measures will remediate any of the deficiencies in its internal control over financial reporting or that additional material weaknesses or significant deficiencies in its internal control over financial reporting will not be identified in the future.
Li-Cycle’s
current controls and any new controls that it develops may become inadequate because of changes in conditions in its business. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause the Combined Company to fail to meet its reporting obligations.
Risks Relating to this Offering and Ownership of Our Securities
Li-Cycle’s
shareholders prior to the Business Combination own approximately 60% of our outstanding common shares and their interests may conflict with yours in the future.
Following the Closing of the Business Combination and related PIPE Financing,
Li-Cycle’s
shareholders prior to the Business Combination own approximately 60% of our outstanding common shares. Each common share initially entitles its holders to one vote on all matters presented to shareholders generally. Accordingly, those owners, if voting in the same manner, will be able to control the election and removal of the majority of directors and thereby determine corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, amendment of our articles and
by-laws
and other significant corporate
27
transactions for so long as they retain significant ownership. This concentration of ownership may delay or deter possible changes in control, which may reduce the value of an investment in our common shares. So long as the
Li-Cycle
shareholders prior to the Business Combination continue to own a significant amount of the combined voting power, even if such amount is less than 50%, they will continue to be able to strongly influence or effectively control decisions of the Company.
Our
by-laws
provide, subject to limited exceptions, that the Superior Court of Justice of the Province of Ontario and the appellate courts therefrom are the sole and exclusive forum for certain shareholder litigation matters, which could limit shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or shareholders.
Our
by-laws
require, to the fullest extent permitted by law and subject to certain exemptions for actions brought to enforce a duty or liability under certain U.S. securities laws, that (i) derivative actions brought in our name, (ii) actions against directors, officers and employees for breach of fiduciary duty, (iii) any action or proceeding asserting a claim arising pursuant to the Ontario Business Corporations Act (the “OBCA”) or our Governing Documents, and (iv) any action or proceeding asserting a claim otherwise related to our “affairs” (as defined in the OBCA) may be brought only in the Superior Court of Justice of the Province of Ontario, Canada and the appellate courts therefrom and, if brought outside of such forum, the shareholder bringing the suit will be deemed to have consented to the personal jurisdiction of the provincial and federal courts located within the Province of Ontario in connection with any action brought in such court to enforce the forum provisions and to service of process on such shareholder’s counsel. Any person or entity purchasing or otherwise acquiring any interest in our common shares shall be deemed to have notice of and consented to the forum provisions in its articles. Unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will have exclusive jurisdiction for the resolution of any complaint asserting a cause of action arising under the U.S. Securities Act. The exclusive forum provision in our
by-laws
will not apply to actions arising under the Securities Act or the Exchange Act.
This choice of forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or shareholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in our articles to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.
Our common shares have only recently become publicly traded, and the market price of our common shares may be volatile. The trading price of our common shares could be subject to wide fluctuations due to a variety of factors, including:
| • |
the
COVID-19
pandemic and its impact on the markets and economies in which we operate;
|
| • |
our actual or anticipated operating performance and the operating performance of our competitors;
|
| • |
failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet the estimates or the expectations of investors;
|
| • |
any major change in our board of directors, management, or key personnel;
|
| • |
market conditions in our industry;
|
| • |
general economic conditions such as recessions, interest rates, fuel prices, international currency fluctuations;
|
| • |
rumors and market speculation involving us or other companies in our industry;
|
28
| • |
announcements by us or our competitors of significant innovations, new products, services or capabilities, acquisitions, strategic investments, partnerships, joint ventures or capital commitments;
|
| • |
the legal and regulatory landscape and changes in the application of existing laws or adoption of new laws that impact our business;
|
| • |
legal and regulatory claims, litigation, or
pre-litigation
disputes and other proceedings;
|
| • |
other events or factors, including those resulting from war, incidents of terrorism, or responses to these events; and
|
| • |
sales or expected sales of our common shares by us, our officers, directors, significant stockholders, and employees.
|
In addition, stock markets have experienced significant price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. The stock market in general and NYSE have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. These fluctuations may be even more pronounced in the trading market for our common shares as a result of the supply and demand forces for newly public companies. In the past, stockholders have instituted securities class action litigation following periods of stock volatility.
A significant portion of our outstanding common shares are restricted from immediate resale. Sales of substantial amounts of our common shares after the registration thereof or the expiration of applicable
lock-up
periods, or the perception that such sales will occur, could adversely affect the market price of our common shares.
In connection with the Business Combination, we issued an aggregate of 163,179,555 common shares upon closing. Approximately 116 million, or 71%, of such common shares are restricted from immediate resale, including the common shares issued to the Peridot Class B Holders, the
Li-Cycle
Holders and the PIPE Investors (as defined herein).
On the Closing Date, we, the Peridot Class B Holders and the
Li-Cycle
Holders entered into the Investor Agreement. Pursuant to the Investor Agreement, we are obligated to file a registration statement to register the resale of certain securities held by such holders within 30 days after the Closing. However, the Investor Agreement provides that the common shares held by Peridot Class B Holders and
Li-Cycle
Holders will be subject to certain transfer restrictions until (i) with respect to the Peridot Class B Holders, the earliest of (a) one year after the Closing and (b) (x) the last consecutive trading day where the last reported sale price of the our common shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the Closing, or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of its public shareholders having the right to exchange their common shares for cash, securities or other property, and (ii) with respect to the
Li-Cycle
Holders, 180 days following the Closing.
Additionally, the common shares issued in the PIPE Financing are restricted from immediate resale until registered under the Securities Act or sold pursuant to an applicable exemption therefrom. Sales of a substantial number of our common shares in the public market after the expiration of the applicable
lock-up
periods pursuant to the Investor Agreement and the registration of the common shares issued in the PIPE Financing pursuant to this registration statement, or the perception that such sales will occur, could adversely affect the market price of our common shares and make it difficult for us to raise funds through securities offerings.
29
NYSE may delist our securities, which could limit investors’ ability to engage in transactions in our securities and subject us to additional trading restrictions.
Upon consummation of the Business Combination, our common shares and warrants became listed on the New York Stock Exchange. In order to list our common shares and warrants, we were required to meet the NYSE initial listing requirements. Although we were able to meet those initial listing requirements, we may be unable to maintain the listing of our securities in the future.
If NYSE were to delist our securities, we could face significant material adverse consequences, including:
| • |
a limited availability of market quotations for our securities;
|
| • |
a limited amount of news and analyst coverage for the Company; and
|
| • |
a decreased ability to obtain capital or pursue acquisitions by issuing additional equity or convertible securities.
|
Because
operation of our business.
Li-Cycle
has historically operated as a private company, we have limited experience complying with public company obligations and fulfilling these obligations is expensive and time consuming and may divert management’s attention from the
day-to-day
As a privately held company,
Li-Cycle
was not required to comply with many corporate governance and financial reporting practices and policies required of publicly-traded companies. As a publicly traded company, we incur significant legal, accounting and other expenses that
Li-Cycle
was not required to incur in the recent past. These expenses will increase once we are no longer an “emerging growth company” as defined under the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure for public companies, including the Dodd-Frank Act, the Sarbanes-Oxley Act, regulations related thereto and the rules and regulations of the SEC and NYSE, have increased the costs and the time that must be devoted to compliance matters. We expect these laws and regulations to increase our legal and financial compliance costs and to render some activities more time-consuming and costly, although we are currently unable to estimate these costs with any degree of certainty. We may need to hire more employees or engage outside consultants to comply with these requirements, which will increase our costs and expenses. Being a public company could make it more difficult or costly for us to obtain certain types of insurance, including director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. Being a public company could also make it more difficult and expensive for us to attract and retain qualified persons to serve on our board of directors, board committees or as executive officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common shares, fines, sanctions and other regulatory action and potentially civil litigation.
For as long as we remain an “emerging growth company” as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO (its predecessor), (b) in which it has total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of the shares that are held by
non-affiliates
exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in
non-convertible
debt securities during the prior three-year period. To the extent we choose not to use exemptions from various reporting requirements under the JOBS Act, or if we can no longer be classified as an “emerging growth company,” we expect to incur additional compliance costs, which will reduce our ability to operate profitably.
30
As a “foreign private issuer” under the rules and regulations of the SEC, we are permitted to, and will, file less or different information with the SEC than a company incorporated in the United States or otherwise subject to these rules, and will follow certain home country corporate governance practices in lieu of certain NYSE requirements applicable to U.S. issuers.
The Company is considered a “foreign private issuer” under the Exchange Act and is therefore exempt from certain rules under the Exchange Act. For example, we are not required to file current reports on Form
8-K
or quarterly reports on Form
10-Q,
we are exempt from the U.S. proxy rules which impose certain disclosure and procedural requirements for U.S. proxy solicitations and we will not be required to file financial statements prepared in accordance with or reconciled to U.S. GAAP so long as our financial statements are prepared in accordance with IFRS as issued by the International Accounting Standards Board. We are not required to comply with Regulation FD, which imposes restrictions on the selective disclosure of material information to shareholders, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act. In addition, we are not required to file periodic reports and financial statements with the SEC as frequently or within the same time frames as U.S. companies with securities registered under the Exchange Act. Accordingly, holders of the Company’s securities may receive less or different information about the Company than they may receive with respect to public companies incorporated in the United States.
In addition, as a “foreign private issuer” whose common shares are listed on NYSE, we are permitted to follow certain home country corporate governance practices in lieu of certain NYSE requirements.
We could lose our status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of our outstanding voting securities become directly or indirectly held of record by U.S. holders and one of the following is true: (i) the majority of our directors or executive officers are U.S. citizens or residents; (ii) more than 50% of our assets are located in the United States; or (iii) our business is administered principally in the United States. If we lose our status as a foreign private issuer in the future, we will no longer be exempt from the rules described above and, among other things, will be required to file periodic reports and annual and quarterly financial statements as if we were a company incorporated in the United States (including preparation of financial statements in accordance with U.S. GAAP). If this were to happen, we would likely incur substantial costs in fulfilling these additional regulatory requirements and members of our management would likely have to divert time and resources from other responsibilities to ensuring these additional regulatory requirements are fulfilled.
Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, operating results and stock price.
Prior to the consummation of the Business Combination,
Li-Cycle
was not subject to Section 404 of the Sarbanes-Oxley Act. However, following the consummation of the Business Combination and the transactions related thereto, the Company is required to comply with Section 404 of the Sarbanes-Oxley Act on the timeline described below, which requires, among other things, the Company to evaluate annually the effectiveness of its internal controls over financial reporting. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those required of
Li-Cycle
prior to the Business Combination. Section 404(a) of the Sarbanes-Oxley Act (“Section 404(a)”) requires that, beginning with the second annual report following the Business Combination, management assess and report annually on the effectiveness of internal control over financial reporting and identify any material weaknesses in internal control over financial reporting. Additionally, Section 404(b) requires the independent registered public accounting firm to issue an annual report that addresses the effectiveness of internal control over financial reporting. We expect our first Section 404(a) assessment will take place for our annual report for the year ending October 31, 2022 and our first Section 404(b) assessment will take place after we no longer qualify as an emerging growth company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable to the Company
31
following the Business Combination. If we are not able to implement the additional requirements of Section 404 in a timely manner as required or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our shares.
As an “emerging growth company,” the Company cannot be certain if the reduced disclosure and governance requirements applicable to “emerging growth companies” will make its shares less attractive to investors.
As an “emerging growth company,” the Company may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including not being required to obtain an assessment of the effectiveness of its internal controls over financial reporting from its independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its 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. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, which the Company has elected to do.
We cannot predict if investors will find our shares less attractive because we will rely on these exemptions. If some investors find our shares less attractive as a result, there may be a less active market for our shares, our share price may be more volatile and the price at which our securities trade could be less than if we did not use these exemptions.
We expect to incur costs related to our internal control over financial reporting in the upcoming years to further improve our internal control environment. If we identify deficiencies in our internal controls over financial reporting or if we are unable to comply with the requirements applicable to us as a public company, including the requirements of Section 404 of the Sarbanes-Oxley Act, in a timely manner, we may be unable to accurately report our financial results, or report them within the timeframes required by the SEC. If this occurs, we also could become subject to sanctions or investigations by the SEC or other regulatory authorities. In addition, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, or express an adverse opinion, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets and our share price may be adversely affected.
We may issue additional shares or other equity securities without your approval, which would dilute your ownership interest in the Company and may depress the market price of our shares.
We may issue additional shares or other equity securities in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or grants under the Company’s 2021 Incentive Award Plan (the “Incentive Plan”) without shareholder approval in a number of circumstances. In addition, pursuant to the terms of the Spring Creek Capital Convertible Note, we may issue common shares upon conversion or redemption of the Spring Creek Capital Convertible Note or pursuant to any other term of the Spring Creek Capital Convertible Note, including as a result of any of the PIK provisions of the Spring Creek Capital Convertible Note.
The issuance of additional shares or other equity securities could have one or more of the following effects:
| • |
our existing shareholders’ proportionate ownership will decrease;
|
| • |
the amount of cash available per share, including for payment of dividends in the future, may decrease;
|
| • |
the relative voting strength of each previously outstanding share may be diminished; and
|
| • |
the market price of our shares may decline.
|
32
Exercise of warrants by our warrantholders could result in dilution to our shareholders.
To the extent outstanding warrants are exercised, additional common shares will be issued, which will result in dilution to our shareholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could depress the market price of our common shares.
The Company’s ability to meet expectations and projections in any research or reports published by securities or industry analysts, or a lack of coverage by securities or industry analysts, could result in a depressed market price and limited liquidity for its shares.
The trading market for the Company’s common shares will be influenced by the research and reports that industry or securities analysts may publish about it, its business, its market, or its competitors. If no securities or industry analysts commence coverage of the Company, its share price would likely be less than that which would be obtained if it had such coverage and the liquidity, or trading volume of its shares may be limited, making it more difficult for a shareholder to sell shares at an acceptable price or amount. If any analysts do cover the Company, their projections may vary widely and may not accurately predict the results it actually achieves. The Company’s share price may decline if its actual results do not match the projections of research analysts covering it. Similarly, if one or more of the analysts who write reports on the Company downgrades its shares or publishes inaccurate or unfavorable research about its business, its share price could decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on it regularly, its share price or trading volume could decline.
The Company may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and share price, which could cause you to lose some or all of your investment.
The Company may be forced to later write down or write off assets, restructure its operations, or incur impairment or other charges that could result in losses. Unexpected risks may arise and previously known risks may materialize. Even though these charges may be
non-cash
items and not have an immediate impact on the Company’s liquidity, the fact that it may report charges of this nature could contribute to negative market perceptions about the Company or its securities. In addition, charges of this nature may cause the Company to be unable to obtain future financing on favorable terms or at all.
The issuance of our common shares in connection with the conversion of the Spring Creek Capital Convertible Note would cause substantial dilution, and could materially affect the trading price of our common shares.
There is an aggregate principal amount of $100 million outstanding under the Spring Creek Capital Convertible Note. To the extent we or the holder of the Spring Creek Capital Convertible Note converts the Spring Creek Capital Convertible Note into our common shares, substantial amounts of our common shares will be issued. Such issuances could result in substantial decreases to our stock price and dilution to our existing shareholders.
33
FORWARD-LOOKING STATEMENTS
Some of the statements in this prospectus constitute forward-looking statements that do not directly or exclusively relate to historical facts. You should not place undue reliance on such statements because they are subject to numerous uncertainties and factors relating to our operations and business environment, among other things, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These statements are often, but not always, made through the use of words or phrases such as “believe,” “anticipate,” “could,” “may,” “would,” “should,” “intend,” “plan,” “potential,” “predict,” “forecast,” “will,” “expect,” “believe,” “estimate,” “continue,” “project,” “positioned,” “strategy,” “outlook” and similar expressions. You should read statements that contain these words carefully because they:
| • |
discuss future expectations;
|
| • |
contain projections of future results of operations or financial condition; or
|
| • |
state other “forward-looking” information.
|
All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. We believe it is important to communicate our expectations to our security holders. However, there may be events in the future that we are not able to predict accurately or over which we have no control. The risk factors and cautionary language discussed in this prospectus provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described by us in such forward-looking statements, including among other things:
| • |
changes adversely affecting the industry in which we operate;
|
| • |
our ability to achieve our business strategies or to manage our growth;
|
| • |
general economic conditions;
|
| • |
the effects of the
COVID-19
pandemic on the global economy, on the markets in which we compete and on our business;
|
| • |
our ability to maintain the listing of our securities on NYSE;
|
| • |
our ability to retain our key employees;
|
| • |
our ability to recognize the anticipated benefits of the Business Combination; and
|
| • |
the outcome of any legal proceedings or arbitrations that may be instituted against us or in which we may be involved.
|
These and other factors are more fully discussed in the “
” section and elsewhere in this prospectus. These risks could cause actual results to differ materially from those implied by the forward-looking statements contained in this prospectus.
Risk Factors
All forward-looking statements included herein attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable laws and regulations, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
34
USE OF PROCEEDS
All of the common shares covered by this prospectus will be sold by the selling shareholder. We will not receive any of the proceeds from these sales. We cannot advise you as to whether the selling shareholder will convert the Spring Creek Capital Convertible Note or will otherwise receive any common shares upon conversion or redemption of the Spring Creek Capital Convertible Note and, to the extent it does, whether or when it will in fact sell any or all of such securities.
We will pay certain expenses associated with the registration of the securities covered by this prospectus, as described in the section titled “
.”
Plan of Distribution
DIVIDEND POLICY
Our board of directors will evaluate whether or not to pay dividends and, if so, whether to pay dividends on a quarterly, semi-annual or annual basis, depending on our results, financial condition, market conditions, contractual obligations, legal restrictions and other factors deemed relevant by the board of directors.
35
CAPITALIZATION
The following table sets forth the capitalization of the Company on an unaudited pro forma combined basis as of July 31, 2021 following the closing of the Business Combination and the PIPE Financing, reflecting that holders of 3,377,626 common shares exercised their redemption rights.
The information in this table should be read in conjunction with the financial statements and notes thereto and other financial information included in this prospectus and any prospectus supplement and the information in the section titled “
.” Our historical results are not necessarily indicative of our expected results for any future periods.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
As at July 31, 2021 (US$ in millions)
|
Actual
|
Pro forma for Business
Combination and PIPE financing |
||||||
|
Cash
|
$ | 2.4 | $ | 530.2 | ||||
|
Other current assets
|
$ | 12.7 | $ | 6.8 | ||||
|
Non-current
assets
|
$ | 34.4 | $ | 34.4 | ||||
|
|
|
|
|
|||||
|
Total assets
|
$ | 49.4 | $ | 571.4 | ||||
|
|
|
|
|
|||||
|
Accounts payable and accrued liabilities
|
$ | 15.8 | $ | 9.6 | ||||
|
Restricted share units
|
$ | 3.3 | $ | — | ||||
|
Lease liabilities
|
$ | 16.2 | $ | 16.2 | ||||
|
Loans payable
|
$ | 11.5 | $ | 11.5 | ||||
|
Restoration provisions
|
$ | 0.3 | $ | 0.3 | ||||
|
Warrant liability
|
$ | — | $ | 62.3 | ||||
|
|
|
|
|
|||||
|
Total liabilities
|
$ | 47.1 | $ | 100.0 | ||||
|
|
|
|
|
|||||
|
Share capital
|
$ | 37.8 | $ | 660.0 | ||||
|
Contributed surplus
|
$ | 1.0 | $ | 2.3 | ||||
|
Accumulated deficit
|
$ | (36.1 | ) | $ | (190.5 | ) | ||
|
Accumulated other comprehensive income
|
$ | (0.3 | ) | $ | (0.3 | ) | ||
|
|
|
|
|
|||||
|
Total shareholders’ equity
|
$ | 2.3 | $ | 471.4 | ||||
|
|
|
|
|
|||||
|
Total liabilities and shareholders’ equity
|
$ | 49.4 | $ | 571.4 | ||||
|
|
|
|
|
|||||
36
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Introduction
On February 15, 2021,
Li-Cycle
Holdings Corp. (“NewCo”) entered into the Business Combination Agreement, by and among NewCo, Peridot and
Li-Cycle.
Pursuant to the Business Combination Agreement, among other matters, (a) Peridot continued from the Cayman Islands to a corporation existing under the laws of the Province of Ontario (“Peridot Ontario”) and (b) on the Closing Date, (i) Peridot Ontario and NewCo amalgamated (the “Amalgamation” and Peridot Ontario and NewCo as so amalgamated, the “Company”) and, in connection therewith, the outstanding Class A common shares and warrants to purchase Class A common shares of Peridot Ontario converted into an equivalent number of common shares of the Company and warrants to purchase common shares of the Company, respectively, and (ii) the Company acquired all of the issued and outstanding common shares of
Li-Cycle
from
Li-Cycle’s
shareholders in exchange for 96,476,955 common shares.
On February 15, 2021, concurrently with the execution of the Business Combination Agreement, NewCo and Peridot entered into subscription agreements (the “Subscription Agreements”) with the investors in the PIPE Financing (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to subscribe for and purchase, and Peridot and NewCo agreed for the Company to issue and sell to such PIPE Investors, immediately prior to closing of the Business Combination, an aggregate of 31,549,000 common shares for a purchase price of $10.00 per share for aggregate proceeds of $315,490,000 in the PIPE Financing. The PIPE Financing closed on the Closing Date after the Amalgamation.
As a result of and upon consummation of the Business Combination,
Li-Cycle
became a subsidiary of the Company and the Company began using the name
“Li-Cycle
Holdings Corp.”
The following unaudited pro forma condensed combined balance sheet of the Company and its consolidated subsidiaries after giving effect to the Business Combination (the “Combined Company”) as of July 31, 2021 and the unaudited pro forma condensed combined statements of operations of the Combined Company for the nine months ended July 31, 2021 and for the fiscal year ended October 31, 2020 present the combination of the financial information of Peridot and
Li-Cycle,
after giving effect to the Business Combination and related adjustments described in the accompanying notes. Peridot and
Li-Cycle
are collectively referred to herein as the “Companies,” and the Companies, subsequent to the Business Combination, are referred to herein as the Combined Company or the Company.
The unaudited pro forma condensed combined statements of operations for the nine months ended July 31, 2021 and for the fiscal year ended October 31, 2020 give pro forma effect to the Business Combination as if it had occurred on November 1, 2019. The unaudited pro forma condensed combined balance sheet as of July 31, 2021 gives pro forma effect to the Business Combination as if it was completed on July 31, 2021.
The unaudited pro forma condensed combined financial information is based on and should be read in conjunction with the historical financial statements of each of Peridot and
.”
Li-Cycle
and the notes thereto, as well as the disclosures contained in the section titled “
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what the Combined Company’s financial condition or results of operations would have been had the Business Combination occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the Combined Company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.
37
Accounting for the Business Combination
The Business Combination will be accounted for as a reverse acquisition in accordance with IFRS. Under this method of accounting,
Li-Cycle
Holdings Corp. (as the continuing entity after the amalgamation of
Li-Cycle
Holdings Corp. and Peridot) will be treated as the “acquired” company for accounting purposes. Since
Li-Cycle
Holdings Corp. does not meet the definition of a business under IFRS, net assets of
Li-Cycle
Holdings Corp. will be stated at historical cost, with no goodwill or other intangible assets recorded.
Li-Cycle
has been determined to be the accounting acquirer based on an evaluation of the following facts and circumstances, and accordingly the Business Combination is treated as an equivalent to an acquisition of Peridot accompanied by a recapitalization.
| • |
Li-Cycle’s
shareholders prior to the Business Combination had, immediately following the Business Combination, the greatest voting interest in the combined entity relative to other shareholders (including following the redemptions discussed below under “Liquidity and Capital Resources — Sources of Liquidity”);
|
| • |
the largest individual minority shareholder of the combined entity was a shareholder of
Li-Cycle
prior to the Business Combination;
|
| • |
the senior management of
Li-Cycle
became the senior management of
Li-Cycle
Holdings following the Business Combination;
|
| • |
Prior to the Business Combination,
Li-Cycle
was larger than Peridot based on historical total assets and revenues; and
|
| • |
Li-Cycle’s
operations comprise the ongoing operations of
Li-Cycle
Holdings Corp.
|
Upon consummation of the Business Combination and the closing of the PIPE Financing, the most significant change in
Li-Cycle’s
future reported financial position and results of operations was an estimated increase in cash and cash equivalents (as compared to
Li-Cycle’s
balance sheet at July 31, 2021) of approximately $527 million, including $315 million in gross proceeds from the PIPE Financing. Total direct and incremental transaction costs of Peridot and
Li-Cycle
are estimated at approximately $55 million, a portion of which will be treated as a reduction of the cash proceeds and deducted from
Li-Cycle
Holdings Corp.’s additional
paid-in
capital and a portion of which will be treated as an expense on
Li-Cycle
Holdings Corp.’s statement of operations.
As a consequence of the Business Combination,
Li-Cycle
Holdings Corp. became the successor to an
SEC-registered
and NYSE-listed company, which will require
Li-Cycle
to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.
38
COMBINED COMPANY
UNAUDITED PRO FORMA CONDENSED
COMBINED BALANCE SHEET
AS OF JULY 31, 2021
|
Final Redemption
|
||||||||||||||||||||||||
|
Li-Cycle
Holdings Corp. US$ (A) |
Li-Cycle
Corp. US$ (B) |
Peridot
Acquisition Corp US$ (C) |
Transaction
Accounting Adjustments US$ |
Pro Forma
Balance Sheet US$ |
||||||||||||||||||||
|
Assets
|
||||||||||||||||||||||||
|
Current assets
|
||||||||||||||||||||||||
|
Cash
|
1 | 2,350,722 | 563 | 315,490,000 | (2 | ) | ||||||||||||||||||
| (54,000,000 | ) | (3 | ) | |||||||||||||||||||||
| (33,793,998 | ) | (4 | ) | |||||||||||||||||||||
| 300,154,668 | (4 | ) | 530,201,956 | |||||||||||||||||||||
|
Cash and securities held in Trust Account
|
300,154,668 | (300,154,668 | ) | (4 | ) | — | ||||||||||||||||||
|
Accounts receivable
|
3,255,981 | 3,255,981 | ||||||||||||||||||||||
|
Prepayments and deposits
|
7,911,436 | 303,958 | (6,176,806 | ) | (3 | ) | 2,038,588 | |||||||||||||||||
|
Inventory
|
1,502,921 | 1,502,921 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 1 | 15,021,060 | 300,459,189 | 221,519,196 | 536,999,446 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Non-current
assets
|
||||||||||||||||||||||||
|
Plant and equipment
|
18,113,712 | 18,113,712 | ||||||||||||||||||||||
|
Right of use assets
|
16,277,652 | 16,277,652 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 34,391,364 | — | — | 34,391,364 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 1 | 49,412,424 | 300,459,189 | 221,519,196 | 571,390,810 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Liabilities
|
||||||||||||||||||||||||
|
Current liabilities
|
||||||||||||||||||||||||
|
Accounts payable and accrued liabilities
|
15,778,982 | 5,386,827 | (5,386,827 | ) | (3 | ) | ||||||||||||||||||
| (6,176,806 | ) | (3 | ) | 9,602,176 | ||||||||||||||||||||
|
Restricted share units
|
3,259,010 | (3,259,010 | ) | (5 | ) | — | ||||||||||||||||||
|
Lease liabilities
|
1,190,086 | 1,190,086 | ||||||||||||||||||||||
|
Loans payable
|
1,688,853 | 1,688,853 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 21,916,931 | 5,386,827 | (14,822,643 | ) | 12,481,115 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Non-current
liabilities
|
||||||||||||||||||||||||
|
Lease liabilities
|
15,044,408 | 15,044,408 | ||||||||||||||||||||||
|
Loan payable
|
— | 9,776,681 | 9,776,681 | |||||||||||||||||||||
|
Restoration provisions
|
332,420 | 332,420 | ||||||||||||||||||||||
|
Class A ordinary shares subject to possible redemption
|
— | 217,242,360 | (1 | ) | ||||||||||||||||||||
| — | (33,776,260 | ) | (4 | ) | ||||||||||||||||||||
| — | (183,466,100 | ) | (4 | ) | — | |||||||||||||||||||
|
Warrant liability
|
62,330,000 | 62,330,000 | ||||||||||||||||||||||
|
Deferred underwriting fee payable
|
— | 10,500,000 | (10,500,000 | ) | (3 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 25,153,509 | 72,830,000 | (10,500,000 | ) | 87,483,509 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 47,070,440 | 78,216,827 | (25,322,643 | ) | 99,964,624 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Class A ordinary shares subject to possible redemption
|
217,242,360 | (217,242,360 | ) | (1 | ) | — | ||||||||||||||||||
39
|
Final Redemption
|
||||||||||||||||||||||||
|
Li-Cycle
Holdings Corp. US$ (A) |
Li-Cycle
Corp. US$ (B) |
Peridot
Acquisition Corp US$ (C) |
Transaction
Accounting Adjustments US$ |
Pro Forma
Balance Sheet US$ |
||||||||||||||||||||
|
Shareholders’ equity
|
||||||||||||||||||||||||
|
Share capital —
Li-Cycle
Corp.
|
37,805,879 | (37,805,879 | ) | (5 | ) | — | ||||||||||||||||||
|
Share capital — Peridot Acquisition Corp.
|
1,578 | (1,578 | ) | (4 | ) | — | ||||||||||||||||||
|
Share capital —
Li-Cycle
Holdings Corp.
|
1 | 37,805,879 | (5 | ) | ||||||||||||||||||||
| 3,259,010 | (5 | ) | ||||||||||||||||||||||
| 794,328 | (5 | ) | ||||||||||||||||||||||
| 315,490,000 | (2 | ) | ||||||||||||||||||||||
| (38,113,173 | ) | (3 | ) | |||||||||||||||||||||
| 183,448,362 | (4 | ) | ||||||||||||||||||||||
| 56,008,334 | (4 | ) | ||||||||||||||||||||||
| (51,009,910 | ) | (4 | ) | |||||||||||||||||||||
| 152,285,376 | (6 | ) | ||||||||||||||||||||||
| 1,578 | (4 | ) | 659,969,785 | |||||||||||||||||||||
|
Contributed surplus
|
952,441 | 56,008,334 | (56,008,334 | ) | (4 | ) | ||||||||||||||||||
| 2,124,321 | (5 | ) | ||||||||||||||||||||||
| 794,328 | (5 | ) | 2,284,434 | |||||||||||||||||||||
|
Accumulated deficit
|
(36,119,724 | ) | (51,009,910 | ) | 51,009,910 | (4 | ) | |||||||||||||||||
| (2,124,321 | ) | (5 | ) | |||||||||||||||||||||
| (152,285,376 | ) | (6 | ) | (190,529,421 | ) | |||||||||||||||||||
|
Accumulated other comprehensive income
|
(296,612 | ) | (296,612 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 1 | 2,341,984 | 5,000,002 | 464,084,199 | 471,426,186 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| 1 | 49,412,424 | 300,459,189 | 221,519,196 | 571,390,810 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
|
A.
|
Derived from the audited statement of financial position of
Li-Cycle
Holdings Corp. as of May 31, 2021 prepared under IFRS.
|
|
B.
|
Derived from the unaudited condensed consolidated interim statement of financial position of
Li-Cycle
Corp as of July 31, 2021 which was prepared in US dollars and under IFRS.
|
|
C.
|
Derived from the unaudited condensed interim statement of financial position of Peridot Acquisition Corp. (“Peridot”) as of June 30, 2021 which was prepared under US GAAP. Except as noted in Note 1, there was no other material adjustment made to convert Peridot’s balance sheet from US GAAP to IFRS.
|
|
1.
|
Peridot’s Class A ordinary shares subject to possible redemption balance of US$217,242,360 was classified as a temporary equity under US GAAP and should be classified as a liability under IFRS because the right to redeem was at the option of the holder.
|
|
2.
|
On February 16, 2021,
Li-Cycle
Corp. entered into a definitive business combination agreement with Peridot Acquisition Corp.
Li-Cycle
Corp. is expected to receive approximately US$582 million in gross transaction proceeds after redemption by Peridot Acquisition Corp.’s shareholders, and 100% of
Li-Cycle
Corp.’s existing shares will roll into the combined company,
Li-Cycle
Holdings Corp. Out of the US$582 million in gross proceeds, US$266.4 million will come from Peridot’s existing cash balance while the remaining US$315.5 million is expected to come from private investments in public equity.
|
|
3.
|
Li-Cycle
Corp. was identified as the acquirer for accounting purposes. An expected $55 million of fees relating to the raising of capital via share issuance is presented as a reduction of share capital on the pro forma combined balance sheet. US$10.5 million of the fees have been recorded as deferred underwriting fee payable on Peridot’s balance sheet as of June 30, 2021. US$6.4 million of fees have been incurred to date
|
40
|
and $1.0 million has been paid by Peridot Acquisition Corp. as of June 30, 2021. The remaining US$38.1 million of expected fees have been deducted directly against share capital of
Li-Cycle
Holdings Corp. on the pro forma combined balance sheet. Out of the remaining US38.1 million, $6.2 million was recorded in prepayments and deposits and in accounts payable and accrued liabilities in the interim statement of financial position of
Li-Cycle
Corp. as of July 31, 2021.
|
|
4.
|
In connection with the shareholder meeting held by Peridot to approve the Business Combination, a total of 3,377,626 Class A Shares were redeemed by Peridot, resulting in a total redemption payment of approximately $33.8 million, while the remaining US$266.4 million of cash and securities held in trust account will become cash of the combined entity,
Li-Cycle
Holdings Corp. US$183.5 million of Peridot’s Class A ordinary shares which were subject to possible redemption but not redeemed (18,346,610 shares at US$10.00 per share) will become part of the permanent share capital of the combined entity,
Li-Cycle
Holdings Corp. Peridot’s existing share capital of US$1,578 and contributed surplus of US$58,008,334 will be added to the share capital balance of
Li-Cycle
Holdings Corp. and Peridot’s existing accumulated deficit of US$51,009,910 will be deducted from the share capital balance of
Li-Cycle
Holdings Corp.
|
|
5.
|
All of
Li-Cycle
Corp.’s existing fully diluted shares will be exchanged for shares or stock options of
Li-Cycle
Holdings Corp.
Li-Cycle
Corp.’s existing share capital of US$37,805,879 as of July 31, 2021 will become part of the share capital of the combined entity,
Li-Cycle
Holdings Corp. All restricted share units will be exercised upon the business combination transaction, so
Li-Cycle
Corp.’s restricted share units balance of US$3,259,010 are added to the share capital balance of
Li-Cycle
Holdings Corp. Accelerated vesting of
Li-Cycle
Corp.’s existing stock options would result in an additional expense of $2,124,321. For the portion of
Li-Cycle
Corp.’s existing stock options which are surrendered in exchange for shares, $794,328 of contributed surplus would be added to the share capital balance of
Li-Cycle
Holdings Corp. The remaining stock options of
Li-Cycle
Corp. would be converted into stock options of
Li-Cycle
Holdings Corp. at the exchange ratio of 39.91.
|
|
6.
|
Li-Cycle
Corp. was identified as the acquirer for accounting purposes. The acquisition of Peridot Acquisition Corp. is outside the scope of IFRS 3, “Business Combinations,” and it is accounted for as an equity-settled, share-based payment transaction in accordance with IFRS 2, “Share-based Payments” (“IFRS 2”).
Li-Cycle
Holdings Corp. is considered to be a continuation of
Li-Cycle
Corp., with the net identifiable assets of Peridot Acquisition Corp. deemed to have been acquired by
Li-Cycle
Corp. in exchange for shares of
Li-Cycle
Corp. Under IFRS 2, the transaction is measured at the fair value of the consideration deemed to have been issued by
Li-Cycle
Corp. in order to acquire 100% of Peridot Acquisition Corp. Any difference in the fair value of the consideration deemed to have been issued by
Li-Cycle
Corp. and the fair value of Peridot Acquisition Corp.’s identifiable net assets represents a listing service received by
Li-Cycle
Corp., recorded through profit and loss, summarized as follows:
|
| As at July 31, 2021 | ||||
|
Peridot’s existing assets to be acquired
|
$ | 266,665,191 | (1) | |
|
Cash from private investment in public equity
|
315,490,000 | |||
|
Peridot’s existing liabilities to be assumed
|
(78,216,827 | ) | ||
|
|
|
|||
|
Net assets to be acquired by
Li-Cycle
Corp.
|
503,938,364 | |||
|
Total consideration deemed to be issued by
Li-Cycle
Corp.
|
656,223,740 | (1)(2) | ||
|
|
|
|||
|
Excess of fair value of shares issued over net assets acquired
|
$ | 152,285,376 | ||
| (1) |
Adjusted for $33.8 million cash payout upon redemption by Peridot’s shareholders
|
| (2) |
Based on an estimated fair value of
Li-Cycle’s
business on a
pre-money
basis, calculated using generally accepted valuation methodologies.
|
41
COMBINED COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS FOR NINE MONTHS
ENDED JULY 31, 2021
|
Final Redemption
|
||||||||||||||||||||||||
|
Li-Cycle
Holdings Corp. US$ (A) |
Li-Cycle
Corp. US$ (B) |
Peridot
Acquisition Corp. US$ (C) |
Transaction
Accounting Adjustments US$ |
Pro Forma
Income Statement US$ |
||||||||||||||||||||
|
Revenue
|
||||||||||||||||||||||||
|
Product sales
|
2,682,531 | 2,682,531 | ||||||||||||||||||||||
|
Recycling services
|
301,216 | — | 301,216 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 2,983,747 | — | — | 2,983,747 | ||||||||||||||||||||
|
Expenses
|
||||||||||||||||||||||||
|
Professional fees
|
4,095,596 | 5,756,638 | 9,852,234 | |||||||||||||||||||||
|
Employee salaries and benefits, net
|
5,358,953 | 5,358,953 | ||||||||||||||||||||||
|
Raw materials, supplies and finished goods
|
4,876,561 | 4,876,561 | ||||||||||||||||||||||
|
Research and development, net
|
1,928,582 | 1,928,582 | ||||||||||||||||||||||
|
Share-based compensation
|
1,307,874 | 1,307,874 | ||||||||||||||||||||||
|
Office and administrative
|
987,820 | 323,160 | 1,310,980 | |||||||||||||||||||||
|
Depreciation, net
|
788,830 | 788,830 | ||||||||||||||||||||||
|
Freight and shipping
|
587,953 | 587,953 | ||||||||||||||||||||||
|
Marketing
|
465,269 | 465,269 | ||||||||||||||||||||||
|
Plant facilities
|
232,358 | 232,358 | ||||||||||||||||||||||
|
Travel and entertainment
|
188,712 | 188,712 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 20,818,508 | 6,079,798 | — | 26,898,306 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Loss from operations
|
— | (17,834,761 | ) | (6,079,798 | ) | — | (23,914,559 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Other (income) expense
|
||||||||||||||||||||||||
|
Interest expense
|
788,335 | 788,335 | ||||||||||||||||||||||
|
Interest income
|
(1,725 | ) | (80,300 | ) | (82,025 | ) | ||||||||||||||||||
|
Fair value gain on warrant liability
|
21,390,000 | 21,390,000 | ||||||||||||||||||||||
|
Fair value loss on restricted share units
|
2,433,196 | 2,433,196 | ||||||||||||||||||||||
|
Foreign exchange loss
|
536,216 | 536,216 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 3,756,022 | 21,309,700 | — | 25,065,722 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net loss
|
— | (21,590,783 | ) | (27,389,498 | ) | — | (48,980,281 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Weighted average shares outstanding, basic and diluted
|
34,122,374 | (1 | ) | |||||||||||||||||||||
| 97,508,179 | (2 | ) | ||||||||||||||||||||||
| 31,549,000 | (3 | ) | 163,179,553 | |||||||||||||||||||||
|
Loss per common share — basic and diluted
|
(0.30 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
42
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR NINE MONTHS ENDED JULY 31, 2021
|
A.
|
There was no statement of operations prepared for
Li-Cycle
Holdings Corp. as it was incorporated on February 12, 2021 for the purpose of the Business Combination and had no operations between February 12 and May 31, 2021.
|
|
B.
|
Derived from the unaudited condensed consolidated interim statement of loss and comprehensive loss of
Li-Cycle
Corp. for the nine months ended July 31, 2021, which was prepared in US dollars and under IFRS.
|
|
C.
|
Derived from the unaudited condensed interim statement of operations of Peridot Acquisition Corp. for the six months ended June 30, 2021, which was prepared under US GAAP. There was no material adjustment made to convert Peridot’s statement of operations from US GAAP to IFRS.
|
|
1.
|
In connection with the shareholder meeting held by Peridot to approve the Business Combination, a total of 3,377,626 Class A Shares were redeemed by Peridot, resulting in a total redemption payment of approximately $33.8 million, while the remaining 26,622,374 of Class A shares will be converted into Class A shares of the combined entity,
Li-Cycle
Holdings Corp. In addition, 7,500,000 of Class B shares of Peridot Acquisition Corp. will be converted into 7,500,000 of Class A shares of the combined entity,
Li-Cycle
Holdings Corp. upon closing.
|
|
2.
|
Li-Cycle
Corp.’s existing shareholders will exchange 2,552,450 fully diluted shares of
Li-Cycle
Corp. for the shares of the combined entity,
Li-Cycle
Holdings Corp., at an Exchange Ratio of approximately 1:39.91, as determined per the Plan of Arrangement, resulting in 97,508,179 shares of
Li-Cycle
Holdings Corp. and 4,242,707 stock options of
Li-Cycle
Holdings Corp. for the existing shareholders of
Li-Cycle
Corp.
|
|
3.
|
31,549,000 shares of the combined entity,
Li-Cycle
Holdings Corp., will be issued to the new investors at US$10 per share for a total of US$315.5 million of Private Investment in Public Equity.
|
43
COMBINED COMPANY
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS FOR YEAR
ENDED OCTOBER 31, 2020
|
Final Redemption
|
||||||||||||||||||||||||
|
Li-Cycle
Holdings Corp. US$ (A) |
Li-Cycle
Corp. US$ (B) |
Peridot
Acquisition Corp. US$ (C) |
Transaction
Accounting Adjustments US$ |
Pro Forma
Income Statement US$ |
||||||||||||||||||||
|
Revenue
|
||||||||||||||||||||||||
|
Product sales
|
554,914 | 554,914 | ||||||||||||||||||||||
|
Recycling services
|
237,340 | — | 237,340 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 792,254 | — | — | 792,254 | ||||||||||||||||||||
|
Expenses
|
||||||||||||||||||||||||
|
Professional fees
|
2,962,261 | 348,854 | 693,847 | (4 | ) | 4,004,962 | ||||||||||||||||||
|
Listing expense
|
— | 152,285,376 | (5 | ) | 152,285,376 | |||||||||||||||||||
|
Employee salaries and benefits, net
|
2,819,195 | 2,819,195 | ||||||||||||||||||||||
|
Depreciation
|
1,095,250 | 1,095,250 | ||||||||||||||||||||||
|
Research and development, net
|
776,668 | 776,668 | ||||||||||||||||||||||
|
Raw materials and supplies
|
577,859 | 577,859 | ||||||||||||||||||||||
|
Plant facilities and others
|
390,687 | 390,687 | ||||||||||||||||||||||
|
Marketing
|
365,820 | 365,820 | ||||||||||||||||||||||
|
Share-based compensation
|
332,634 | 2,124,321 | (2 | ) | 2,456,955 | |||||||||||||||||||
|
Office and administrative
|
316,401 | 112,123 | 428,524 | |||||||||||||||||||||
|
Travel and entertainment
|
160,332 | 160,332 | ||||||||||||||||||||||
|
Freight and shipping
|
137,010 | 137,010 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 9,934,117 | 460,977 | 155,103,544 | 165,498,638 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Loss from operations
|
— | (9,141,863 | ) | (460,977 | ) | (155,103,544 | ) | (164,706,384 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Other (income) expense
|
||||||||||||||||||||||||
|
Interest expense
|
529,700 | 529,700 | ||||||||||||||||||||||
|
Interest income
|
(34,403 | ) | (74,412 | ) | (108,815 | ) | ||||||||||||||||||
|
Fair value loss on restricted share units
|
84,454 | 84,454 | ||||||||||||||||||||||
|
Fair value loss on warrant liability
|
22,540,000 | 22,540,000 | ||||||||||||||||||||||
|
Offering costs allocated to warrant liability
|
693,847 | (693,847 | ) | (4 | ) | — | ||||||||||||||||||
|
Foreign exchange (gain) loss
|
(445,652 | ) | (445,652 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| — | 134,099 | 23,159,435 | (693,847 | ) | 22,599,687 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Net loss
|
— | (9,275,962 | ) | (23,620,412 | ) | (154,409,697 | ) | (187,306,071 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Weighted average shares outstanding, basic and diluted
|
34,122,374 | (1 | ) | |||||||||||||||||||||
| 97,508,179 | (2 | ) | ||||||||||||||||||||||
| 31,549,000 | (3 | ) | 163,179,553 | |||||||||||||||||||||
|
Loss per common share — basic and diluted
|
(1.15 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
44
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR YEAR ENDED OCTOBER 31, 2020
|
A.
|
There was no statement of operations prepared for
Li-Cycle
Holdings Corp. as it was incorporated on February 12, 2021 for the purpose of the Business Combination and had no operations between February 12 and May 31, 2021.
|
|
B.
|
Derived from the audited consolidated statement of loss and comprehensive loss of
Li-Cycle
Corp. for the year ended October 31, 2020, which was prepared in US dollars and under IFRS.
|
|
C.
|
Derived from the audited statement of operations of Peridot Acquisition Corp. for the year ended December 31, 2020, which was prepared under US GAAP. There was no material adjustment made to convert Peridot’s statement of operations from US GAAP to IFRS.
|
|
1.
|
In connection with the shareholder meeting held by Peridot to approve the Business Combination, a total of 3,377,626 Class A Shares were redeemed by Peridot, resulting in a total redemption payment of approximately $33.8 million, while the remaining 26,622,374 of Class A shares will be converted into Class A shares of the combined entity,
Li-Cycle
Holdings Corp. In addition, 7,500,000 of Class B shares of Peridot Acquisition Corp. will be converted into 7,500,000 of Class A shares of the combined entity,
Li-Cycle
Holdings Corp. upon closing.
|
|
2.
|
Li-Cycle
Corp.’s existing shareholders will exchange 2,552,450 fully diluted shares of
Li-Cycle
Corp. for the shares of the combined entity,
Li-Cycle
Holdings Corp., at an Exchange Ratio of approximately 1:39.91, as determined per the Plan of Arrangement, resulting in 97,508,179 shares of
Li-Cycle
Holdings Corp. and 4,242,707 stock options of
Li-Cycle
Holdings Corp. for the existing shareholders of
Li-Cycle
Corp. Accelerated vesting of
Li-Cycle
Corp.’s existing stock options upon the business combination transaction would result in an additional expense of $2,124,321.
|
|
3.
|
31,549,000 shares of the combined entity,
Li-Cycle
Holdings Corp., will be issued to the new investors at US$10 per share for a total of US$315.5 million of Private Investment in Public Equity.
|
|
4.
|
Peridot’s offering costs allocated to warrant liability of US$693,847 was classified under other (income) expenses under US GAAP and should be classified as professional fees expense under IFRS based on the nature of the expense.
|
|
5.
|
Li-Cycle
Corp. was identified as the acquirer for accounting purposes. The acquisition of Peridot Acquisition Corp. is outside the scope of IFRS 3, “Business Combinations,” and it is accounted for as an equity-settled, share-based payment transaction in accordance with IFRS 2, “Share-based Payments” (“IFRS 2”).
Li-Cycle
Holdings Corp. is considered to be a continuation of
Li-Cycle
Corp., with the net identifiable assets of Peridot Acquisition Corp. deemed to have been acquired by
Li-Cycle
Corp. in exchange for shares of
Li-Cycle
Corp. Under IFRS 2, the transaction is measured at the fair value of the consideration deemed to have been issued by
Li-Cycle
Corp. in order to acquire 100% of Peridot Acquisition Corp. Any difference in the fair value of the consideration deemed to have been issued by
Li-Cycle
Corp. and the fair value of Peridot Acquisition Corp.’s identifiable net assets represents a listing service received by
Li-Cycle
Corp., recorded through profit and loss, summarized as follows:
|
| As at July 31, 2021 | ||||
|
Peridot’s existing assets to be acquired
|
$ | 266,665,191 | (1) | |
|
Cash from private investment in public equity
|
315,490,000 | |||
|
Peridot’s existing liabilities to be assumed
|
(78,216,827 | ) | ||
|
|
|
|||
|
Net assets to be acquired by
Li-Cycle
Corp.
|
503,938,364 | |||
|
Total consideration deemed to be issued by
Li-Cycle
Corp.
|
656,223,740 | (1)(2) | ||
|
|
|
|||
|
Excess of fair value of shares issued over net assets acquired
|
$ | 152,285,376 | ||
| (1) |
Adjusted for $33.8 million cash payout upon redemption by Peridot’s shareholders
|
| (2) |
Based on an estimated fair value of
Li-Cycle’s
business on a
pre-money
basis, calculated using generally accepted valuation methodologies.
|
45
INDUSTRY AND MARKET OVERVIEW
This section provides an overview of the industry in which
Li-Cycle
previously operated and in which the Company operates subsequent to the Business Combination. References in this section to “we,” “us” or
“Li-Cycle”
refer to
Li-Cycle
Corp. and its subsidiaries prior to the consummation of the Business Combination and the Company and its subsidiaries subsequent to the Business Combination.
Lithium-ion
Battery Recycling Market in North America
As production and use of
batteries and battery scrap in an environmentally friendly way.
lithium-ion
batteries has increased in recent years, manufacturers, consumers, regulators and investors have increasingly cited the importance of creating sustainable recycling technologies to maximize recovery and minimize waste from
end-of-life
According to
Li-Cycle’s
total addressable market forecast, based on a range of inputs from independent sources such as Benchmark Mineral Intelligence, the
lithium-ion
battery recycling market in North America is expected to grow from $257 million in 2020 to $1,784 million by 2025. Presently, most recycling facilities use pyrometallurgy-based technologies involving heat-based operations. Many of these facilities are capital intensive due to the need to treat the emission of toxic fluorine compounds released while smelting. Hydrometallurgical processing techniques, on the other hand, employ a less energy-consuming and more environmentally friendly alternative at a lower cost.
The outlook for the
and ultimately will be recycled.
lithium-ion
battery recycling market generally will depend on a number of factors, including how many batteries are placed in the market, remain in use, reach
end-of-life,
Single events may also have a disproportional high impact on the
lithium-ion
battery market. For example, an expansion in the Chinese bus market from 2015-2020 helped accelerate the use of
lithium-ion
batteries in the Chinese EV market from a minimal amount to more than 2.5 million vehicles annually over five years according to the International Energy Agency’s 2020 Global EV Outlook. According to Tesla, its own 2020 Gigafactory production for EVs of 500,000 vehicles now outpaces the global 2013 production for all battery cells at that time.
Canada
Canada has a moderately established market for post-consumer battery sorting and
lithium-ion
battery recycling, primarily from several small-scale sorting and recycling facilities. According to
Li-Cycle’s
total addressable market forecast developed using independent inputs such as those from Benchmark Mineral Intelligence, the Canada
lithium-ion
battery recycling market by volume was estimated to be 5,000 tonnes of
lithium-ion
batteries available for recycling in 2020 and is expected to reach a market volume of 9,219 tonnes of
lithium-ion
batteries available for recycling in 2025. Based on recycling regulations,
lithium-ion
recycling is compulsory in three provinces in Canada — British Columbia, Manitoba and Quebec. The EV market continues to grow in Canada as well, where regulators and private institutions are jointly developing EV charging stations.
United States
The United States has a relatively established market for
lithium-ion
battery recycling, primarily from several small-scale recycling facilities. According to
Li-Cycle’s
total addressable market forecast developed using independent inputs such as those from Benchmark Mineral Intelligence, the United States
lithium-ion
battery recycling market by volume was estimated to be 40,460 tonnes of
lithium-ion
batteries available for recycling in 2020 and is expected to reach a market volume of 238,678 tonnes of
lithium-ion
batteries available for recycling by 2025. Fuel economy standards and their increase under the Biden administration, corresponding to high growth rates in electric vehicle sales, are expected to result in an increase in
lithium-ion
recycling in the United States.
46
Key Products in the North America
Lithium-ion
Battery Recycled Raw Materials Market
Lithium Cobalt Oxide
Lithium Cobalt Oxide (“LCO”) has a specific energy that makes it an attractive cathode material for
lithium-ion
batteries used in mobile phones, laptops, and digital cameras. It is mostly used in consumer electronics.
Lithium-iron Phosphate
Lithium-iron phosphate (“LFP”) has a moderate specific energy and is widely used for residential storage systems, such as Alpha ESS battery and Enphase battery system. LFP are environmentally friendly and cost effective, but they have the lowest resale values. At present, China is the most lucrative market for LFP recycling as these batteries are being used on a large scale in the country.
Lithium Nickel Cobalt Manganese Oxide
Lithium nickel cobalt manganese oxide (“NCM”) is one of the most widely used cathode chemistries in
lithium-ion
batteries. It is known to have a high capacity, high operating voltage, and relatively slow reaction time with electrolytes. There is a major shift to high nickel content NCM to reduce the content of cobalt in NCM cathode technologies. Some NCM lithium technologies used in energy storage system applications are 7 kilowatt-hour Tesla Powerwall, the LG Chem equivalent and Leclanche Apollion Cube, for example.
Lithium Nickel Cobalt Aluminum Oxide
Lithium nickel cobalt aluminum oxide (“NCA”) is similar to NCM; it offers high specific energy and has high durability. NCA is extensively used by Tesla. The increasing demand for NCA technologies from the electronics industry is expected to boost demand for NCA in the global market.
Competitors in the North America
Lithium-ion
Recycling Market
In addition to
Li-Cycle,
the key players in the North American
lithium-ion
battery recycling market are American Battery Metals Corp., American Manganese Inc., Redwood Materials Inc., and Retriev Technologies.
American Battery Metals Corp.
American Battery Metals Corp. is developing a clean technology platform that is focused on creating a circular economy for battery materials through (i) recycling of
lithium-ion
batteries to recover and reuse battery metals, (ii) extraction of battery metals from primary resources and development of new green technologies that can be deployed at scale and (iii) exploration and stewardship of new mineral resources globally.
American Manganese Inc.
American Manganese Inc. is a metals company that focuses on the recycling of
lithium-ion
batteries with its RecycLiCo patented process. The process provides for the extraction of cathode metals. The company is engaged in the acquisition, exploration, and development of interests in mineral resource projects.
Redwood Materials Inc.
Redwood Materials Inc. is a battery recycling company which is primarily focused on an electronic waste
(“e-waste”)
recycling business for consumer electronics. The company utilizes a thermal recycling process.
47
Retriev Technologies Incorporated
Retriev Technologies Incorporated is a diverse battery recycling company that uses advanced materials processing plants to recycle various types of batteries.
COVID-19
Impact
In late 2019, a novel strain of coronavirus, now referred to as
COVID-19,
was identified in China. The virus has spread globally, resulting in governmental authorities implementing protective measures, such as travel restrictions, quarantines, shelter in place orders and shutdowns, in order to contain its spread and reduce its impact. The pandemic has significantly disrupted economies around the world.
COVID-19
continues to have a materially adverse impact in North America. The United States is one of the largest markets for
lithium-ion
battery recycling. The continuous spread of
COVID-19
has caused lockdowns and shutdowns of manufacturing facilities. Therefore, many industry sectors, including the automotive sector, have been negatively impacted and continue to be unable to produce vehicles at capacity. The continued impact of
COVID-19
on manufacturing production may lead to less demand for
lithium-ion
batteries, impacting the resulting contribution of batteries and battery-related scrap material to the recycling market over the short-
to-medium
term.
COVID-19
related lockdowns and shutdowns could also impact the ability to collect batteries and battery scrap for recycling.
Li-Cycle’s
operations have been impacted by the
COVID-19
pandemic. Because
Li-Cycle’s
operations have been considered an essential service in both Canada and the United States,
Li-Cycle’s
plants have continued operations during the pandemic, albeit with the implementation of appropriate measures to ensure employee safety.
Li-Cycle
shut down its commercial headquarters in March 2020 and has enforced a work-from-home mandate since that time. The Kingston spoke experienced some battery supply related issues in the second fiscal quarter of 2021 due to
COVID-19
related shutdowns in Ontario, Canada. In the coming months, and depending on government guidelines,
Li-Cycle
may
re-open
its office facilities but with a robust plan to ensure compliance with all recommended actions to ensure employee safety. Management continues to monitor the impact that the
COVID-19
pandemic is having on the Company, the
Lithium-ion
battery recycling industry and the economies in which the Company operates.
We anticipate that our future results of operations, including the results for 2021, will be negatively impacted by the coronavirus outbreak, but the impact is difficult to quantify. Given the speed and frequency of continuously evolving developments with respect to this pandemic, we cannot reasonably estimate the magnitude of the impact to our results of operations, and such impacts could grow in a way that is material to our results. See “
.”
Risk Factors —
Unfavorable economic conditions, such as consequences of the global
COVID-19
pandemic, may have a material adverse effect on
Li-Cycle’s
business, results of operations and financial condition
Regulation
There has been an increase in battery regulation globally in recent years. For example, in the United States, California is evaluating a policy to drive Recycling Efficiency Rates as close to 100% as possible, potentially beginning as early as 2022. In Canada, Ontario requires Recycling Efficiency Rates for
lithium-ion
batteries of over 70% by 2023. China has required functional material recovery rates greater than 80% since 2018, with specific targets by key materials (nickel, cobalt, and lithium). The European Union proposes to update its EU Battery Directive during 2021 to implement more aggressive recycling targets, including minimum material recovery rates of 90% for both cobalt and nickel by 2025 (also a potential ‘high level of ambition’ mandate for at least a 95% material recovery rate for both cobalt and nickel by 2030; this is being discussed as part of the proposed regulation), a minimum recovery rate of 35% for lithium by 2025 (also a potential ‘high level of ambition’ mandate for at least a 70% material recovery rate for lithium by 2030; this is being discussed as part of
48
the proposed regulation), and a Recycling Efficiency Rate of least 65% by 2025 (also includes a potential ‘high level of ambition’ mandate for a Recycling Efficiency Rate of at least 70% by 2030; this is being discussed as part of the proposed regulation).
Li-Cycle
holds all licenses currently required in connection with its technologies and operations.
Li-Cycle
has engaged a third-party consultant to work with a dedicated team across all
Li-Cycle
projects, supporting it with permitting and regulatory compliance, and keeping it apprised of all regulatory changes and regulations applicable to it.
49
BUSINESS
Shareholders should read this section in conjunction with the other sections of this prospectus, including our audited financial statements and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
General
We are an industry leader in
batteries to produce “black mass” and other intermediate products, and (b) at our Hubs, to process black mass to recover raw materials, including but not limited to lithium carbonate, nickel sulphate and cobalt sulphate . Our process enables an up to 95% Recycling Efficiency Rate, as compared to what we believe to be a 50% traditional industry average. Unlike the traditional revenue model for recycling that relies primarily on waste or tipping fees, our model is focused on generating revenue from sales of the raw materials we produce. We expect that future facilities will achieve similar Recycling Efficiency Rates.
lithium-ion
battery resource recovery and the leading
lithium-ion
battery recycler in North America. When we refer to ourselves as the leading
lithium-ion
battery recycler in North America, we are referring to our status based on installed permitted capacity for
lithium-ion
battery recycling measured in tonnes per year. Our proprietary “Spoke & Hub” recycling process is designed (a) at our Spokes, to process battery manufacturing scrap and
end-of-life
Lithium-ion
batteries are increasingly powering products and solutions in a range of industries, including consumer electronics and EVs. An overview of the industries in which
lithium-ion
batteries are utilized is set forth below:
Source: Expert Interviews, Secondary Research, and BIS Research Analysis
We estimate that by the end of 2020 there were 465,000 tonnes annually of
lithium-ion
batteries available for recycling globally. The number of mobile devices operating worldwide is expected to reach 17.72 billion by 2024, an increase of 3.7 billion devices compared to 2020 levels, according to Statista. The number of EVs is expected to reach 137.8 million annual sales by 2030, as compared to 7.6 million in 2020, according to the International Energy Agency’s 2020 Global EV Outlook.
We currently have over 70 commercial contracts with suppliers of
stage and are available for recycling, we expect to source a larger percentage of our
end-of-life
lithium-ion
batteries and battery-related manufacturing scrap. As the market for EVs grows and the batteries from those vehicles reach
end-of-life
lithium-ion
recyclables from EVs.
50
Under our
batteries and battery-related waste are first shipped to Spoke locations, where the materials are mechanically processed into several intermediate products, including black mass. Black mass is a powder-like substance, which contains a number of valuable metals, including lithium, cobalt and nickel. Black mass from several Spoke locations is then collected at a Hub location, where it is put through a hydrometallurgical (or “wet chemistry”) process to produce end products, such as lithium carbonate, nickel sulphate and cobalt sulphate, which can be sold back into the battery supply chain and used in the manufacturing of new
two-part
“Spoke & Hub” process,
end-of-life
lithium-ion
batteries. We expect to operate two types of Hubs as we construct and develop additional Hubs. A ternary Hub is a Hub that will process all types of black mass using our technology. An LFP Hub is a Hub that will have the capacity to process all types of black mass using our technology but that will be dedicated to processing lithium iron phosphate (“LFP”) black mass derived from LFP
lithium-ion
batteries, LFP
lithium-ion
battery materials, and third
party-LFP
black mass to produce LFP cathode pertinent
end-products
(e.g. lithium carbonate). LFP
lithium-ion
batteries have historically been viewed by the market as more difficult to recycle than other
lithium-ion
batteries; we are targeting to change this ethos in the
lithium-ion
battery recycling industry and to transform
LFP-containing
lithium-ion
batteries into a valuable resource.
We have a market-leading position in North America through our two operational commercial Spokes in Kingston, Ontario, and Rochester, New York, and are developing our first commercial ternary Hub in Rochester, New York. We have also announced the development and construction of our third Spoke in Gilbert, Arizona and the development of our fourth Spoke near Tuscaloosa, Alabama. We are also evaluating additional opportunities to scale our operations with a range of potential partners and expansion opportunities that may include acquisitions, joint ventures or other commercial arrangements in North America, Europe, and Asia.
We believe that our recycling process can make a valuable contribution to the world’s transition to renewable energy sources, by diverting
manufacturing phases in both an environmentally and economically sustainable manner.
end-of-life
lithium-ion
battery materials from landfill sites, by offering an environmentally-friendly alternative to energy-intensive pyrometallurgical processing methods, and by providing a steady source of recycled content into the battery supply chain. We believe our production costs are on average lower than the mining and processing costs otherwise incurred by suppliers to produce these materials because it is able to produce multiple materials from a single process and because its process yields minimal waste and no displaced earth or tailings, as compared to traditional mining processes. By
re-inserting
critical materials back into the
lithium-ion
battery supply chain, we are able to effectively close the loop between the beginning and
end-of-life
Spoke & Hub Processes and Products
Spokes
Spokes handle the preliminary processing of
batteries and battery scrap. At our Spokes, batteries for recycling are broken down through a mechanical size reduction process known as shredding and separated into three “intermediate” product lines: black mass, mixed copper/aluminum and mixed plastics. Based on the Product Recovery Percentage, more than 95% of the mass of batteries and battery scrap entering the recycling process is transformed through our Spokes into these intermediate products.
end-of-life
We currently own and operate two Spokes, located in Kingston, Ontario (the “Kingston Spoke”) and Rochester, New York (the “Rochester Spoke”), respectively. Additionally, we are currently developing a third Spoke located in Gilbert, Arizona, in the Phoenix metropolitan area (the “Arizona Spoke”), and have announced the development of a fourth Spoke located near Tuscaloosa, Alabama (the “Alabama Spoke”).
Hubs
At our Hub facilities, black mass from the Spokes will be separated through the hydrometallurgical circuit to produce individual raw materials with the purity levels required of raw materials to be used in battery production. The end products produced from black mass include lithium carbonate, nickel sulphate and cobalt sulphate.
51
Our hydrometallurgical process is both more efficient and more environmentally friendly than traditional pyrometallurgical processes, which involve volatizing or burning materials at high temperatures. Pyrometallurgical processes have lower recovery rates, are carbon-intensive and generate harmful emissions. Accordingly, the hydrometallurgical process is expected to become the preferred approach to
lithium-ion
battery recycling among manufacturers who are focused on product stewardship and environmental sustainability.
Ternary Hub facilities will process all types of black mass. LFP Hub facilities will have the capacity to process all types of black mass but will be dedicated to processing lithium iron phosphate black mass, deriving from LFP
lithium-ion
batteries, LFP
lithium-ion
battery materials, and third
party-LFP
black mass to produce LFP cathode pertinent
end-products
(e.g. lithium carbonate).
Our first commercial-scale ternary Hub facility, the Rochester Hub, is currently in late stage development and will be located in the Eastman Business Park, in Rochester, New York.
Utilizing our Spoke & Hub Technologies
™
, we are able to achieve a Recycling Efficiency rate of up to 95%. Our
two-stage
battery recycling model enables our customers to benefit from a safe and environmentally friendly solution for recycling all types of
lithium-ion
batteries and
lithium-ion
battery materials. We expect that our future facilities will achieve similar Recycling Efficiency Rates.
Company Overview and History
Our wholly-owned subsidiary
Li-Cycle
was founded by Ajay Kochhar and Tim Johnston in 2016 with the goal of solving the global
end-of-life
lithium-ion
battery disposal problem and creating a secondary supply chain to meet the demand for critical battery materials through innovative recycling technology, ultimately creating a closed-loop supply chain. Historically, the products generated from
lithium-ion
battery recycling processes were treated as a waste and a liability.
Li-Cycle
opened its first pilot facility in Canada in 2017, which had a recycling capacity of 50 tonnes per year. In 2018, it launched its first Spoke and Hub demonstration facility in Kingston, Ontario, Canada.
Li-Cycle
commissioned its first commercial Spoke facility in 2019 in Kingston, Ontario, with a recycling capacity of 2,500 tonnes per year, and upgraded this facility to 5,000 tonnes per year in 2020. In late 2020,
Li-Cycle
opened a second commercial Spoke facility with a recycling capacity of 5,000 tonnes per year, in Rochester, New York. In the first quarter of 2021,
Li-Cycle
announced the development and construction of the Arizona Spoke, and in the fourth quarter of 2021,
Li-Cycle
announced the development of the Alabama Spoke. At the Arizona Spoke, we expect operations of the first 5,000 tonnes Spoke line to commence in 2022 and the second 5,000 tonnes Spoke line to commence in 2023. At the Alabama Spoke, we expect operations to commence in 2022, with an initial capacity of 5,000 tonnes.
Once completed, we expect the Arizona Spoke to have a recycling capacity of 10,000 tonnes per year and the Alabama Spoke to have a recycling capacity of 5,000 tonnes per year, bringing our total recycling capacity to 25,000 tonnes per year. The Phoenix metropolitan area is strategically located close to our existing battery and battery scrap supply network, as well as being at the nexus of where we expect there will be continued growth of
batteries.
lithium-ion
batteries available for recycling due to Arizona’s growing EV industry. The southeastern United States, where our Alabama Spoke is located, is emerging as an important region for the
lithium-ion
battery supply chain, as battery manufacturers and automotive OEMs establish operations in the region, which we expect to lead to increased quantities of battery manufacturing scrap and
end-of-life
Our first revenue-generating Hub will be located in Rochester, New York, and is currently in late stage development. The location for the Rochester Hub was selected due to the nature of the infrastructure available at the site, including utilities, logistics and other physical infrastructure.
Li-Cycle’s
pre-feasibility
study for the Rochester Hub provides that the facility would have the capacity to process 25,000 tonnes of black mass annually (equivalent to approximately 60,000 tonnes of
lithium-ion
battery feed equivalent annually). Based on the
52
pre-feasibility
study, the Rochester Hub will require an estimated investment of at least US$175 million (±30%). The estimate accuracy is based on Association for the Advancement of Cost Engineering (“AACE”) accuracy ranges applicable to the relevant level of engineering. As the Rochester Hub project has progressed through the definitive engineering phase, we identified a range of potential scope additions, covering items such as infrastructure
tie-ins
and systems to achieve zero liquid discharge from the plant. We are also pursuing optimization strategies throughout the definitive engineering phase, including in response to market developments (such as increasing EV battery manufacturing volumes in North America and trends around battery chemistries in EV applications), which could lead to potential changes in the scope of the project. The ultimate scale of and investment in the Rochester Hub may be significantly greater than 25,000 tonnes per annum and US$175 million
(+/-30%,
based on the scope as at the
pre-feasibility
study) respectively, as set forth in the
pre-feasibility
study. Pending the approval of local and environmental permits, we expect construction at the Hub site to begin in late 2021, with operations commencing in early 2023. Based on the
pre-feasibility
study, the Rochester Hub would result in the creation of approximately 120 new jobs.
In 2021,
Li-Cycle
received the 2021 Big Innovation Award presented by Business Intelligence Group, and it was named to the World Circular Economy Forum’s list of Circular Economy Solutions Inspiring the World. In addition, it was named a 2020 and 2021 Global Cleantech 100 Company by the Cleantech Group and was a finalist in the 10th Annual Business Green Leaders Awards.
Customer Solutions
We provide sustainable and customer-centric solutions for each of our customer’s battery recycling needs. We provide the support necessary along each step of the process to ensure that our customers’ battery recycling experience is handled in a manner that is safe, professional, and economically viable.
Logistics Management
We work closely with a reliable network of logistics partners to support customers in, among other things, transporting their batteries to our facilities. This includes:
| • |
seamless and efficient coordination of shipments;
|
| • |
logistics partners to support transporting batteries from around the world;
|
| • |
a knowledgeable team to assist the customer in understanding packaging and documentation requirements;
|
| • |
managing storage and logistics with respect to specialized containers and shipment of large format, high voltage batteries used for EVs and energy storage; and
|
| • |
compliance with applicable regional, state, provincial and country regulations.
|
For example, on July 20, 2021, we announced a partnership with Univar Solutions OnSite Services, a global specialty chemical and ingredient distributor, to provide waste management solutions to customers.
Secure Destruction
We offer our customers a home for the secure destruction of materials containing
IP-sensitive
design information, such as research and development batteries and battery materials. We have adopted procedures to protect the privacy and confidentiality of its customers’ trade secrets.
Add-On
Services
In addition to providing advice on packaging and support with procurement, we provide spare battery storage, manage comprehensive battery replacement campaigns and customize programs and services to individual customers’ needs.
53
Supply Agreements
On May 11, 2021,
Li-Cycle
announced its entry into an agreement with Ultium Cells LLC ( “Ultium”), a joint venture between General Motors and LG Energy Solution, pursuant to which
Li-Cycle
will purchase and recycle up to 100% of the scrap generated by battery cell manufacturing at Ultium’s Lordstown, Ohio site.
Customer Agreements
Glencore
Li-Cycle
has a current
off-take
agreement with Glencore, an Anglo-Swiss multinational commodity trading and mining company, pertaining to the sale of black mass produced at
Li-Cycle’s
Spokes.
Li-Cycle
is paid in accordance with commodities pricing at the time of sale, subject to discounts due to additional refinements required for Glencore to be able to isolate cobalt metal and nickel metal
end-products
from the black mass it purchases. Product sales to Glencore represented a significant majority of
Li-Cycle’s
revenues in 2020.
Li-Cycle
expects to continue to sell black mass from our Spokes to third parties, pending completion of our first commercial Hub in Rochester, New York.
Traxys
Li-Cycle
has entered into a strategic global marketing relationship with Traxys, a company that provides financial and logistics solutions to the metals, mining and energy industries.
Li-Cycle
has entered into two Marketing, Logistics and Working Capital Agreements with Traxys, covering (i) 100% of its production of black mass, until such time as this material is integrated by
Li-Cycle
into the supply chain for
Li-Cycle’s
Hubs, and (ii) 100% of its production of certain end products from
Li-Cycle’s
Hubs, consisting of lithium carbonate, nickel sulphate, cobalt sulphate, manganese carbonate and graphite concentrate. The black mass-related agreement with Traxys remains subject to the completion of certain outstanding fixed-volume sales commitments to a third-party purchaser, to be completed by
Li-Cycle
in 2021, and the Hub end products agreement with Traxys is limited to production which is controlled by
Li-Cycle
(namely, production from the Rochester Hub and production that is not committed to any third-party JV partners at other Hubs). The Hub products agreement extends for a term expiring seven years after the achievement of certain commercial production milestones at the Rochester Hub, and is therefore expected to extend to 2030. Traxys may earn marketing fees under these agreements, based on the final sales price of products sold by Traxys to its third-party customers, as well as interest on provisional payments made from Traxys to
Li-Cycle.
Prices are based on index pricing for the critical materials, adjusted for the product form (e.g., adjusted to reflect the pricing for the premium battery grade nickel sulphate form, relative to the relevant index pricing which is for nickel metal). Commercial terms between Traxys and its third-party customers are arranged in advance, transparent to
Li-Cycle
and based on the commodity prices for the metals contained in the
Li-Cycle
products.
Sales of
Li-Cycle
products through Traxys are expected to represent the significant majority of
Li-Cycle’s
revenues. When the Rochester Hub commences commercial production,
Li-Cycle
expects to generate approximately $300 million per year of revenue from the sale of Hub products to Traxys (based on existing assumptions regarding feedstock volumes and composition and commodity price estimates). Estimates of future revenues are based on commodity price assumptions for the metals contained in the applicable end products, and actual revenues will vary.
Others
Li-Cycle
has entered into agreements with third party purchasers for other intermediate products produced at the Spokes, including mixed copper/aluminum and plastics.
Li-Cycle
sells mixed/copper aluminum products to Glencore. It sold black mass to Glencore in past periods, and has an outstanding commitment to sell a fixed volume of black mass to Glencore pursuant to an agreement ending December 31, 2021. Product sales to Glencore represented approximately seventy percent (70%) of
Li-Cycle’s
revenues in fiscal 2020 and are
54
expected to represent a significant portion of
Li-Cycle’s
revenues in fiscal 2021. Under the terms of
Li-Cycle’s
agreements with Glencore,
Li-Cycle
receives an agreed percentage of the contained metal content, at referenced commodity prices for the applicable metals, less applicable treatment and refining charges.
Our Strengths and Strategy
At the Intersection of Three Core Trends
We benefit from sitting at the intersection of three core trends: the electric vehicle revolution, the supply shortage of strategic battery materials, and the need for a truly sustainable
ESG-friendly
lithium-ion
battery recycling solution, which we believe is currently a critical missing step in the battery supply chain.
Well-Positioned to Benefit from Proprietary Technology
We have established proprietary technology that we believe sets us apart from competitors because our technology has the ability to respond to changes in battery chemistries and adapt to change in inputs to the battery recycling process. Our process produces the fundamental building blocks of
recycling produce
lithium-ion
batteries — cathode precursor input chemicals, cathode input chemicals and raw materials that can be reused in batteries or the broader economy. By contrast, competitive emerging technologies such as
cathode-to-cathode
end-products
have a higher risk of obsolescence due to continuous cathode technology advancement.
Well-Positioned to Comply with Government Mandates
Due to our high recovery rates and sustainable, environmentally friendly processes, we believe we are well-positioned to comply with heightened battery regulations across the globe.
Superior to Other Forms of Recycling
Through our Spoke & Hub Technologies
batteries to produce “black mass” and other intermediate products, and (b) at our Hubs, to process black mass to recover raw materials, including but not limited to lithium carbonate, nickel sulphate and cobalt sulphate .
™
, our recycling process is designed (a) at our Spokes, to process battery manufacturing scrap and
end-of-life
Li-Cycle’s
process enables an up to 95% Recycling Efficiency Rate. We expect that our future facilities will achieve similar Recycling Efficiency Rates.
Our
batteries and reduces waste.
wet-chemistry
method is able to extract valuable battery-grade chemicals from black mass that are directly
re-usable
in the manufacturing of new battery technologies. In the short term, this greatly increases the value that we derive from battery manufacturing scrap as well as
end-of-life
Minimal Human Operating Risk
Unlike smelting, thermal
processes, our processes have minimal human operating risk. Our Spokes can safely process
pre-treatment
refining, or
cathode-to-cathode
lithium-ion
batteries at any state of charge, without any manual sorting, discharging, or dismantling required. Spoke plants reduce the size of battery mass in an automated fashion, minimizing human operating risk.
Strong Commercial Supply Contracts
Our commercial supply contracts include leaders in the EV and
lithium-ion
battery ecosystem, including consumer electronics, manufacturing scrap, energy storage, and auto OEMs/transportation companies. We believe we have approximately 30% North American market share based on our total addressable market forecast, which in turn is developed using independent inputs from Benchmark Mineral Intelligence and our estimate of contracted
lithium-ion
battery supply based on information derived from our communications with
55
secured battery supply customers. We have supply contracts with over 70 customers. As a percent breakdown based on tonnage as of 2020, our existing supply network comprises of
lithium-ion
batteries and
lithium-ion
battery materials that derive approximately 50% from consumer electronics, 29% from manufacturing scrap, 16% from auto OEMs/transportation, and 5% from energy storage systems.
Well-Positioned to Benefit from Pricing Tailwinds
We stand to benefit from expected increases in pricing for lithium carbonate, nickel sulphate and cobalt sulphate, all of which are in high demand due to growing electrification.
Governmental Partnerships
We have partnered with New York State, which offers financial incentives for investors in clean energy businesses. We located a Spoke facility in the Eastman Kodak Business Park in Rochester, New York, and we plan to locate our first ternary Hub in Rochester, New York.
Li-Cycle
has historically built strong relationships with various Canadian government agencies and has received grant funding and access to other
scale-up
support initiatives.
Li-Cycle
has primarily worked with Sustainable Development Technology, Ontario Centres of Excellence, GreenCentre Canada, and the Industrial Research Assistance Program. In 2018,
Li-Cycle
received funding of C$2.7 million from Sustainable Development Technology Canada for the development of
Li-Cycle’s
process to recover material in
lithium-ion
batteries. In 2021,
Li-Cycle
received approval for additional funding of C$4.0 million from Sustainable Development Technology Canada for the
scale-up
of
Li-Cycle’s
Hub technology.
Future
Off-Take
Opportunities
We expect to complete construction and begin to ramp up production at our Rochester Hub in early 2023.
Li-Cycle
has entered into a marketing, logistics and working capital agreement with Traxys, covering one hundred percent (100%) of the nickel sulphate, cobalt sulphate, lithium carbonate, manganese carbonate and graphite concentrate end products from the Rochester Hub.
Li-Cycle
intends to seek customers to purchase the copper sulphide, sodium sulphate and gypsum produced by the Hub and not currently covered by the Traxys contract.
Continuous Enhancement of Research and Development Efforts
We continue to conduct Research & Development (“R&D”) focus on various aspects of our business. R&D work continues in support of the Rochester Hub project, the Arizona Spoke project and the Alabama Spoke Project, specifically focused on optimizing operating parameters and preparing for operations. We expect the Arizona Spoke and the Alabama Spoke to have the capability to process entire vehicles battery packs, without dismantling. We will also continue to develop and evaluate new concepts with an eye to the future, including processing nickel metal hydride, LFP and solid-state batteries.
Regional Presence and Global Footprint
We are focused on growing our regional presence across various markets while furthering our global footprint. We intend to construct a global network of Spokes located at regionally optimized locations that reduce safety risk and costs associated with battery transport to our Spokes. We intend to construct centralized, large-scale Hubs to maximize economies of scale and efficiencies. Hub facilities will process intermediate products from a network of global Spokes, as intermediate products, particularly black mass, are significantly easier and safer to transport than batteries. Our current global growth strategy includes, in addition to the Rochester Hub, Arizona Spoke and Alabama Spoke, plans to add additional Spokes in Europe and additional Hubs in the Asia Pacific region (including China) over the next five years. We are in discussions with multiple partners in each
56
geography in some cases for the development of Spokes and Hubs and in others in connection with supply and
off-take
agreements. We may scale our operations through acquisitions, joint ventures or other commercial arrangements.
Intellectual Property
Patents
Li-Cycle
has a total of 18 pending utility patent applications and issued utility patents, grouped into three patent families based on common priority details. These filings cover aspects of
Li-Cycle’s
innovative technologies and include issued patents or pending patent applications in Australia, Canada, China, Europe, Hong Kong, Japan, South Korea, United States and the World Intellectual Property Office. These applications and patents have filing dates between 2018 and 2021, and therefore will expire between 2038 and 2041.
All patents and patent applications are 100% owned by
Li-Cycle.
Research and Development
Our highly experienced technical team is continuously engaged in research and development efforts to expand the scope of our processing capacities and drive other process improvements.
We also generate continued process improvements developed through continued experience gained through new supplier relationships. For instance, we partnered with New Flyer, one of the world’s leading independent global bus manufacturers to complete a recycling pilot. New Flyer provided us with 45
end-of-life
lithium-ion
battery modules totaling 3,200 pounds that were processed at our Spoke facility and then turned into intermediate products, which are then further refined to recover critical materials such as nickel sulphate and cobalt sulphate.
Employees
As of July 30, 2021, we had 130 employees, all but one employed on a full-time basis, and primarily located in Ontario, Canada and Rochester, New York. We expect that the Rochester Hub will result in approximately 120 additional employment positions at its operations. We estimate that the Arizona Spoke will have 38 employees upon the
start-up
of the first Spoke line expected in 2022 and a total of 50 employees when both Spoke lines are operational, which is anticipated to occur in 2023. We estimate that the Alabama Spoke will have a total of approximately 30 employees once the facility is operational, which is expected to occur in
mid-2022.
Our success is highly dependent on human capital and a strong leadership team. We aim to attract, retain and develop staff with the skills, experience and potential necessary to implement our growth strategy.
Our culture is fair, ethical, diverse and performance-oriented. When onboarding new employees, we communicate our vision and core values that we expect all staff to uphold, which is underpinned by a business-wide Code of Conduct and Ethics supported by appropriate training programs. We regularly engage with staff on issues affecting the business through group-wide and location-specific
“all-hands”
and “town hall” sessions and other engagement platforms.
None of our employees are represented by a labor union and there have been no work stoppages to date. We generally consider relations with our employees to be good.
Legal Proceedings
We are not currently, nor have we ever been, party to any legal proceedings, but we could be involved in various litigation and regulatory proceedings arising in the normal course of business in the future. Where it is
57
determined, in consultation with counsel based on litigation and settlement risks, that a loss is both probable and estimable, we establish an accrual. We expect that we may not be able to predict with certainty outcome of any litigation or the potential for future litigation. We expect to continuously monitor any proceedings as they develop and adjust any accrual or disclosure as needed. Regardless of the outcome, litigation could have an adverse impact on us due of defense costs, diversion of management resources and other factors, and it could have a material effect on our results of operations for a given reporting period.
Our Vision, Mission and Commitment to Environmental, Social and Governance Leadership
Our vision is to be the world’s most sustainable, vertically-integrated and globally
pre-eminent
lithium-ion
battery resource recovery company. Our mission is: (i) to provide sustainable and safe customer-centric solutions and technology to solve the global
end-of-life
lithium-ion
battery challenge, and (ii) to meet the rapidly growing demand for critical battery materials
By supporting the
lithium-ion
battery materials supply chain with an innovative recycling solution, we are contributing to the global “green energy” transition and the movement toward a
zero-carbon
economy. We believe that environmental, social and governance (“ESG”) leadership is important to the success of our business model and intend to develop corporate policies and business practices to support these values.
Our Focus on Quality and Sustainability
We have instituted an Integrated Business Policy to guide our actions on health and safety, environmental and quality practices.
Our Kingston and Mississauga sites are certified by ISO (“International Standards Organization”) 9001 quality standard, ISO 14001 environmental standard, ISO 45001 employee health & safety standard and the Responsible Recycling (“R2”) electronics recycling.
We prioritize the safety of our employees, suppliers, contractors and visitors. We aim for a
“zero-harm”
workplace and ensure compliance with all applicable occupation health and safety laws, regulations and standards in the jurisdictions in which we operate. We provide training to our employees on quality, health and safety and environmental and R2 requirements. We also ensure that our equipment is equipped with safety instructions, allot the time to practice emergency procedures and expect our managers and employees to maintain clean and well-organized facilities.
58
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the “Business” and “Selected Historical Financial Information” sections and the consolidated financial statements included elsewhere in this prospectus. The financial information contained herein is taken or derived from such consolidated financial statements, unless otherwise indicated. The following discussion contains forward-looking statements. Our actual results could differ materially from those that are discussed in our forward-looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this prospectus, particularly under “Risk Factors.”
References in this section to “we,” “us” or
“Li-Cycle”
refer to
Li-Cycle
Corp. and its subsidiaries prior to the consummation of the Business Combination and the Company and its subsidiaries subsequent to the Business Combination, unless the context otherwise requires or indicates otherwise.
Our financial statements have been prepared in accordance with IFRS. All amounts are in U.S. dollars except as otherwise indicated. For more information about the basis of presentation of our financial statements, see the section titled “
.”
Basis of Presentation
Certain figures, such as interest rates and other percentages included in this discussion and analysis, have been rounded for ease of presentation. Percentage figures included in this discussion and analysis have not in all cases been calculated on the basis of such rounded figures but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this discussion and analysis may vary slightly from those obtained by performing the same calculations using the figures in our financial statements or in the associated text. Certain other amounts that appear in this section may similarly not sum due to rounding.
Li-Cycle reports
its financial results in accordance with IFRS. The Company makes references to
certain non-IFRS measures,
including Adjusted EBITDA. These measures are not recognized measures under IFRS, do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing a further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for the analysis of the Company’s financial information reported under IFRS.
Company Overview
Li-Cycle
is an industry leader in
lithium-ion
battery resource recovery based on installed permitted capacity for
lithium-ion
battery recycling measured in tonnes per year. Its proprietary “Spoke & Hub” recycling process is designed (a) at its spokes (“Spokes”), to process battery manufacturing scrap and
end-of-life
Li-Cycle
currently owns and operates two Spokes, located in Kingston, Ontario (the “Kingston Spoke”) and Rochester, New York (the “Rochester Spoke”), respectively. Additionally,
Li-Cycle
is currently developing a third Spoke located in Gilbert, Arizona, in the Phoenix metropolitan area (the “Arizona Spoke”) and a fourth Spoke located near Tuscaloosa, Alabama (the “Alabama Spoke”).
Li-Cycle’s
first commercial-scale Hub facility (the “Rochester Hub”) is currently in late-stage development and will be located in the Eastman Business Park, in Rochester, New York.
Li-Cycle
was until 2020 a development stage company with no commercial revenues. For the year ended October 31, 2020,
Li-Cycle’s
revenue was $0.8 million, and it recorded a net loss of $9.3 million. For the three and nine months ended July 31, 2021, Li-Cycle’s revenue was $1.7 million and $3.0 million, respectively, and it recorded a net loss of $6.9 million and $21.6 million, respectively.
59
To date,
Li-Cycle
has financed its operations primarily through: (i) private placements of
Li-Cycle
common shares and preferred shares; (ii) loans from BDC Capital and certain
Li-Cycle
shareholders and (iii) various government funding initiatives.
Li-Cycle
expects both its capital and operating expenditures will increase significantly in connection with its ongoing activities, as
Li-Cycle:
| • |
completes the development and construction of the Rochester Hub;
|
| • |
completes the development and construction of the Arizona Spoke and Alabama Spoke;
|
| • |
expands globally with the deployment of additional Spokes and Hubs, including through acquisitions and/or through joint ventures or other contractual arrangements;
|
| • |
continues to invest in its technology, R&D efforts and the expansion of its intellectual property portfolio;
|
| • |
increases its investment in logistics infrastructure for transportation of intermediate products from Spokes to Hubs;
|
| • |
obtains, maintains and improves its operational, financial and management information systems;
|
| • |
hires additional personnel; and
|
| • |
operates as a public company.
|
The Business Combination and Public Company Costs
On August 10, 2021,
Li-Cycle,
Li-Cycle
Holdings Corp. (a wholly-owned subsidiary of
Li-Cycle
prior to the Business Combination) (“Old
Li-Cycle
Holdings”) and Peridot Acquisition Corp. (“Peridot”) completed their previously announced business combination pursuant to a plan of arrangement under the Business Corporations Act (Ontario) (the “Business Combination”).
Pursuant to the terms of the Business Combination, on the closing date of the Business Combination (the “Closing Date”), (i) Peridot and Old
Li-Cycle
Holdings amalgamated, and in connection therewith, the Class A common shares and warrants to purchase Class A common shares of Peridot converted into an equivalent number of shares and warrants of the amalgamated entity,
Li-Cycle
Holdings, and the common share in Old
Li-Cycle
Holdings held by
Li-Cycle
was exchanged for a share of
Li-Cycle
Holdings; (ii) the share of
Li-Cycle
Holdings held by
Li-Cycle
was purchased for cancellation by
Li-Cycle
Holdings for cash equal to the subscription price for the common share in Old
Li-Cycle
Holdings for which such share was exchanged pursuant to the amalgamation; (iii) the preferred shares of
Li-Cycle
converted into common shares of
Li-Cycle;
and
(iv) Li-Cycle
Holdings acquired all of the issued and outstanding common shares of
Li-Cycle
from
Li-Cycle’s
shareholders (including
Li-Cycle
common shares issued upon exercise, cancellation, exchange or settlement of all issued and outstanding equity awards (whether vested or unvested), including pursuant to the Business Combination, but excluding any equity awards that were cancelled and exchanged for equity awards of
Li-Cycle
Holdings and remained outstanding on the day following the Closing Date of the Business Combination) in exchange for common shares of
Li-Cycle
Holdings. Pursuant to the Business Combination,
Li-Cycle
became a wholly-owned subsidiary of
Li-Cycle
Holdings.
Upon the closing of the Business Combination and a concurrent $315 million private placement of common shares (the “PIPE Financing”), the combined company received $582 million of gross transaction proceeds before the deduction of $55 million of transaction costs.
The most significant change in
Li-Cycle’s
future reported financial position and results of operations as a result of the consummation of the Business Combination and the closing of the PIPE Financing is expected to be an estimated increase in cash and cash equivalents (as compared to
Li-Cycle’s
balance sheet at July 31, 2021) of
60
approximately $537.4 million, including $315.5 million in gross proceeds from the PIPE Financing by the PIPE Investors. Total direct and incremental transaction costs of Peridot and
Li-Cycle
are estimated at approximately $44 million, a portion of which will be treated as a reduction of the cash proceeds and deducted from the Company’s additional
paid-in
capital and a portion of which will be treated as an expense on the Company’s statement of operations.
As a consequence of the Business Combination, the Company became the successor to an
SEC-registered
and NYSE-listed company which requires us to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, and legal and administrative resources, including increased audit and legal fees.
Accounting for the Business Combination
The Business Combination will be accounted for as a reverse acquisition in accordance with IFRS. Under this method of accounting, the
Li-Cycle
Holdings (as the continuing entity after the Amalgamation
of Li-Cycle Holdings
Corp. and Peridot) will be treated as the “acquired” company for accounting purposes. Since the Company does not meet the definition of a business under IFRS, net assets of the Company will be stated at historical cost, with no goodwill or other intangible assets recorded.
Li-Cycle Corp.
has been determined to be the accounting acquirer based on an evaluation of the following facts and circumstances, and accordingly the Business Combination is treated as an equivalent to an acquisition of Peridot accompanied by a recapitalization.
| • |
Li-Cycle’s shareholders
prior to the Business Combination will have the greatest voting interest in the combined entity relative to other shareholders (including following the redemptions discussed under “
Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources of Liquidity
|
| • |
the largest individual minority shareholder of the combined entity is an existing shareholder
of Li-Cycle;
|
| • |
The Company’s senior management will be the senior management
of Li-Cycle;
|
| • |
Li-Cycle is
the larger entity based on historical total assets and revenues; and
|
| • |
Li-Cycle’s operations
will comprise the ongoing operations of the Company.
|
Current Situation with Regards to
COVID-19
In late 2019, a novel strain of coronavirus, now referred to as
COVID-19,
was identified in China. The virus has spread globally, resulting in governmental authorities implementing protective measures, such as travel restrictions, quarantines, shelter in place orders and shutdowns, in order to contain its spread and reduce its impact. This pandemic has significantly disrupted economies around the world.
COVID-19
continues to have a materially adverse impact in North America. The United States is one of the largest markets for
lithium-ion
battery recycling. The continuous spread of
COVID-19
has caused lockdowns and shutdowns of manufacturing facilities. Therefore, many industry sectors, including the automotive sector, have been negatively impacted and continue to be unable to produce at capacity. The continued impact of
COVID-19
on manufacturing production may lead to less demand for
lithium-ion
batteries, impacting the resulting contribution of batteries and battery-related scrap material to the recycling market over the
short-to-medium
61
Li-Cycle’s
operations have been impacted by the
COVID-19
pandemic. Because
Li-Cycle’s
operations have been considered an essential service in both Canada and the United States,
Li-Cycle’s
plants have continued operations during the pandemic, albeit with the implementation of appropriate measures to ensure employee safety.
Li-Cycle
shut down its commercial headquarters in March 2020 and has enforced a work-from-home mandate since that time. The Kingston Spoke experienced some battery supply related issues in the second fiscal quarter of 2021 due to
COVID-19
related shutdowns in Ontario, Canada which were alleviated in the third fiscal quarter of 2021. In the coming months, and depending on government guidelines,
Li-Cycle
may
re-open
its office facilities but with a robust plan to ensure compliance with all recommended actions to ensure employee safety.
Comparability of Financial Information
Li-Cycle’s
future results of operations and financial position may not be comparable to historical results as a result of the Business Combination and the factors described below, among other things.
In addition,
Li-Cycle
included certain projected financial information in the proxy statement/prospectus on Form
F-4
dated July 15, 2021 and filed with the U.S. Securities and Exchange Commission (the “SEC”) in connection with the Business Combination (as amended, the “Proxy/Registration Statement”), which information was also incorporated by reference in
Li-Cycle’s
non-offering
final prospectus dated August 10, 2021 filed with the Ontario Securities Commission (the “Canadian Prospectus”) and Shell Company Report on Form
20-F
filed with the SEC.
Demand for
lithium-ion
battery recycling has continued to exceed our forecasts and, in order to meet this growing demand, we have determined to increase and accelerate our investment in the
build-out
of our recycling capacity in certain respects. Since the date of effectiveness of the Proxy/Registration Statement, we have, among other things, announced the development of the Alabama Spoke, increasing our North American processing capacity beyond that of our previous plans and projections. As a result of these developments, the assumptions underlying the projected financial information included in the Proxy/Registration Statement, including a number of assumptions regarding capital expenditures and the timing of the
roll-out
of new operational facilities, no longer reflect a reasonable basis on which to project our future results and therefore such projections should not be relied on as indicative of future results. Our actual results could differ substantially from the projected financial information contained in the Proxy/Registration Statement. We expect to provide guidance for fiscal year 2022 in our first fiscal quarter of 2022.
Key Factors Affecting
Li-Cycle’s
Performance
We believe that
.”
Li-Cycle’s
performance and future success is dependent on multiple factors that present significant opportunities for
Li-Cycle,
but also pose significant risks and challenges, including those discussed below and in the section of the U.S. Prospectus titled “
Risk Factors
Availability of
Lithium-Ion
Batteries for Recycling
Li-Cycle
is reliant on obtaining
lithium-ion
batteries for recycling through its contracts with suppliers.
Li-Cycle
currently has over 70 commercial contracts with suppliers of
end-of-life
lithium-ion
batteries and battery-related manufacturing scrap and we expect
Li-Cycle
to attract new suppliers by differentiating itself based on the sustainability of its process and the robustness of its technology, which in turn enable
Li-Cycle
to offer competitive terms to suppliers. We expect
Li-Cycle’s
supply pipeline to grow as we expect existing suppliers will have growing volumes of batteries available for recycling due to the continuing trend toward electric vehicles (“EVs”), and as
Li-Cycle
continues to source additional supplier relationships. However, there can be no assurance that
Li-Cycle
will attract new suppliers or expand its supply pipeline from existing suppliers, and any decline in supply volume from existing contracts or an inability to source new supplier relationships could have a negative impact on
Li-Cycle’s
operating results.
62
Li-Cycle’s
commercial supply contracts include leaders in the EV and
lithium-ion
battery ecosystem, including companies in consumer electronics, manufacturing scrap, energy storage, and auto OEMs/transportation. We believe that
Li-Cycle
has approximately 30% of the North American market share, based on our internal estimates — comprising of
lithium-ion
batteries and
lithium-ion
battery materials that derive 18% from consumer electronics, 49% from manufacturing scrap, 28% from auto OEMs/transportation, and 5% from energy storage systems.
On May 11, 2021,
Li-Cycle
announced its entry into an agreement with Ultium Cells LLC (“Ultium”), a joint venture between General Motors and LG Energy Solution, pursuant to which
Li-Cycle
will purchase and recycle up to 100% of the scrap generated by battery cell manufacturing at Ultium’s Lordstown, Ohio site.
Customer Demand for
Lithium-Ion
Recycled Raw Materials
Li-Cycle
has entered into two agreements with Traxys North America LLC covering
off-take
from its Spokes and Hubs. See the section titled “
— Customer Agreements — Traxys
Li-Cycle
expects to enter into additional
off-take
customer agreements in the future.
Ability to Build Out Additional Facilities
Li-Cycle
is confident in its ability to scale the business as currently planned.
Li-Cycle
has a market-leading position in North America through its two operational commercial Spokes in Kingston, Ontario, and Rochester,
New York, and is developing the Rochester Hub.
Li-Cycle
has also announced its development and construction of the Arizona Spoke in Gilbert, Arizona and the Alabama Spoke.
Li-Cycle
is evaluating additional opportunities to scale its operations with a range of potential partners and expansion opportunities that may include acquisitions, joint ventures or other commercial arrangements in North America, Europe, and Asia.
Li-Cycle’s
continued growth and results of operations will be negatively impacted if it is unable to continue to scale its operations.
International operations are subject to certain risks inherent in doing business abroad, including:
| • |
political, civil and economic instability;
|
| • |
corruption risks;
|
| • |
trade, customs and tax risks;
|
| • |
currency exchange rates and currency controls;
|
| • |
limitations on the repatriation of funds;
|
| • |
insufficient infrastructure;
|
| • |
restrictions on exports, imports and foreign investment;
|
| • |
increases in working capital requirements related to long supply chains;
|
| • |
changes in labor laws and regimes and disagreements with the labor force;
|
| • |
difficulty in protecting intellectual property rights; and
|
| • |
different and less established legal systems.
|
Expanding our business in international markets is an important element of our strategy and, as a result, our exposure to the risks described above may be greater in the future. The likelihood of such occurrences and their potential effects on our business and results of operations will vary from country to country and are unpredictable, but could have an adverse effect on our ability to execute our strategy and accordingly on our results of operations.
63
Commodity and Specialty Prices
The price
Li-Cycle
can charge for its end products is tied to commodity and specialty pricing for lithium, nickel, and cobalt, among others. This can lead to variability in revenues, but we believe the wide range of raw materials
Li-Cycle
produces results in a diversification effect that provides it with a natural hedge against significant variations in the commodity pricing related to a single product.
Regulatory Landscape
We believe
Li-Cycle
is well-positioned to comply with heightened battery regulations across the globe.
Li-Cycle
holds all licenses currently required in connection with its technologies and operations.
Li-Cycle
has engaged a third-party consultant to work with a dedicated team across all
Li-Cycle
projects, to provide support with permitting and regulatory compliance, and to keep
Li-Cycle
abreast of legal and regulatory developments.
While competitors face challenges adapting to increasingly stringent environmental regulations,
Li-Cycle’s
technologies are sustainable and attractive to a growing number of
ESG-focused
clients.
Li-Cycle’s
scalable, sustainable, safe and patented Spoke & Hub Technologies
™
enable an up to 95% Spoke Recycling Efficiency Rate, produce minimal solid waste or wastewater, zero impact air emissions, and use far less energy than any other existing solution. By contrast, other hydrometallurgical technologies often have significant water emissions and solid waste streams, while smelting or thermal processing typically involves the burning of
lithium-ion
batteries that produces toxic emissions in the
off-gas.
The emissions caused by competitor methods present regulatory compliance challenges and complicate facility permitting. We believe that this provides a significant opportunity for
Li-Cycle
with a truly differentiated hydrometallurgical process.
Government mandates also continue to drive increased infrastructure spending and funding availability for the battery supply chain. In the United States, the Biden Administration announced it will make a $2 trillion investment in infrastructure, including investments in the clean energy economy.
Research and Development
Li-Cycle
continues to conduct R&D centered on various aspects of its business. R&D work is ongoing in support of its Spoke operations and its Rochester Hub project, specifically focused on continuous optimization of operating parameters and preparing for operations.
Li-Cycle
also continues to develop and evaluate new concepts with an eye to the future, including solid-state battery processing and others related to both the Spoke & Hub Technologies
™
.
Components of Results of Operations
Basis of Presentation
Li-Cycle’s
consolidated financial statements have been prepared in accordance with IFRS. All amounts are in U.S. dollars except otherwise indicated. Currently,
Li-Cycle
conducts business through one operating segment.
Li-Cycle
was a
pre-revenue
company with no commercial operations until 2020. For more information about
Li-Cycle’s
basis of presentation, refer to Note 2 in the accompanying financial statements of
Li-Cycle.
Li-Cycle’s
fiscal year end is October 31.
Revenue
Li-Cycle
recognizes revenue from: (i) sales of products, which currently include three intermediate products, being black mass, mixed copper/aluminum and mixed plastics from
Li-Cycle’s
Spokes; and (ii) providing the service of recycling
lithium-ion
batteries, which includes coordination of logistics and destruction of batteries.
Li-Cycle
expects its sales of products to increase as a percentage of overall revenue, as more Spokes and Hubs become operational over time.
64
For product sales, revenue is recognized when control of the goods has transferred, meaning when the goods have been shipped to the customer’s location (delivery). A receivable is recognized by
Li-Cycle
when the goods are delivered to the customer, as this represents the point in time at which the right to consideration becomes unconditional, as passage of time is the only condition to payment becoming due. The revenue recognized is based on commodity prices at the time of delivery. Under
Li-Cycle’s
standard contract terms, customers do not have a right of return. The Company estimates the amount of consideration to which it expects to be entitled under provisional pricing arrangements. The amount of consideration for black mass and mixed copper/aluminum sales is based on the mathematical product of: (i) market prices of the constituent metals at the date of settlement, (ii) product weight, and (iii) assay results (ratio of the constituent metals initially estimated by management and subsequently trued up to customer confirmation). Certain adjustments like handling and refining charges are also made per contractual terms with customers. Depending on the contractual terms with customers, the payment of receivables may take up to 12 months from date of shipment. Product sales and the related trade accounts receivables are measured at fair value at initial recognition and are
re-estimated
at each reporting period end using the market prices of the constituent metals at the respective measurement dates. Changes in fair value are recognized as an adjustment to profit and loss and to the related accounts receivable.
Service revenue is recognized upon completion of each service. Prices for services are separately identifiable within each contract. A receivable is recognized by
Li-Cycle
when the services are completed as this represents the point in time at which the right to consideration becomes unconditional, as passage of time is the only condition to payment becoming due.
Expenses
Primary expense categories for
Li-Cycle
include employee salaries and benefits, consulting and professional fees, R&D and depreciation. As
Li-Cycle
continues to grow and expand internationally,
Li-Cycle
expects to incur additional expenses in connection with acquisitions, joint ventures and/or other commercial or contractual arrangements. Additional personnel expenses are also anticipated. The amount of consulting and professional fees
Li-Cycle
incurs and expects to incur is commensurate with the engineering requirements associated with the Rochester Hub project, Arizona Spoke project and Alabama Spoke Project, as well as requisite expenses for legal and audit as
Li-Cycle
funds its operations and scales its internal systems and processes. R&D expenses reflect ongoing efforts by
Li-Cycle
to develop and expand its technology, and such costs are offset by any government funding for government funded projects.
Finance Costs and Interest Expense
Financing costs are typically applied against the gross proceeds of any capital raised, and in the case of debt, amortized over the term of such debt. Interest expense represents the actual cash interest costs incurred plus any accrued interest payable at a future date.
65
Results of Operations
Comparison of the three and nine months ended July 31, 2021 and 2020
|
Three months ended
July 31, |
$
Change |
%
Change |
Nine months ended
July 31, |
$
Change |
%
Change |
|||||||||||||||||||||||||||
|
2021
|
2020
|
2021
|
2020
|
|||||||||||||||||||||||||||||
|
(dollar amounts in thousands, except share and per share data)
|
||||||||||||||||||||||||||||||||
|
Revenues
|
1,709 | 182 | 1,527 | 840 | % | 2,984 | 323 | 2,661 | 824 | % | ||||||||||||||||||||||
|
Product sales
|
1,594 | 107 | 1,487 | 1389 | % | 2,683 | 185 | 2,497 | 1349 | % | ||||||||||||||||||||||
|
Recycling Services
|
116 | 75 | 41 | 55 | % | 301 | 138 | 163 | 118 | % | ||||||||||||||||||||||
|
Operating expenses
|
7,930 | 1,905 | 6,025 | 316 | % | 20,819 | 4,968 | 15,850 | 319 | % | ||||||||||||||||||||||
|
Employee salaries and benefits, net
|
2,482 | 547 | 1,935 | 354 | % | 5,359 | 1,416 | 3,943 | 279 | % | ||||||||||||||||||||||
|
Raw materials, supplies and finished goods
|
2,261 | 142 | 2,119 | 1491 | % | 4,877 | 345 | 4,532 | 1315 | % | ||||||||||||||||||||||
|
Professional fees
|
1,176 | 897 | 279 | 31 | % | 4,096 | 1,560 | 2,535 | 163 | % | ||||||||||||||||||||||
|
Research and development, net
|
577 | (283 | ) | 859 | 1,929 | (19 | ) | 1,948 | ||||||||||||||||||||||||
|
Share-based compensation
|
298 | 57 | 241 | 420 | % | 1,308 | 220 | 1,087 | 493 | % | ||||||||||||||||||||||
|
Office and administrative
|
369 | 65 | 304 | 470 | % | 988 | 134 | 853 | 635 | % | ||||||||||||||||||||||
|
Depreciation, net
|
273 | 328 | (55 | ) | (17 | %) | 789 | 717 | 72 | 10 | % | |||||||||||||||||||||
|
Freight and shipping
|
155 | (5 | ) | 161 | 588 | 57 | 531 | 926 | % | |||||||||||||||||||||||
|
Marketing
|
160 | 66 | 95 | 145 | % | 465 | 189 | 277 | 147 | % | ||||||||||||||||||||||
|
Plant facilities
|
75 | 60 | 15 | 25 | % | 232 | 224 | 9 | 4 | % | ||||||||||||||||||||||
|
Travel and entertainment
|
103 | 31 | 72 | 234 | % | 189 | 126 | 63 | 50 | % | ||||||||||||||||||||||
|
Other (income) expenses
|
676 | 88 | 588 | 667 | % | 3,756 | 197 | 3,559 | 1804 | % | ||||||||||||||||||||||
|
Foreign exchange (gain) loss
|
(214 | ) | (74 | ) | (141 | ) | 190 | % | 536 | (109 | ) | 646 | -591 | % | ||||||||||||||||||
|
Interest expense
|
383 | 165 | 218 | 132 | % | 788 | 341 | 448 | 131 | % | ||||||||||||||||||||||
|
Interest income
|
(1 | ) | (3 | ) | 2 | -82 | % | (2 | ) | (34 | ) | 32 | -95 | % | ||||||||||||||||||
|
Fair value loss on restricted share units
|
509 | — | 509 | 100 | % | 2,433 | — | 2,433 | 100 | % | ||||||||||||||||||||||
|
Net loss
|
(6,897 | ) | (1,811 | ) | (5,086 | ) | 281 | % | (21,591 | ) | (4,842 | ) | (16,748 | ) | 346 | % | ||||||||||||||||
|
Foreign currency translation adjustment
|
0 | 250 | (250 | ) | (100 | %) | 0 | (277 | ) | 277 | (100 | %) | ||||||||||||||||||||
|
Comprehensive loss
|
(6,897 | ) | (1,561 | ) | (5,336 | ) | 342 | % | (21,591 | ) | (5,119 | ) | (16,471 | ) | 322 | % | ||||||||||||||||
|
Basic and diluted loss per share
|
(2.88 | ) | (0.86 | ) | (2.02 | ) | 234 | % | (9.10 | ) | (2.35 | ) | (6.75 | ) | 287 | % | ||||||||||||||||
|
Weighted average number of common shares outstanding
|
2,394,475 | 2,100,603 | 293,872 | 14 | % | 2,372,731 | 2,057,723 | 315,008 | 15 | % | ||||||||||||||||||||||
Revenue
For the three and nine months ended July 31, 2021,
Li-Cycle’s
revenues increased by 840% and 824%, respectively, when compared to the corresponding periods in 2020. Revenue reached $1.7 million and $3.0 million in the three and nine months ended July 31, 2021, as compared to $0.2 and $0.3 million in the corresponding periods of 2020, respectively. The Revenue growth was attributable to increases in recycling
66
services revenue and product sales, in each case primarily as a result of the Rochester Spoke beginning to process meaningful quantities of batteries and battery scrap and the onboarding of a new offtake customer. Revenues from recycling services were approximately $0.1 million and $0.3 million, respectively, while revenues from product sales were approximately $1.6 million and $2.7 million, respectively, for the three-and nine-month periods ended July 31, 2021.
Expenses
For the three and nine months ended July 31, 2021, operating expenses increased by 316% and 319%, respectively, when compared to the corresponding periods of 2020, as
changes in R&D expenditure are primarily due to the fact that research and development expenses in 2020 were largely funded by government grants, the amortization of which offset the applicable R&D expense for accounting purposes. The amortization of government grants in the three and nine months ended July 31, 2020 totaled $1.1 million and $2.2 million, respectively, and did not recur in the 2021 comparative periods. The level of consulting and professional fees is commensurate with the engineering requirements associated with the Rochester Hub project, as well as requisite legal and audit expenses for raising capital to execute
Li-Cycle
scaled up its operations in North America. The increases in personnel costs of $1.9 million and $3.9 million for the three- and nine-month periods ended July 31, 2021 reflect the ramp up of operations of the Kingston Spoke and Rochester Spoke as well as the increase in corporate team members as
Li-Cycle
ramps up its expansion plans. The increases in raw materials and supplies of $2.1 million and $4.5 million, respectively, are mainly a result of strong sales figures and increased inventory production during the
ramp-up
phase of the Spoke operations. The
period-to-period
Li-Cycle’s
growth plan, including completion of the Business Combination.
Other (Income) Expenses
Other expenses were $0.7 million and $3.8 million in the three and nine months ended July 31, 2021, respectively. The increase as compared to the corresponding 2020 periods was mainly a result of a fair value loss on restricted share units, interest expenses on the loans payable, lease liabilities and foreign exchange losses.
Non-IFRS
Measure Reconciliation
Adjusted EBITDA
Li-Cycle
defines Adjusted EBITDA as net earnings or earnings before depreciation and amortization, interest expense (income), stock-based compensation, foreign exchange (gain) loss, income tax expense (recovery), fair value (gain) loss on restricted share units, and forfeited SPAC transaction cost, as set out in the reconciliation table below.
|
Three months ended
July 31, |
Nine months ended
July 31, |
|||||||||||||||
|
2021
|
2020
|
2021
|
2020
|
|||||||||||||
|
(dollar amounts in thousands)
|
||||||||||||||||
|
Net loss
|
(6,897 | ) | (1,811 | ) | (21,591 | ) | (4,842 | ) | ||||||||
|
Depreciation, gross
|
698 | 328 | 1,831 | 717 | ||||||||||||
|
Interest expense (income), gross
|
428 | 162 | 900 | 307 | ||||||||||||
|
Share-based compensation
|
298 | 57 | 1,308 | 220 | ||||||||||||
|
Foreign exchange (gain) loss
|
(214 | ) | (74 | ) | 536 | (109 | ) | |||||||||
|
Fair value loss on restricted share units
|
509 | — | 2,433 | — | ||||||||||||
|
Forfeited SPAC transaction cost
|
— | — | 2,000 | — | ||||||||||||
|
Adjusted EBITDA loss
|
(5,178 | ) | (1,338 | ) | (12,583 | ) | (3,708 | ) | ||||||||
67
Capital Projects
Arizona Spoke
In March 2021,
Li-Cycle
announced the development and construction of the Arizona Spoke. We expect the Arizona Spoke to have a nominal recycling capacity of 10,000 tonnes per year. While the Kingston Spoke and Rochester Spoke each operate a single battery recycling line with capacity of 5,000 tonnes per year, the Arizona Spoke will operate two battery recycling lines totaling 10,000 tonnes per year. Each Spoke recycling line is constructed in a modular format and subsequently installed at the designated site.
The Phoenix metropolitan area is strategically proximate to
Li-Cycle’s
existing battery and battery scrap supply network, as well as being at the nexus of where we expect there will be continued growth of
lithium-ion
batteries available for recycling due to the growing EV industry in Arizona, Nevada and other western States.
We expect
Li-Cycle
to invest approximately $20 million to construct, commission and commence operations at the Arizona Spoke.
The Arizona Spoke project is currently in the detailed engineering and facility construction stage. We expect that the detailed engineering and facility construction will be completed by the end of 2021, at a cost of approximately $4 million. We expect the first processing line at the Arizona Spoke to be constructed, commissioned and commence operations in 2022, at an estimated cost of approximately $8 million, in addition to the $4 million of expenses during the engineering and facility construction phase. We expect the second processing line to be constructed, commissioned and commence operations in 2023, at an estimated cost of approximately $8 million. As of July 31, 2021,
Li-Cycle
had spent $2.9 million on detailed engineering, equipment procurement and facility-related expenditures in connection with the Arizona Spoke.
The principal regulatory and other approvals required to develop and construct the Arizona Spoke consist of a conditional use permit required by the Town of Gilbert, Arizona and environmental permits required by the Arizona Department of Environmental Quality and the Maricopa County Air Quality Department, all of which are expected to be filed and completed by the end of 2021. Under the U.S. Resource Conservation and Recovery Act,
Li-Cycle
is required to obtain a permit for battery storage and processing, which
Li-Cycle
intends to obtain in 2022.
Alabama Spoke
On September 8, 2021,
Li-Cycle
announced the development and construction of the Alabama Spoke. We expect the Alabama Spoke to have an initial recycling capacity of 5,000 tonnes per year, bringing
Li-Cycle’s
total recycling capacity to 25,000 tonnes per year. The location can also accommodate a future second 5,000 tonne per year processing line, which would increase capacity at the Alabama Spoke to 10,000 tonnes per year, and
Li-Cycle’s
total North American recycling capacity to 30,000 tonnes per year. Each Spoke recycling line is constructed in a modular format and subsequently installed at the designated site.
The Alabama Spoke is located near Tuscaloosa, Alabama, in a region where we expect there will be continued growth of
lithium-ion
battery materials available for recycling due to the growing EV industry in Alabama and the U.S. Southeast.
We expect
Li-Cycle
to invest approximately $10 million to construct, commission and commence operations at the Alabama Spoke.
The Alabama Spoke project is currently in the detailed engineering and facility construction stage. We expect that the detailed engineering and facility construction will be completed in 2022, at a cost of approximately $2 million. We expect the processing line at the Alabama Spoke to be constructed, commissioned and commence operations in 2022, at an estimated cost of approximately $8 million, in addition to the $2 million of expenses during the engineering and facility construction phase.
68
The principal regulatory and other approvals required to develop and construct the Alabama Spoke consist of a conditional use permit and site plan approval required by the City of Tuscaloosa, and environmental permits required by the Alabama Department of Environmental Quality and the local county, all of which are expected to be filed and completed in 2022. Under the U.S. Resource Conservation and Recovery Act and corresponding Alabama laws,
Li-Cycle
is required to obtain a permit for battery storage and processing, which
Li-Cycle
intends to obtain in 2022.
Rochester Hub
Li-Cycle’s first
revenue-generating Hub will be located in Rochester, New York, and is currently in late-stage development. The location for the Rochester Hub was specifically selected due to the nature of the infrastructure available at the site, including utilities, logistics, and other physical infrastructure.
Li-Cycle’s
pre-feasibility
study for the Rochester Hub provided that the facility would have the capacity to process 25,000 tonnes of black mass annually (equivalent to approximately 60,000 tonnes
of lithium-ion battery
feed equivalent annually). Based on
the pre-feasibility study,
the Company had previously determined that the Rochester Hub would require an estimated investment of at least
$175 million (+/-30%, based
on the scope as at
the pre-feasibility study).
The Rochester Hub is currently in the definitive engineering phase. As the Rochester Hub project has progressed through the definitive engineering
phase, Li-Cycle has
identified a range of potential scope additions, covering items such as
infrastructure tie-ins and
systems to achieve zero liquid discharge from the
plant. Li-Cycle is
also pursuing optimization strategies throughout the definitive engineering phase, including with respect to an increase in the processing capacity of the Rochester Hub above the 25,000 tonnes per annum level set forth in the
pre-feasibility
study, in response to market developments (such as increasing EV battery manufacturing volumes in North America and trends around battery chemistries in EV applications). Such scope additions and changes in processing capacity of the Rochester Hub would be expected to result in a significantly greater estimated capital investment than that set forth in the
pre-feasibility
study.
Li-Cycle
expects to complete the definitive engineering phase of the Rochester Hub project in late 2021, at a cost of approximately $10 million. As of July 31,
2021, Li-Cycle had
spent approximately $7.5 million on the definitive engineering phase for the Rochester Hub.
Li-Cycle’s
board of directors is expected to make final determinations regarding the Rochester Hub, including with respect to the project scope, processing capacity and budgetary approvals, following the completion of definitive engineering, and the receipt of applicable regulatory and other approvals.
Li-Cycle
expects construction at the Rochester Hub site to begin in late 2021, with commissioning of the plant expected to commence in early 2023.
The anticipated principal regulatory and other approvals required to develop and construct the Rochester Hub consist of: a special use permit, site plan approval, subdivision approval and special permit from the Town of Greece, New York, including the related New York State Environmental Quality Review Act process; and permits for air emissions, storm water discharge and chemical bulk storage granted by the New York State Department of Environmental Conservation.
Additional Spokes
Li-Cycle
plans to develop additional Spokes over the next five years in North America (including the Arizona Spoke and the Alabama Spoke), Europe and the Asia-Pacific region (including China). In furtherance of these plans,
Li-Cycle
opened a new Spoke Fulfillment Centre in Kingston, Ontario in July 2021 where
Li-Cycle
will fabricate and assemble on a custom basis machinery and equipment for future Spoke recycling lines. These assembled lines will be modular and able to be shipped to, and installed at, the relevant Spoke site.
We expect the initial European Spoke to have an annual throughput capacity of 5,000 tonnes of
lithium-ion
battery equivalent. In Europe,
Li-Cycle
is engaged in discussions with potential battery feedstock suppliers to
69
identify both sources of supply and strategic locations for future Spokes. With the assistance of a third-party consultant,
Li-Cycle
is currently assessing locations in several European countries, with a view to identifying and leasing an appropriate site for, and constructing and commissioning, its initial European Spoke in 2022. The process of identifying an appropriate location takes into account a variety of other factors, including utilities, logistics, and other physical infrastructure. Upon selecting a site for its initial European Spoke, we expect
Li-Cycle
to incur expenses in connection with the site lease, detailed engineering, facility construction and local site plan and environmental permit approvals. We estimate that the aggregate cost of identifying and leasing a site for, and constructing and commissioning,
Li-Cycle’s
initial European Spoke will be approximately $10.0 million.
In the Asia-Pacific region (including China),
Li-Cycle
intends to establish an initial Spoke in 2022, with an expected annual throughput capacity of 5,000 tonnes of
lithium-ion
battery equivalent.
Li-Cycle
is engaged in discussions with both potential joint venture partners and potential battery feedstock suppliers in the Asia-Pacific region to identify both sources of supply and strategic locations for future Spokes. We expect
Li-Cycle
to incur expenses in connection with the negotiation of joint venture documentation, a site lease, detailed engineering, local site plan and environmental permit approvals and constructing and commissioning its initial Spoke in the Asia-Pacific region. We estimate that the aggregate cost of negotiating joint venture documentation and identifying and leasing a site for, and constructing and commissioning,
Li-Cycle’s
initial Asia-Pacific region Spoke will be approximately $10.0 million.
Years Ended October 31, 2020 and 2019
|
Year Ended October 31,
|
$
Change |
%
Change |
||||||||||||||
|
2020
|
2019
|
|||||||||||||||
|
(dollar amounts in thousands, except share and per
share data) |
||||||||||||||||
|
Revenues
|
$ | 792 | $ | 48 | $ | 744 | 1,550 | % | ||||||||
|
Product sales
|
555 | — | 555 | % | ||||||||||||
|
Recycling Services
|
237 | 48 | 189 | 394 | % | |||||||||||
|
Operating expenses
|
9,934 | 4,113 | 5,821 | 142 | % | |||||||||||
|
Professional fees
|
2,962 | 547 | 2,415 | 441 | % | |||||||||||
|
Employee salaries and benefits, net
|
2,819 | 608 | 2,211 | 364 | % | |||||||||||
|
Depreciation
|
1,095 | 184 | 911 | 495 | % | |||||||||||
|
Research and development, net
|
777 | 2,112 | (1,335 | ) | (63 | )% | ||||||||||
|
Raw materials and supplies
|
578 | — | 578 | |||||||||||||
|
Plant facilities and other
|
391 | — | 391 | |||||||||||||
|
Marketing
|
366 | 66 | 300 | 455 | % | |||||||||||
|
Share-based compensation
|
333 | 97 | 236 | 243 | % | |||||||||||
|
Office and administrative
|
316 | 355 | (39 | ) | (11 | )% | ||||||||||
|
Travel and entertainment
|
160 | 138 | 22 | 16 | % | |||||||||||
|
Freight and shipping
|
137 | 6 | 131 | 2,183 | % | |||||||||||
|
Other (income) expenses
|
134 | 36 | 98 | 272 | % | |||||||||||
|
Interest expense
|
530 | 60 | 470 | 783 | % | |||||||||||
|
Interest income
|
(34 | ) | (24 | ) | (10 | ) | 42 | % | ||||||||
|
Fair value loss on cash-settled share-based compensation
|
84 | — | 84 | |||||||||||||
|
Foreign exchange gain
|
(446 | ) | — | (446 | ) | |||||||||||
|
Net loss
|
(9,276 | ) | (4,101 | ) | (5,175 | ) | 126 | % | ||||||||
|
Foreign currency translation adjustment
|
(219 | ) | (37 | ) | (182 | ) | 492 | % | ||||||||
|
Comprehensive loss
|
$ | (9,495 | ) | $ | (4,138 | ) | $ | (5,357 | ) | 129 | % | |||||
|
Basic and diluted loss per share
|
$ | (4.48 | ) | $ | (2.28 | ) | $ | (2.20 | ) | 97 | % | |||||
|
Weighted average number of common shares outstanding
|
2,068,952 | 1,801,338 | 267,614 | 15 | % | |||||||||||
70
Revenue
Revenue reached $0.8 million in 2020 as the Ontario Spoke commenced commercial operations in the summer of 2020. As the Ontario Spoke started to process meaningful quantities of
batteries, Li-Cycle saw
growth in recycling services while also realizing revenue from product sales. Revenues from recycling services were approximately $0.2 million while revenues from product sales were approximately $0.6 million.
Expenses
Operating expenses increased by 144% year over year
as Li-Cycle scaled
up its operations and expanded internationally. The increase in personnel costs of $2.2 million reflects the increased commercial activities to support the operations of the Ontario Spoke and
the start-up of
the Rochester Spoke. The level of consulting and professional fees is commensurate with the engineering requirements associated with the Rochester Hub project, as well as requisite legal and audit expenses for raising capital to execute
the Li-Cycle’s growth
plan. R&D expenses declined mainly
because Li-Cycle received
significant government grants of which $2.2 million were recognized as an offset to the R&D in 2020.
Other (Income) Expenses
Other expenses were $0.1 million in 2020, as compared to other expenses of $0.04 million in 2019 mainly as a result of interest expenses on the loans payable and lease liabilities. These were partially offset by interest income and foreign exchange gains.
Years Ended October 31, 2019 and 2018
Li-Cycle’s results
of operations for the years ended October 31, 2019 and 2018 are presented below:
|
Year Ended
October 31, |
$
Change |
%
Change |
||||||||||||||
|
2019
|
2018
|
|||||||||||||||
|
(dollar amounts in thousands, except share and per
share data) |
||||||||||||||||
|
Revenues
|
$ | 48 | $ | 6 | $ | 42 | 738 | % | ||||||||
|
Product sales
|
0 | 0 | — | % | ||||||||||||
|
Recycling Services
|
48 | 6 | 42 | 738 | % | |||||||||||
|
Operating expenses
|
4,112 | 881 | 3,231 | 367 | % | |||||||||||
|
Professional fees
|
547 | 77 | 470 | 613 | % | |||||||||||
|
Employee salaries and benefits, net
|
608 | 202 | 406 | 201 | % | |||||||||||
|
Depreciation
|
184 | — | 184 | |||||||||||||
|
Research and development, net
|
2,112 | 397 | 1,715 | 432 | % | |||||||||||
|
Marketing
|
66 | 34 | 31 | 91 | % | |||||||||||
|
Share-based compensation
|
97 | 27 | 71 | 267 | % | |||||||||||
|
Office and administrative
|
355 | 94 | 262 | 280 | % | |||||||||||
|
Travel and entertainment
|
138 | 51 | 87 | 172 | % | |||||||||||
|
Freight and shipping
|
6 | — | 6 | |||||||||||||
|
Other (income) expenses
|
37 | 34 | 3 | 9 | % | |||||||||||
|
Interest expense
|
60 | 39 | 21 | 54 | % | |||||||||||
|
Interest income
|
(24 | ) | (5 | ) | (18 | ) | 332 | % | ||||||||
|
Fair value loss on cash-settled share-based compensation
|
— | — | — | |||||||||||||
|
Foreign exchange gain
|
— | — | — | |||||||||||||
|
Net loss
|
(4,101 | ) | (909 | ) | (3,192 | ) | 351 | % | ||||||||
|
Foreign currency translation adjustment
|
(37 | ) | 126 | (163 | ) | (129 | )% | |||||||||
|
Comprehensive loss
|
$ | (4,138 | ) | $ | (783 | ) | $ | (3,192 | ) | 351 | % | |||||
|
Basic and diluted loss per share
|
$ | (2.28 | ) | $ | (0.53 | ) | $ | (1.74 | ) | 326 | % | |||||
|
Weighted average number of common shares outstanding
|
1,801,338 | 1,700,751 | 100,587 | 6 | % | |||||||||||
71
Revenue
Li-Cycle generated
minimal revenue in 2019 which was attributable to its pilot project recycling services.
Expenses
Operating expenses increased by 367% year over year
as Li-Cycle invested
heavily in its R&D activities to develop its Spoke & Hub Technologies
™
. This was partially offset by $0.6 million of government grants and $0.4 million of investment tax credits recognized as an offset to the R&D expenses in 2019.
Other (Income) Expenses
Other expenses in 2019 and 2018 mainly consisted of interest expenses on convertible debt. The increase in the interest expenses year over year was partially offset by increase in the interest income on cash balances.
Liquidity and Capital Resources
Sources of Liquidity
Prior to the Business Combination,
Li-Cycle
financed its operations primarily through: (i) private placements of
Li-Cycle
Common and Preferred Shares; (ii) a loan from BDC Capital Inc.; (iii) loans from corporations controlled by
Li-Cycle’s
Chief Executive Officer and Executive Chair; and (iv) various government funding initiatives.
We expect both
Li-Cycle’s
capital and operating expenditures will increase significantly in connection with its ongoing activities, as
Li-Cycle:
completes the development and construction of the Rochester Hub, which is currently in late stage development; completes the development and construction of the Arizona Spoke and the Alabama Spoke; expands globally with the deployment of additional Spokes and Hubs, including through acquisitions and/or through joint ventures or other contractual arrangements; continues to invest in its technology, R&D efforts and the expansion of its intellectual property portfolio; increases its investment in logistics infrastructure for transportation of intermediate products from Spokes to Hubs; obtains, maintains and improves its operational, financial and management information systems; hires additional personnel; and operates as a public company.
Since inception,
Li-Cycle
has generally operated at a loss. We expect that as it completes its Rochester Hub and adds Spokes, it will be able to operate at a profit in future periods, though there can be no assurance that
Li-Cycle
will achieve or maintain profitability in the future. In order to continue to fund the planned expansion of its business and maintain profitability in the future, to acquire complementary businesses and/or due to unforeseen circumstances,
Li-Cycle
may need to secure additional debt or equity financing. Such additional funds may not be available when
Li-Cycle
needs them on terms that are acceptable to it, or at all.
The net proceeds from the Business Combination and PIPE Financing, which were approximately $527 million (the “Net Transaction Proceeds”), are expected to be used as follows: (i) approximately $12 million to repay borrowings under the loan from BDC Capital Inc. and the promissory notes issued to corporations controlled by
Li-Cycle’s
Chief Executive Officer and Executive Chair (now complete), (ii) approximately $20 million to fund the development, construction and commissioning costs of the Arizona Spoke, (iii) approximately $10 million to fund the development, construction and commissioning costs of the Alabama Spoke, (iv) at least $175 million to fund the development, construction and commissioning costs of the Rochester Hub, (v) approximately $280 million to fund the development, construction and commissioning costs of additional Spokes and future Hubs (such funding to be supplemented by cash flow from operations and capital contributions from third parties), (vi) $10 million for research and development, and (vii) the remainder for working capital.
72
Debt Obligations
On December 16, 2019,
Li-Cycle
entered into a binding agreement with BDC Capital Inc. for a loan of $5.3 million (Cdn. $7.0 million) to help finance the expansion plans of
Li-Cycle.
The maturity date of the loan was December 14, 2023 and loan was funded in three tranches based on the achievement of specific milestones by
Li-Cycle.
The base rate of interest was 16% per annum, paid monthly, plus additional accrued interest in kind of 3% that could be reduced to 0% based on the achievement of certain milestones by
Li-Cycle.
Principal payments began on the first anniversary date of the loan and could be made at $0.13 million (Cdn. $0.175 million) per month with a balloon payment of $0.5 million (Cdn. $0.7 million) at maturity. As of July 31, 2021, the BDC Capital Inc. loan balance was $4.4 million.
On August 11, 2021, in accordance with an agreement to repay the BDC Capital Loan in full upon the closing of the Business Combination,
Li-Cycle
repaid BDC Capital Loan in full.
On June 16, 2021,
Li-Cycle
issued promissory notes (the “Promissory Notes”) for an aggregate principal amount of $7,000,000 as consideration for loans received from companies related to the Chief Executive Officer and the Executive Chair of
Li-Cycle,
respectively. The Promissory Notes bore interest at the rate of 10% per annum and had a maturity date of December 15, 2023. The Promissory Notes were unsecured and subordinate to indebtedness owing to
Li-Cycle’s
senior lender, BDC Capital Inc.
Li-Cycle
had the option of prepaying all or any portion of the principal and accrued interest of the Promissory Notes prior to the maturity date without penalty, subject to certain conditions. On August 17, 2021,
Li-Cycle
repaid the Promissory Notes and accrued interest in full.
On September 29, 2021, the Company entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with Spring Creek Capital, LLC (“Spring Creek Capital”) and issued to Spring Creek Capital an unsecured Convertible Note (the “Spring Creek Capital Convertible Note”) under the Note Purchase Agreement in the principal amount of $100,000,000, in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act.
The Spring Creek Capital Convertible Note matures five years from the date of issuance and accrues interest from the date of issuance at the London Interbank Offer Rate (LIBOR) plus five percent (5%) per annum. Interest on the Spring Creek Capital Convertible Note is payable on a semi-annual basis, either in cash or by
(“PIK”), at the Company’s option, beginning on December 31, 2021. Interest on PIK amounts accrues at LIBOR plus six percent (6%) per annum. Under the terms of the investment, LIBOR has a floor of 1% and a cap of 2%.
payment-in-kind
The principal and accrued interest owing under the Spring Creek Capital Convertible Note may be converted at any time by the holder into the Company’s common shares, without par value (the “common shares”), at a per share price equal to $13.43 (the “Conversion Price”). If the closing price per share of the Company’s common shares on the New York Stock Exchange is above $17.49 for 20 consecutive trading days, the Company may elect to convert the principal and accrued interest owing under the Spring Creek Capital Convertible Note, plus a make-whole amount equal to the undiscounted interest payments that would have otherwise been payable through maturity (the “Make-Whole Amount”) into the Company’s common shares at the Conversion Price.
The Company may redeem the Spring Creek Capital Convertible Note at any time by payment in cash of an amount equal to 130% of the principal amount of the Spring Creek Capital Convertible Note and all accrued interest owing under the Spring Creek Capital Convertible Note, plus the Make-Whole Amount. Upon a change of control transaction, the Company will be required to redeem the Spring Creek Capital Convertible Note by payment in cash of an amount equal to the outstanding principal amount of the Spring Creek Capital Convertible Note and all accrued interest owing under the Spring Creek Capital Convertible Note, plus the Make-Whole Amount.
73
The Spring Creek Capital Convertible Note is subject to certain events of default, the occurrence of which would give the holder the right to require the Company to redeem the Spring Creek Capital Convertible Note by payment in cash of an amount equal to the outstanding principal amount of the Spring Creek Capital Convertible Note and all accrued interest owing under the Spring Creek Capital Convertible Note, plus the Make-Whole Amount. The Note Purchase Agreement contains certain customary representations, warranties and covenants by and for the benefit of the parties.
The Company granted certain registration rights under the Note Purchase Agreement. The Company agreed to file with the SEC within 30 days a registration statement covering the resale of the common shares issued or issuable upon conversion of the Spring Creek Capital Convertible Note. The Company is required to use commercially reasonable efforts to have such registration statement declared effective by the SEC as soon as practicable and no later than the earlier of (A) 60 days after the issuance of the Spring Creek Capital Convertible Note (or 90 days after the issuance of the Spring Creek Capital Convertible Note if the SEC notifies the Company that it will review the registration statement) or (B) 10 business days after the SEC notifies the Company in writing that it will not review the registration statement. The Company agreed to keep the registration statement (or another shelf registration statement covering the common shares issued or issuable upon conversion of the Spring Creek Capital Convertible Note) effective until the earlier of (x) the third anniversary of the issuance of the Spring Creek Capital Convertible Note or (y) the date on which the holder of the Spring Creek Capital Convertible Note ceases to hold any common shares issued or upon conversion of the Spring Creek Capital Convertible Note.
On September 29, 2021, the Company, Koch Strategic Platforms, LLC (“KSP”) and Spring Creek Capital entered into a Standstill Agreement (the “Standstill Agreement”), which restricts KSP, Spring Creek Capital and their affiliates from taking certain actions until the later of the conversion of the Spring Creek Capital Convertible Note in full or twelve months from the issuance of the Spring Creek Capital Convertible Note (the “Standstill Period”). The actions that KSP, Spring Creek Capital and their affiliates are restricted from taking during the Standstill period include, among others, (A) the acquisition of additional voting securities of the Company if, after giving effect to such acquisition, KSP and its subsidiaries and affiliates would beneficially own or exercise control or direction over voting securities of the Company having aggregate voting rights equal to or greater than 9.9% of the aggregate voting power of the Company (B) any tender or exchange offer, take-over bid, merger, business combination and certain other transactions involving the Company and its securities, (C) any solicitation of proxies or votes or other attempt to influence votes by any holder of the Company’s securities and (D) formation of a “group” (as defined under the Securities Exchange Act of 1934) with respect to the Company’s securities.
In addition to Spring Creek Capital’s investment, the Company and several subsidiaries of Koch Industries intend to explore opportunities for collaboration on several commercial initiatives.
Cash Flows Summary
Presented below is a summary
of Li-Cycle’s operating,
investing, and financing cash flows for the periods indicated:
|
Three months ended
July 31, |
Nine months ended
July 31, |
|||||||||||||||
|
2021
|
2020
|
2021
|
2020
|
|||||||||||||
|
(in thousands)
|
(in thousands)
|
|||||||||||||||
|
Cash flows used in operating activities
|
$ | (5,245 | ) | $ | (2,161 | ) | $ | (16,567 | ) | $ | (7,654 | ) | ||||
|
Cash flows used in investing activities
|
(5,298 | ) | (836 | ) | (12,050 | ) | (1,748 | ) | ||||||||
|
Cash flows from financing activities
|
6,568 | 294 | 30,304 | 9,502 | ||||||||||||
|
Net change in cash
|
$ | (3,975 | ) | $ | (2,703 | ) | $ | 1,687 | $ | 100 | ||||||
74
|
Year Ended
October 31, |
Year Ended
October 31, |
|||||||||||||||
|
2020
|
2019
|
2019
|
2018
|
|||||||||||||
|
(in thousands)
|
(in thousands)
|
|||||||||||||||
|
Cash flows used in operating activities
|
$ | (7,429 | ) | $ | (4,568 | ) | $ | (4,568 | ) | $ | (686 | ) | ||||
|
Cash flows used in investing activities
|
(5,108 | ) | (998 | ) | (998 | ) | (244 | ) | ||||||||
|
Cash flows from financing activities
|
9,417 | 7,164 | 7,164 | 3,111 | ||||||||||||
| — | — | — | ||||||||||||||
|
Net change in cash
|
$ | (3,120 | ) | $ | 1,598 | $ | 1,598 | $ | 2,181 | |||||||
Cash Flows Used in Operating Activities
For the three and nine months ended July 31, 2021, cash flows used in operating activities were approximately $5.2 million and $16.6 million, respectively, and in each case were primarily driven by the growth and commercialization of
Li-Cycle’s
operations, including headcount,
ramp-up
phase production costs at the Rochester Spoke, research and development, and consulting costs relating to the development of the Rochester Hub. The period over period increases in cash flows used in operating activities for the three- and nine-month periods ended July 31, 2021 were primarily the result of an increase in operating expenses of $6.0 million and $15.9 million for those periods, respectively, partially offset by an increase in accounts payable and accrued liabilities in each period in 2021.
For each of the three years ended October 31, 2020, 2019 and 2018, cash flows used in operating activities were approximately $7.4 million, $4.6 million and $0.7 million, respectively and in each case were primarily driven by the growth and commercialization of
Li-Cycle’s
operations, including headcount, R&D, and extensive third-party consulting costs relating to the development of the Rochester Hub. The year over year increase in cash flows used in operating activities for 2020 were primarily the result of an increase in operating expenses by $5.8 million, partially offset by an increase in accounts payable and accrued liabilities.
Cash Flows Used in Investing Activities
For the three and nine months ended July 31, 2021, cash flows used in investing activities were primarily driven by the acquisition of equipment and leasehold improvements for the Rochester Spoke and the Rochester Hub. For the three and nine months ended July 31, 2020, cash flows used in investing activities were primarily for the Kingston Spoke.
For each of the three years ended October 31, 2020, 2019 and 2018, cash flows used in investing activities were primarily driven by the acquisition of equipment and leasehold improvements for
Li-Cycle’s
two Spokes.
Cash Flows from Financing Activities
Cash flows generated from financing activities in the three and nine months ended July 31, 2021 related primarily to capital raising through the issuance of common shares and net proceeds from loans. In the three months ended July 31, 2021,
Li-Cycle
received $7 million from the Promissory Notes issued to companies related to the Chief Executive Officer and the Executive Chair of
Li-Cycle,
respectively. In the nine months ended July 31, 2021,
Li-Cycle
received net proceeds of $21.6 million from a private placement of 281,138 class A shares in November 2020, $3.1 million (Cdn. $4 million) from a loan advance from BDC Capital Inc., and $7 million from the Promissory Notes. In the nine months ended July 31, 2020, cash flows from financing activities related to
Li-Cycle’s
Series B round, loan advance of $2.3 million (Cdn. $3.0 million) from BDC Capital Inc., and proceeds from government grants of $1.1 million.
Amounts generated in 2018 relate to
Li-Cycle’s
Series A round and amounts in 2019 and 2020 relate to
Li-Cycle’s
Series B round. Additionally, in 2020,
Li-Cycle
completed a debt facility with BDC Capital for $5.3 million (C$7.0 million), of which $2.3 million (C$3.0 million) was funded in the year.
Li-Cycle
also received government grants of $1.2 million, $1.7 million and $0.1 million in the years ended October 31, 2020, 2019 and 2018 respectively.
75
Contractual Obligations and Commitments
The following table summarizes
Li-Cycle’s
contractual obligations and other commitments for cash expenditures as of July 31, 2021, and the years in which these obligations are due.
|
Payment due by period
|
||||||||||||||||||||
|
(in thousands)
|
||||||||||||||||||||
|
Contractual Obligations
|
Total
|
Less than
1 year |
1 - 3
years |
3 - 5
years |
More than
5 years |
|||||||||||||||
|
Accounts payable and accrued liabilities
|
$ | 15,779 | $ | 15,779 | $ | — | $ | — | — | |||||||||||
|
Lease liabilities
|
22,621 | 2,155 | 5,592 | 4,697 | 10,177 | |||||||||||||||
|
Loan payable
|
11,466 | 7,012 | 4,454 | — | — | |||||||||||||||
|
Restoration provisions
|
332 | — | 81 | 53 | 198 | |||||||||||||||
|
Restricted share units
|
3,259 | 3,259 | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Total as of July 31, 2021
|
|
53,457
|
|
|
28,205
|
|
|
10,127
|
|
|
4,750
|
|
|
10,375
|
|
|||||
Note:
| (1) |
On August 3, 2021,
Li-Cycle
North America Hub, Inc., a wholly-owned subsidiary of
Li-Cycle,
entered into a ground lease for the lands on which
Li-Cycle
intends to construct its Rochester Hub.
Li-Cycle
North America Hub, Inc.’s lease liabilities in connection with the ground lease will be as follows: (i) less than 1 year: $450,000; (ii) 1 – 3 years: $900,000; (iii) 3 – 5 years: $900,000; and (iv) more than 5 years: $7,050,000. Under a guaranty dated as of August 3, 2021,
Li-Cycle
has agreed to guarantee the performance of
Li-Cycle
North America Hub, Inc.’s obligations under the lease.
|
| (2) |
On September 7, 2021,
Li-Cycle
Inc. entered into a warehouse lease for the Arizona Spoke. The Arizona Spoke warehouse lease covers approximately 67,000 square feet and has an original term of 5 years 3 months plus a renewal term totaling 5 additional years. The lease increases the Company’s contractual obligations by undiscounted cash flows of approximately $3.7 million over the original term of the lease.
Li-Cycle
has guaranteed the performance of
Li-Cycle
Inc.’s obligations under the lease.
|
| (3) |
On September 8, 2021,
Li-Cycle
Inc. entered into a premises lease for the Alabama Spoke. The Alabama Spoke premises lease covers approximately 108,000 square feet and has an original term of 20 years plus multiple renewal terms totaling 10 additional years. The lease increases the Company’s contractual obligations by undiscounted cash flows of approximately $21.0 million over the original term of the lease.
Li-Cycle
has guaranteed the performance of
Li-Cycle
Inc.’s obligations under the lease.
|
As of July 31, 2021, there were $7.3 million in committed purchase orders
that Li-Cycle was
in various stages of executing (October 31, 2020: $4.2 million).
For the 12 months following July 31, 2021, we
expect Li-Cycle to
enter into additional premises leases relating to a warehouse for the Arizona Spoke, a facility for the Alabama Spoke and a land lease for the Rochester Hub (which leases were entered into on August 3, 2021, September 7, 2021 and September 8, 2021, respectively, and are described in the Notes to the table above). We also
expect Li-Cycle to
enter into premises leases for additional Spokes and/or Hubs.
Related Party Transactions
During the past four
years, Li-Cycle has
leased certain office space from Ashlin BPG Marketing, which is controlled by certain members of the immediate family of our President and Chief Executive Officer. Under the terms of the
lease, Li-Cycle is
required to pay $4,500 per month plus applicable taxes in Canadian dollars, subject to 60 days’ notice of termination.
Consulting Agreement
On May 1,
2020, Li-Cycle entered
into a consulting agreement with Atria Limited (“Atria”), an entity which beneficially owned more than 5% of the
outstanding Li-Cycle Shares
at that time, to agree upon and finalize the
76
consideration for certain business development and marketing consulting services that were previously performed on behalf
of Li-Cycle from
2018 through April 2020. The fees for such services were agreed at 12,000 common shares
of Li-Cycle Corp.,
payable in installments of 1,000 shares per month. On January 25, 2021,
Li-Cycle
issued all of the 12,000 shares to Atria as full and final satisfaction of all obligations
of Li-Cycle to
Atria under the consulting agreement. Atria also directed the issuance of such shares as follows: 8,000 Shares to Atria; 2,000 Shares to Pella Ventures (an affiliated company of Atria); and 2,000 Shares to a director
of Li-Cycle Corp.
at the time, who is not related to Atria.
Promissory Notes
Li-Cycle issued
promissory notes (the “Promissory Notes”) for an aggregate principal amount of $7,000,000 as consideration for loans received from companies related to the Chief Executive Officer and the Executive Chair
of Li-Cycle, respectively.
The Promissory Notes bore interest at the rate of 10% per annum and had a maturity date of December 15, 2023. The Promissory Notes were unsecured and subordinate to indebtedness owing
to Li-Cycle’s senior
lender, BDC Capital
Inc. Li-Cycle had
the option of prepaying all or any portion of the principal and accrued interest of the Promissory Notes prior to the maturity date without penalty, subject to certain conditions. On August 17,
2021, Li-Cycle repaid
the $7 million Promissory Notes and accrued interest in full.
Off-Balance Sheet
Arrangements
During the periods
presented, Li-Cycle did
not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which were established for the purpose of
facilitating off-balance sheet
arrangements.
Critical Accounting Policies and Estimates
Li-Cycle’s condensed
consolidated interim financial statements and consolidated annual financial statements have been prepared in conformity with IFRS using the significant accounting policies and measurement bases that are in effect at October 31, 2020, as summarized in Note 2 of the financial statements. These were used throughout all periods presented with any applicable changes noted in the July 31, 2021 condensed consolidated interim financial statements.
Outstanding Share Data
As of October 18,
2021, Li-Cycle Holdings
had the following issued and outstanding shares, warrants and stock options:
| • |
163,179,555 common shares, which are listed on the New York Stock Exchange under the symbol “LICY”.
|
| • |
23,000,000 warrants (of which 15,000,000 are public warrants and 8,000,000 are private placement warrants), which are listed on the New York Stock Exchange under the symbol “LICY.WS”. Each warrant is exercisable for a common share at a price of $11.50, subject to adjustment.
|
| • |
5,296,553 stock options to purchase 5,296,553 common shares.
|
Internal Control Over Financial Reporting
Prior to the consummation of the Business Combination, the Company had been a private company and we have addressed our internal control over financial reporting with internal accounting and financial reporting personnel and other resources.
Li-Cycle
identified material weaknesses in its internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
77
there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements may not be prevented or detected on a timely basis.
Li-Cycle did
not have in place an effective control environment with formal processes and procedures or an adequate number of accounting personnel with the appropriate technical training in, and experience with, IFRS to allow for a detailed review of complex accounting transactions that would identify errors in a timely manner, including inventory costing and business
combinations. Li-Cycle did
not design or maintain effective controls over the financial statement close and reporting process in order to ensure the accurate and timely preparation of financial statements in accordance with IFRS. In addition, information technology controls, including end user and privileged access rights and appropriate segregation of duties, including for certain users the ability to create and post journal entries, were not designed or operating effectively.
Li-Cycle has
taken steps to address these material weaknesses and expects to continue to implement its remediation plan,
which Li-Cycle believes
will address their underlying
causes. Li-Cycle expects
to engage external advisors to provide assistance in the areas of information technology, internal controls over financial reporting, and financial accounting in the short term and to evaluate and document the design and operating effectiveness of our internal controls and assist with the remediation and implementation of our internal controls as
required. Li-Cycle is
evaluating the longer-term resource needs of its various financial functions. These remediation measures may be time consuming, costly, and might place significant demands on
Li-Cycle’s
financial and operational resources.
Although Li-Cycle has
made enhancements to its control procedures in this area, the material weaknesses will not be remediated until the necessary controls have been implemented and are operating
effectively. Li-Cycle does
not know the specific time frame needed to fully remediate the material weaknesses identified.
Quantitative and Qualitative Disclosures About Market Risk
Li-Cycle is
exposed to various risks in relation to financial instruments. The main types of risks are currency risk and interest rate risk.
While Li-Cycle may
enter into hedging contracts from time to time, any change in the fair value of the contracts could be offset by changes in the underlying value of the transactions being hedged.
Furthermore, Li-Cycle does
not have foreign-exchange hedging contracts in place with respect to all currencies in which it does business.
Currency Risk
It is management’s opinion
that Li-Cycle is
not exposed to significant currency risk as its cash is denominated in both Canadian and U.S. dollars and funds its operations accordingly. Up to October 31, 2020, most of
Li-Cycle’s transactions
have been in Canadian dollars. Effective November 1, 2020, the functional currency has changed to U.S. dollars given the shift in currency of most of
Li-Cycle’s
transactions to U.S. dollars.
Interest Rate Risk
Interest rate risk is the risk arising from the effect of changes in prevailing interest rates on
Li-Cycle’s
financial instruments. It is management’s opinion
that Li-Cycle is
not exposed to significant interest rate risk, as it has no variable interest rate debt.
Credit Risk
Financial instruments that potentially subject us to concentration of credit risk consist of cash and cash equivalents and accounts receivable. Substantially all of our cash and cash equivalents were deposited in accounts at one financial institution, and account balances may at times exceed federally insured limits. Management believes that we are not exposed to significant credit risk due to the financial strength of the depository institution in which the cash is held.
78
Recently Issued Accounting Standards Not Yet Adopted
From time to time, new accounting standards, amendments to existing standards, and interpretations are issued by the International Accounting Standards Board (“IASB”). Unless otherwise discussed, and as further highlighted in Note 3 to the fiscal 2020 consolidated financial
statements, Li-Cycle believes
that the impact of recently issued standards or amendments to existing standards that are not yet effective will not have a material impact
on Li-Cycle’s financial
position or results of operations under adoption.
79
MANAGEMENT
The following table sets forth our current directors and executive officers:
|
Directors and Executive Officers
|
Age
|
Position/Title
|
||||
|
Ajay Kochhar
|
29 | Director and President and Chief Executive Officer | ||||
|
Tim Johnston
|
35 | Director and Executive Chairman | ||||
|
Mark Wellings
|
57 | Director | ||||
|
Rick Findlay
|
64 | Director | ||||
|
Anthony Tse
|
50 | Director | ||||
|
Alan Levande
|
64 | Director | ||||
|
Scott Prochazka
|
54 | Director | ||||
|
Bruce MacInnis
|
62 | Chief Financial Officer | ||||
|
Kunal Phalpher
|
37 | Chief Strategy Officer | ||||
|
Chris Biederman
|
36 | Chief Technology Officer | ||||
|
Carl DeLuca
|
53 | General Counsel and Corporate Secretary | ||||
|
Lauren Choate
|
63 | Chief People Officer | ||||
The business address for each of the Company’s directors and executive officers is 207 Queen’s Quay West, Suite 590, Toronto, ON, M5J 1A7, Canada.
Biographical information concerning our directors and executive officers listed above is set forth below.
Ajay Kochhar
Ajay Kochhar has served as our President and Chief Executive Officer,
Co-Founder,
and a director since the consummation of the Business Combination on August 10, 2021. Before founding
Li-Cycle,
Mr. Kochhar gained extensive technology and project development experience through progressive roles with Hatch’s industrial cleantech and advisory practices. While working in that space, he garnered
in-depth
engineering and project management experience through clean technology development in the lithium, cobalt, nickel, copper, gold, lead, zinc, molybdenum, and rare earth metals industries. His technical expertise spans the entire project lifecycle, from conceptual and
pre-feasibility
study to construction and commissioning. Mr. Kochhar is a graduate of the University of Toronto and holds a Bachelor of Applied Science (BASc) in Chemical Engineering.
Tim Johnston
Tim Johnston has served as our
issuer. The
Co-Founder
and Executive Chairman since the consummation of the Business Combination on August 10, 2021. With more than 15 years of experience, Mr. Johnston has overseen the development and operation of batteries, metals, industrial minerals and large infrastructure assets. In addition to
co-founding
Li-Cycle,
Mr. Johnston served as a director and the chief executive officer of Desert Lion Energy Inc. (“Desert Lion”), a lithium exploration and development company whose securities were listed on the TSX Venture Exchange (the
“TSX-V”),
from February 2018 to July 2019, when Desert Lion was sold to a third party. In
mid-2019,
the
TSX-V
initiated a review of the Desert Lion senior management team, including Mr. Johnston, to assess their suitability to act as directors or officers of a listed issuer as a result of certain incorrect statements and omissions made by Desert Lion in its press releases for a financing transaction and its listing application with the
TSX-V
for approval of the issuance of shares in connection with such transaction. On May 11, 2020, the
TSX-V
made a procedural determination that requires Mr. Johnston to make a written application to and obtain the prior written acceptance from the Compliance & Disclosure Department of the
TSX-V
for any proposed involvement by Mr. Johnston as a director or officer of (or to perform similar functions for) any
TSX-V-listed
TSX-V
has subsequently publicly stated that it has not reached any conclusions regarding the suitability of Mr. Johnston to be a director or officer of a
TSX-V
listed company in the future. Prior to Desert Lion, Mr. Johnston worked as a Senior Consultant for Hatch, specializing in project management and
80
transactional analysis for their global lithium business. While there, Mr. Johnston managed the development of projects across the
lithium-ion
battery value chain for companies such as SQM, Rockwood Lithium (Albemarle), Bacanora Minerals,
AMG-NV,
Rio Tinto, Galaxy Resources, and other key developers. Mr. Johnston is also the
Co-Founder
and Chairman of
Li-Metal
and the Director of Lacero Solutions. A graduate of the University of Queensland’s Mechanical Engineering Program, Mr. Johnston is a chartered professional engineer and CFA charter holder.
Mark Wellings
Mark Wellings has served as a director of the Company since the consummation of the Business Combination on August 10, 2021. Mr. Wellings is a finance professional with over 30 years international experience in both the mining industry and mining finance sector. Mr. Wellings initially worked in the mining industry both in Canada and Australia in exploration, development and production capacities. He then joined the investment dealer GMP Securities L.P. where he
co-founded
the firm’s corporate finance mining practice. During over 18 years at GMP Securities L.P., Mr. Wellings was responsible for, and advised on, some of the Canadian mining industry’s largest transactions, both in equity financing and mergers and acquisitions. Since then he has been appointed to several public and private boards. Mr. Wellings is a Professional Engineer and holds a Master of Business Administration degree and a Bachelor of Applied Science degree in Geological Engineering.
Rick Findlay
Rick Findlay has served as a director of the Company since the consummation of the Business Combination on August 10, 2021. Mr. Findlay has been consulting in the environment and recycling sectors for over 25 years across Canada and internationally. This has included strategy, organization design, processing design, technology development, and financial management. From 2012 to 2014 he was Director of Oversight and Operations for the Province of Ontario’s waste diversion programs, including batteries. Mr. Findlay is currently chief executive officer of LINCit, a firm that focusses on scaling up clean technology ventures. He has previously started a few other firms, two being in environmental management and medical technology. He also
co-founded
and built an international consulting firm, PSTG Consulting, advising small to global companies across a variety of sectors, and local to national governments. Mr. Findlay is a Certified Management Consultant, with a Bachelor in Industrial Engineering and a Master of Business Administration.
Anthony Tse
Anthony Tse has served as a director of the Company since the consummation of the Business Combination on August 10, 2021. Mr. Tse has over 25 years of corporate private and public company experience in numerous high-growth industries such as technology, media and telecoms, as well as resource and commodities. This has predominantly been in senior management, corporate finance, capital markets and mergers and acquisitions roles across Greater China and the Asia Pacific region. His previous senior roles include various positions in News Corporation’s STAR TV, the deputy general manager of TOM Online, Director of Corporate Development at Hutchison Whampoa’s TOM Group, President of China Entertainment Television (a joint venture between TOM and Time Warner), and chief executive officer of CSN Corp. He is currently executive director of Galaxy Resources Limited, a leading
ASX-listed
lithium producer, with diversified assets across three continents in Australia, Argentina and Canada, serving key customers in China, Japan and Korea. He joined the board of directors at Galaxy Resources Limited in 2010 and from June 2013 to July 2019, served as the managing director and chief executive officer during the corporate turnaround and growth stage of the company, which involved restructuring of over $500 million of debt restructuring and refinancing, as well as asset divestments.
Alan Levande
Alan Levande has served as a director of the Company since the consummation of the Business Combination on August 10, 2021. Mr. Levande was Peridot’s Chairman and Chief Executive Officer since
81
August 2020. Mr. Levande also served as Vice Chairman of Peridot Acquisition Corp. II. Mr. Levande is a career energy executive with broad experience across the power, utilities, renewables, midstream and upstream value chains. Most recently, Mr. Levande was
Co-Chief
Executive Officer of Covey Park Energy LLC, a natural gas company that was acquired for $2.2 billion in 2019 by a public company, from June 2013 to July 2019. Previously, Mr. Levande was a
Co-Founder
and Senior Managing Director at Tenaska Capital Management LLC, a $4 billion private equity manager focused on investments in the power and energy sectors, from 2003 to 2012. Mr. Levande began his career in energy investment banking, where he spent 20 years with Goldman Sachs and Salomon Brothers covering power, utilities, renewables and natural resources. In all of Mr. Levande’s prior roles, Mr. Levande was actively involved in sourcing and executing large-scale, complex mergers and acquisitions. Mr. Levande received his B.S. and M.B.A. from The Wharton School of The University of Pennsylvania.
Scott Prochazka
Scott Prochazka has served as a director of the Company since the consummation of the Business Combination on August 10, 2021. Mr. Prochazka most recently served as the President and Chief Executive Officer and a director of CenterPoint Energy, an NYSE-listed, Fortune 500 energy delivery company with electric transmission and distribution, power generation and natural gas distribution operations (“CenterPoint”) from January 1, 2014 to February 20, 2020. Prior to that role, Mr. Prochazka held several positions at CenterPoint since 2011, including Executive Vice President, Chief Operating Officer and Senior Vice President and Division President, Electric Operations. Mr. Prochazka was a director of Peridot Acquisition Corp. II. Mr. Prochazka received his B.S. in Chemical Engineering from the University of Texas in Austin.
Bruce MacInnis
Bruce MacInnis has served as our Chief Financial Officer since the consummation of the Business Combination on August 10, 2021. Mr. MacInnis has 40 years of financial experience that includes raising capital for emerging technology companies, both publicly traded and privately held, as well as robust experience as the chief financial officer for multiple technology companies. Over the past four decades, Mr. MacInnis has participated in successfully ensuring numerous companies are listed on the Toronto Stock Exchange and Nasdaq, while also completing several cross-border mergers and acquisitions transactions. In previous roles with public companies such as Redline Communications, Inc., Bioscrypt Inc., and Certicom Corp., he has overseen the management of numerous functional business areas that have included intellectual property law, compliance, and manufacturing and operations. With comprehensive expertise in establishing financial reporting and disclosure infrastructures that are often required of public companies, Mr. MacInnis has aptly led the implementation of sound internal controls and corporate governance procedures throughout his career. A graduate of the University of Toronto, Mr. MacInnis has a Bachelor of Commerce degree and holds both the Chartered Accountant (CA) and Chartered Professional Accountant (CPA) designations.
Mr. MacInnis has advised the Company that he intends to retire on January 31, 2022. Mr. MacInnis has committed to a flexible timetable and to remaining in his position until the Company has identified his successor and completed a thorough transition of his responsibilities.
Kunal Phalpher
Kunal Phalpher has served as our Chief Strategy Officer since November 1, 2021. Mr. Phalper previously served as the Chief Commercial Officer of the Company since the consummation of the Business Combination on August 10, 2021. Mr. Phalpher initially joined
Li-Cycle
in 2017 and became the Chief Commercial Officer of
Li-Cycle
in 2018. With nearly 15 years of work experience, Kunal brings extensive international expertise in the
lithium-ion
battery and renewable energy sectors to his current role. Prior to joining the
Li-Cycle
team, Mr. Phalpher worked for a residential solar company as the Director of Product Development and was the Director of Business Development for a
lithium-ion
battery manufacturer, both in Toronto, Canada. He spent several years working in Germany in the cleantech sector. A University of Toronto graduate, Mr. Phalpher possesses a Bachelor of Applied Sciences in Electrical Engineering and also holds a Master of Business Administration from the Rotman School of Management.
82
Chris Biederman
Chris Biederman has served as our Chief Technical Officer of the Company since the consummation of the Business Combination on August 10, 2021. Mr. Biederman joined
Li-Cycle
in 2020 as the Chief Process Engineer before being promoted to Chief Technical Officer. Mr. Biederman is a professional engineer with 15 years of process engineering experience. Mr. Biederman brings extensive expertise to his current role, having acted as Lead Process Engineer for numerous large and small EPCM projects in the mining industry. He has experience working on greenfield and brownfield projects and overseeing bench-scale and pilot-scale testing. Mr. Biederman is also a skilled project manager with a robust history leading multi- disciplinary engineering teams and delivering successful projects. Previous to his role with
Li-Cycle,
he spent time at Hatch as a Senior Engineer and Technology Commercialization Portfolio Manager; he is also the Founder and Managing Director of Biederman Engineering. Mr. Biederman is a graduate of the University of Waterloo’s Chemical Engineering program and is a registered engineer with the Professional Engineers of Ontario.
Carl DeLuca
Carl DeLuca has served as General Counsel and Corporate Secretary of the Company since the consummation of the Business Combination on August 10, 2021. Mr. DeLuca joined
Li-Cycle
in 2021. Mr. DeLuca brings 25 years of legal and public company experience to the Company with a track record of successfully executing business-critical transactions and leading organizational change. Prior to joining
Li-Cycle,
Mr. DeLuca served as General Counsel and Corporate Secretary for Detour Gold Corporation, a
TSX-listed
gold producer. Previously, Mr. DeLuca held various roles at Vale S.A.’s global base metal business, including Head of Legal for North American & U.K. Operations. His experience at Vale included advising on international M&A and joint ventures, capital projects, and commercial transactions. Mr. DeLuca started his career in private practice, in Toronto and New York. Mr. DeLuca holds his LL.B. from the University of Windsor, an H.B.A. from the Ivey School of Business at Western University, and a B.A. from Huron University College.
Lauren Choate
Ms. Choate has served as Chief People Officer of the Company since the consummation of the Business Combination on August 10, 2021. Ms. Choate joined
Li-Cycle
in 2021. She brings over 25 years of experience across a variety of industries as a global people operations leader and has been a change agent for complex corporate challenges balancing the people strategy in partnership with business opportunities. Prior to joining
Li-Cycle,
Ms. Choate led the human resources function for Kärcher North America, a $2.8 billion global cleaning technology solutions company. Prior to Kärcher North America, she served as the Senior Director, Learning & Organizational Development at HIS. Ms. Choate holds her MBA from the Weatherhead School of Management at Case Western University. She also holds a B.A. in Mathematics and Economics from Ohio Wesleyan University.
Corporate Governance
We are a “foreign private issuer” under applicable U.S. federal securities laws. As a result, we are permitted to follow certain corporate governance rules that conform to Canada requirements in lieu of certain NYSE corporate governance rules. We generally intend to comply with the rules applicable to U.S. domestic companies listed on the NYSE, but may use foreign private issuer exemptions with respect to some of the NYSE listing requirements. Following Canadian governance practices, as opposed to the requirements that would otherwise apply to a company listed on the NYSE, may provide less protection than is accorded to investors under the NYSE listing requirements applicable to U.S. domestic issuers.
The Canadian Securities Administrators have issued corporate governance guidelines pursuant to National Policy
(the “Corporate Governance Guidelines”), together with certain related disclosure requirements pursuant to National Instrument
58-201
—
Corporate Governance Guidelines
58-101
—
Disclosure of Corporate
83
Governance Practices
58-101”).
The Corporate Governance Guidelines are recommended as “best practices” for issuers to follow. We recognize that good corporate governance plays an important role in our overall success and in enhancing shareholder value and, accordingly, we have adopted certain corporate governance policies and practices which reflect our consideration of the recommended Corporate Governance Guidelines.
The disclosure set out below includes disclosure required by NI
58-101
describing our approach to corporate governance in relation to the Corporate Governance Guidelines.
Election of Directors
At any general meeting of our shareholders at which directors are to be elected, a separate vote of shareholders entitled to vote will be taken with respect to each candidate nominated for director. Pursuant to the OBCA, any casual vacancy occurring on our board may be filled by a quorum of the remaining directors, subject to certain exceptions.
Under the Investor Agreement, the Sponsor will also have the right to designate for nomination a number of directors to our board as follows: (i) during any time that the Sponsor and its affiliates collectively beneficially own at least 50% of the number of common shares held by them on the Closing Date, two directors or (ii) during any time that the Sponsor and its affiliates do not collectively satisfy the test set forth in the preceding clause (i) but do collectively beneficially own at least 25% of the number of common shares held by them on the Closing Date, one director. Alan Levande and Scott Prochaska were designated for nomination by the Sponsor.
Director Term Limits and Other Mechanisms of Board Renewal
We have not adopted director term limits or other automatic mechanisms of board renewal. Rather than adopting formal term limits, mandatory
age-related
retirement policies and other mechanisms of board renewal, the nominating and corporate governance committee has developed a skills and competencies matrix for the board as a whole and for individual directors. The nominating and corporate governance committee conducts a process for the assessment of the board, each committee and each director regarding his, her or its effectiveness and contribution, and reports the evaluation results to our board of directors on a regular basis.
Director Independence
Under the NYSE listing standards, independent directors must comprise a majority of a listed company’s board of directors. For purposes of the NYSE rules, an independent director means a person who, in the opinion of our board of directors, has no material relationship with our company. Under NI
58-101,
a director is considered to be independent if he or she is independent within the meaning of Section 1.4 of National Instrument
52-110
— Audit Committees (“NI
52-110”).
Our board of directors has determined that each of the directors other than Mr. Kochhar, Mr. Johnston and Mr. Levande qualify as independent directors, as defined under the rules of the NYSE, and therefore the board of directors consists of a majority of “independent directors,” as defined under the rules of the NI
58-101
and the NYSE relating to director independence requirements. In addition, the board of directors is subject to the rules of the NI
58-101
and the NYSE relating to the membership, qualifications, and operations of the audit committee, as discussed below. Mr. Kochhar is not independent by reason of the fact that he is our President and Chief Executive Officer, Mr. Johnston is not independent by reason of the fact that he is our Executive Chairman and Mr. Levande is not independent by reason of his previous employment with Peridot.
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Mandate of the Board of Directors
The board of directors will be responsible for supervising the management of our business and affairs, including providing guidance and strategic oversight to management. The board has adopted a formal mandate that includes the following:
| • |
appointing our President and Chief Executive Officer;
|
| • |
developing the corporate goals and objectives that our President and Chief Executive Officer is responsible for meeting and reviewing the performance of our President and Chief Executive Officer against such corporate goals and objectives;
|
| • |
taking steps to satisfy itself as to the integrity of our President and Chief Executive Officer and other executive officers and that our President and Chief Executive Officer and other executive officers create a culture of integrity throughout the organization;
|
| • |
reviewing and approving our code of conduct and reviewing and monitoring compliance with the code of conduct and our enterprise risk management processes;
|
| • |
reviewing and approving management’s strategic and business plans and our financial objectives, plans and actions, including significant capital allocations and expenditures; and
|
| • |
reviewing and approving material transactions not in the ordinary course of business.
|
Meetings of Independent Directors
The board of directors will hold regularly-scheduled quarterly meetings as well as ad hoc meetings from time to time. The independent members of our board of directors will also meet, as required, without the
non-independent
directors and members of management before or after each regularly scheduled board meeting.
A director who has a material interest in a matter before our board of directors or any committee on which he or she serves is required to disclose such interest as soon as the director becomes aware of it. In situations where a director has a material interest in a matter to be considered by our board of directors or any committee on which he or she serves, such director may be required to absent himself or herself from the meeting while discussions and voting with respect to the matter are taking place. Directors will also be required to comply with the relevant provisions of the OBCA regarding conflicts of interest.
Position Descriptions
Tim Johnston is the Executive Chairman of the board. The board has adopted a written position description for the Executive Chairman which sets out his key responsibilities, including duties relating to determining the frequency, dates and locations of meetings and setting board of directors meeting agendas, chairing board of directors and shareholder meetings and carrying out any other or special assignments or any functions as may be requested by the board or management, as appropriate.
The board has appointed Mark Wellings, an independent director, as our Lead Director. The board has adopted a written position description for the Lead Director which sets out his key responsibilities, including ensuring that the board evaluates the performance of management objectively and that the board operates independently of management and serving as an independent leadership contact for the directors.
The board has also adopted a written position description for each of the committee chairs which set out each of the committee chair’s key responsibilities, including duties relating to determining the frequency, dates and locations of meetings and setting committee meeting agendas, chairing committee meetings, reporting to the board and carrying out any other special assignments or any functions as may be requested by the board.
85
The board has adopted a written position description for the President and Chief Executive Officer which sets out the key responsibilities of the President and Chief Executive Officer, including to supervise
management of the business and affairs of the Company, formulate the Company’s short and long term strategic and business plans and present such plans to the board, implement capital and operating plans to support the Company’s strategic and business plans; identify the risks associated with the Company’s strategic and business plans and suggest systems to manage such risks; develop and maintain an effective organizational structure; recruit and manage an appropriate senior leadership team; serve as the Company’s role model for responsible, ethical and effective decision-making; and act as the principal spokesperson for the Company and oversee the interactions between the Company, the public, investors, regulators, analysts, the media and other stakeholders.
day-to-day
Orientation and Continuing Education
The nominating and corporate governance committee is responsible for overseeing a director orientation and continuing education program, designed to maintain or enhance the skills and abilities of our directors and ensure their knowledge and understanding of our business.
The chair of each committee will be responsible for coordinating orientation and continuing director development programs relating to their respective committee mandates.
Code of Business Conduct and Ethics
The board has adopted a Code of Conduct applicable to all of our directors, officers, employees and agents, including our President and Chief Executive Officer, Executive Chairman, Chief Financial Officer, controller or principal accounting officer, or other persons performing similar functions, which is a “code of ethics” as defined in Item 16B of Form
20-F
promulgated by the SEC and which is a “code” under NI
58-101.
The Code of Conduct sets out the Company’s fundamental values and standards of behavior that are expected from our directors, officers and employees with respect to all aspects of our business. The objective of the Code of Conduct is to provide guidelines for maintaining the Company’s integrity, reputation and honesty with a goal of honoring others’ trust in us at all times.
The full text of the Code of Conduct is posted our website at www.li-cycle.com. Information contained on, or that can be accessed through, our website does not constitute a part of this prospectus and is not incorporated by reference herein. If we make any amendment to the Code of Conduct or grant any waivers, including any implicit waiver, from a provision of the code of ethics, we will disclose the nature of such amendment or waiver on our website to the extent required by the rules and regulations of the SEC and the Canadian Securities Administrators. Under Item 16B of the SEC’s Form
20-F,
if a waiver or amendment of the Code of Conduct applies to our principal executive officer, principal financial officer, principal accounting officer or controller and relates to standards promoting any of the values described in Item 16B(b) of Form
20-F,
we will disclose such waiver or amendment on our website in accordance with the requirements of Instruction 4 to such Item 16B.
Monitoring Compliance with the Code of Conduct
The nominating and corporate governance committee is responsible for reviewing and evaluating the Code of Conduct at least annually and will recommend any necessary or appropriate changes to the board for consideration.
Complaint Reporting
The Company encourages all employees, officers and directors to report any suspected violations of the Code of Conduct promptly and intends to thoroughly investigate any good faith reports of violations. In order to ensure that violations or suspected violations can be reported without fear of retaliation, harassment or an adverse employment consequence, the Code of Conduct contains procedures that are aimed to facilitate confidential, anonymous submissions by our employees.
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Diversity
The Company does not have a formal policy for the representation of women on the board of directors or senior management of the Company but the nominating and corporate governance committee and senior executives take gender and other diversity representation into consideration as part of their overall recruitment and selection process.
It is expected that the composition of the board will be shaped by the selection criteria established by the nominating and corporate governance committee. This will be achieved through developing an evergreen list of potential candidates for anticipated board vacancies who fit the committee’s list of evolving selection criteria, ensuring that diversity considerations are taken into account in senior management, monitoring the level of female representation on the board and in senior management positions, continuing to broaden recruiting efforts to attract and interview qualified female candidates, and committing to retention and training to ensure that our most talented employees are promoted from within the organization.
Committees of the Board of Directors
The Company has established an audit committee, a compensation committee, a nominating and governance committee and a health, safety, environmental, quality and technical committee. Each committee has a written charter that is posted on our website.
Audit Committee
In connection with the consummation of the Business Combination, our board of directors formed an audit committee consisting of Scott Prochazka (Chair), Rick Findlay and Mark Wellings. The audit committee is comprised of independent directors as required by applicable SEC, NYSE rules and NI
52-110.
At least one member of the audit committee must qualify as the “audit committee financial expert,” as such term is defined in Item 407 of Regulation
S-K
and all members of the audit committee must be “financially literate,” as such term is defined in NI
52-110
(except as may be permitted by NI
52-110).
Scott Prochazka serves as the audit committee financial expert (within the meaning of SEC regulation). The audit committee is, among other things, directly responsible for the appointment, compensation, retention and oversight of the work of our independent auditor, overseeing management’s conduct of our financial reporting process (including the development and maintenance of systems of internal accounting and financial controls), overseeing the integrity of our financial statements, overseeing the performance of the internal audit functions, preparing certain reports required by the rules and regulations of the SEC and applicable Canadian securities laws and the review of the results and scope of the audit and other accounting related services. The board has established a written charter setting forth the purpose, composition, authority and responsibility of the audit committee consistent with the rules of the NYSE, the SEC and the applicable Canadian securities laws.
Compensation Committee
As a foreign private issuer, the Company is not required to have a compensation committee or a compensation committee consisting only of independent directors. However, in connection with the consummation of the Business Combination, our board of directors formed a compensation committee initially consisting of Rick Findlay (Chair), Alan Levande and Mark Wellings. The compensation committee, among other things, reviews and approves, or recommends to the board for approval, compensation of the President and Chief Executive Officer, Executive Chair and other executive officers, oversees the administration of the Company’s incentive compensation plans, and prepares any report on executive compensation required for the Company’s proxy statement. The board has established a written charter setting forth the purpose, composition, authority and responsibility of the compensation committee consistent with the rules of the NYSE, the SEC and the guidance of the Canadian Securities Administrators. The compensation committee’s purpose is to assist the board in its oversight of executive compensation, management development and succession, director compensation and executive compensation disclosure.
87
Nominating and Corporate Governance Committee
As a foreign private issuer, the Company is not required to have a nominating and governance committee or a nominating and governance committee composed entirely of independent directors. However, in connection with the consummation of the Business Combination, our board of directors formed a nominating and governance committee with a majority of independent directors. The members of the nominating and governance committee are Mark Wellings (Chair), Alan Levande and Anthony Tse. The nominating and governance committee is, among other things, responsible for overseeing the selection of persons to be nominated to serve on our board of directors and overseeing our corporate governance practices. The board has established a written charter setting forth the purpose, composition, authority and responsibility of the nominating and corporate governance committee.
Health, Safety, Environmental, Quality and Technical Committee
Effective upon consummation of the Business Combination, the Company established a health, safety, environmental, quality and technical committee of the board of directors. The members of the health, safety, environmental, quality and technical committee are Tim Johnston (Chair), Anthony Tse, Rick Findlay and Scott Prochazka. The function and purpose of the health, safety, environmental, quality and technical committee will is to assist the board in fulfilling its responsibilities with respect to: (i) developing and implementing the health, safety, environmental and quality policies, procedures and programs of the Company and its subsidiaries, and monitoring compliance with such policies; and (ii) developing and implementing quality assurance and technical policies, procedures and programs of the Company and its subsidiaries, and monitoring compliance with such policies. The board has established a written charter setting forth the purpose, composition, authority and responsibility of the health, safety, environmental, quality and technical committee.
Family Relationships
Related-Party Lease
During the past four years,
Li-Cycle
has leased certain office space from Ashlin BPG Marketing, which is controlled by certain members of the immediate family of Ajay Kochhar, our President and Chief Executive Officer. Under the terms of the lease,
Li-Cycle
is required to pay C$4,500 per month plus applicable taxes, subject to 60 days’ notice of termination.
Share Subscription
On March 23, 2018,
Li-Cycle
issued 1,663
Li-Cycle
Shares to Richard Findlay, 9,706
Li-Cycle
Shares to Alex Lowrie, 9,706
Li-Cycle
Shares to Louise Lowrie, 9,706
Li-Cycle
Shares to Anthony Lowrie and 9,706
Li-Cycle
Shares to Liv Lowrie, in each case for a subscription price of C$18.03 per
Li-Cycle
Share. On January 23, 2019,
Li-Cycle
issued 4,234
Li-Cycle
Shares to Alex Lowrie as a finder’s fee in connection with a prior financing conducted by
Li-Cycle.
Alex Lowrie was a director of
Li-Cycle
prior to the Business Combination and each of Louise Lowrie, Anthony Lowrie and Liv Lowrie are immediate family members of Alex Lowrie.
Independence of Directors
As a foreign private issuer, the Company is not required to have a majority of independent directors. However, the board has determined that four out of seven members of our board of directors — Rick Findlay, Scott Prochazka, Anthony Tse and Mark Wellings — are “independent” directors.
Board Leadership Structure and Role in Risk Oversight
No policy exists requiring combination or separation of leadership roles and our governing documents do not mandate a particular structure. This allows the board the flexibility to establish the most appropriate structure for the Company at any given time.
88
The board is actively involved in overseeing our risk management processes. The board focuses on our general risk management strategy and ensures that appropriate risk mitigation strategies are implemented by management. Further, operational and strategic presentations by management to the board include consideration of the challenges and risks of our businesses, and the board and management actively engage in discussion on these topics. In addition, each of the board’s committees considers risk within its area of responsibility.
89
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation of Executives
Introduction
The following section describes the significant elements of the Company’s executive compensation program, with particular emphasis on the process for determining compensation payable to the Company’s Chief Executive Officer, Executive Chair, Chief Financial Officer and the Company’s other two most highly compensated executive officers (collectively, the “Named Executive Officers” or “NEOs”). The NEOs are:
| • |
Ajay Kochhar, Chief Executive Officer;
|
| • |
Tim Johnston, Executive Chairman;
|
| • |
Bruce MacInnis, Chief Financial Officer;
|
| • |
Kunal Phalpher, Chief Strategy Officer; and
|
| • |
Chris Biederman, Chief Technology Officer.
|
Overview and Compensation Committee
The compensation committee, among other things, reviews and approves, or recommends to the board for approval, compensation of the President and Chief Executive Officer, Executive Chair and other executive officers, oversees the administration of the Company’s incentive compensation plans, and prepares any report on executive compensation required for the Company’s proxy statement.
Compensation Objectives
The Company’s executive compensation program is designed to achieve the following objectives:
| • |
provide market-competitive compensation opportunities in order to attract and retain talented, high-performing and experienced executive officers, whose knowledge, skills and performance are critical to our success;
|
| • |
motivate these executive officers to achieve our business objectives;
|
| • |
align the interests of our executive officers with those of our shareholders by tying a meaningful portion of compensation directly to the long-term value and growth of our business;
|
| • |
continue to foster an entrepreneurial and results-driven culture; and
|
| • |
provide the appropriate balance of short and long-term incentives to encourage appropriate levels of risk-taking and prudent decision-making by the executive team.
|
Compensation Components
In 2021, our compensation program consists primarily of the following components: base salary, short-term incentives, long-term equity incentives and benefit and perquisite programs.
Base Salary.
We seek to maintain base salary amounts consistent with industry norms. Base salaries for NEOs are established based on the scope of their responsibilities, competencies and their prior relevant experience, taking into account compensation paid in the market for similar positions, the market demand for such NEOs and the NEO’s total compensation package. Base salaries are reviewed annually and increased for merit reasons, based on the executive’s success in meeting or exceeding individual objectives. Additionally, base salaries can be adjusted as warranted throughout the year to reflect promotions or other changes in the scope of breadth of an executive’s role or responsibilities, as well as to maintain market competitiveness.
90
Short-Term Incentives.
The Company’s compensation program for NEOs and other executive officers includes eligibility for annual cash bonuses. Annual bonuses are designed to motivate our executive officers to meet our business and financial objectives generally and its annual financial performance targets in particular. For 2021, the NEOs are expected to be eligible to earn an annual bonus based on a target percentage of
70-120%
of base salary, depending on the level of each NEO, of which a percentage is based on the achievement of certain corporate and financial objectives, and a percentage of which may be based upon the achievement, by the NEO, of personalized goals and objectives.
Long-Term Incentives.
Equity-based awards are a variable element of compensation that allows the Company to reward its NEOs for their sustained contributions to the Company. Equity awards reward performance and continued employment by an NEO, with associated benefits to the Company of attracting and retaining employees. The Company believes that options and other equity-based compensation will provide NEOs with a strong link to long-term corporate performance and the creation of shareholder value.
Historically,
Li-Cycle
has made equity-based awards to NEOs by issuing options under
Li-Cycle’s
share option plan (the “Legacy Option Plan”) and options and Restricted Share Units (“RSUs”) under
Li-Cycle’s
long-term incentive plan effective November 1, 2019 (the “Legacy LTIP”). Pursuant to the Arrangement, outstanding
Li-Cycle
options were exchanged for options to purchase Company common shares (with the number of Company common shares subject to each such option and the exercise price being adjusted in accordance with the terms of the Arrangement), and such options were, depending on the election of the holder, (i) transferred to the Company pursuant to the Arrangement in exchange for Company common shares having a fair market value equal to the “in the money value” of such Company options, or (ii) remain outstanding under the Legacy Option Plan or the Legacy LTIP, as applicable, as the board of directors succeeded to the authority and responsibility of the
Li-Cycle
board of directors with respect to each such option and each such option is subject to administrative procedures consistent with those in effect under the Incentive Plan. Pursuant to the Arrangement, the RSUs that were outstanding immediately prior to the closing of the Business Combination became fully vested and were surrendered in exchange for an equivalent number of
Li-Cycle
common shares, and the
Li-Cycle
common shares, including the
Li-Cycle
common shares received in exchange for the RSUs, were transferred to the Company in exchange for a number of Company common shares determined in accordance with the Arrangement. Following the consummation of the Business Combination, no further awards will be made pursuant to the Legacy Option Plan or the Legacy LTIP.
In connection with the Business Combination, the Company adopted the Incentive Plan to grant future awards to eligible directors, officers, employees and consultants of the Company and its subsidiaries. See “Long-Term Incentive Plan.”
Employee Benefits.
Li-Cycle
provides standard health, dental, life and disability insurance benefits to its executive officers, on the same terms and conditions as provided to all other eligible employees.
Li-Cycle
does not offer a deferred compensation plan or pension plan.
Li-Cycle
currently does not provide executive perquisites that are not generally available on a
non-discriminatory
basis to all of its employees.
Long-Term Incentive Plan
The purpose of the Incentive Plan is to promote the success and enhance the value of the Company and its subsidiaries by linking the individual interests of the members of the board of directors, employees, and consultants to those of our shareholders and other stakeholders and by providing such individuals with an
91
incentive for outstanding performance to generate superior returns to our shareholders. The Incentive Plan also provides flexibility to the Company in its ability to motivate, attract, and retain the services of members of the board of directors, employees, and consultants upon whose judgment, interest, and special effort the successful conduct of the Company’s operation will be largely dependent. Set forth below is a summary of the material terms of the Incentive Plan.
Eligibility and Administration.
The Company’s employees, consultants and directors, and employees, consultants and directors of its subsidiaries are eligible to receive awards under the Incentive Plan. The Incentive Plan is administered by the board with respect to awards to
non-employee
directors and by the compensation committee with respect to other participants, each of which may delegate its duties and responsibilities to committees of the board of directors and/or officers (referred to collectively as the “plan administrator” below), subject to certain limitations that may be imposed under Section 16 of the Exchange Act, and/or stock exchange rules, as applicable. The plan administrator has the authority to interpret and adopt rules for the administration of the Incentive Plan, subject to its express terms and conditions. The plan administrator can also set the terms and conditions of all awards under the Incentive Plan, including any vesting and vesting acceleration conditions.
Limitation on Awards and Shares Available.
The Incentive Plan provides that the maximum number of common shares initially available for issuance under the Incentive Plan is 14,799,519. The number of common shares available for issuance under the Incentive Plan will be automatically increased on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, in an amount equal to the lesser of (i) 5% of the outstanding common shares on the last day of the immediately preceding fiscal year and (ii) such number of common shares determined by the board. Any common shares distributed pursuant to an award may consist, in whole or in part, of authorized and unissued common shares, treasury shares or common shares purchased on the open market. Notwithstanding the foregoing, the aggregate number of common shares which may be issued or transferred pursuant to awards under the Incentive Plan in the form of incentive stock options (“ISOs”) is 14,799,519.
The Incentive Plan provides that awards granted upon the assumption of, or in substitution for, outstanding equity awards previously granted by an entity in connection with a corporate transaction, such as a merger, combination, consolidation or acquisition of property or shares, in any case, will not reduce the number of shares authorized for grant under the Incentive Plan, except as required by Section 422 of the Code. If any common shares subject to an award are forfeited or expire, are converted to shares of another person in connection with a recapitalization, reorganization, merger, consolidation,
split-up,
spin-off,
combination, exchange of shares or other similar event, or such award is settled for cash (in whole or in part), the common shares subject to such award will, to the extent of such forfeiture, expiration, conversion or cash settlement, again be available for future grants of awards under the Incentive Plan.
The Incentive Plan provides that the following will not be added to the common shares authorized for grant under the Incentive Plan and shall not be available for future grants of awards: (i) common shares tendered by an award holder or withheld by the Company in payment of the exercise price of an option; (ii) common shares tendered by an award holder or withheld by the Company to satisfy any tax withholding obligation with respect to an award; (iii) common shares subject to a share appreciation right (SAR) or other share-settled award (including awards that may be settled in cash or shares) that are not issued in connection with the settlement or exercise, as applicable, of the SAR or other share-settled award; and (iv) common shares purchased on the open market by the Company with the cash proceeds received from the exercise of options.
The Incentive Plan provides that the sum of the grant date fair value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of equity-based awards and the amount of any cash-based awards granted to a
non-employee
92
director during any calendar year will not exceed $750,000 in respect of such
non-employee
director’s service as a member of the board during such year.
Awards.
The Incentive Plan provides for the grant of share options, including ISOs and
non-qualified
share options (“NSOs”), Share Appreciation Rights (“SARs”), restricted shares, restricted share units, dividend equivalents, share payments, other incentive awards, and cash awards. No determination has been made as to the types or amounts of awards that will be granted to certain individuals pursuant to the Incentive Plan. Certain awards under the Incentive Plan may constitute or provide for a deferral of compensation, subject to Section 409A of the Code, which may impose additional requirements on the terms and conditions of such awards. All awards under the Incentive Plan will be set forth in award agreements, which will detail all terms and conditions of the awards, including any applicable vesting and payment terms and post-termination exercise limitations. Awards, other than cash awards, generally will be settled in common shares but the plan administrator may provide for cash settlement of any award (other than share options). A brief description of each award type follows.
| • |
Share Options
|
| • |
SARs
|
| • |
Restricted Shares and RSUs
non-transferable
common shares that remain forfeitable unless and until specified conditions are met, and which may be subject to a purchase price. RSUs are contractual promises to deliver common shares in the future, which may also remain forfeitable unless and until specified conditions are met.
|
| • |
Other Share or Cash Based Awards
|
| • |
Dividend Equivalents
|
93
Vesting.
Vesting conditions determined by the plan administrator may apply to each award and may include continued service, performance and/or other conditions.
Certain Transactions.
The plan administrator has broad discretion to take action under the Incentive Plan, as well as make adjustments to the terms and conditions of existing and future awards, to prevent the dilution or enlargement of intended benefits and facilitate necessary or desirable changes in the event of certain transactions and events affecting the common shares, such as share dividends, share splits, mergers, amalgamations, arrangements, acquisitions, consolidations and other corporate transactions. In addition, in the event of certain
non-reciprocal
transactions with shareholders known as “equity restructurings,” the plan administrator will make equitable adjustments to the Incentive Plan and outstanding awards.
In the event of a Change in Control (as defined in the Incentive Plan), unless the plan administrator elects to (i) terminate an award in exchange for cash, rights or property, or (ii) cause an award to become fully exercisable and no longer subject to any forfeiture restrictions prior to the consummation of a Change in Control, such award will continue in effect or be assumed or an equivalent award substituted by the successor corporation or a parent or subsidiary of the successor corporation. In the event an award continues in effect or is assumed or an equivalent award substituted, and a holder incurs a termination of service without “cause” (as such term is defined in the sole discretion of the plan administrator, or as set forth in the award agreement relating to such award) upon or within 12 months following a Change in Control, then such holder will be fully vested in such continued, assumed or substituted award.
Non-U.S.
Participants, Claw-Back Provisions and Transferability.
The Incentive Plan provides that the plan administrator may modify award terms, establish subplans and/or adjust other terms and conditions of awards, subject to the share limits described above, in order to facilitate grants of awards subject to the laws and/or stock exchange rules of countries outside of the United States. All awards will be subject to the provisions of any clawback policy implemented by the Company to the extent set forth in such clawback policy and/or in the applicable award agreement. With limited exceptions for estate planning, domestic relations orders, certain beneficiary designations and the laws of descent and distribution, awards under the Incentive Plan are generally
non-transferable,
and are exercisable only by the participant.
Plan Amendment and Termination.
The Incentive Plan provides that the board may amend or terminate the Incentive Plan at any time, provided that no amendment, suspension or termination of the Incentive Plan will, without the consent of the holder, materially and adversely affect any rights or obligations under any award, unless the award itself otherwise expressly so provides, and provided further that the board of directors may not take any of the following actions without approval of shareholders given within 12 months before or after such action: (i) increase the limit on the maximum number of common shares which may be issued under the Incentive Plan, (ii) reduce the price per share of any outstanding option or SAR granted under the Incentive Plan, or (iii) cancel any option or SAR in exchange for cash or another award when the option or SAR price per share exceeds the fair market value of the underlying shares.
The Incentive Plan provides that in no event may any award be granted under the Incentive Plan after the tenth anniversary of the earlier of (i) the date on which the Incentive Plan is adopted by the board or (ii) the date the Plan is approved by shareholders.
Summary Compensation Table
The aggregate cash compensation, including benefits in kind granted, accrued or paid to
Li-Cycle’s
executive officers and directors with respect to the fiscal year ended October 31, 2020 for services in all
94
capacities was $806,454 (converting from Canadian to U.S. dollars using an exchange rate of C$1.00 = US$0.7509, which was the Bank of Canada noon rate on October 30, 2020). The total amount set aside or accrued by
Li-Cycle
or its subsidiaries to provide pensions, retirement or similar benefits was zero. In addition, for the year ended October 31, 2020,
Li-Cycle
granted RSUs to our executive officers and directors with an aggregate value of $100,532 (converting from Canadian to U.S. dollars using an exchange rate of C$1.00 = US$0.7509, which was the Bank of Canada noon rate on October 30, 2020). Mr. Kochhar, Mr. Johnston, Mr. MacInnis, Mr. Phalpher and Mr. Biederman were also granted RSUs in December 2020 having the following respective values: $112,431, $86,435, 112,431, $86,435 and $26,410 (in each case converting from Canadian to U.S. dollars using an exchange rate of C$1.00 = US$0.7721, which was the Bank of Canada noon rate on December 1, 2020). In connection with the Amalgamation, the RSUs were treated as described under “— Compensation Components.”
Upon the closing of the Business Combination, the board, on recommendation of the compensation committee, following analysis and review of benchmarking of a comparator group of companies conducted by independent compensation consultants, approved certain salary increases and the granting of long-term incentive awards to the NEOs, effective on the Closing Date.
The NEOs’ new base salaries effective from the Closing Date and for the balance of the year ending October 31, 2021 are as follows: $450,000 to Mr. Kochhar, $450,000 to Mr. Johnston, $325,000 to Mr. MacInnis, $300,000 to Mr. Phalpher and $300,000 to Mr. Biederman. Mr. Kochhar, Mr. Johnston, Mr. MacInnis, Mr. Phalpher and Mr. Biederman were granted options at the Closing Date having the following respective values: $1,181,500; $1,181,500; $2,077,000; $450,000; and $450,000. They will each be granted RSUs of an equivalent value on the date following the effectiveness of a registration statement on
Form S-8
to be filed by the Company with the SEC to register the common shares issuable thereunder.
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Share Ownership
The following table sets out the names and positions of the executive officers of the Company as of October 18, 2021, the number of common shares, options and RSUs of the Company owned or over which control or direction is exercised by each such executive officer of the Company and, where known after reasonable enquiry, by their respective associates or affiliates.
|
Name and Principal Position
|
Number
of Shares Owned (#) |
Percentage
of Total Shares Outstanding (%) (1) |
Special
Voting Rights |
Number of
Securities Underlying Options |
Option
Exercise Price ($) |
Option
Expiration Date |
||||||||||||||||||
|
Ajay Kochhar, President and Chief Executive Officer (2)
|
24,908,409 | 15.26 | % | None | 159,640 | $ | 0.02 | April 11, 2023 | ||||||||||||||||
| 139,685 | $ | 0.37 | July 19, 2024 | |||||||||||||||||||||
| 176,871 | $ | 10.93 | August 10, 2031 | |||||||||||||||||||||
|
Tim Johnston, Executive Chairman (3)
|
11,092,964 | 6.80 | % | None | 339,100 | $ | 0.02 | September 12, 2022 | ||||||||||||||||
| 159,640 | $ | 0.02 | April 11, 2023 | |||||||||||||||||||||
| 199,550 | $ | 0.37 | July 19, 2024 | |||||||||||||||||||||
| 176,871 | $ | 10.93 | August 10, 2031 | |||||||||||||||||||||
|
Bruce MacInnis, Chief Financial Officer
|
— | — | None | 310,928 | $ | 10.93 | August 10, 2031 | |||||||||||||||||
|
Kunal Phalpher, Chief Commercial Officer
|
304,272 | 0.19 | % | None | 159,640 | $ | 0.02 | April 11, 2023 | ||||||||||||||||
| 139,685 | $ | 0.37 | July 19, 2024 | |||||||||||||||||||||
| 67,365 | $ | 10.93 | August 10, 2031 | |||||||||||||||||||||
|
Chris Biederman, Chief Technology Officer
|
106,141 | 0.07 | % | None | 67,365 | $ | 10.93 | August 10, 2031 | ||||||||||||||||
|
Carl DeLuca, General Counsel, Corporate Secretary
|
— | — | None | 102,470 | $ | 10.93 | August 10, 2031 | |||||||||||||||||
|
Lauren Choate, Chief People Officer
|
500 | — | None | 98,278 | $ | 10.93 | August 10, 2031 | |||||||||||||||||
Notes:
| (1) |
The ownership percentage set out in this column is based on a total of 163,179,555 outstanding common shares as of October 18, 2021, following the closing of the Business Combination, in each case rounded down to the nearest hundredth.
|
| (2) |
The number of shares owned include 45,797 common shares owned directly by Mr. Kochhar and 24,862,612 common shares owned by 2829908 Delaware LLC, a Delaware limited liability company, which is a wholly-owned subsidiary of Maplebriar Holdings Inc., a corporation organized under the laws of the Province of Ontario (“Maplebriar Holdings”), having a sole shareholder, The Kochhar Family Trust, an irrevocable trust established under the laws of the Province of Ontario, Canada (the “Trust”). There is an oral agreement among Mr. Kochhar, the Trust, Maplebriar Holdings, and 2829908 Delaware LLC, that grants Mr. Kochhar the sole power to control the voting and disposition of the common shares of the Company held by 2829908 Delaware LLC. Mr. Kochhar is one of three trustees of the Trust, along with Mr. Kochhar’s brother and father, and the beneficiaries of the Trust are principally relatives of Mr. Kochhar. There is an oral agreement among Mr. Kochhar, the Trust, Maplebriar Holdings and 2829908 Delaware LLC that grants Mr. Kochhar the sole power to control the voting and disposition of the common shares held by 2829908 Delaware LLC. Mr. Kochhar is a Director and the President and Chief Executive Officer of the Company.
|
| (3) |
The number of shares owned include 45,797 common shares owned directly by Mr. Johnston and 11,047,167 common shares owned by Keperra Holdings Ltd., a Guernsey corporation (“Keperra”). Mr. Johnston is the sole shareholder of Keperra. Artemis Nominees Limited is a nominee company that holds legal title to 100 shares of Keperra as nominee of and trustee for Mr. Johnston. Mr. Johnston is a Director and the Executive Chairman of the Company.
|
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Employment Arrangements, Termination and Change in Control Benefits
Ajay Kochhar
On September 1, 2020,
Li-Cycle
entered into an employment agreement with Mr. Kochhar setting forth the terms and conditions of his employment as
Li-Cycle’s
President and Chief Executive Officer, including base salary, annual performance bonus and benefits.
In the case of
Li-Cycle’s
termination of Mr. Kochhar’s employment other than for cause, or in the case of Mr. Kochhar’s termination of his employment for good reason (as defined in the employment agreement) following a change of control (as defined in the employment agreement and which will not be triggered by consummation of the Business Combination), Mr. Kochhar is entitled to accrued but unpaid base salary, vacation pay, expense reimbursements and benefits, an additional
fifty-two
weeks’ base salary and bonus (calculated on the basis of an average of each bonus received by Mr. Kochhar in the three fiscal years preceding the termination date), and, until the earlier of
fifty-two
weeks from the termination date or the date on which Mr. Kochhar commences alternative employment or consulting work, continued coverage under
Li-Cycle
group benefit plans in place and as amended from time to time. Assuming Mr. Kochhar was terminated other than for cause following the Closing of the Business Combination, he would be entitled to a termination payment equal to $630,000 (assuming bonus of 40%).
If Mr. Kochhar is terminated for cause, he will not be entitled to any severance pay, notice or compensation in lieu of notice, nor to any bonus payment, other than any minimum entitlements to which he would be entitled under applicable law. He will, however, be entitled to payment of any unpaid base salary, vacation pay and expense reimbursements accrued to the termination date.
Tim Johnston
On September 1, 2020,
Li-Cycle
entered into an employment agreement with Mr. Johnston setting forth the terms and conditions of his employment as
Li-Cycle’s
Executive Chairman, including base salary, annual performance bonus and benefits.
In the case of
Li-Cycle’s
termination of Mr. Johnston’s employment other than for cause, or in the case of Mr. Johnston’s termination of his employment for good reason (as defined in the employment agreement and which will not be triggered by consummation of the Business Combination) following a change of control (as defined in the employment agreement), Mr. Johnston is entitled to accrued but unpaid base salary, vacation pay, expense reimbursements and benefits, an additional
fifty-two
weeks’ base salary and bonus (calculated on the basis of an average of each bonus received by Mr. Johnston in the three fiscal years preceding the termination date), and, until the earlier of
fifty-two
weeks from the termination date or the date on which Mr. Johnston commences alternative employment or consulting work, continued coverage under
Li-Cycle
group benefit plans in place and as amended from time to time. Assuming Mr. Johnston was terminated other than for cause following the Closing of the Business Combination, he would be entitled to a termination payment equal to $630,000.
If Mr. Johnston is terminated for cause, he will not be entitled to any severance pay, notice or compensation in lieu of notice, nor to any bonus payment, other than any minimum entitlements to which he would be entitled under applicable law. He will, however, be entitled to payment of any unpaid base salary, vacation pay and expense reimbursements accrued to the termination date.
Bruce MacInnis
On September 1, 2020,
Li-Cycle
entered into an employment agreement with Mr. MacInnis setting forth the terms and conditions of his employment as
Li-Cycle’s
Chief Financial Officer, including base salary, annual performance bonus and benefits. On July 7, 2021,
Li-Cycle
and NewCo entered into a retirement agreement with
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Mr. MacInnis (the “Retirement Agreement”) setting forth certain terms and conditions relating to his retirement from employment with
Li-Cycle,
which supersede the terms and conditions of his employment agreement that pertain to that subject matter.
In the case of
Li-Cycle’s
termination of Mr. MacInnis’ employment other than for cause, or in the case of Mr. MacInnis’ termination of his employment for good reason (as defined in the employment agreement and which will not be triggered by consummation of the Business Combination) following a change of control (as defined in the employment agreement), Mr. MacInnis is entitled to accrued but unpaid base salary, vacation pay, expense reimbursements and benefits, an additional
fifty-two
weeks’ base salary and bonus (calculated on the basis of an average of each bonus received by Mr. MacInnis in the three fiscal years preceding the termination date), and, until the earlier of
fifty-two
weeks from the termination date or the date on which Mr. MacInnis commences alternative employment or consulting work, continued coverage under
Li-Cycle
group benefit plans in place and as amended from time to time. Assuming Mr. MacInnis was terminated other than for cause following the Closing of the Business Combination, he would be entitled to a termination payment equal to $455,000 (assuming bonus of 40%).
Pursuant to the Retirement Agreement, subject to certain conditions including those set out below, Mr. MacInnis will be entitled to (i) salary continuance for a period of 12 months following the retirement date, (ii) a bonus for the fiscal year ended October 31, 2021 calculated and payable in the ordinary course in accordance with his employment agreement and the Company’s bonus plan for such year, (iii) a bonus for the period from November 1, 2021 up to and including the retirement date based on his actual bonus achieved in the prior fiscal year, prorated for such period, and (iv) continued participation in the Company’s group health and dental plans until the earlier of the date which is 12 months following the retirement date and the date on which he secures alternate coverage through any source other than existing spousal coverage. The terms of the Retirement Agreement will be null and void in the event that Mr. MacInnis’ employment is terminated by the Company for just clause (as defined in the employment agreement) or by way of Mr. MacInnis’ voluntary resignation (as defined in the employment agreement) at any time prior to the retirement date. Following the entering into of the retirement agreement, the Company and Mr. MacInnis mutually agreed that Mr. MacInnis’ retirement date will be January 31, 2022, and the Company agreed to accelerate and settle certain retirement payments to Mr. MacInnis in an amount of $325,000, which amounts shall be repayable to the Company if Mr. MacInnis’ employment is terminated by the Company for just cause or by Mr. MacInnis by way of voluntary resignation at any time prior to the retirement date.
If Mr. MacInnis is terminated for cause, he will not be entitled to any severance pay, notice or compensation in lieu of notice, nor to any bonus payment, other than any minimum entitlements to which he would be entitled under applicable law. He will, however, be entitled to payment of any unpaid base salary, vacation pay and expense reimbursements accrued to the termination date.
Kunal Phalpher
On September 1, 2020,
Li-Cycle
entered into an employment agreement with Mr. Phalpher setting forth the terms and conditions of his employment as
Li-Cycle’s
Chief Commercial Officer, including base salary, annual performance bonus and benefits. On November 1, 2021, Mr. Phalpher’s title was changed from Chief Commercial Officer to Chief Strategy Officer, but the terms of his employment agreement remained the same.
In the case of
Li-Cycle’s
termination of Mr. Phalpher’s employment other than for cause, or in the case of Mr. Phalpher’s termination of his employment for good reason (as defined in the employment agreement and which will not be triggered by consummation of the Business Combination) following a change of control (as defined in the employment agreement), Mr. Phalpher is entitled to accrued but unpaid base salary, vacation pay, expense reimbursements and benefits, an additional
fifty-two
weeks’ base salary and bonus (calculated on the basis of an average of each bonus received by Mr. Phalpher in the three fiscal years preceding the termination date), and, until the earlier of
fifty-two
weeks from the termination date or the date on which Mr. Phalpher commences alternative employment or consulting work, continued coverage under
Li-Cycle
group benefit plans
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in place and as amended from time to time. Assuming Mr. Phalpher was terminated other than for cause following the Closing of the Business Combination, he would be entitled to a termination payment equal to $420,000 (assuming bonus of 40%).
If Mr. Phalpher is terminated for cause, he will not be entitled to any severance pay, notice or compensation in lieu of notice, nor to any bonus payment, other than any minimum entitlements to which he would be entitled under applicable law. He will, however, be entitled to payment of any unpaid base salary, vacation pay and expense reimbursements accrued to the termination date.
Chris Biederman
On September 7, 2020,
Li-Cycle
entered into an employment agreement with Mr. Biederman setting forth the terms and conditions of his employment as
Li-Cycle’s
Chief Technology Officer, including base salary, annual performance bonus and benefits.
In the case of
Li-Cycle’s
termination of Mr. Biederman’s employment other than for cause, Mr. Biederman is entitled to accrued but unpaid base salary, vacation pay, expense reimbursements and benefits, and (a) before his completion of one year of service under the agreement, one months’ written notice, or (b) upon one year of completed service under the agreement, one months’ written notice plus an additional one months’ written notice for every additional completed year of completed service up to a maximum of 12 months’ written notice.
Li-Cycle
may terminate the agreement and continue to pay Mr. Biederman his base salary until the expiry of the notice period or the date he commences alternative employment or consulting work, in which case
Li-Cycle
will pay Mr. Biederman an amount equal to 50% of the value of the payments remaining to the end of the notice period. Assuming Mr. Biederman was terminated other than for cause following the Closing of the Business Combination, he would be entitled to a termination payment equal to $70,000 (assuming two years of service and bonus of 40%).
If Mr. Biederman is terminated for cause, he will not be entitled to any severance pay, notice or compensation in lieu of notice, nor to any bonus payment, other than any minimum entitlements to which he would be entitled under applicable law. He will, however, be entitled to payment of any unpaid base salary, vacation pay and expense reimbursements accrued to the termination date.
Carl DeLuca
On February 24, 2021,
Li-Cycle
entered into an employment agreement with Mr. DeLuca setting forth the terms and conditions of his employment as
Li-Cycle’s
General Counsel & Corporate Secretary, including base salary, annual performance bonus and benefits.
In the case of
Li-Cycle’s
termination of Mr. DeLuca’s employment other than for cause, in addition to accrued but unpaid base salary, earned bonus, vacation pay, expense reimbursements and benefits to the date of termination, Mr. DeLuca is entitled to, (i) before his completion of six years of service, six months’ written notice, or (ii) upon six years of completed service, six months’ written notice plus an additional one month’s written notice for every additional completed year of service starting after the sixth anniversary of the commencement date up to an aggregate maximum of 12 months’ written notice. The notice may be satisfied by working notice or pay in lieu of notice (via salary continuance). In the case of salary continuance, the salary continuance period will cease on the date that Mr. DeLuca commences alternate employment or full-time consulting work, and
Li-Cycle
will pay Mr. DeLuca a
lump-sum
equal to 50% of the value of the payments remaining between the date that Mr. DeLuca commences alternate employment or consulting work and the end of the applicable notice period, less all lawful deductions. Assuming Mr. DeLuca was terminated other than for cause following the Closing of the Business Combination, he would be entitled to a termination payment equal to $210,000 (assuming bonus of 40%).
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If Mr. DeLuca is terminated for cause, he will not be entitled to any severance pay, notice or compensation in lieu of notice, other than any minimum entitlements to which he would be entitled under applicable law. He will, however, be entitled to payment of any unpaid base salary, vacation pay and expense reimbursements accrued to the termination date.
Lauren Choate
On April 12, 2021,
Li-Cycle
entered into an employment agreement with Ms. Choate setting forth the terms and conditions of her employment, including base salary, annual performance bonus and benefits. Ms. Choate’s agreement is on an
“at-will
basis,” meaning that the Company is free to release the employee at any time for any reason and does not specify any entitlements on such termination of employment.
Compensation of Directors
We have established a compensation program for our directors who are not executive officers of the Company, which consists of an annual retainer, and additional retainers for serving as Lead Director and/or serving as Chair of a committee of the board, as applicable. We will also reimburse our directors for reasonable documented expenses incurred in connection with the performance of their duties as directors, including travel expenses in connection with their attendance at board and committee meetings. Our directors who are also executive officers of the Company will not receive additional compensation for serving as directors.
A portion of the board member retainer is paid in RSUs. Each director may also elect to receive up to 100% of their cash retainer in the form of RSUs, with the number of RSUs to be issued being determined based on the fair market value of the common shares prior to each such issuance.
Under the terms of an agreement dated July 19, 2019 between
Li-Cycle
and Anthony Tse, Mr. Tse provides consulting services to
Li-Cycle
in relation to the proposed expansion of its operations in Asia and is entitled to a fee of $4,700 per month for such services. For the twelve months ended April 30, 2021, Mr. Tse was paid aggregate fees under this agreement of $56,400.
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DESCRIPTION OF SECURITIES
General
The following description of the material terms of our share capital includes a summary of certain provisions of our articles that became effective upon the closing of the Business Combination (the “articles”). This description is qualified in its entirety by reference to our articles which are incorporated by reference as exhibits to the registration statement of which this prospectus forms a part.
Share Capital
Our authorized share capital consists of an unlimited number of common shares and an unlimited number of preferred shares issuable in series. Prior to the closing of the Business Combination on August 10, 2021, the Company was authorized to issue an unlimited number of common shares without par value and an unlimited number of preferred shares without par value and there were 2,126,396 common shares issued and outstanding and 281,138 preferred shares issued and outstanding. As of October 18, 2021, subsequent to the Closing, there were 163,179,555 common shares outstanding and no preferred shares outstanding.
Common Shares
Voting Rights
Dividend Rights
Preemptive Rights
pre-emptive
rights relating to the common shares.
Repurchase of Common Shares
Liquidation
Preferred Shares
The Company is authorized to issue an unlimited number of preferred shares, issuable in series. Subject to any limitations prescribed by law, including the OBCA, each series of preferred shares will consist of such
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number of shares and have such rights, privileges, restrictions and conditions as may be determined by the board prior to the issuance of such series. No rights, privileges, restrictions or conditions attaching to any series of preferred shares will confer upon the shares of such series a priority in respect of dividends or distribution of assets or return of capital in the event of the liquidation, dissolution or winding up of the Company over the shares of any other series of preferred shares. The preferred shares of each series will, with respect to the right of payment of dividends and the distribution of assets or return of capital in the event of liquidation, dissolution or winding up of the Company, rank on parity with the shares of every other series of preferred shares.
The issuance of preferred shares and the terms selected by the board could decrease the amount of earnings and assets available for distribution to holders of common shares or adversely affect the rights and powers, including the voting rights, of the holders of common shares without any further vote or action by the holders of common shares. The issuance of preferred shares, or the issuance of rights to purchase preferred shares, could make it more difficult for a third-party to acquire a majority of the outstanding voting shares and thereby have the effect of delaying, deferring or preventing a change of control of the Company or an unsolicited acquisition proposal or of making the removal of management more difficult. Additionally, the issuance of preferred shares may have the effect of decreasing the market price of the common shares.
Dissent Rights
Under the OBCA, shareholders of a corporation are entitled to exercise dissent rights in respect of certain matters and to be paid the fair value of their shares in connection therewith. The dissent right is applicable where the corporation resolves to: (i) amend its articles to add, remove or change restrictions on the issue, transfer or ownership of shares of a class or series of the shares of the corporation; (ii) amend its articles to add, remove or change any restrictions on the business it is permitted to carry on or the powers it may exercise; (iii) amalgamate with another corporation, subject to certain exceptions; (iv) be continued under the laws of another jurisdiction; or (v) sell, lease or exchange all or substantially all of its property. In addition, holders of a class or series of shares of an OBCA corporation are, in certain circumstances and, in the case of items (a), (b) and (e) below, unless the articles of the corporation provide otherwise, entitled to exercise dissent rights and be paid the fair value of their shares if the corporation resolves to amend its articles to (a) increase or decrease any maximum number of authorized shares of such class or series, or increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to shares of such class or series; (b) effect an exchange, reclassification or cancellation of the shares of such class or series; (c) add to, remove or change the rights, privileges, restrictions or conditions attached to the shares of such class or series; (d) add to the rights or privileges of any class or series of shares having rights or privileges equal or superior to the shares of such class or series; (e) create a new class or series of shares equal or superior to the shares of such class or series, except in certain circumstances; (f) make a class or series of shares having rights or privileges inferior to the shares of such class or series equal or superior to the shares of such class or series; (g) effect an exchange or create a right of exchange of the shares of another class or series into the shares of such class of series; or (h) add, remove or change restrictions on the issue, transfer or ownership of the shares of such class of series.
Transfer of Shares
Subject to the rules of any stock exchange on which shares are posted or listed for trading, no transfer of a security issued by the Company will be registered except upon (i) presentation of the security certificate representing the security with an endorsement which complies with the OBCA, together with such reasonable assurance that the endorsement is genuine and effective as the directors may require, (ii) payment of all applicable taxes and fees, and (iii) compliance with the articles of the Company. If no security certificate has been issued by the Company in respect of a security issued by the Company, clause (i) above may be satisfied by presentation of a duly executed security transfer power, together with such reasonable assurance that the security transfer power is genuine and effective as the directors may require.
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Transfer Restrictions
Li-Cycle Transaction
Support Agreements
Concurrently with the execution of the Business Combination Agreement, the
Li-Cycle Holders
entered into
the Li-Cycle Transaction
Support Agreements with Peridot (the
“Li-Cycle
Transaction Support Agreements”), pursuant to which each
Li-Cycle
Holder agreed to, among other things, (i) vote or cause to be voted (whether in person, by proxy, by action by written consent, as applicable, or as may be required under
Li-Cycle’s
shareholders agreement or articles of incorporation) their
Li-Cycle
Shares in favor of the Business Combination Agreement, the Arrangement and certain related transactions; (ii) be bound by certain other covenants and agreements related to the Business Combination and (iii) be bound by certain transfer restrictions with respect to such securities, in each case, on the terms and subject to the conditions set forth in
the Li-Cycle Transaction
Support Agreements.
On August 10, 2021, the Company, the Peridot Class B Holders and the
Li-Cycle
Holders (collectively for the purposes of this subsection referred to as the “Holders”) entered into the Investor Agreement. The Investor Agreement provides that the common shares held by the Peridot Class B Holders and
Li-Cycle
Holders will be subject to certain transfer restrictions until (i) with respect to the Peridot Class B Holders, the earliest of (a) one year after the Closing and (b) (x) if the closing price of our common shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the Closing, or (y) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our public shareholders having the right to exchange their common shares for cash, securities or other property, and (ii) with respect to the
Li-Cycle
Holders, 180 days following the Closing.
Registration Rights
Investor Agreement
Pursuant to the Investor Agreement, the Company is obligated to file a registration statement to register the resale of certain securities held by the Peridot Class B Holders and
Li-Cycle
Holders within 30 days after the Closing and to use commercially reasonable efforts to cause such registration statement to be declared effective as soon as practicable after such filing, but no later than the earlier of (i) the 75th day (or the 105th day if the SEC notifies that it will “review” such registration statement) following the Closing Date and (ii) the 15th business day after the date the SEC notifies us that such registration statement will not be “reviewed” or will not be subject to further review. In addition, pursuant to the terms of the Investor Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the Peridot Class B Holders and
Li-Cycle
Holders may, subject to the limitations in the Investor Agreement, demand at any time or from time to time, that the Company file a registration statement on Form
F-3
(or on Form
F-1
if Form
F-3
is not available) to register the securities of the Company held by such Peridot Class B Holders and
Li-Cycle
Holders, and each may specify that such demand registration take the form of an underwritten offering, in each case subject to limitations on the number of demands and underwritten offerings that can be requested by each Peridot Class B Holder and
Li-Cycle
Holder, as specified in the Investor Agreement. The Peridot Class B Holders and
Li-Cycle
Holders also have “piggy-back” registration rights, subject to certain requirements and customary conditions. The Investor Agreement also provides that the Company will pay certain expenses relating to such registrations and indemnify the Peridot Class B Holders and
Li-Cycle
Holders against (or make contributions in respect of) certain liabilities that may arise under the Securities Act.
Subscription Agreements
Contemporaneously with the execution of the Business Combination Agreement, Subscription Agreements were entered into by and among each PIPE Investor, Peridot, and NewCo. Peridot obtained commitments from
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the PIPE Investors under the Subscription Agreements to purchase common shares for a purchase price of $10.00 per share, for aggregate gross proceeds of $315,490,000. Certain offering related expenses are payable by Peridot, including customary fees payable to the placement agents. The purpose of the sale of common shares to the PIPE Investors was to raise additional capital for use in connection with the Business Combination.
The common shares sold to the PIPE Investors were identical to the shares that were held by the public shareholders at the time of the Closing, except that when initially issued by Peridot, such shares were restricted securities. The PIPE Financing occurred on the date of, and immediately prior to, the consummation of the Business Combination.
The closing of the PIPE Financing was subject to customary conditions, including, among other conditions, the Company’s agreement to, as soon as practicable (but in any case no later than 30 calendar days after the consummation of the Business Combination), file with the SEC (at its sole cost and expense) a registration statement registering the resale of the shares received by the PIPE Investors in the PIPE Financing (the “Resale Registration Statement”), and to use its commercially reasonable efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof.
Note Purchase Agreement
On September 29, 2021, in connection with the Company’s entry into the Note Purchase Agreement and issuance of the Spring Creek Capital Convertible Note, the Company granted certain registration rights under the Note Purchase Agreement. Pursuant to the Note Purchase Agreement, the Company agreed to file with the SEC within 30 days a registration statement covering the resale of the common shares issued or issuable upon conversion of the Spring Creek Capital Convertible Note. The Company is required to use commercially reasonable efforts to have such registration statement declared effective by the SEC as soon as practicable and no later than the earlier of (A) 60 days after the issuance of the Spring Creek Capital Convertible Note (or 90 days after the issuance of the Spring Creek Capital Convertible Note if the SEC notifies the Company that it will review the registration statement) or (B) 10 business days after the SEC notifies the Company in writing that it will not review the registration statement. The Company agreed to keep the registration statement (or another shelf registration statement covering the common shares issued or issuable upon conversion of the Spring Creek Capital Convertible Note) effective until the earlier of (x) the third anniversary of the issuance of the Spring Creek Capital Convertible Note or (y) the date on which the holder of the Spring Creek Capital Convertible Note ceases to hold any common shares issued or upon conversion of the Spring Creek Capital Convertible Note. The registration statement of which this prospectus forms a part is intended to satisfy this requirement.
Listing
Our common shares and warrants are listed on NYSE under the symbols “LICY” and “LICY.WS,” respectively. Holders of our common shares and warrants should obtain current market quotations for their securities. There can be no assurance that our common shares and/or warrants will remain listed on NYSE. If we fail to comply with the NYSE listing requirements, our common shares and/or warrants could be delisted from NYSE. A delisting of our common shares will affect the liquidity of our common shares and could inhibit or restrict our ability to raise additional financing. See the section titled “Risk Factors — Risks Relating to this Offering and Ownership of Our Securities — NYSE may delist our securities, which could limit investors’ ability to engage in transactions in our securities and subject us to additional trading restrictions.”
Transfer Agent
A register of holders of our shares is maintained by Continental Stock Transfer and Trust Company in Canada, who serves as registrar and transfer agent for our equity securities.
104
DESCRIPTION OF AMENDED AND RESTATED COMPANY ORGANIZATIONAL DOCUMENTS
Annual Meetings
Under the OBCA and the Company’s
by-laws,
the Company must hold its first annual meeting of shareholders within 18 months after the date on which it was incorporated, and after that must hold an annual meeting not later than 15 months after the last annual meeting at such time and place in or outside the Province of Ontario as may be determined by the directors of the Company or, in the absence of such a determination, at the place where the registered office of the Company is located.
Board and Shareholder Ability to Call Shareholder Meetings
The
by-laws
of the Company provide that meetings of the shareholders may be called by the board of directors at any time. In addition, under the OBCA, the holders of not less than 5% of the issued shares of a corporation that carry the right to vote at a meeting sought to be held may requisition that the directors call a meeting of shareholders for the purposes stated in the requisition. Upon receiving a requisition to call a meeting of shareholders, the directors must, within 21 days after receiving the requisition, call a meeting of shareholders to transact the business stated in the requisition unless a record date has been fixed for a meeting of shareholders and notice of the meeting has been given in accordance with the OBCA; the directors of the Company have called a meeting of shareholder and have given notice of the meeting in accordance with the OBCA; or the business of the meeting as stated in the requisition includes certain matters, including, but not limited to, a proposal the primary purpose of which is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or security holders. If the directors do not call such a meeting within 21 days after receiving the requisition, any shareholder who signed the requisition may call the meeting. The corporation must reimburse the requisitioning shareholders for the expenses reasonably incurred by them in requisitioning, calling and holding the meeting unless the shareholders have not acted in good faith and in the interest of the shareholders of the corporation generally.
Shareholder Meeting Quorum
The
by-laws
of the Company provide that one or more persons who are, or who represent by proxy, one or more shareholders who, in the aggregate, hold at least 33 1/3% of the issued shares of the Company entitled to be voted at the meeting, constitute a quorum at any annual or special meeting of shareholders.
Voting Rights
Under the OBCA, at any meeting of shareholders at which a quorum is present, any action that must or may be taken or authorized by the shareholders, except as otherwise provided under the OBCA, the Company articles or
by-laws,
may be taken or authorized by an “ordinary resolution,” which is a simple majority of the votes cast by shareholders voting shares that carry the right to vote at general meetings. The Company’s
by-laws
provide that every motion put to a vote at a meeting of shareholders will be decided by a show of hands unless a ballot is directed by the chair or demanded by any shareholder entitled to vote who is present in person or by proxy. Votes by a show of hands or functional equivalent result in each person having one vote regardless of the number of shares such person is entitled to vote. If voting is conducted by ballot, each person is entitled to one vote for each share such person is entitled to vote.
There are no limitations on the right of
non-resident
or foreign owners to hold or vote securities imposed by Canadian law or by the charter or other constituent document of the Company.
Shareholder Action by Written Consent
Under the OBCA, shareholder action without a meeting may be taken by a resolution signed by all the shareholders or their attorney authorized in writing entitled to vote on that resolution at a meeting of
105
shareholders. A written resolution of shareholders is as valid as if it had been passed at a meeting of those shareholders. A written resolution of shareholders dealing with all matters required by the OBCA to be dealt with at a meeting of shareholders, and signed by all the shareholders or their attorney authorized in writing entitled to vote on that resolution at that meeting, satisfies all the requirements of the OBCA relating to that meeting of shareholders.
Access to Books and Records and Dissemination of Information
The Company must keep at its registered office, or at such other place as the OBCA may permit, the documents, copies, registers, minutes and other records which the Company is required by the OBCA to keep at such places. The Company must prepare and maintain, among other specified documents, adequate accounting records. Under the OBCA, any director, shareholder or creditor of the Company may, free of charge, examine certain of the Company’s records during the usual business hours of the Company.
Election and Appointment of Directors
The articles do not provide for the board of directors to be divided into classes.
At any general meeting of shareholders at which directors are to be elected, a separate vote of shareholders entitled to vote will be taken with respect to each candidate nominated for director. Pursuant to the OBCA, any casual vacancy occurring on the board may be filled by a quorum of the remaining directors, subject to certain exceptions. If the Company does not have a quorum of directors, or if there has been a failure to elect the number of directors required by the articles or the OBCA, the directors then in office must forthwith call a special meeting of shareholders to fill the vacancy and, if the directors fail to call a meeting or if there are no directors then in office, the meeting may be called by any shareholder. Pursuant to the OBCA, where empowered by a special resolution, the directors may, between meetings of shareholders, appoint one or more additional directors, but the number of additional directors may not exceed one third times the number of directors required to have been elected at the last annual meeting of shareholders.
At least 25% of directors must be resident Canadians. The minimum number of directors the Company may have is one and the maximum number of directors is ten, as set out in the articles. The OBCA provides that any amendment to the articles to increase or decrease the minimum or maximum number of directors requires the approval of shareholders by a special resolution.
Removal of Directors
Pursuant to the OBCA, the shareholders may remove any director before the expiration of his or her term of office by ordinary resolution at an annual or special meeting of shareholders, provided that, where the holders of any class or series of shares have an exclusive right to elect one or more directors, a director so elected may only be removed by an ordinary resolution at a meeting of the shareholders of that class or series. In that event, the shareholders may elect, by ordinary resolution, another individual as director to fill the resulting vacancy.
Proceedings of Board of Directors
At all meetings of the board, every question will be decided by a majority of the votes cast and, in the case of an equality of votes, the chair of the meeting will not have a second or casting vote. A resolution of the directors or of any committee of the directors consented to in writing by all of the directors entitled to vote on it is as valid and effective as if it had been passed at a meeting of the directors or of the committee of the directors duly called and held.
Requirements for Advance Notification of Shareholder Nominations
Pursuant to the
by-laws
and subject only to the OBCA, the articles and applicable securities laws, shareholders of record entitled to vote will nominate persons for election to the board only by providing proper
106
notice to the corporate secretary. In the case of annual meetings, proper notice must be given, generally between 30 and 65 days prior to the date of the annual meeting. However, in the event that the annual meeting of shareholders is to be held on a date that is less than 50 days after the date (the “Notice Date”) that is the earlier of (i) the date that a notice of meeting is filed for such meeting, and (ii) the date on which the first public announcement of the meeting was made, the notice must be given on the 10th day following the Notice Date. In the case of a special meeting called for the purpose of electing directors and which is not also an annual meeting of shareholders, the notice must be given not later than the close of business on the 15th day following the date that is the earlier of (i) the date that a notice of meeting is filed for such meeting, and (ii) the date on which the first public announcement of the special meeting was made. Such notice must include, among other information, certain information with respect to each shareholder nominating persons for elections to the board, a written consent of each nominee consenting to serve as a director, disclosure about any proxy, contract, arrangement, understanding or relationship pursuant to which the nominating shareholder has a right to vote shares and any other information the Company may reasonably require to determine the eligibility of the nominee to serve as a director.
Approval of Amalgamations, Mergers and Other Corporate Transactions
Under the OBCA, certain corporate actions, such as: (i) amalgamations (other than with certain affiliated corporations); (ii) continuances; (iii) sales, leases or exchanges of all, or substantially all, the property of a corporation other than in the ordinary course of business; (iv) reductions of stated capital for any purpose, including in connection with the payment of special distributions (subject, in certain cases, to the satisfaction of solvency tests); and (v) other actions such as liquidations, or arrangements, must be approved by a special resolution of shareholders.
In certain specified cases where share rights or special rights may be prejudiced or interfered with, a special resolution of shareholders to approve the corporate action in question affecting the share rights or special rights, is also required to be approved separately by the holders of a class or series of shares, including a class or series of shares not otherwise carrying voting rights. In specified extraordinary corporate actions, such as approval of plans of arrangements and amalgamations all shares have a vote, whether or not they generally vote and, in certain cases, have separate class votes.
Limitations on Director Liability and Indemnification of Directors and Officers
Under the OBCA, no provision in a contract, the articles, the
by-laws
or a resolution relieves a director or officer from the duty to act in accordance with the OBCA and its related regulations or relieves him or her from liability for a breach of the OBCA or its regulations.
A director is not liable under the OBCA for certain acts if the director exercised the care, diligence and skill that a reasonably prudent person would have exercised in comparable circumstances, including reliance, in good faith, on (i) financial statements of the corporation represented to the director by an officer of the corporation or in a written report of the auditor of the corporation to fairly reflect the financial position of the corporation in accordance with generally accepted accounting principles; (ii) an interim or other report of the corporation represented to the director by an officer of the corporation to fairly reflect the financial position of the corporation in accordance with generally accepted accounting principles; (iii) a report or advice of an officer or employee of the corporation, where it is reasonable in the circumstances to rely on the report of advice; or (iv) a report of a lawyer, accountant, engineer, appraiser or other person whose profession lends credibility to a statement made by that person.
Under the OBCA, the Company may indemnify its current or former directors or officers or another individual who acts or acted at the Company’s request as a director or officer, or an individual acting in a similar capacity, of another entity, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the individual in respect of any civil, criminal, administrative,
107
investigative or other proceeding in which the individual is involved because of his or her association with the Company or another entity.
The OBCA also provides that the Company may advance monies to a director, officer or other individual for costs, charges and expenses reasonably incurred in connection with such a proceeding; provided that such individual must repay the monies if the individual does not fulfill the conditions described below.
However, indemnification is prohibited under the OBCA unless the individual (i) acted honestly and in good faith with a view to our best interests, or the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at our request; and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that his or her conduct was lawful.
Under the
by-laws,
the Company will indemnify to the fullest extent permitted by the OBCA (i) any director or officer of the Company; (ii) any former director or officer of the Company; (iii) any individual who acts or acted at the Company’s request as a director or officer, or in a similar capacity, of another entity, against all costs, charges and expenses reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the Company or other entity.
Derivative Suits and Oppression Remedy
Under the OBCA, a complainant (being a current or former director, officer or security holder of a corporation, which includes a beneficial shareholder, and any other person that a court considers to be a proper person to make such an application) of the Company may apply to the Ontario Superior Court of Justice for leave to bring an action in the name and on behalf of the Company or any of its subsidiaries, or to intervene in an existing action to which the Company or any of its subsidiaries is a party, for the purpose of prosecuting, defending or discontinuing an action on behalf of the Company or any of its subsidiaries.
No such action may be brought and no intervention in any action may be made unless the complainant has given the requisite notice of the application for leave to the directors of the Company or its subsidiary of the complainant’s intention to apply to the court and the court is satisfied that (i) the directors of the Company or its subsidiary will not bring, diligently prosecute or defend or discontinue the action; (ii) the complainant is acting in good faith; and (iii) it appears to be in the best interests of the Company or its subsidiary for the action to be brought, prosecuted, defended or discontinued.
Under the OBCA, the court in a derivative action may make any order it thinks fit.
Under the OBCA, a complainant, and, in the case of a public corporation, the Ontario Securities Commission, may apply to the Ontario Superior Court of Justice for any interim or final order the court thinks fit, including, but not limited to, an order restraining the conduct complained of, where the court is satisfied that, in respect of the Company or any of its affiliates, any act or omission of the Company or any of its affiliates effects or threatens to effect a result, the business or affairs of the Company or any of its affiliates are, have been or are threatened to be carried on or conducted in a manner, or the powers of the directors of the Company or any of its affiliates are, have been or are threatened to be exercised in a manner, that is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the Company.
Exclusive Forum
The
by-laws
provide that, unless the Company consents in writing to the selection of an alternative forum and except as set out below, the Superior Court of Justice of the Province of Ontario, Canada and the appellate courts therefrom will, to the fullest extent permitted by law will be the sole and exclusive forum for any
108
derivative action or proceeding brought on behalf of the Company, any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to the Company, any action asserting a claim arising pursuant to any provision of the OBCA or the articles or
by-laws,
or any action asserting a claim related to the relationships among the Company, its affiliates and their respective shareholders, directors or officers (other than the business carried on by the Company or its affiliates). The
by-laws
also provide that, notwithstanding the foregoing, unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will have exclusive jurisdiction for the resolution of any complaint asserting a cause of action arising under the U.S. Securities Act. The exclusive forum provision in the
by-laws
will not apply to actions arising under the Securities Act or the Exchange Act. Investors cannot waive compliance with the U.S. federal securities laws and the rules and regulations thereunder.
Amendment of the Articles,
By-laws
and Alteration of Share Capital
Under the OBCA, the Company may amend the articles by special resolution. For purposes of the OBCA, a special resolution is a resolution submitted to a special meeting of shareholders duly called for the purpose of considering the resolution and passed at the meeting by at least
two-thirds
of the votes cast or consented to in writing by all shareholders entitled to vote at such a meeting. A special resolution is generally required to approve corporate matters that may materially affect the rights of shareholders or are of a transformative nature for the corporation, including, but not limited to, changes to the corporation’s authorized capital structure, changes to the rights privileges, restrictions and conditions in respect of any of the corporation’s shares, a change in the corporation’s name, the winding up, dissolution or liquidation of the corporation, and a plan of arrangement with shareholders.
Under the OBCA, the board may, by resolution, make, amend or repeal any
by-laws
that regulate the business of affairs of the Company. Where the directors make, amend or repeal any
by-law,
they must submit the
by-law,
amendment or repeal to the shareholders at the next meeting of shareholders, and the shareholders may confirm, reject or amend the
by-law,
amendment or repeal. Where a
by-law
is made, amended or repealed by the directors, the
by-law,
amendment or repeal is effective from the date of the resolution of the directors until it is confirmed, amended or rejected by shareholders (or, if the directors fail to submit the
by-law,
amendment or repeal to shareholders, until the date of the shareholders meeting at which it should have been submitted).
109
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Certain Related Person Transactions Related to the Business Combination
Transaction Support Agreements
Concurrently with the execution of the Business Combination Agreement,
the Li-Cycle Holders
entered into
the Li-Cycle Transaction
Support Agreements with Peridot, pursuant to which each of the
Li-Cycle
Holders agreed to, among other things, (i) vote or cause to be voted (whether in person, by proxy, by action by written consent, as applicable, or as may be required
under Li-Cycle’s shareholders
agreement or articles of incorporation)
their Li-Cycle Shares
in favor of the Business Combination Agreement, the Arrangement and certain related transactions; (ii) be bound by certain other covenants and agreements related to the Business Combination and (iii) be bound by certain transfer restrictions with respect to such securities.
PIPE Financing
MMF LT, LLC, an affiliate of Moore Strategic Ventures, LLC, which was a beneficial owner, in the aggregate, of more than 5% of
Li-Cycle’s
Class A preferred shares prior to the Business Combination, agreed to purchase as a PIPE Investor under the PIPE Financing, 5,000,000 shares of NewCo, which, upon the Amalgamation, became 5,000,000 common shares of the Company, for a purchase price of $10 per share.
Anthony Peter Tse, Richard Findlay and Mark Wellings (through his holding company, ZCR Corp.), directors of
Li-Cycle,
respectively agreed to purchase as PIPE Investors in the PIPE Financing, 18,000, 13,000 and 18,000 shares of NewCo, which, upon the Amalgamation, became 18,000, 13,000 and 18,000 common shares of the Company, respectively, for a purchase price of $10 per share.
Certain Relationships and Related Person Transactions prior to the Business Combination
Shareholder Agreement
The
Li-Cycle’s
shareholders agreement, as amended November 12, 2020, granted certain rights to holders of
Li-Cycle
Shares and Class A preferred shares of
Li-Cycle,
including certain approval rights,
pre-emptive
rights,
tag-along
rights, drag-along rights and information rights. The shareholders agreement terminated in connection with the consummation of the Business Combination.
Related-Party Lease
During the past four years,
Li-Cycle
has leased certain office space from Ashlin BPG Marketing, which is controlled by certain members of the immediate family of Ajay Kochhar,
Li-Cycle’s
President and Chief Executive Officer. Under the terms of the lease,
Li-Cycle
is required to pay C$4,500 per month plus applicable taxes, subject to 60 days’ notice of termination.
Share Subscriptions
On March 23, 2018,
Li-Cycle
issued 1,663
Li-Cycle
Shares to Richard Findlay, 9,706
Li-Cycle
Shares to Alex Lowrie, 9,706
Li-Cycle
Shares to Louise Lowrie, 9,706
Li-Cycle
Shares to Anthony Lowrie and 9,706
Li-Cycle
Shares to Liv Lowrie, in each case for a subscription price of C$18.03 per
Li-Cycle
Share. On January 23, 2019,
Li-Cycle
issued 4,234
Li-Cycle
Shares to Alex Lowrie as a finder’s fee in connection with a prior financing conducted by
Li-Cycle.
Alex Lowrie was a director of
Li-Cycle
prior to the Business Combination and each of Louise Lowrie, Anthony Lowrie and Liv Lowrie are immediate family members of Alex Lowrie.
On October 10, 2019,
Li-Cycle
issued 123,519
Li-Cycle
Shares to TechMet Limited, a beneficial owner of more than 5% of the outstanding
Li-Cycle
Shares at that time, for a subscription price of C$53.34 per
Li-Cycle
Share. On February 4, 2020,
Li-Cycle
issued 122,600
Li-Cycle
Shares to TechMet Limited for a subscription price of C$81.81.
110
On May 1, 2020,
Li-Cycle
entered into a consulting agreement with Atria Limited (“Atria”), an entity which beneficially owned more than 5% of the outstanding
Li-Cycle
Shares at that time, to agree upon and finalize the consideration for certain business development and marketing consulting services that were previously performed on behalf of the Company from 2018 through April 2020. The fees for such services were agreed at 12,000
Li-Cycle
Shares payable in installments of 1,000
Li-Cycle
Shares per month. On January 25, 2021,
Li-Cycle
issued all of the 12,000 shares to Atria in full and final satisfaction of all obligations of
Li-Cycle
to Atria under the consulting agreement. Atria also directed the issuance of such shares as follows: 8,000 Shares to Atria; 2,000 Shares to Pella Ventures, an affiliated company of Atria; and 2,000 Shares to a director of the Company at such time, who is not related to Atria.
Investor Agreement
At the Closing, the Company, the Peridot Class B Holders and the
.”
Li-Cycle
Holders entered into the Investor Agreement, pursuant to which, among other things, the Peridot Class B Holders and the
Li-Cycle
Holders were granted certain registration rights with respect to the common shares held by the Peridot Class B Holders and the
Li-Cycle
Holders. The Investor Agreement provides that the common shares held by the
Li-Cycle
Holders will be subject to certain restrictions on the transfer of common shares held by them. For additional information, see the section titled “
Description of Securities — Registration Rights — Investor Agreement
Promissory Notes
On June 16, 2021,
Li-Cycle
issued promissory notes (the “Notes”) to companies related to our Chief Executive Officer and our Executive Chairman (the “Lenders”) for an aggregate principal amount of US $7,000,000 as consideration for loans of such aggregate amount received from the Lenders. The Notes bear interest at the rate of 10% per annum, payable at maturity, and mature on December 15, 2023. The Notes are subordinate to indebtedness owing to
Li-Cycle’s
senior lender (the “Senior Indebtedness”). Pursuant to the Notes,
Li-Cycle
may, at its option, prepay all or any portion of the principal amount of the Notes, together with the accrued and unpaid interest thereon, without premium or penalty, at any time prior to the maturity date, provided that (a) such prepayment is made using proceeds from the Business Combination, or (b) prior to or concurrently with such prepayment,
Li-Cycle
repays in full its Senior Indebtedness.
Li-Cycle
repaid the Notes following the closing of the Business Combination using the proceeds from the Business Combination.
Certain Peridot Relationships and Related Person Transactions prior to the Business Combination
In August 2020, the Sponsor acquired 8,625,000 Peridot Class B Shares for an aggregate purchase price of $25,000. In September 2020, the Sponsor transferred 30,000 Peridot Class B Shares to each of Peridot’s independent directors, at the original per share purchase price. Prior to the initial investment in Peridot of $25,000 by the Sponsor, Peridot had no assets, tangible or intangible. The number of Peridot Class B Shares issued was determined based on the expectation that such Peridot Class B Shares would represent 20% of the outstanding shares of Peridot upon completion of Peridot’s initial public offering. In November 2020, the Sponsor forfeited 1,125,000 as a result of the expiration of the underwriter’s option to exercise its overallotment. In connection with the Amalgamation, the Peridot Class B Shares were converted into Class A common shares of Peridot, which were converted into common shares of the Company.
In September 2020, the Sponsor purchased an aggregate of 8,000,000 warrants from Peridot for a purchase price of $1.00 per whole warrant, or an aggregate purchase price of $8,000,000, in a private placement that occurred simultaneously with the closing of Peridot’s initial public offering. Each such warrant entitled the holder to purchase one Peridot Class A Share at a purchase price of $11.50 per share. In connection with the Amalgamation, these warrants were converted into warrants to purchase an equivalent number of the Company’s common shares.
111
In August 2020, Peridot issued an unsecured promissory note to the Sponsor, pursuant to which Peridot could borrow up to an aggregate principal amount of $300,000. The promissory note was
non-interest
bearing and payable on the earlier of (i) December 31, 2020 and (ii) the completion of Peridot’s initial public offering. The outstanding balance under the promissory note of $119,331 was repaid at the closing of the initial public offering on September 28, 2020.
In August 2020, Peridot entered into an agreement to pay an affiliate of Peridot’s Sponsor up to $10,000 per month for office space, secretarial and administrative support services. Upon completion of the Business Combination, Peridot ceased paying these monthly fees. For the period from July 31, 2020 through December 31, 2020, Peridot incurred $30,000 in fees for these services, which is included in accrued expenses in the balance sheet as of December 31, 2020.
In connection with Peridot’s initial public offering, Peridot entered into a registration and shareholder rights agreement with respect to certain Peridot securities. Upon consummation of the Business Combination, the registration and shareholder rights agreement was terminated in connection with the execution of the Investor Agreement. For more information, see the section titled “
.”
Description of Securities — Registration Rights — Investor Agreement
In February 2020, as part of the PIPE Financing, Peridot and the Company entered into a Subscription Agreement with an affiliate of the Sponsor, pursuant to which such affiliate of the Sponsor agreed to subscribe for and purchase, and Peridot and the Company agreed to issue and sell to such affiliate, immediately prior to Closing, 2,500,000 common shares for a purchase price of $10.00 per share.
Our Related Party Transaction Policy and Practices
Related Party Transaction Policy
In connection with the Business Combination, our board of directors adopted a written related party transactions policy that became effective as of the Closing. For purposes of the policy, related party transactions include transactions that would be required to be disclosed under Item 7 of Form
20-F.
This includes transactions or loans between the company and (a) enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the Company, (b) unconsolidated enterprises in which the Company has significant influence, or which has significant influence over the Company, (c) individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Company, and close members of any such individual’s family, (d) key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including directors and senior management of companies and close members of such individuals’ families, and (e) enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence. Shareholders beneficially owning a 10% interest or greater in voting power are deemed to have significant influence.
Employment Agreements
In accordance with the Business Combination Agreement, upon the consummation of the Business Combination, we entered into employment agreements with certain of our executive officers. See the section titled “
.”
Executive and Director Compensation — Employment Arrangements, Termination and Change in Control Benefits
112
Indemnification Agreements
The Company has entered into separate indemnification agreements with its directors and executive officers, in addition to the indemnification provided for in the
by-laws.
These agreements, among other things, require the Company to indemnify its directors and executive officers for certain costs, charges and expenses, including attorneys’ fees, judgments, fines and settlement amounts, reasonably incurred by a director or executive officer in any action or proceeding because of their association with the Company or any of its subsidiaries.
113
PRINCIPAL SECURITYHOLDERS
The following table sets forth information regarding beneficial ownership of the Company’s common shares based on 163,179,555 common shares issued and outstanding as of October 18, 2021, with respect to beneficial ownership of our shares by:
| • |
each person known by us to be the beneficial owner of more than 5% of our issued and outstanding common shares;
|
| • |
each of our executive officers and directors; and
|
| • |
all our executive officers and directors as a group.
|
In accordance with SEC rules, individuals and entities below are shown as having beneficial ownership over common shares they own or have the right to acquire within 60 days, as well as common shares for which they have the right to vote or dispose of such common shares. In accordance with SEC rules, for purposes of calculating percentages of beneficial ownership, common shares which a person has the right to acquire within 60 days are included both in that person’s beneficial ownership as well as in the total number of common shares issued and outstanding used to calculate that person’s percentage ownership but not for purposes of calculating the percentage for other persons.
Except as indicated by the footnotes below, we believe that the persons named below have sole voting and dispositive power with respect to all common shares that they beneficially own. The common shares owned by the persons named below have the same voting rights as the common shares owned by other holders. We believe that, as of October 18, 2021, approximately 63.1% of our common shares are owned by 59 record holders in the United States of America.
Unless otherwise indicated, the business address of each beneficial owner listed in the tables below is c/o
Li-Cycle
Holdings Corp., 207 Queen’s Quay West, Suite 590, Toronto, ON, M5J 1A7, Canada.
|
Name and Address of Beneficial Owner
|
Number of
Common Shares Beneficially Owned |
Percentage
of Outstanding Common Shares (1) |
||||||
|
Directors and Executive Officers
|
||||||||
|
Ajay Kochhar (2)
|
25,207,734 | 15.4 | % | |||||
|
Tim Johnston (3)
|
11,851,254 | 7.3 | % | |||||
|
Mark Wellings (4)
|
274,541 | * | ||||||
|
Rick Findlay (5)
|
822,415 | * | ||||||
|
Anthony Tse (6)
|
227,844 | * | ||||||
|
Alan Levande (7)
|
933,660 | * | ||||||
|
Scott Prochazka (8)
|
30,000 | * | ||||||
|
Bruce MacInnis (9)
|
0 | * | ||||||
|
Kunal Phalpher (10)
|
603,597 | * | ||||||
|
Chris Biederman (11)
|
106,141 | * | ||||||
|
Carl DeLuca (12)
|
0 | * | ||||||
|
Lauren Choate (13)
|
500 | |||||||
|
All directors and executive officers post-Business Combination as a group (12 individuals)
|
40,307,860 | 24.7 | % | |||||
|
Five Percent or Greater Shareholders
|
||||||||
|
TechMet Limited (14)
|
12,969,674 | 7.9 | % | |||||
|
Louis M. Bacon (15)
|
13,030,398 | 8.0 | % | |||||
| * |
Less than 1 percent
|
114
| (1) |
Based upon a total of 163,179,555 common shares outstanding as of October 18, 2021.
|
| (2) |
Ajay Kochhar’s 25,207,734 shares beneficially owned include (1) 45,797 common shares owned directly by Mr. Kochhar, (2) 24,862,612 common shares owned by 2829908 Delaware LLC, a Delaware limited liability company, which is a wholly-owned subsidiary of Maplebriar Holdings Inc., a corporation organized under the laws of the Province of Ontario (“Maplebriar Holdings”), having a sole shareholder, The Kochhar Family Trust, an irrevocable trust established under the laws of the Province of Ontario, Canada (the “Trust”), and (3) 299,325 common shares subject to stock options held by Mr. Kochhar which includes options to acquire (i) 159,640 common shares at a price of US$0.02 per share until April 11, 2023, and (ii) 139,685 common shares at a price of US$0.36 per share until July 19, 2024. There is an oral agreement among Mr. Kochhar, the Trust, Maplebriar Holding, and 2829908 Delaware LLC, that grants Mr. Kochhar the sole power to control the voting and disposition of the common shares of the Company held by 2829908 Delaware LLC. Mr. Kochhar is one of three trustees of the Trust, along with Mr. Kochhar’s brother and father, and the beneficiaries of the Trust are principally relatives of Mr. Kochhar. There is an oral agreement among Mr. Kochhar, the Trust, Maplebriar Holdings and 2829908 Delaware LLC that grants Mr. Kochhar the sole power to control the voting and disposition of the common shares held by 2829908 Delaware LLC. Mr. Kochhar is a Director and the President and Chief Executive Officer of the Company.
|
| (3) |
Tim Johnston’s 11,851,254 shares beneficially owned include (1) 45,797 common shares owned directly by Mr. Johnston, (2) 11,047,167 common shares owned by Keperra Holdings Ltd., a Guernsey corporation (“Keperra”) and (3) 758,290 common shares subject to stock options, which includes options to acquire (i) 399,100 common shares at a price of US$0.02 per share until September 12, 2022, (ii) 159,640 common shares at a price of US$0.02 per share until April 11, 2023, and (iii) 199,550 common shares at a price of US$0.36 per share until July 19, 2024. Mr. Johnston is the sole shareholder of Keperra. Artemis Nominees Limited is a nominee company that holds legal title to 100 shares of Keperra as nominee of and trustee for Mr. Johnston. Mr. Johnston is a Director and the Executive Chairman of the Company.
|
| (4) |
Mark Wellings’ 274,541 shares beneficially owned include (1) 7,304 common shares owned directly by Mr. Wellings, (2) 180,234 common shares owned by ZCR Corp., a holding company wholly owned by Mr. Wellings, 18,000 of which were purchased through the PIPE Financing, and (3) options to acquire 87,003 common shares at a price of US$0.37 per share until July 19, 2024. Mr. Wellings is a director of the Company.
|
| (5) |
Rick Findlay’s 822,415 shares beneficially owned include (1) 523,090 owned directly, including 13,000 acquired through the PIPE Financing and (2) 299,325 common shares subject to stock options, which includes options to acquire (i) 159,640 common shares at a price of US$0.02 per share until April 11, 2023 and (ii) 139,685 common shares at a price of US$0.37 per share until July 19, 2024. Mr. Findlay is a Director of the Company.
|
| (6) |
Of the 227,844 common shares beneficially owned by Anthony Tse, 18,000 were acquired through the PIPE Financing. Mr. Tse is a Director of the Company.
|
| (7) |
Alan Levande beneficially owns 933,660 common shares. Mr. Levande was previously the Chief Executive Officer and Chairman of the board of directors of Peridot prior to the consummation of the Business Combination and is currently a Director of the Company.
|
| (8) |
Scott Prochazka beneficially owns 30,000 common shares directly. Mr. Prochazka previously served as a Director of Peridot and is currently a Director of the Company.
|
| (9) |
Bruce MacInnis is the Chief Financial Officer of the Company.
|
| (10) |
Kunal Phalpher beneficially owns 603,597 common shares consisting of (1) 304,272 common shares owned directly by Mr. Phalpher, and (2) 299,325 common shares subject to stock options, which includes options to acquire (i) 159,640 common shares at a price of US$0.02 per share until April 11, 2023 and (ii) 139,685 common shares at a price of US$0.37 per share until July 19, 2024. Mr. Phalpher is the Chief Strategy Officer of the Company.
|
| (11) |
Chris Biederman beneficially owns 106,141 common shares which he owns directly. Mr. Biederman is the Chief Technology Officer of the Company.
|
| (12) |
Carl DeLuca is the General Counsel and Corporate Secretary of the Company.
|
| (13) |
Lauren Choate is the Chief People Officer of the Company.
|
115
| (14) |
According to a Schedule 13G filed with the SEC on August 17, 2021, as of August 17, 2021, TechMet Limited beneficially owned 12,969,674 common shares. The business address of TechMet Limited is Suite 22, 20 lower Baggott Street, Dublin 2, D02 X658 Ireland.
|
| (15) |
According to a Schedule 13G filed with the SEC on August 20, 2021, as of August 20, 2021, Louis M. Bacon beneficially owned 13,030,398 common shares consisting of (1) 5,225,000 common shares held by MMF LT, LLC, a Delaware limited liability company (“MMF”) inclusive of 75,000 common shares issuable upon exercise of warrants to purchase common shares, and (2) 7,805,398 common shares held by Moore Strategic Ventures, LLC, a Delaware limited liability company (“MSV”). Kendall Capital Markets, LLC, a Delaware limited liability company (“KCM”) and MSV may be deemed to be the beneficial owner of the 7,805,398 common shares held by MSV. Each of Moore Capital Management, LP, a Delaware limited partnership (“MCM”), Moore Global Investments, LLC, a Delaware limited liability company (“MGI”), Moore Capital Advisors, L.L.C., a Delaware limited liability company (“MCA”), MMF and Mr. Bacon may be deemed to be the beneficial owner of 5,225,000 Shares held by MMF, inclusive of 75,000 common shares issuable upon exercise of warrants to purchase common shares. Mr. Bacon controls the general partner of MCM, is the chairman and director of MCA, and is the indirect majority owner of MMF. MCM, the investment manager of MMF, has voting and investment control over the shares held by MMF. MGI and MCA are the sole owners of MMF. KCM, the investment manager of MSV, has voting and investment control over the shares held by MSV. Louis M. Bacon controls KCM and may be deemed the beneficial owner of the shares held by MSV. The business address of MCM, MMF, MGI, MCA, MSV, KCM, and Mr. Bacon is Eleven Times Square, New York, New York 10036.
|
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of the Company.
116
SELLING SHAREHOLDER
This prospectus relates to the offer and sale from time to time by the selling shareholder of up to 11,021,923 common shares issuable upon conversion of the Spring Creek Capital Convertible Note or pursuant to any other term of the Spring Creek Capital Convertible Note, including as a result of any of the PIK provisions of the Spring Creek Capital Convertible Note.
The selling shareholder may from time to time offer and sell any or all of the securities set forth below pursuant to this prospectus, subject to the terms and conditions of the Spring Creek Capital Convertible Note. There are no contractual transfer restrictions or lockup arrangements on the common shares issuable under the Spring Creek Capital Convertible Note. When we refer to the “selling shareholder” in this prospectus, we mean the person listed in the table below, and the pledgees, donees, transferees, assignees, successors and others who later come to hold any of the selling shareholder’s interest in the Spring Creek Capital Convertible Note and the securities issuable thereunder after the date of this prospectus.
The table below identifies the selling shareholder and provides other information regarding the beneficial ownership of our common shares by the selling shareholder. The first column lists the number of common shares based on the selling shareholder’s ownership of our securities as of September 29, 2021. In accordance with SEC rules, the entity below is shown as having beneficial ownership over shares it owns or has the right to acquire within 60 days, as well as shares for which it has the right to vote or dispose of such shares. Also in accordance with SEC rules, for purposes of calculating percentages of beneficial ownership, shares which a person has the right to acquire within 60 days are included both in that person’s beneficial ownership as well as in the total number of shares issued and outstanding used to calculate that person’s percentage ownership but not for purposes of calculating the percentage for other persons.
The second column lists the number of common shares issuable upon conversion of the Spring Creek Capital Convertible Note and pursuant to the PIK provisions of the Spring Creek Capital Convertible Note.
The third column lists the beneficial ownership of our common shares by the selling shareholder after this offering. For purposes of this table, we have assumed that all of the common shares that are covered by this prospectus will be sold by the selling shareholder.
The information presented regarding the selling shareholder is based, in part, on information the selling shareholder provided to us in writing specifically for use herein.
We cannot advise you as to whether the selling shareholder will convert the Spring Creek Capital Convertible Note into common shares or will otherwise receive any common shares upon conversion of the Spring Creek Capital Convertible Note and, to the extent it does, whether or when it will in fact sell any or all of such securities. In addition, the selling shareholder may sell, transfer or otherwise dispose of, at any time and from time to time, the securities issued upon conversion of the Spring Creek Capital Convertible Note in transactions exempt from the registration requirements of the Securities Act after the date of this prospectus, subject to applicable law. Because the selling shareholder may not sell or otherwise dispose of some or all of the securities covered by this prospectus and because there are currently no agreements, arrangements or understandings with respect to the sale or other disposition of any of the securities, we cannot estimate the number of securities that will be held by the selling shareholder after completion of the offering. However, for purposes of this table, we have assumed that all of the common shares that are covered by this prospectus will be sold by the selling shareholder.
Selling shareholder information for each additional selling shareholder, if any, will be set forth by prospectus supplement to the extent required prior to the time of any offer or sale of such selling shareholder’s securities pursuant to this prospectus. Any prospectus supplement may add, update, substitute, or change the information contained in this prospectus, including the identity of each selling shareholder and the number of common shares registered on its behalf. A selling shareholder may sell all, some or none of such securities in this offering. See “
.”
Plan of Distribution
117
Unless otherwise indicated, we believe that the person named below has sole voting and dispositive power with respect to all securities that it beneficially owns. The shares owned by the selling shareholder named below do not have voting rights different from the shares owned by other holders.
|
Name of Selling Shareholder
|
Securities
Beneficially Owned prior to this Offering Common Shares |
Maximum
Number of Securities to Be Sold in this Offering Common Shares |
Securities Beneficially
Owned after this Offering Common Shares |
|||||||||
|
Spring Creek Capital, LLC (1)
|
7,466,017 | 11,021,923 | 0 | |||||||||
| (1) |
The number of securities shown as beneficially owned by Spring Creek Capital, LLC prior to this offering consists of the minimum number of shares that Spring Creek Capital, LLC is entitled to receive upon conversion of the note based on a conversion price of $13.43 per share. See “Summary — Background of the Offering” for a description of the terms of the Spring Creek Capital Convertible Note. The maximum number of securities to be sold in this offering as shown in this prospectus includes common shares issuable pursuant to the PIK provisions of the Spring Creek Capital Convertible Note. The address for Spring Creek Capital, LLC identified in this footnote is 4111 East 37th Street North, Wichita, Kansas 67220.
|
Material Relationships with the Selling Shareholder
Other than as described in this prospectus, including the section titled “
,” the selling shareholder has not within the past three years had any position, office or other material relationship with us or any of our predecessors or affiliates other than as a holder of our securities.
Certain Relationships and Related Person Transactions
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary based on present law of certain U.S. federal income tax considerations relevant to U.S. Holders (as defined below) of common shares. This discussion is not a complete description of all tax considerations that may be relevant to a U.S. Holder of common shares; it is not a substitute for tax advice. It applies only to U.S. Holders that will hold common shares as capital assets and use the U.S. dollar as their functional currency. In addition, it does not describe all of the U.S. federal income tax considerations that may be relevant to a U.S. Holder in light of a U.S. Holder’s particular circumstances, including U.S. Holders subject to special rules, such as banks or other financial institutions, insurance companies,
regulated investment companies, real estate investment trusts, partnerships and other pass-through entities (including
tax-exempt
entities, dealers, traders in securities that elect to
mark-to-market,
S-corporations),
U.S. expatriates, persons liable for the alternative minimum tax, persons that directly, indirectly or constructively, own 5% or more of the total combined voting power of the Company’s stock or of the total value of the Company’s equity interests, investors that will hold common shares in connection with a permanent establishment or fixed base outside the United States, or investors that will hold securities as part of a hedge, straddle, conversion, constructive sale or other integrated financial transaction. This summary also does not address U.S. federal taxes other than the income tax (such as estate or gift taxes) or U.S. state and local, or
non-U.S.
tax laws or considerations. This summary also does not address the U.S. federal income tax considerations relevant to the acquisition, holding, disposition or conversion of the Spring Creek Capital Convertible Note into common shares or the payment of any amount of principal or interest on the Spring Creek Capital Convertible Note.
As used in this section, “U.S. Holder” means a beneficial owner of common shares that is, for U.S. federal income tax purposes: (i) a citizen or individual resident of the United States, (ii) a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (iii) a trust subject to the control of one or more U.S. persons and the primary supervision of a U.S. court; or (iv) an estate the income of which is subject to U.S. federal income taxation regardless of its source.
The U.S. federal income tax treatment of a partner in a partnership (or other entity or arrangement treated as a partnership for U.S. federal income tax purposes) that holds common shares generally will depend on the status of the partner and the activities of the partnership. Partnerships that hold common shares should consult their own tax advisors regarding the specific U.S. federal income tax consequences to their partners of the partnership’s ownership and disposition of common shares.
U.S. federal income tax consequences of U.S. Holders of common shares
Taxation of dividends and other distributions on our common shares
Subject to the discussion below under “—
” the gross amount of any distribution of cash or property (other than certain pro rata distributions of ordinary stock) with respect to common shares will be included in a U.S. Holder’s gross income as ordinary income from foreign sources when actually or constructively received. Dividends will not be eligible for the dividends-received deduction generally available to U.S. corporations. Dividends received from a “qualified foreign corporation” by eligible
Passive Foreign Investment Company rules,
non-corporate
U.S. Holders that satisfy a minimum holding period and certain other requirements generally will be taxed at the preferential rate applicable to qualified dividend income. A
non-U.S.
corporation is treated as a qualified foreign corporation with respect to dividends it pays on shares that are readily tradable on an established securities market in the United States. U.S. Treasury guidance indicates that shares listed on NYSE will be considered readily tradable on an established securities market in the United States. There can be no assurance, however, that common shares will be considered readily tradable on an established securities market in future years.
Non-corporate
U.S. holders that do not meet a minimum holding period requirement during which they are not protected from the risk of loss or that elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code (dealing with the deduction for investment interest expense)
119
will not be eligible for the reduced rates of taxation regardless of the Company’s status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to the positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. The Company will not constitute a qualified foreign corporation for purposes of these rules if it is a passive foreign investment company for the taxable year in which it pays a dividend or for the preceding taxable year. See “—
.”
Passive Foreign Investment Company Rules
Dividends paid in a currency other than U.S. dollars will be included in income in a U.S. dollar amount based on the exchange rate in effect on the date of receipt, whether or not the currency is converted into U.S. dollars at that time. A U.S. Holder’s tax basis in the
non-U.S.
currency will equal the U.S. dollar amount included in income. Any gain or loss realized on a subsequent conversion or other disposition of the
non-U.S.
currency for a different U.S. dollar amount generally will be U.S. source ordinary income or loss. If dividends paid in a currency other than U.S. dollars are converted into U.S. dollars on the day they are received, the U.S. Holder generally will not be required to recognize foreign currency gain or loss in respect of the dividend income.
Subject to certain conditions and limitations, withholding taxes, if any, on dividends paid by the Company may be treated as foreign taxes eligible for credit against a U.S. Holder’s U.S. federal income tax liability under the U.S. foreign tax credit rules. For purposes of calculating the U.S. foreign tax credit, dividends paid on the — common shares will generally be treated as income from sources outside the United States and will generally constitute passive category income. The rules governing the U.S. foreign tax credit are complex. U.S. Holders should consult their tax advisors regarding the availability of the U.S. foreign tax credit under their particular circumstances.
Dividends received by certain
non-corporate
U.S. Holders generally will be includible in “net investment income” for purposes of the Medicare contribution tax.
Taxation of dispositions of common shares
Subject to the discussion below under “—
,” a U.S. Holder generally will recognize capital gain or loss on the sale or other disposition of common shares in an amount equal to the difference between the U.S. dollar value of the amount realized and the U.S. Holder’s adjusted tax basis in the disposed common shares. Any gain or loss generally will be treated as arising from U.S. sources and will be long-term capital gain or loss if the U.S. Holder’s holding period exceeds one year. Deductions for capital loss are subject to significant limitations.
Passive Foreign Investment Company rules
It is possible that Canada may impose an income tax upon sale of common shares. Because gains generally will be treated as U.S. source gain, as a result of the U.S. foreign tax credit limitation, any Canadian income tax imposed upon capital gains in respect of common shares may not be currently creditable unless a U.S. Holder has other foreign source income for the year in the appropriate U.S. foreign tax credit limitation basket. U.S. Holders should consult their tax advisors regarding the application of Canadian taxes to a disposition of common shares and their ability to credit a Canadian tax against their U.S. federal income tax liability.
Capital gains from the sale or other disposition of common shares received by certain
non-corporate
U.S. Holders generally will be includible in “net investment income” for purposes of the Medicare contribution tax.
Passive Foreign Investment Company rules
Based on the composition of the Company’s current gross assets and income and the manner in which the Company expects to operate its business in future years, the Company believes that it should not be classified as a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes for its current taxable year and does not expect to be so classified in the foreseeable future. In general, a
non-U.S.
corporation will be a
120
PFIC for any taxable year in which, taking into account a pro rata portion of the income and assets of 25% or more owned subsidiaries, either (i) 75% or more of its gross income is passive income, or (ii) 50% or more of the average quarterly value of its assets are assets that produce, or are held for the production of, passive income or which do not produce income. For this purpose, passive income generally includes, among other things and subject to various exceptions, interest, dividends, rents, royalties and gains from the disposition of assets that produce passive income. Whether the Company is a PFIC is a factual determination made annually, and the Company’s status could change depending among other things upon changes in the composition and relative value of its gross receipts and assets. Because the market value of the Company’s assets (including for this purpose goodwill) may be measured in large part by the market price of the common shares, which is likely to fluctuate, no assurance can be given that the Company will not be a PFIC in the current year or in any future taxable year.
If the Company were a PFIC for any taxable year in which a U.S. Holder holds common shares, such U.S. Holder would be subject to additional taxes on any excess distributions and any gain realized from the sale or other taxable disposition of common shares (including certain pledges) regardless of whether the Company continues to be a PFIC. A U.S. Holder will have an excess distribution to the extent that distributions on common shares during a taxable year exceed 125% of the average amount received during the three preceding taxable years (or, if shorter, the US Holder’s holding period). To compute the tax on excess distributions or any gain, (i) the excess distribution or gain is allocated ratably over the U.S. Holder’s holding period, (ii) the amount allocated to the current taxable year and any year before the Company became a PFIC is taxed as ordinary income in the current year and (iii) the amount allocated to other taxable years is taxed at the highest applicable marginal rate in effect for each year and an interest charge is imposed to recover the deemed benefit from the deferred payment of the tax attributable to each year.
If, as is not expected to be the case, the Company were a PFIC for any taxable year in which a U.S. Holder holds common shares, a U.S. Holder may be able to avoid some of the adverse impacts of the PFIC rules described above by electing to mark common shares to market annually. The election is available only if the common shares are considered “marketable stock,” which generally includes stock that is regularly traded in more than de minimis quantities on a qualifying exchange (which includes NYSE). If a U.S. Holder makes the
election, any gain from marking common shares to market or from disposing of them would be ordinary income. Any loss from marking common shares to market would be recognized only to the extent of unreversed gains previously included in income. Loss from marking common shares to market would be ordinary, but loss on disposing of them would be capital loss except to the extent of
gains previously included in income. No assurance can be given that the common shares will be traded in sufficient frequency and quantity to be considered “marketable stock.” A valid
election cannot be revoked without the consent of the IRS unless the common shares cease to be marketable stock.
mark-to-market
mark-to-market
mark-to-market
As an alternative, if the Company were to be treated as a PFIC, a U.S. Holder may avoid the excess distribution rules described above in respect of common shares by electing to treat the Company (for the first taxable year in which the U.S. Holder owns any common shares) and any lower-tier PFIC (for the first taxable year in which the U.S. Holder is treated as owning an equity interest in such lower-tier PFIC) as a “qualified electing fund” (a “QEF”). If a U.S. Holder makes an effective QEF election with respect to the Company (and any lower-tier PFIC), the U.S. Holder will be required to include in gross income each year, whether or not the Company makes distributions, as capital gains, its pro rata share of the Company’s (and such lower-tier PFIC’s) net capital gains and, as ordinary income, its pro rata share of the Company’s (and such lower-tier PFIC’s) net earnings in excess of its net capital gains. U.S. Holders can make a QEF election only if the Company (and each lower-tier PFIC) provides certain information, including the amount of its ordinary earnings and net capital gains determined under U.S. tax principles. The Company has not determined whether it will provide U.S. Holders with this information if it determines that it is a PFIC.
U.S. Holders of common shares should consult their own tax advisors concerning the Company’s possible PFIC status and the consequences to them if the Company were classified as a PFIC for any taxable year.
121
Information Reporting and Backup Withholding
Dividends on common shares and proceeds from the sale or other disposition of common shares may be reported to the IRS unless the holder is a corporation or otherwise establishes a basis for exemption. Backup withholding tax may apply to amounts subject to reporting. Any amount withheld may be credited against the holder’s U.S. federal income tax liability subject to certain rules and limitations. U.S. Holders should consult with their own tax advisers regarding the application of the U.S. information reporting and backup withholding rules.
Certain
non-corporate
U.S. Holders are required to report information with respect to common shares not held through an account with a domestic financial institution to the IRS. U.S. Holders that fail to report required information could become subject to substantial penalties. Prospective investors are encouraged to consult with their own tax advisors about these and any other reporting obligations arising from their investment in common shares.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR U.S. HOLDER. EACH U.S. HOLDER OF COMMON SHARES IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES TO IT OF OWNING AND DISPOSING OF COMMON SHARES IN LIGHT OF THE U.S. HOLDER’S OWN CIRCUMSTANCES.
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal Canadian federal income tax considerations under the
(Canada) and the regulations thereunder (collectively, the “
”), as of the date hereof, that are generally applicable to an investor who acquires, as beneficial owner, common shares from the selling shareholder pursuant to this prospectus and who, at all relevant times, for the purposes of the Tax Act and any applicable tax treaty or convention: (i) is not, and is not deemed to be, resident in Canada, (ii) deals at arm’s length with each of the Company and the selling shareholder; (iii) is not affiliated with either of the Company or the selling shareholder; and (iv) does not use or hold, and is not deemed to use or hold, the common shares in connection with, or in the course of carrying on, a business in Canada (each a “
”). Special rules, which are not discussed in this summary, may apply to a
Income Tax Act
Tax Act
Non-Canadian
Holder
Non-Canadian
Holder that is an insurer carrying on business in Canada and elsewhere. Such
Non-Canadian
Holders should consult their own tax advisors.
This summary does not address any income tax considerations relevant to the acquisition, holding, disposition or conversion of the Spring Creek Capital Convertible Note into common shares or the payment of any amount of principal or interest on the Spring Creek Capital Convertible Note. This summary also does not address any income tax considerations that may arise as a result of a Non-Canadian Holder being an employee of the Company or its affiliates. All such persons should consult their own tax advisors with respect to the Canadian federal income tax consequences to them, which may differ materially from the discussion provided in this summary.
This summary is based upon the current provisions of the Tax Act in force as of the date hereof and an understanding of the current administrative policies and assessing practices published in writing by the Canada Revenue Agency (“
”) prior to the date hereof. This summary also takes into account all specific proposals to amend the Tax Act publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “
”), and assumes that all Proposed Amendments will be enacted in the form proposed. However, no assurances can be given that the Proposed Amendments will be enacted as proposed, or at all. Except for the Proposed Amendments, this summary does not take into account or anticipate any changes in law or administrative policies, whether by legislative, regulatory, administrative or judicial action or decision, nor does it take into account other federal or any provincial, territorial or foreign tax legislation or considerations, which may be different from those discussed in this summary.
CRA
Proposed Amendments
122
This summary is of a general nature only, is not exhaustive of all possible Canadian federal income tax considerations and is not intended to be, nor should it be construed to be, legal or tax advice to any particular
Non-Canadian
Holder. Accordingly,
Non-Canadian
Holders should consult their own tax advisors with respect to their particular circumstances.
Currency
Generally, for purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of common shares must be expressed in Canadian dollars. Amounts denominated in another currency must be converted into Canadian dollars using the exchange rate quoted by the Bank of Canada on the date such amounts first arose, or such other rate of exchange as is acceptable to the CRA.
Adjusted cost base of common shares
The adjusted cost base of a common share to a
Non-Canadian
Holder will generally include all amounts paid by the
Non-Canadian
Holder for the common share. When common shares are acquired by a
Non-Canadian
Holder who already owns common shares, the cost of newly acquired common shares will generally be averaged with the adjusted cost base of all common shares held by the
Non-Canadian
Holder as capital property immediately prior to the acquisition for the purpose of determining the
Non-Canadian
Holder’s adjusted cost base of each common share held by such
Non-Canadian
Holder.
Dividends
Dividends paid or credited, or deemed to be paid or credited, on common shares to a
(1980), fully entitled to the benefits of such convention and the beneficial owner of the dividends, will generally be subject to Canadian withholding tax at a rate of 15% of the amount of such dividends.
Non-Canadian
Holder generally will be subject to Canadian withholding tax. Under the Tax Act, the rate of withholding tax is 25% of the gross amount of such dividends, which rate may be subject to reduction under the provisions of an applicable income tax treaty. For example, a
Non-Canadian
Holder who is resident in the United States for the purposes of the
Canada-United States Tax Convention
Disposition of common shares
A
Non-Canadian
Holder who disposes or is deemed to dispose of a common share in a taxation year will not be subject to tax in Canada, unless the common share is, or is deemed to be, “taxable Canadian property” to the
Non-Canadian
Holder at the time of disposition and the
Non-Canadian
Holder is not entitled to relief under an applicable income tax treaty between Canada and the country in which the
Non-Canadian
Holder is resident.
Provided the common shares are listed on a “designated stock exchange”, as defined in the Tax Act (which currently includes the NYSE), at the time of disposition, the common shares generally will not constitute taxable Canadian property of a
Non-Canadian
Holder at that time, unless at any time during the
60-month
period immediately preceding the disposition the following two conditions are met concurrently: (i) one or any combination of (a) the
Non-Canadian
Holder, (b) persons with whom the
Non-Canadian
Holder did not deal at arm’s length, and (c) partnerships in which the
Non-Canadian
Holder or a person described in (b) holds a membership interest directly or indirectly through one or more partnerships owned 25% or more of the issued shares of any class or series of shares of the Company; and (ii) more than 50% of the fair market value of the common shares was derived directly or indirectly from one or any combination of (a) real or immovable property situated in Canada, (b) “Canadian resource property” (as defined in the Tax Act), (c) “timber resource property” (as defined in the Tax Act), or (d) an option in respect of, an interest in, or for civil law rights in, property described in any of (a) through (c), whether or not such property exists.
Non-Resident
Holders who dispose of common shares that are taxable Canadian property should consult their own tax advisors with respect to the requirement to file a Canadian income tax return in respect of the disposition in their particular circumstances.
123
PLAN OF DISTRIBUTION
This prospectus relates to the offer and sale from time to time by the selling shareholder or its permitted transferees of up to 11,021,923 common shares issuable upon conversion of the Spring Creek Capital Convertible Note or pursuant to any other term of the Spring Creek Capital Convertible Note, including as a result of any of the PIK provisions of the Spring Creek Capital Convertible Note. This prospectus covers any additional securities that may become issuable by reason of share splits, share dividends and other events described therein. We will not receive any of the proceeds from the sale of the securities by the selling shareholder.
The selling shareholder will pay any underwriting discounts and commissions and expenses incurred by the selling shareholder for brokerage, accounting, tax or legal services or any other expenses incurred by the selling shareholder in disposing of the securities. We will bear all other costs, fees and expenses incurred in effecting the registration of the shares covered by this prospectus, including, without limitation, all registration and filing fees, NYSE listing fees and fees and expenses of our counsel and our independent registered public accountants.
The securities beneficially owned by the selling shareholder covered by this prospectus may be offered and sold from time to time by the selling shareholder. The term “selling shareholder” includes donees, pledgees, transferees or other successors in interest selling securities received after the date of this prospectus from the selling shareholder as a gift, pledge, partnership distribution or other transfer. The selling shareholder will act independently of us in making decisions with respect to the timing, manner and size of each sale. Such sales may be made on one or more exchanges or in the
over-the-counter market
or otherwise, at prices and under terms then prevailing or at prices related to the then current market price or in negotiated transactions. The selling shareholder reserves the right to accept and, together with its respective agents, to reject, any proposed purchase of securities to be made directly or through agents. The selling shareholder and any of its permitted transferees may sell their securities offered by this prospectus on any stock exchange, market or trading facility on which the securities are traded or in private transactions. There are no contractual transfer restrictions or lock-up arrangements on the common shares issuable upon conversion or redemption of the Spring Creek Capital Convertible Note.
Subject to the limitations set forth in any applicable agreement, the selling shareholder may use any one or more of the following methods when selling the securities offered by this prospectus:
| • |
purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus;
|
| • |
ordinary brokerage transactions and transactions in which the broker solicits purchasers;
|
| • |
block trades in which the broker-dealer so engaged will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
| • |
an
over-the-counter distribution
in accordance with the rules of NYSE;
|
| • |
through trading plans entered into by a selling shareholder pursuant to Rule 10b5-1 under the Exchange Act that are in place at the time of an offering pursuant to this prospectus and any applicable prospectus supplement hereto that provide for periodic sales of their securities on the basis of parameters described in such trading plans;
|
| • |
to or through broker-dealers;
|
| • |
in “at the market” offerings, as defined in Rule 415 under the Securities Act, at negotiated prices,
|
| • |
at prices prevailing at the time of sale or at prices related to such prevailing market prices, including sales made directly on a national securities exchange or sales made through a market maker other than on an exchange or other similar offerings through sales agents;
|
124
| • |
directly to purchasers, including through a specific bidding, auction or other process or in privately negotiated transactions;
|
| • |
in options transactions;
|
| • |
through a combination of any of the above methods of sale; or
|
| • |
any other method permitted pursuant to applicable law.
|
There can be no assurance that the selling shareholder will sell all or any of the securities offered by this prospectus. In addition, the selling shareholder may also sell securities under Rule 144 under the Securities Act, if available, or in other transactions exempt from registration, rather than under this prospectus. The selling shareholder has the sole and absolute discretion not to accept any purchase offer or make any sale of securities if it deems the purchase price to be unsatisfactory at any particular time or for any other reason.
The selling shareholder also may transfer the securities in other circumstances, in which case the transferees, pledgees or other
successors-in-interest will
be the selling beneficial owners for purposes of this prospectus.
With respect to a particular offering of the securities held by the selling shareholder, to the extent required, an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement of which this prospectus is part, will be prepared and will set forth the following information:
| • |
the specific securities to be offered and sold;
|
| • |
the names of the selling shareholders;
|
| • |
the respective purchase prices and public offering prices, the proceeds to be received from the sale, if any, and other material terms of the offering;
|
| • |
settlement of short sales entered into after the date of this prospectus;
|
| • |
the names of any participating agents or broker-dealers; and
|
| • |
any applicable commissions, discounts, concessions and other items constituting compensation from the selling shareholders.
|
In connection with distributions of the securities or otherwise, the selling shareholder may enter into hedging transactions with broker-dealers or other financial institutions, subject to SEC rules. In connection with such transactions, broker-dealers or other financial institutions may engage in short sales of the securities in the course of hedging the positions they assume with selling shareholder. The selling shareholder may also sell the securities short and redeliver the securities to close out such short positions. The selling shareholder may also enter into option or other transactions with broker-dealers or other financial institutions which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction). The selling shareholder may also pledge securities to a broker-dealer or other financial institution, and, upon a default, such broker-dealer or other financial institution, may effect sales of the pledged securities pursuant to this prospectus (as supplemented or amended to reflect such transaction).
In order to facilitate the offering of the securities, any agents involved in the offering of such securities may engage in transactions that stabilize, maintain or otherwise affect the price of our securities. Specifically, the agents may overallot in connection with the offering, creating a short position in our securities for their own account. In addition, to cover overallotments or to stabilize the price of our securities, the agents may bid for, and purchase, such securities in the open market. Any of these activities may stabilize or maintain the market price of the securities above independent market levels. The agents are not required to engage in these activities, and may end any of these activities at any time.
125
The selling shareholder may solicit offers to purchase the securities directly from, and they may sell such securities directly to, institutional investors or others. In this case, no agents would be involved. The terms of any of those sales, including the terms of any bidding or auction process, if utilized, will be described in the applicable prospectus supplement.
We cannot give any assurance as to the liquidity of the trading market for our securities. Our common shares are listed on NYSE under the symbol “LICY”.
The selling shareholder may authorize broker-dealers or agents to solicit offers by certain purchasers to purchase the securities pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. The contracts will be subject only to those conditions set forth in the prospectus supplement (or such post-effective amendment), and such document will set forth any commissions we or the selling shareholder pay for solicitation of these contracts.
A selling shareholder may enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by any selling shareholder or borrowed from any selling shareholder or others to settle those sales or to close out any related open borrowings of stock, and may use securities received from any selling shareholder in settlement of those derivatives to close out any related open borrowings of stock. The third party in such sale transactions will be an underwriter and will be identified in the applicable prospectus supplement (or a post-effective amendment). In addition, any selling shareholder may otherwise loan or pledge securities to a financial institution or other third party that in turn may sell the securities short using this prospectus. Such financial institution or other third party may transfer its economic short position to investors in our securities or in connection with a concurrent offering of other securities.
In effecting sales, broker-dealers or agents engaged by the selling shareholder may arrange for other broker-dealers to participate. Broker-dealers or agents may receive commissions, discounts or concessions from the selling shareholder in amounts to be negotiated immediately prior to the sale.
In compliance with the guidelines of the Financial Industry Regulatory Authority (“FINRA”), the aggregate maximum discount, commission, fees or other items constituting underwriting compensation to be received by any FINRA member or independent broker-dealer will not exceed 8% of the gross proceeds of any offering pursuant to this prospectus and any applicable prospectus supplement.
If at the time of any offering made under this prospectus a member of FINRA participating in the offering has a “conflict of interest” as defined in FINRA Rule 5121, that offering will be conducted in accordance with the relevant provisions of Rule 5121.
To our knowledge, there are currently no plans, arrangements or understandings between the selling shareholder and any broker-dealer or agent regarding the sale of the securities by the selling shareholder. Upon our notification by the selling shareholder that any material arrangement has been entered into with a broker-dealer for the sale of securities through a block trade, special offering, exchange distribution, secondary distribution or a purchase by a broker-dealer, we will file, if required by applicable law or regulation, a supplement to this prospectus pursuant to Rule 424(b) under the Securities Act disclosing certain material information relating to such broker-dealer and such offering.
Broker-dealers or agents may facilitate the marketing of an offering online directly or through one of their affiliates. In those cases, prospective investors may view offering terms and a prospectus online and, depending upon the particular broker-dealer or agent, place orders online or through their financial advisors.
126
In offering the securities covered by this prospectus, the selling shareholder and any broker-dealers or agents who execute sales for the selling shareholder may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. Any discounts, commissions, concessions or profit they earn on any resale of those securities may be underwriting discounts and commissions under the Securities Act.
The broker-dealers and agents may engage in transactions with us or the selling shareholder, or perform services for us or the selling shareholder, in the ordinary course of business.
In order to comply with the securities laws of certain states, if applicable, the securities must be sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the securities may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.
We have advised the selling shareholder that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of securities in the market and to the activities of the selling shareholder and its affiliates. The selling shareholder may indemnify any broker-dealer that participates in transactions involving the sale of the securities against certain liabilities, including liabilities arising under the Securities Act.
127
SHARES ELIGIBLE FOR FUTURE SALE
The Company has an unlimited number of common shares authorized and 163,179,555 common shares issued and outstanding as of October 18, 2021. The registration statement of which this prospectus forms a part has been filed to satisfy our obligations to register the offer and sale of our securities pursuant to the Note Purchase Agreement entered into with the selling shareholder. We cannot make any prediction as to the effect, if any, that sales of our shares or the availability of our shares for sale will have on the market price of our common shares. Sales of substantial amounts of our common shares in the public market could adversely affect prevailing market prices of the common shares.
Rule 144
Pursuant to Rule 144, a person who has beneficially owned restricted shares of the Company’s common shares for at least six months would be entitled to sell his, her or its securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic reporting requirements for at least three months before the sale and have filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale. However, Rule 144 is not available for the resale of securities initially issued by shell companies (other than business combination related shell companies) or issuers that have been at any time previously a shell company. Rule 144 does include an important exception to this prohibition if the following conditions are met:
| • |
the issuer of the securities that was formerly a shell company has ceased to be a shell company;
|
| • |
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
|
| • |
the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Form
8-K
reports; and
|
| • |
at least one year has elapsed from the time that the issuer filed current Form 10 type information with the SEC reflecting its status as an entity that is not a shell company.
|
As a result, the initial holders and purchasers of Peridot’s securities will be able to sell their common shares and warrants that may be issued on conversion of loans by the Sponsor, members of Peridot’s management team or any of their respective affiliates or other third parties (and shares issued upon their exercise), as applicable, pursuant to and in accordance with Rule 144 without registration one year after the Business Combination. However, if they remain one of our affiliates, they will only be permitted to sell a number of securities that does not exceed the greater of:
| • |
1% of the total number of shares then outstanding, which was 375,000 shares on the record date; or
|
| • |
the average weekly reported trading volume of the common shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
|
Sales by our affiliates under Rule 144 would also limited be limited by manner of sale provisions and notice requirements and to the availability of current public information about us.
Regulation S
Regulation S under the Securities Act provides an exemption from registration requirements in the United States for offers and sales of securities that occur outside the United States. Rule 903 of Regulation S provides
the conditions to the exemption for a sale by an issuer, a distributor, their respective affiliates or anyone acting on their behalf, while Rule 904 of Regulation S provides the conditions to the exemption for a resale by persons
128
other than those covered by Rule 903. In each case, any sale must be completed in an offshore transaction, as that term is defined in Regulation S, and no directed selling efforts, as that term is defined in Regulation S, may be made in the United States.
We are a foreign issuer as defined in Regulation S. As a foreign issuer, securities that we sell outside the United States pursuant to Regulation S are not considered to be restricted securities under the Securities Act, and, subject to the offering restrictions imposed by Rule 903, are freely tradable without registration or restrictions under the Securities Act, unless the securities are held by our affiliates. Generally, subject to certain limitations, holders of our restricted shares who are not affiliates of our company or who are affiliates of our company by virtue of their status as an officer or director may, under Regulation S, resell their restricted shares in an “offshore transaction” if none of the seller, its affiliate nor any person acting on their behalf engages in directed selling efforts in the United States and, in the case of a sale of our restricted shares by an officer or director who is an affiliate of ours solely by virtue of holding such position, no selling commission, fee or other remuneration is paid in connection with the offer or sale other than the usual and customary broker’s commission that would be received by a person executing such transaction as agent. Additional restrictions are applicable to a holder of our restricted shares who will be an affiliate of our Company other than by virtue of his or her status as an officer or director of our Company.
Registration Rights
Investor Agreement
On August 10, 2021, the Company, the Peridot Class B Holders and the
Li-Cycle
Holders (collectively for the purposes of this subsection referred to as the “Holders”) entered into the Investor Agreement. Pursuant to the Investor Agreement, the Company is obligated to file a registration statement to register the resale of certain common shares held by the Holders within 30 days after the Closing and to use commercially reasonable efforts to cause such registration statement to be declared effective as soon as practicable after such filing, but no later than the earlier of (i) the 75th day (or the 105th day if the SEC notifies that it will “review” such registration statement) following the Closing Date and (ii) the 15th business day after the date the SEC notified that such registration statement will not be “reviewed” or will not be subject to further review. In addition, pursuant to the terms of the Investor Agreement and subject to certain requirements and customary conditions, including with regard to the number of demand rights that may be exercised, the Holders may demand at any time or from time to time, that the Company file a registration statement on Form
F-3
(or on Form
F-1
if Form
F-3
is not available) to register the securities of the Company held by such Holders, and each may specify that such demand registration take the form of an underwritten offering, in each case subject to limitations on the number of demands and underwritten offerings that can be requested by each Holder, as specified in the Investor Agreement. Holders will also have “piggy-back” registration rights, subject to certain requirements and customary conditions. The Investor Agreement also provides that the Company will pay certain expenses relating to such registrations and indemnify the Holders against (or make contributions in respect of) certain liabilities that may arise under the Securities Act.
The Investor Agreement further provides that the securities of the Company held by the Peridot Class B Holders and
Li-Cycle
Holders will be subject to certain transfer restrictions until (i) with respect to the Peridot Class B Holders, the earliest of (a) one year after the Closing and (b) (x) the last consecutive trading day where the last reported sale price of the Company Shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after the Closing, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of its public shareholders having the right to exchange their common shares for cash, securities or other property, and (ii) with respect to the
Li-Cycle
Holders, 180 days following the Closing.
129
Subscription Agreements
Contemporaneously with the execution of the Business Combination Agreement, Subscription Agreements were entered into by and among each PIPE Investor, Peridot, and NewCo. Peridot obtained commitments from the PIPE Investors to purchase common shares for a purchase price of $10.00 per share for aggregate gross proceeds of $315,490,000. Certain offering related expenses are payable by Peridot under the Subscription Agreements, including customary fees payable to the placement agents. The purpose of the sale of common shares to the PIPE Investors under the Subscription Agreements was to raise additional capital for use in connection with the Business Combination.
The common shares sold to the PIPE Investors were identical to the common shares that were held by our other shareholders at the time of the Closing, except that when initially issued by Peridot, such shares were restricted securities. The PIPE Financing occurred on the date of, and immediately prior to, the consummation of the Business Combination.
The closing of the PIPE Financing was subject to customary conditions, including, among other conditions, the Company agreed to, as soon as practicable (but in any case no later than 30 calendar days after the consummation of the Business Combination), file with the SEC (at its sole cost and expense) a registration statement registering the resale of the shares received by the PIPE Investors in the PIPE Financing, and to use its commercially reasonable efforts to have such resale registration statement declared effective as soon as practicable after the filing thereof.
Warrant Agreement
The Company agreed that, as soon as practicable, but in no event later than 20 business days after the Closing, we would use our commercially reasonable efforts to file a registration statement with the SEC covering the common shares issuable upon exercise of the warrants. The Company also agreed to use our best efforts to cause the registration statement to become effective within 60 business days following the Closing and to maintain a current prospectus relating to such common shares until the warrants expire or are redeemed. The warrants expire on August 10, 2026, at 5:00 p.m., New York City time, or earlier upon redemption.
If a registration statement covering the common shares issuable upon exercise of the warrants is not effective within 60 days after the Closing, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis.
Note Purchase Agreement
On September 29, 2021, in connection with the Company’s entry into the Note Purchase Agreement and issuance of the Spring Creek Capital Convertible Note, the Company granted certain registration rights under the Note Purchase Agreement. Pursuant to the Note Purchase Agreement, the Company agreed to file with the SEC within 30 days a registration statement covering the resale of the common shares issued or issuable upon conversion of the Spring Creek Capital Convertible Note. The Company is required to use commercially reasonable efforts to have such registration statement declared effective by the SEC as soon as practicable and no later than the earlier of (A) 60 days after the issuance of the Spring Creek Capital Convertible Note (or 90 days after the issuance of the Spring Creek Capital Convertible Note if the SEC notifies the Company that it will review the registration statement) or (B) 10 business days after the SEC notifies the Company in writing that it will not review the registration statement. The Company agreed to keep the registration statement (or another shelf registration statement covering the common shares issued or issuable upon conversion of the Spring Creek Capital Convertible Note) effective until the earlier of (x) the third anniversary of the issuance of the Spring Creek Capital Convertible Note or (y) the date on which the holder of the Spring Creek Capital Convertible Note ceases to hold any common shares issued or upon conversion of the Spring Creek Capital Convertible Note. The registration statement of which this prospectus forms a part is intended to satisfy this requirement.
130
Transfer Restrictions
Please see the section titled “
.”
Description of Securities — Transfer Restrictions
131
EXPENSES RELATED TO THE OFFERING
Set forth below is an itemization of the total expenses which are expected to be incurred by us in connection with the offer and sale of our common shares by our selling shareholder. With the exception of the SEC registration fee, all amounts are estimates.
|
USD
|
||||
|
SEC registration fee
|
$ | 13,578.82 | ||
|
FINRA filing fee
|
$ | 22,472.20 | ||
|
Legal fees and expenses
|
* | |||
|
Accounting fees and expenses
|
* | |||
|
Printing expenses
|
* | |||
|
Transfer agent fees and expenses
|
* | |||
|
Miscellaneous expenses
|
* | |||
|
Total
|
$ | * | ||
|
*
|
The fees are calculated based on the securities offered and the number of issuances and accordingly cannot be defined at this time.
|
132
ENFORCEMENT OF CIVIL LIABILITIES
We are incorporated under the laws of the Province of Ontario. Some of our directors and officers, and some of the experts named in this prospectus, are residents of Canada or otherwise reside outside of the United States, and all or a substantial portion of their assets, and a substantial portion of our assets, are located outside of the United States. We have appointed an agent for service of process in the United States, but it may be difficult for shareholders who reside in the United States to effect service within the United States upon those directors, officers and experts who are not residents of the United States. It may also be difficult for shareholders who reside in the United States to realize in the United States upon judgments of courts of the United States predicated upon our civil liability and the civil liability of our directors, officers and experts under the United States federal securities laws. There can be no assurance that U.S. investors will be able to enforce against us, members of our board of directors, officers or certain experts named herein who are residents of Canada or other countries outside the United States, any judgments in civil and commercial matters, including judgments under the federal securities laws.
We have appointed Puglisi & Associates, 850 Library Avenue, Suite 204, Newark, Delaware 19711 as our agent to receive service of process with respect to any action brought against us under the federal securities laws of the United States or of any state in the United States.
LEGAL MATTERS
The validity of the common shares offered by this prospectus and certain legal matters as to Canadian law will be passed upon by McCarthy Tétrault LLP, Toronto, Ontario, Canada. We have been advised on U.S. securities matters by Freshfields Bruckhaus Deringer US LLP.
133
EXPERTS
The financial statements of
Li-Cycle
Holdings Corp. appearing in this prospectus have been audited by Deloitte LLP, independent registered public accounting firm, as set forth in their report thereon, appearing elsewhere in this prospectus, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The financial statements of
Li-Cycle
Corp. for the years ended October 31, 2020, October 31, 2019 and October 31, 2018, appearing in this prospectus have been audited by Deloitte LLP, independent registered public accounting firm, as set forth in their report thereon, appearing elsewhere in this prospectus, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The offices of Deloitte LLP, Chartered Professional Accountants, are located at 8 Adelaide Street West, Suite 200, Toronto, Ontario, Canada M5H 0A9.
Deloitte LLP has complied with the independence standards of the Chartered Professional Accountants of Ontario for the years ended October 31, 2020, October 31, 2019 and October 31, 2018. During 2020 but prior to the engagement of Deloitte LLP as the Company’s independent registered public accounting firm under the standards of the PCAOB, Deloitte LLP had provided legal services
to Li-Cycle Corp.
which consisted of drafting two intercompany agreements. One service was provided from November 2019 to January 2020 and the other in July 2020, and the total fees collected were approximately C$14,000. These services were considered permissible under Canadian private company independence standards but were impermissible under the auditor independence rules of the SEC and the PCAOB.
With respect to these services, the agreements did not
impact Li-Cycle Corp.’s
accounting records or result in the preparation or origination of source data underlying the financial statements and were not subject to Deloitte LLP’s audit of the Company’s financial statements. Furthermore, none of the individuals who provided the legal services were members of the audit team, management
of Li-Cycle Corp.
oversaw and provided ultimate approval of these services and the fees were immaterial
to Li-Cycle Corp.
and Deloitte LLP.
After careful consideration of the facts and circumstances and the applicable independence rules, Deloitte LLP has concluded that (i) the aforementioned matters do not impair Deloitte LLP’s ability to exercise objective and impartial judgment in connection with its audits of the consolidated financial statements
of Li-Cycle Corp.
and (ii) a reasonable investor with knowledge of all relevant facts and circumstances would conclude that Deloitte LLP has been and is capable of exercising objective and impartial judgment on all issues encompassed within its audits of the consolidated financial statements
of Li-Cycle Corp.
After considering these matters, the Company’s management and board of directors concur with Deloitte LLP’s conclusions.
The financial statements of Peridot Acquisition Corp. as of December 31, 2020 and for the period from July 31, 2020 (inception) through December 31, 2020 appearing in this prospectus have been audited by WithumSmith+Brown, PC, independent registered public accounting firm, as set forth in their report thereon, appearing elsewhere in this prospectus, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
134
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement (including amendments and exhibits to the registration statement) on Form
F-1
under the Securities Act. For purposes of this section, the term registration statement means the original registration statement and any and all amendments including the schedules and exhibits to the original registration statement or any amendment. This prospectus, which is part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits and schedules to the registration statement. For further information, we refer you to the registration statement and the exhibits and schedules filed as part of the registration statement. If a document has been filed as an exhibit to the registration statement, we refer you to the copy of the document that has been filed. Each statement in this prospectus relating to a document filed as an exhibit is qualified in all respects by the filed exhibit.
We are subject to the informational requirements of the Exchange Act that are applicable to foreign private issuers. Accordingly, we are required to file or furnish reports and other information with the SEC, including annual reports on
Form 20-F
and reports on Form
6-K.
The SEC maintains an Internet website that contains reports and other information regarding issuers that file electronically with the SEC. Our filings with the SEC are available to the public through the SEC’s website at
http://www.sec.gov.
As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal and selling shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act.
We maintain a corporate website at
The information posted on or accessible through our website is not incorporated into this prospectus. We have included our website address in this prospectus solely for informational purposes and the references to our websites are intended to be inactive textual references only.
www.li-cycle.com.
135
|
Page
|
||||
|
Index to Unaudited Financial Statements of Peridot Acquisition Corp. as of and for the Three and Six Months Ended June 30, 2021
|
||||
| F-1 | ||||
| F-2 | ||||
| F-3 | ||||
| F-4 | ||||
| F-5 | ||||
|
Audited Financial Statements of Peridot Acquisition Corp. as of December 31, 2020 and for the period from July 31, 2020 (Inception) through December 31, 2020
|
||||
| F-22 | ||||
| F-23 | ||||
| F-24 | ||||
| F-25 | ||||
| F-26 | ||||
| F-27 | ||||
|
Index to Audited Financial Statements of Li-Cycle Corp. as of and for the years ended October 31, 2020 and October 31, 2019
|
||||
| F-45 | ||||
| F-46 | ||||
| F-47 | ||||
| F-48 | ||||
| F-49 | ||||
| F-50 | ||||
|
Unaudited Financial Statements of Li-Cycle Corp. as of and for the Three and Nine Months ended July 31, 2021 and 2020
|
||||
| F-82 | ||||
| F-83 | ||||
| F-84 | ||||
| F-85 | ||||
| F-86 | ||||
|
Index to Audited Financial Statements of Li-Cycle Holdings Corp. as of May 31, 2021
|
||||
| F-100 | ||||
| F-101 | ||||
| F-102 | ||||
PERIDOT ACQUISITION CORP.
CONDENSED BALANCE SHEETS
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-1
PERIDOT ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
|
Three Months
Ended
June 30,
2021
|
Six Months
Ended
June 30,
2021
|
|||||||
|
Operational costs
|
$ | 1,809,124 | $ | 6,079,798 | ||||
|
|
|
|
|
|||||
|
Loss from operations
|
(1,809,124 | ) | (6,079,798 | ) | ||||
|
Other expense:
|
||||||||
|
Interest earned on marketable securities held in Trust Account
|
8,284 | 80,276 | ||||||
|
Interest income – bank
|
2 | 24 | ||||||
|
Change in fair value of warrant liability
|
(23,690,000 | ) | (21,390,000 | ) | ||||
|
|
|
|
|
|||||
|
Other expense, net
|
(23,681,714 | ) | (21,309,700 | ) | ||||
|
Net loss
|
$
|
(25,490,838
|
)
|
$
|
(27,389,498
|
)
|
||
|
|
|
|
|
|||||
|
Weighted average shares outstanding, Class A redeemable ordinary shares
|
30,000,000 | 30,000,000 | ||||||
|
|
|
|
|
|||||
|
Basic and diluted income per share, Class A redeemable ordinary shares
|
$
|
0.00
|
|
$
|
0.00
|
|
||
|
|
|
|
|
|||||
|
Weighted average shares outstanding, Class A and Class B
non-redeemable
ordinary shares
|
7,500,000 | 7,500,000 | ||||||
|
|
|
|
|
|||||
|
Basic and diluted net loss per share, Class B
non-redeemable
ordinary shares
|
$
|
(3.40
|
)
|
$
|
(3.66
|
)
|
||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-2
PERIDOT ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
|
Class A
Ordinary Shares
|
Class B
Ordinary Shares
|
Additional
Paid-in
Capital
|
Accumulated
Deficit
|
Total
Shareholders’
Equity
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||
|
Balance — January 1, 2021
|
|
5,536,815
|
|
$
|
554
|
|
|
7,500,000
|
|
$
|
750
|
|
$
|
28,619,118
|
|
$
|
(23,620,412
|
)
|
$
|
5,000,010
|
|
|||||||
|
Change in value Class A ordinary shares subject to redemption
|
189,866 | 19 | — | — | 1,898,641 | — | 1,898,660 | |||||||||||||||||||||
|
Net income
|
— | — | — | — | — | (1,898,660 | ) | (1,898,660 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance – March 31, 2021 (unaudited)
|
|
5,726,681
|
|
$
|
573
|
|
|
7,500,000
|
|
$
|
750
|
|
$
|
30,517,759
|
|
$
|
(25,519,072
|
)
|
$
|
5,000,010
|
|
|||||||
|
Change in value of Class A ordinary shares subject to redemption
|
2,549,083 | 255 | — | — | 25,490,575 | — | 25,490,830 | |||||||||||||||||||||
|
Net loss
|
— | — | — | — | — | (25,490,838 | ) | (25,490,838 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance – June 30, 2021
|
|
8,275,764
|
|
$
|
828
|
|
|
7,500,000
|
|
$
|
750
|
|
$
|
56,008,334
|
|
$
|
(51,009,910
|
)
|
$
|
5,000,002
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-3
PERIDOT ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
|
Cash Flows from Operating Activities:
|
||||
|
Net loss
|
$ | (27,389,498 | ) | |
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||
|
Change in fair value of warrant liability
|
21,390,000 | |||
|
Interest earned on marketable securities held in Trust Account
|
(80,276 | ) | ||
|
Changes in operating assets and liabilities:
|
||||
|
Prepaid expenses
|
77,791 | |||
|
Accounts payable and accrued expenses
|
5,030,939 | |||
|
|
|
|||
|
Net cash used in operating activities
|
|
(971,044
|
)
|
|
|
|
|
|||
|
Net Decrease in Cash
|
|
(971,044
|
)
|
|
|
Cash – Beginning of period
|
971,607 | |||
|
|
|
|||
|
Cash – End of period
|
$
|
563
|
|
|
|
|
|
|||
|
Non-Cash
investing and financing activities:
|
||||
|
Change in value of Class A ordinary shares subject to possible redemption
|
$ | (27,389,489 | ) | |
|
|
|
|||
The accompanying notes are an integral part of these unaudited condensed financial statements.
F-4
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Note 1 — Description of Organization and Business Operations
Peridot Acquisition Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on July 31, 2020. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (a “Business Combination”).
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus on environmentally sound infrastructure and technologies that mitigate greenhouse gas (GHG) emissions and/or enhance resilience to climate change. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2021, the Company had not commenced any operations. All activity for the period from July 31, 2020 (inception) through June 30, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below and, subsequent to the completion of the Initial Public Offering, identifying a target for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate
non-operating
income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on September 23, 2020. On September 28, 2020 the Company consummated the Initial Public Offering of 30,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $300,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 8,000,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Peridot Acquisition Sponsor, LLC (the “Sponsor”), generating gross proceeds of $8,000,000, which is described in Note 4.
Transaction costs amounted to $17,066,575, consisting of $6,000,000 of underwriting fees, $10,500,000 of deferred underwriting fees and $566,575 of other offering costs; of this amount, $693,847 was expensed as of the date of the Initial Public Offering and $16,372,728 was charged to shareholders’ equity.
Following the closing of the Initial Public Offering on September 28, 2020, an amount of $300,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund investing solely in U.S. Treasuries and meeting certain conditions under Rule
2a-7
of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company, until the earliest of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The stock
F-5
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
exchange listing rules require that the Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the assets held in the Trust Account (excluding the amount of any deferred underwriting commissions and taxes payable on the income earned on the Trust Account). The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide the holders of the public shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the Business Combination, either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination (initially anticipated to be $10.00 per Public Share), including interest (which interest shall be net of taxes payable), divided by the number of then issued and outstanding public shares, subject to certain limitations as described in the prospectus. The
per-share
amount to be distributed to the Public Shareholders who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 and, if the Company seeks shareholder approval, it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company. If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote the Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.
Notwithstanding the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares without the Company’s prior written consent.
The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the
F-6
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to shareholders’ rights or
pre-initial
business combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the Trust account and not previously released to pay taxes, divided by the number of then issued and outstanding Public Shares.
The Company will have until September 28, 2022 to consummate a Business Combination (the “Combination Period”). However, if the Company has not completed a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned and not previously released to us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish the rights of the Public Shareholders as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining Public Shareholders and its Board of Directors, liquidate and dissolve, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares it will receive if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share, due to reductions in the value of trust assets, in each case net of the interest that may be withdrawn to pay taxes. This liability will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The
F-7
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Capital Resources
As of June 30, 2021, the Company had $563 in its operating bank accounts and negative working capital of approximately $5.1 million.
Prior to the completion of the Initial Public Offering, the Company’s liquidity needs had been satisfied through a contribution of $25,000 from Sponsor to cover certain offering costs in exchange for the issuance of the Founder Shares, the loan of up to $300,000 from the Sponsor pursuant to the Note (see Note 5), and the proceeds from the consummation of the Private Placement not held in the Trust Account. The Note was repaid on September 28, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors will fund, and have the means to provide the Company Working Capital Loans (see Note 5). As of June 30, 2021, there were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity from the Sponsor, who has the means to provide such funds, to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
Note 2 — Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q
and Article 8 of Regulation
S-X
of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed interim financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form
10-K/A
for the year ended December 31, 2020 filed with the SEC on May 7, 2021. The interim results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
F-8
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Emerging Growth Company
The Company is 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 it 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its 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.
Further, 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 (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a 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. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. One of the more significant accounting estimates included in these financial statements is the determination of the fair value of the warrant liability. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of June 30, 2021 and December 31, 2020.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
F-9
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares (if any) that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2021 and December 31, 2020, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheets.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional
paid-in
capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a
non-cash
gain or loss on the statements of operations. The fair value of the warrants issued in the Initial Public Offering has been estimated using a Monte Carlo simulation methodology as of the date of the Initial Public Offering and such warrants’ quoted market price as of June 30, 2021 and December 31, 2020 (see Note 9).
Income Taxes
ASC Topic 740, “Income Taxes,” prescribes a recognition threshold and a measurement attribute for the financial statements recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of June 30, 2021 and December 31, 2020, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
F-10
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Net Loss Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The calculation of diluted loss per share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, (ii) the exercise of the over-allotment option and (iii) Private Placement Warrants since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable to purchase 23,000,000 shares of Class A ordinary shares in the aggregate.
The Company’s statement of operations includes a presentation of loss per share for ordinary shares subject to possible redemption in a manner similar to the
two-class
method of loss per share. Net income per share, basic and diluted, for Class A redeemable ordinary shares is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of Class A redeemable ordinary shares outstanding since original issuance. Net loss per share, basic and diluted, for Class B
non-redeemable
ordinary shares is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable ordinary shares by the weighted average number of Class B
non-redeemable
ordinary shares outstanding for the period. Class B
non-redeemable
ordinary shares includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
F-11
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
The following table reflects the calculation of basic and diluted net income (loss) per ordinary share (in dollars, except per share amounts):
|
Three Months
Ended
June 30,
2021
|
Six Months
Ended
June 30,
2021
|
|||||||
|
Redeemable Class A Ordinary Shares
|
||||||||
|
Numerator: Earnings allocable to Redeemable Class A Ordinary Shares
|
||||||||
|
Interest Income
|
$ | 8,286 | $ | 80,300 | ||||
|
|
|
|
|
|||||
|
Net Income allocable to shares subject to redemption
|
$ | 8,286 | $ | 80,300 | ||||
|
Denominator: Weighted Average Redeemable Class A Ordinary Shares
|
||||||||
|
Redeemable Class A Ordinary Shares, Basic and Diluted
|
30,000,000 | 30,000,000 | ||||||
|
Earnings/Basic and Diluted Redeemable Class A Ordinary Shares
|
$ |
0.00
|
$ |
0.00
|
||||
|
Non-Redeemable
Class B Ordinary Shares
|
||||||||
|
Numerator: Net Loss minus Redeemable Net Earnings
|
||||||||
|
Net Loss
|
$ | (25,490,838 | ) | $ | (27,389,498 | ) | ||
|
Less: Redeemable Net Earnings
|
(8,286 | ) | (80,300 | ) | ||||
|
|
|
|
|
|||||
|
Non-Redeemable
Net Loss
|
$ | (25,499,124 | ) | $ | (27,469,798 | ) | ||
|
Denominator: Weighted Average
Non-Redeemable
Class B Ordinary Shares
|
||||||||
|
Non-Redeemable
Class B Ordinary Shares, Basic and Diluted
|
7,500,000 | 7,500,000 | ||||||
|
Loss/Basic and Diluted
Non-Redeemable
Class B Ordinary Shares
|
$ |
(3.40
|
)
|
$ |
(3.66
|
)
|
||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximate the carrying amounts represented in the Company’s condensed balance sheet, primarily due to their short-term nature, other than the derivative warrant liability.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own
F-12
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. Management is currently evaluating the new guidance, but does not expect the adoption of this guidance to have a material impact on the Company’s financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted would have a material effect on the Company’s condensed financial statements.
Note 3 — Public Offering
Pursuant to the Initial Public Offering, the Company sold 30,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one Class A ordinary share and
one-half
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at an exercise price of $11.50 per whole share (see Note 8).
Note 4 — Private Placement
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 8,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $8,000,000. The over-allotment option expired in November 2020. Each Private Placement Warrant is exercisable to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 8). A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
Note 5 — Related Party Transactions
Founder Shares
During the period ended August 11, 2020, the Sponsor paid $25,000 to cover certain offering and formation costs of the Company in consideration for 8,625,000 Class B ordinary shares (the “Founder Shares”). The Founder Shares include an aggregate of up to 1,125,000 shares that are subject to forfeiture depending on the extent to which the underwriters’ over-allotment option is exercised, so that the number of Founder Shares will equal, on
an as-converted basis,
approximately 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. On November 7, 2020, the underwriters’ election to exercise their over-allotment option expired unexercised, resulting in the forfeiture of 1,125,000 shares. Accordingly, as of November 7, 2020, there are 7,500,000 Founder Shares issued and outstanding.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price of the Class A ordinary shares equals or exceeds $12.00 per share
F-13
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
(as adjusted for share
sub-divisions,
share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Promissory Note – Related Party
On August 11, 2020, the Company issued an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. The Promissory Note was
non-interest
bearing and payable on the earlier of (i) December 31, 2020 and (ii) the completion of the Initial Public Offering. The outstanding balance under the Promissory Note of $119,331 was repaid at the closing of the Initial Public Offering on September 28, 2020.
Administrative Support Agreement
On September 23, 2020, the Company entered into an agreement to pay an affiliate of the Sponsor up to $10,000 per month for office space, secretarial and administrative support services. Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees. For the three months and six months ended June 30, 2021, the Company incurred and accrued $30,000 and $60,000 in fees for these services, respectively. As of June 30, 2021 and December 31, 2020, the total amount payable for these services was $90,000 and $30,000, respectively.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of June 30, 2021 and December 31, 2020, the Company had no outstanding borrowings under the Working Capital Loans.
Note 6 — Commitments
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
F-14
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Registration and Shareholder Rights
Pursuant to a registration and shareholder rights agreement entered into on September 23, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans) are entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration and shareholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a
45-day
option to purchase up to 4,500,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. The over-allotment option expired in November 2020.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $10,500,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 7 — Shareholders’ Equity
Preference Shares
Class
A Ordinary Shares
Class
B Ordinary Shares
Only holders of the Class B ordinary shares will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A ordinary shares and Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of shareholders, except as required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an
as-converted
basis, 20%
F-15
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
of the sum of (i) the total number of ordinary shares issued and outstanding upon completion of the Initial Public Offering, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than
one-to-one.
Note 8 — Warrant Liability
Warrants
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class A ordinary share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 20 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement; provided that if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
F-16
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Redemption of warrants when the price per Class
A ordinary share equals or exceeds $18.00
| • |
in whole and not in part;
|
| • |
at a price of $0.01 per warrant;
|
| • |
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
| • |
if, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share
sub-divisions,
share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders.
|
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class
A ordinary share equals or exceeds $10.00.
| • |
in whole and not in part;
|
| • |
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date and the fair market value of the Class A ordinary shares;
|
| • |
if, and only if, the closing price of the Class A ordinary shares equals or exceeds $10.00 per share (as adjusted for share
sub-divisions,
share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and
|
| • |
if the closing price of the Class A ordinary shares for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted for share
sub-divisions,
share dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
F-17
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of its Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be
non-redeemable,
except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Note 9 — Fair Value Measurements
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
F-18
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
The Company classifies its U.S. Treasury and equivalent securities
accordance with ASC Topic 320 “Investments—Debt and Equity Securities.”
are those securities which the Company has the ability and intent to hold until maturity.
treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.
as held-to-maturity in
Held-to-maturity securities
Held-to-maturity
At June 30, 2021, assets held in the Trust Account were comprised of $184 in cash and $300,154,484 in money market funds which are invested primarily in U.S. Treasury Securities. At December 31, 2020, assets held in the Trust Account were comprised of $184 in cash and $300,074,208 in U.S. Treasury securities at amortized cost. Through June 30, 2021, the Company did not withdraw any interest income from the Trust Account.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
|
Held-To-Maturity
|
Level
|
Amortized
Cost |
Gross
Holding Gain |
Fair Value
|
||||||||||||||
|
Assets:
|
||||||||||||||||||
|
June 30, 2021
|
U.S. Treasury Securities (Mature on 4/1/2021) | 1 | $ | — | $ | — | $ | 300,154,484 | ||||||||||
|
December 31, 2020
|
U.S. Treasury Securities (Mature on 4/1/2021) | 1 | $ | 300,074,208 | $ | 15,764 | $ | 300,089,972 | ||||||||||
|
Liabilities:
|
||||||||||||||||||
|
June 30, 2021
|
Warrant Liability – Public Warrants | 1 | $ | 40,650,000 | ||||||||||||||
|
June 30, 2021
|
Warrant Liability – Private Placement Warrants | 2 | $ | 21,680,000 | ||||||||||||||
|
December 31, 2020
|
Warrant Liability – Public Warrants | 1 | $ | 26,700,000 | ||||||||||||||
|
December 31, 2020
|
Warrant Liability – Private Placement Warrants | 2 | $ | 14,240,000 | ||||||||||||||
The Warrants are accounted for as liabilities in accordance with ASC
815-40
and are presented within warrant liabilities on our balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the consolidated statement of operations.
The Warrants are measured at fair value on a recurring basis. The measurement of the Public Warrants as of June 30, 2021 and December 31, 2020 are classified as Level 1 due to the use of an observable market quote in an active market. As the transfer of Private Placement Warrants to anyone outside of a small group of individuals who are permitted transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. As such, the Private Placement Warrants are classified as Level 2.
F-19
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
The following table presents the changes in the fair value of warrant liabilities:
|
Private
Placement |
Public
|
Warrant
Liabilities |
||||||||||
|
Fair value as of January 1, 2021
|
$ | 14,240,000 | $ | 26,700,000 | $ | 40,940,000 | ||||||
|
Change in valuation inputs or other assumptions
|
7,440,000 | 13,950,000 | 21,390,000 | |||||||||
|
Fair value as of June 30, 2021
|
$ | 21,680,000 | $ | 40,650,000 | $ | 62,330,000 | ||||||
There were no transfers in or out of Level 3 from other levels in the fair value hierarchy during the six months ended June 30, 2021.
Note 10 — Proposed Business Combination
On February 15, 2021, the Company entered into a Business Combination Agreement (the “Agreement”),
Corp., a corporation existing under the laws of the Province of Ontario, Canada and a wholly owned subsidiary
with Li-Cycle Corp.,
a corporation existing under the laws of the Province of Ontario,
Canada (“Li-Cycle”), and Li-Cycle Holdings
of Li-Cycle (“Newco”).
The Agreement and the transactions contemplated thereby were unanimously approved by the boards of directors of each of Peridot
and Li-Cycle.
The Agreement contemplates that the business combination among
Peridot, Li-Cycle and
Newco will be completed through the following series of transactions:
| • |
Peridot will continue as a corporation existing under the laws of the Province of Ontario (the “Continuance” and Peridot as so continued, “Peridot Ontario”), and in connection therewith, (x) the Class A ordinary shares, par value $0.0001 per share, of Peridot (the “Class A Shares”), the Class B ordinary shares, par value $0.0001 per share, of Peridot (the “Class B Shares”), and the warrants to purchase Class A Shares, in each case, issued and outstanding immediately prior to the Continuance will convert into an equal number of Class A common shares, Class B common shares and warrants to purchase Class A common shares of Peridot Ontario;
|
| • |
following the Continuance and any forfeiture by Peridot Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), of Class B common shares of Peridot Ontario, as described below under “Sponsor Letter Agreement”, the Class B common shares will convert into Class A common shares of Peridot Ontario on
a one-for-one basis;
|
| • |
Peridot Ontario and Newco will amalgamate (the “Amalgamation” and Peridot Ontario and Newco as so amalgamated, “Amalco”), and in connection therewith, the Class A common shares and warrants to purchase Class A common shares will convert into an equivalent number of common shares of Amalco (the “Amalco Shares”) and warrants to purchase an equivalent number of Amalco Shares; and
|
| • |
following the Amalgamation, the preferred shares
of Li-Cycle will
convert into common shares
of Li-Cycle and,
on the terms and subject to the conditions set forth in a Plan of Arrangement, Amalco will acquire all of the issued and outstanding common shares
of Li-Cycle from Li-Cycle’s shareholders
|
Concurrently with the execution of the Agreement, Peridot and Newco entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”), pursuant to which the PIPE Investors
F-20
PERIDOT ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
agreed to subscribe for and purchase, and Newco (as the predecessor to Amalco) agreed to issue and sell to such PIPE Investors, immediately prior to Closing, an aggregate of 31,500,000 Amalco Shares for a purchase price of $10.00 per share, for aggregate gross proceeds of $315,000,000 (the “PIPE Financing”).
The Agreement contains representations and warranties of each of the parties thereto that are customary for transactions of this type, including with respect to the operations of
Peridot, Li-Cycle and
Newco. In addition, the Agreement contains
customary pre-closing covenants,
including the obligation
of Li-Cycle to
conduct its business in the ordinary course consistent with past practice and to refrain from taking specified actions, subject to certain exceptions.
Note 11 — Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
F-21
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Peridot Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheet of Peridot Acquisition Corp. (the “Company”), as of December 31, 2020, the related statements of operations, changes in shareholders’ equity and cash flows for the period from July 31, 2020 (inception) through December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the period from July 31, 2020 (inception) through December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Restatement of Financial Statements
As discussed in Note 2 to the financial statements, the Securities and Exchange Commission issued a public statement entitled
(the “Public Statement”) on April 12, 2021, which discusses the accounting for certain warrants as liabilities. The Company previously accounted for its warrants as equity instruments. Management evaluated its warrants against the Public Statement, and determined that the warrants should be accounted for as liabilities. Accordingly, the 2020 financial statements have been restated to correct the accounting and related disclosure for the warrants.
Staff Statement on Accounting and Reporting
Considerations for Warrants Issued by Special
Purpose Acquisition Companies (“SPACs”)
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ WithumSmith+Brown, PC
We have served as the Company’s auditor since 2020.
New York, New York
May 7, 2021
F-22
PERIDOT ACQUISITION CORP.
BALANCE SHEET
DECEMBER 31, 2020 (AS RESTATED)
The accompanying notes are an integral part of these financial statements.
F-23
PERIDOT ACQUISITION CORP.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM JULY 31, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020 (AS RESTATED)
|
Formation and operational costs
|
$ | 460,977 | ||
|
|
|
|||
|
Loss from operations
|
|
(460,977
|
)
|
|
|
Other income (expense):
|
||||
|
Interest earned - bank
|
20 | |||
|
Interest earned on marketable securities held in Trust Account
|
74,392 | |||
|
Change in fair value of warrant liability
|
(22,540,000 | ) | ||
|
Offering costs allocated to warrant liability
|
(693,847 | ) | ||
|
|
|
|||
|
Net Loss
|
$
|
(23,620,412
|
)
|
|
|
|
|
|||
|
Weighted average shares outstanding of Class A redeemable ordinary shares
|
30,000,000 | |||
|
|
|
|||
|
Basic and diluted net income per share, Class A
|
$
|
0.00
|
|
|
|
|
|
|||
|
Weighted average shares outstanding of Class B
non-redeemable
ordinary shares
|
7,500,000 | |||
|
|
|
|||
|
Basic and diluted net loss per share, Class B
|
$
|
(3.16
|
)
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
F-24
PERIDOT ACQUISITION CORP.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE PERIOD FROM JULY 31, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020 (AS RESTATED)
|
Class A
Ordinary Shares
|
Class B
Ordinary Shares
|
Additional
Paid in
|
Accumulated
|
Total
Shareholders’
|
||||||||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
|
||||||||||||||||||||||
|
Balance — July 31, 2020 (inception)
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|||||||
|
Issuance of Class B ordinary shares to Sponsor
|
— | — | 8,625,000 | 863 | 24,137 |
|
—
|
|
25,000 | |||||||||||||||||||
|
Sale of 30,000,000 Units, net of underwriting discounts, offering costs and fair value of warrant liability
|
30,000,000 | 3,000 | — | — | 271,624,272 | — | 271,627,272 | |||||||||||||||||||||
|
Excess of cash received over fair value of private placement warrants
|
— | — | — | — | 1,600,000 | — | 1,600,000 | |||||||||||||||||||||
|
Forfeiture of Founder Shares
|
— | — | (1,125,000 | ) | (113 | ) | 113 | — | — | |||||||||||||||||||
|
Ordinary shares subject to possible redemption
|
(24,463,185 | ) | (2,446 | ) | — | — | (244,629,404 | ) | — | (244,631,850 | ) | |||||||||||||||||
|
Net loss
|
— | — | — | — | — | (23,620,412 | ) | (23,620,412 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance — December 31, 2020
|
|
5,536,815
|
|
$
|
554
|
|
|
7,500,000
|
|
$
|
750
|
|
$
|
28,619,118
|
|
$
|
(23,620,412
|
)
|
$
|
5,000,010
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
F-25
PERIDOT ACQUISITION CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM JULY 31, 2020 (INCEPTION) THROUGH DECEMBER 31, 2020 (AS RESTATED)
|
Cash Flows from Operating Activities:
|
||||
|
Net loss
|
$ | (23,620,412 | ) | |
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||
|
Formation costs paid by Sponsor
|
5,000 | |||
|
Interest earned on marketable securities held in Trust Account
|
(74,392 | ) | ||
|
Change in fair value of warrant liability
|
22,540,000 | |||
|
Offering costs allocable to warrant liability
|
693,847 | |||
|
Changes in operating assets and liabilities:
|
||||
|
Prepaid expenses
|
(381,749 | ) | ||
|
Accrued expenses
|
355,888 | |||
|
|
|
|||
|
Net cash used in operating activities
|
|
(481,818
|
)
|
|
|
|
|
|||
|
Cash Flows from Investing Activities:
|
||||
|
Investment of cash in Trust Account
|
(300,000,000 | ) | ||
|
|
|
|||
|
Net cash used in investing activities
|
|
(300,000,000
|
)
|
|
|
|
|
|||
|
Cash Flows from Financing Activities:
|
||||
|
Proceeds from sale of Units, net of underwriting discounts paid
|
294,000,000 | |||
|
Proceeds from sale of Private Placement Warrants
|
8,000,000 | |||
|
Proceeds from promissory note – related party
|
67,081 | |||
|
Repayment of promissory note – related party
|
(119,331 | ) | ||
|
Payments of offering costs
|
(494,325 | ) | ||
|
|
|
|||
|
Net cash provided by financing activities
|
|
301,453,425
|
|
|
|
|
|
|||
|
Net Change in Cash
|
|
971,607
|
|
|
|
Cash – Beginning
|
— | |||
|
|
|
|||
|
Cash – Ending
|
$
|
971,607
|
|
|
|
|
|
|||
|
Non-Cash
Investing and Financing Activities:
|
||||
|
Offering costs paid directly by Sponsor from proceeds of issuance of Class B ordinary shares
|
$ | 20,000 | ||
|
|
|
|||
|
Initial classification of ordinary shares subject to possible redemption
|
$ | 267,553,420 | ||
|
|
|
|||
|
Change in value of ordinary shares subject to possible redemption
|
$ | (22,921,570 | ) | |
|
|
|
|||
|
Initial classification of warrant liability
|
$ | 18,400,000 | ||
|
|
|
|||
|
Deferred underwriting fee payable
|
$ | 10,500,000 | ||
|
|
|
|||
|
Payment of offering costs through promissory note – related party
|
$ | 52,250 | ||
|
|
|
The accompanying notes are an integral part of these financial statements.
F-26
PERIDOT ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Peridot Acquisition Corp. (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on July 31, 2020. The Company was incorporated for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities (a “Business Combination”).
Although the Company is not limited to a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus on environmentally sound infrastructure and technologies that mitigate greenhouse gas (GHG) emissions and/or enhance resilience to climate change. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2020, the Company had not commenced any operations. All activity for the period from July 31, 2020 (inception) through December 31, 2020 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate
non-operating
income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement for the Company’s Initial Public Offering was declared effective on September 23, 2020. On September 28, 2020 the Company consummated the Initial Public Offering of 30,000,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $300,000,000 which is described in Note 4.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 8,000,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Peridot Acquisition Sponsor, LLC (the “Sponsor”), generating gross proceeds of $8,000,000, which is described in Note 5.
Transaction costs amounted to $17,066,575, consisting of $6,000,000 of underwriting fees, $10,500,000 of deferred underwriting fees and $566,575 of other offering costs; of this amount, $693,847 was expensed as of the date of the initial public offering and $16,372,728 was charged to shareholders’ equity. At December 31, 2020, cash of $971,607 was held outside of the Trust Account (as defined below) and is available for the payment of offering costs and for working capital purposes.
Following the closing of the Initial Public Offering on September 28, 2020, an amount of $300,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), as determined by the Company, until the earliest of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The
F-27
stock exchange listing rules require that the Business Combination must be with one or more operating businesses or assets with a fair market value equal to at least 80% of the assets held in the Trust Account (excluding the amount of any deferred underwriting commissions and taxes payable on the income earned on the Trust Account). The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the issued and outstanding voting securities of the target or otherwise acquires a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide the holders of the public shares (the “Public Shareholders”) with the opportunity to redeem all or a portion of their public shares upon the completion of the Business Combination, either (i) in connection with a general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders will be entitled to redeem their Public Shares, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination (initially anticipated to be $10.00 per Public Share), including interest (which interest shall be net of taxes payable), divided by the number of then issued and outstanding public shares, subject to certain limitations as described in the prospectus. The
per-share
amount to be distributed to the Public Shareholders who properly redeem their shares will not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 7). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 and, if the Company seeks shareholder approval, it receives an ordinary resolution under Cayman Islands law approving a Business Combination, which requires the affirmative vote of a majority of the shareholders who attend and vote at a general meeting of the Company. If a shareholder vote is not required and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Memorandum and Articles of Association, conduct the redemptions pursuant to the tender offer rules of the Securities and Exchange Commission (“SEC”), and file tender offer documents containing substantially the same information as would be included in a proxy statement with the SEC prior to completing a Business Combination. If the Company seeks shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote the Founder Shares (as defined in Note 6) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each Public Shareholder may elect to redeem their Public Shares, without voting, and if they do vote, irrespective of whether they vote for or against a proposed Business Combination.
Notwithstanding the foregoing, if the Company seeks shareholder approval of the Business Combination and the Company does not conduct redemptions pursuant to the tender offer rules, a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares without the Company’s prior written consent.
The Sponsor has agreed (a) to waive its redemption rights with respect to any Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Memorandum and Articles of Association (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business
| F-28 |
Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination within the Combination Period (as defined below) or (ii) with respect to any other provision relating to shareholders’ rights or
pre-initial
business combination activity, unless the Company provides the Public Shareholders with the opportunity to redeem their Public Shares upon approval of any such amendment at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the Trust account and not previously released to pay taxes, divided by the number of then issued and outstanding Public Shares.
The Company will have until September 28, 2022 to consummate a Business Combination (the “Combination Period”). However, if the Company has not completed a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the Public Shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned and not previously released to us to pay our taxes, if any (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish the rights of the Public Shareholders as shareholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining Public Shareholders and its Board of Directors, liquidate and dissolve, subject in each case to the Company’s obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to the Founder Shares it will receive if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or any of its respective affiliates acquire Public Shares, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period, and in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party (other than the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per Public Share, due to reductions in the value of trust assets, in each case net of the interest that may be withdrawn to pay taxes. This liability will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Company’s independent
| F-29 |
registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
Liquidity and Capital Resources
As of December 31, 2020, the Company had approximately $1.0 million in its operating bank accounts and working capital of approximately $1.0 million.
Prior to the completion of the Initial Public Offering, the Company’s liquidity needs had been satisfied through a contribution of $25,000 from Sponsor to cover certain offering costs in exchange for the issuance of the Founder Shares, the loan of up to $300,000 from the Sponsor pursuant to the Note (see Note 6), and the proceeds from the consummation of the Private Placement not held in the Trust Account. The Note was repaid on September 28, 2020. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors will fund, and have the means to provide the Company Working Capital Loans (see Note 6). As of December 31, 2020, there were no amounts outstanding under any Working Capital Loan.
Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
NOTE 2 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
The Company previously accounted for its outstanding Public Warrants (as defined in Note 4) and Private Placement Warrants issued in connection with its Initial Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant. In addition, the warrant agreement includes a provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of ordinary shares, all holders of the warrants would be entitled to receive cash for their warrants (the “tender offer provision”).
In connection with the audit of the Company’s financial statements for the period ended December 31, 2020, the Company’s management further evaluated the warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40- 15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s audit committee, in consultation with management and after discussion with the Company’s independent registered public accounting firm, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s ordinary shares in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s audit committee, in consultation with management and after discussion with the
| F-30 |
Company’s independent registered public accounting firm, concluded the tender offer provision included in the warrant agreement fails the “classified in shareholders’ equity” criteria as contemplated by ASC
Section 815-40-25.
As a result of the above, the Company should have classified the warrants as derivative liabilities in its previously issued financial statements. Under this accounting treatment, the Company is required to measure the fair value of the warrants at the end of each reporting period and recognize changes in the fair value from the prior period in the Company’s operating results for the current period.
The Company’s accounting for the warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported operating expenses, cash flows or cash.
The following table reflects the Company’s balance sheet, statement of operations, and statement of cash flows as of and for the periods indicated below.
|
As
Previously
Reported |
Adjustments
|
As
Restated
|
||||||||||
|
Balance sheet as of September 28, 2020 (audited)
|
||||||||||||
|
Warrant Liability
|
$ | — | $ | 18,400,000 | $ | 18,400,000 | ||||||
|
Class A Ordinary Shares Subject to Possible Redemption
|
285,953,420 | (18,400,000 | ) | 267,553,420 | ||||||||
|
Class A Ordinary Shares
|
140 | 184 | 324 | |||||||||
|
Additional Paid-in Capital
|
5,004,002 | 693,663 | 5,697,665 | |||||||||
|
Accumulated Deficit
|
(5,000 | ) | (693,847 | ) | (698,847 | ) | ||||||
|
Balance sheet as of September 30, 2020 (unaudited)
|
||||||||||||
|
Warrant Liability
|
$ | — | $ | 18,860,000 | $ | 18,860,000 | ||||||
|
Class A Ordinary Shares Subject to Possible Redemption
|
285,947,270 | (18,860,000 | ) | 267,087,270 | ||||||||
|
Class A Ordinary Shares
|
141 | 188 | 329 | |||||||||
|
Additional Paid-in Capital
|
5,010,151 | 1,153,659 | 6,163,810 | |||||||||
|
Accumulated Deficit
|
(11,151 | ) | (1,153,847 | ) | (1,164,998 | ) | ||||||
|
Balance sheet as of December 31, 2020 (audited)
|
||||||||||||
|
Warrant Liability
|
$ | — | $ | 40,940,000 | $ | 40,940,000 | ||||||
|
Class A Ordinary Shares Subject to Possible Redemption
|
285,571,850 | (40,940,000 | ) | 244,631,850 | ||||||||
|
Class A Ordinary Shares
|
144 | 410 | 554 | |||||||||
|
Additional Paid-in Capital
|
5,385,681 | 23,233,437 | 28,619,118 | |||||||||
|
Accumulated Deficit
|
(386,565 | ) | (23,233,847 | ) | (23,620,412 | ) | ||||||
|
Statement of Operations from July 31, 2020 (inception) to September 30, 2020 (unaudited)
|
||||||||||||
|
Change in fair value of warrant liability
|
$ | — | $ | (460,000 | ) | $ | (460,000 | ) | ||||
|
Net loss
|
(11,151 | ) | (1,153,847 | ) | (1,164,998 | ) | ||||||
|
Weighted average shares outstanding of Class A redeemable ordinary shares
|
30,000,000 | — | 30,000,000 | |||||||||
|
Basic and diluted net loss per share, Class A
|
(0.00 | ) | — | (0.00 | ) | |||||||
|
Weighted average shares outstanding of Class B non-redeemable ordinary shares
|
7,500,000 | — | 7,500,000 | |||||||||
|
Basic and diluted net loss per share, Class B
|
(0.00 | ) | (0.16 | ) | (0.16 | ) | ||||||
|
Statement of Operations from July 31, 2020 (inception) to December 31, 2020 (audited)
|
||||||||||||
|
Change in fair value of warrant liability
|
$ | — | $ | 22,540,000 | $ | (22,540,000 | ) | |||||
| F-31 |
|
As
Previously
Reported |
Adjustments
|
As
Restated
|
||||||||||
|
Net loss
|
(386,565 | ) | (23,233,847 | ) | (23,620,412 | ) | ||||||
|
Weighted average shares outstanding of Class A redeemable ordinary shares
|
30,000,000 | — | 30,000,000 | |||||||||
|
Basic and diluted net earnings per share, Class A
|
0.00 | — | 0.00 | |||||||||
|
Weighted average shares outstanding of Class B non-redeemable ordinary shares
|
7,500,000 | — | 7,500,000 | |||||||||
|
Basic and diluted net loss per share, Class B
|
(0.06 | ) | (3.10 | ) | (3.16 | ) | ||||||
|
Cash Flow Statement for the Period from July 31, 2020 (inception) to September 30, 2020 (unaudited)
|
||||||||||||
|
Net income (loss)
|
$ | (11,151 | ) | $ | (1,153,847 | ) | $ | (1,164,998 | ) | |||
|
Change in fair value of warrant liability
|
— | (460,000 | ) | (460,000 | ) | |||||||
|
Offering costs allocated to warrant liability
|
— | 693,847 | 693,847 | |||||||||
|
Initial classification of warrant liability
|
— | 18,400,000 | 18,400,000 | |||||||||
|
Initial classification of common stock subject to possible redemption
|
285,953,420 | (18,400,000 | ) | 267,553,420 | ||||||||
|
Change in value of common stock subject to possible redemption
|
(6,150 | ) | (460,000 | ) | (466,150 | ) | ||||||
|
Cash Flow Statement for the Period from July 31, 2020 (inception) to December 31, 2020 (audited)
|
||||||||||||
|
Net income (loss)
|
(386,565 | ) | (23,233,847 | ) | (23,620,412 | ) | ||||||
|
Change in fair value of warrant liability
|
— | 22,540,000 | 22,540,000 | |||||||||
|
Offering costs allocated to warrant liability
|
— | 693,847 | 693,847 | |||||||||
|
Initial classification of warrant liability
|
— | 18,400,000 | 18,400,000 | |||||||||
|
Initial classification of common stock subject to possible redemption
|
285,953,420 | (18,400,000 | ) | 267,553,420 | ||||||||
|
Change in value of common stock subject to possible redemption
|
(381,570 | ) | (22,540,000 | ) | (22,921,570 | ) | ||||||
NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are presented in U.S. dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”).
Emerging Growth Company
The Company is 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 it 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its 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.
| F-32 |
Further, 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 (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a 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. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of December 31, 2020.
Cash and Marketable Securities Held in Trust Account
At December 31, 2020, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares (if any) that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at December 31, 2020, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
| F-33 |
Offering Costs
Offering costs consist of legal, accounting, underwriting fees and other expenses incurred through the Initial Public Offering that are directly related to the Initial Public Offering. Offering costs amounting to $16,372,728 were charged to shareholders’ equity upon the completion of the Initial Public Offering.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the warrants issued in the IPO has been estimated using a Monte Carlo simulation methodology as of the date of the IPO and such warrants’ quoted market price as of December 31, 2020 (see Note 10).
Income Taxes
ASC Topic 740, “Income Taxes,” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of December 31, 2020, there were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.
The Company is considered to be an exempted Cayman Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
Net Loss Per Ordinary Share
The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per share is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period. The calculation of diluted loss per share does not consider the effect of the
| F-34 |
warrants issued in connection with the (i) Initial Public Offering, (ii) the exercise of the over-allotment option and (iii) Private Placement Warrants since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants are exercisable to purchase 23,000,000 shares of Class A ordinary shares in the aggregate.
The Company’s statement of operations includes a presentation of loss per share for ordinary shares subject to possible redemption in a manner similar to the
two-class
method of loss per share. Net income per share, basic and diluted, for Class A redeemable ordinary shares is calculated by dividing the interest income earned on the Trust Account, by the weighted average number of Class A redeemable ordinary shares outstanding since original issuance. Net loss per share, basic and diluted, for Class B
non-redeemable
ordinary shares is calculated by dividing the net loss, adjusted for income attributable to Class A redeemable ordinary shares, by the weighted average number of Class B
non-redeemable
ordinary shares outstanding for the period. Class B
non-redeemable
ordinary shares includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.
The following table reflects the calculation of basic and diluted net income (loss) per ordinary share (in dollars, except per share amounts):
|
For the Period from
July 31, 2020 (inception) Through December 31, 2020 |
||||
|
Redeemable Class A Ordinary Shares
|
||||
|
Numerator: Earnings allocable to Redeemable Class A Ordinary Shares
|
||||
|
Interest Income
|
$ | 74,412 | ||
|
|
|
|||
|
Net Earnings
|
$
|
74,412
|
|
|
|
|
|
|||
|
Denominator: Weighted Average Redeemable Class A Ordinary Shares
|
||||
|
Redeemable Class A Ordinary Shares, Basic and Diluted
|
30,000,000 | |||
|
Earnings/Basic and Diluted Redeemable Class A Ordinary Shares
|
|
0.00
|
|
|
|
|
|
|||
|
Non-Redeemable
Class B Ordinary Shares
|
||||
|
Numerator: Net Loss minus Redeemable Net Earnings
|
||||
|
Net Loss
|
$ | (23,620,412 | ) | |
|
Redeemable Net Earnings
|
$ | (74,412 | ) | |
|
|
|
|||
|
Non-Redeemable
Net Loss
|
$
|
(23,694,824
|
)
|
|
|
|
|
|||
|
Denominator: Weighted Average
Non-Redeemable
Class B Ordinary Shares
|
||||
|
Non-Redeemable
Class B Ordinary Shares, Basic and Diluted
|
7,500,000 | |||
|
Loss/Basic and Diluted
Non-Redeemable
Class B Ordinary Shares
|
$
|
(3.16
|
)
|
|
|
|
|
|||
Note: As of December 31, 2020, basic and diluted shares are the same as there are no
non-redeemable
securities that are dilutive to the Company’s ordinary shareholders.
| F-35 |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the Company’s balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the Company’s financial statements.
NOTE 4 — PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 30,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one Class A ordinary share and
one-half
of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one Class A ordinary share at an exercise price of $11.50 per whole share (see Note 9).
NOTE 5 — PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 8,000,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $8,000,000. The over-allotment option expired in November 2020. Each Private Placement Warrant is exercisable to purchase one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 8). A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 6 — RELATED PARTY TRANSACTIONS
Founder Shares
During the period ended August 11, 2020, the Sponsor paid $25,000 to cover certain offering and formation costs of the Company in consideration for 8,625,000 Class B ordinary shares (the “Founder Shares”). The Founder Shares include an aggregate of up to 1,125,000 shares that are subject to forfeiture depending on the extent to which the underwriters’ over-allotment option is exercised, so that the number of Founder Shares will equal, on an
as-converted
basis, approximately 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. On November 7, 2020, the underwriters’ election to exercise their over-allotment option expired unexercised, resulting in the forfeiture of 1,125,000 shares. Accordingly, as of November 7, 2020, there are 7,500,000 Founder Shares issued and outstanding.
| F-36 |
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the closing price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share
sub-divisions,
share dividends, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction that results in all of the Public Shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Promissory Note – Related Party
On August 11, 2020, the Company issued an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. The Promissory Note was
non-interest
bearing and payable on the earlier of (i) December 31, 2020 and (ii) the completion of the Initial Public Offering. The outstanding balance under the Promissory Note of $119,331 was repaid at the closing of the Initial Public Offering on September 28, 2020.
Administrative Support Agreement
On September 23, 2020, the Company entered into an agreement to pay an affiliate of the Sponsor up to $10,000 per month for office space, secretarial and administrative support services. Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees.
For the period from July 31, 2020 (inception) through December 31, 2020, the Company incurred $30,000 in fees for these services, of which is included in accrued expenses in the accompanying balance sheet as of December 31, 2020.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of notes may be converted upon completion of a Business Combination into warrants at a price of $1.00 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of December 31, 2020, the Company had no outstanding borrowings under the Working Capital Loans.
NOTE 7 — COMMITMENTS
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
| F-37 |
Registration and Shareholder Rights
Pursuant to a registration and shareholder rights agreement entered into on September 23, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans) are entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. However, the registration and shareholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lockup period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriters a
45-day
option to purchase up to 4,500,000 additional Units to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. The over-allotment option expired in November 2020.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $10,500,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
NOTE 8 — SHAREHOLDERS’ EQUITY
Preference Shares
Class
A Ordinary Shares
Class
B Ordinary Shares
Only holders of the Class B ordinary shares will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A ordinary shares and Class B ordinary shares will vote together as a single class on all other matters submitted to a vote of shareholders, except as required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination or earlier at the option of the holders thereof at a ratio such that the number of Class A ordinary shares issuable upon conversion of all Founder Shares will equal, in the aggregate, on an
as-converted
basis, 20% of the sum of (i) the total number of ordinary shares issued and outstanding upon completion of the Initial Public Offering, plus (ii) the total number of Class A ordinary shares issued or deemed issued or issuable
| F-38 |
upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of a Business Combination, excluding any Class A ordinary shares or equity-linked securities exercisable for or convertible into Class A ordinary shares issued, deemed issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued upon conversion of Working Capital Loans. In no event will the Class B ordinary shares convert into Class A ordinary shares at a rate of less than
one-to-one.
NOTE 9 — WARRANT LIABILITY
Warrants
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class A ordinary share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as practicable, but in no event later than 20 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement; provided that if the Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will use its commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the 60th day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption, but the Company will use its commercially reasonably efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrants when the price per Class
A ordinary share equals or exceeds $18.00.
| • |
in whole and not in part;
|
| F-39 |
| • |
at a price of $0.01 per warrant;
|
| • |
upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
|
| • |
if, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share
sub-divisions,
share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders.
|
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class
A ordinary share equals or exceeds $10.00.
| • |
in whole and not in part;
|
| • |
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date and the fair market value of the Class A ordinary shares;
|
| • |
if, and only if, the closing price of the Class A ordinary shares equals or exceeds $10.00 per share (as adjusted for share
sub-divisions,
share dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a
30-trading
day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and
|
| • |
if the closing price of the Class A ordinary shares for any 20 trading days within a
30-trading
day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted for share
sub-divisions,
share dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the
| F-40 |
Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of its Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be
non-redeemable,
except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 10 — FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. | |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. | |
The Company classifies its U.S. Treasury and equivalent securities as
in accordance with ASC Topic 320 “Investments—Debt and Equity Securities.”
securities are those securities which the Company has the ability and intent to hold until maturity.
treasury securities are recorded at amortized cost on the accompanying balance sheet and adjusted for the amortization or accretion of premiums or discounts.
held-to-maturity
Held-to-maturity
Held-to-maturity
| F-41 |
At December 31, 2020, assets held in the Trust Account were comprised of $184 in cash and $300,074,208 in U.S. Treasury securities at amortized cost. During the year ended December 31, 2020, the Company did not withdraw any interest income from the Trust Account.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at December 31, 2020 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
|
Held-To-Maturity
|
Level
|
Amortized
Cost
|
Gross
Holding
Gain
|
Fair Value
|
||||||||||||||||
|
Assets:
|
||||||||||||||||||||
|
U.S. Treasuries held in Trust Account
|
Mature on 04/01/2021 | 1 | $ | 300,074,208 | $ | 15,764 | $ | 300,089,972 | ||||||||||||
|
Liabilities:
|
||||||||||||||||||||
|
Public Warrants
|
1 | $ | 26,700,000 | |||||||||||||||||
|
Private Placement Warrants
|
2 | $ | 14,240,000 | |||||||||||||||||
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the statement of operations.
Initial Measurement
The Company established the initial fair value for the Warrants on September 28, 2020, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model for the Private Placement Warrants and the Public Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one share of Class A ordinary shares and one-half of one Public Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance of Class B ordinary shares, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A ordinary shares subject to possible redemption, Class A ordinary shares and Class B ordinary shares based on their relative fair values at the initial measurement date. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs.
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants and Public Warrants were as follows at initial measurement:
|
Input
|
September 28, 2020
(Initial Measurement) |
|||
|
Risk-free interest rate
|
0.4 | % | ||
|
Expected term to business combination (years)
|
1 | |||
|
Expected volatility
|
15.0 | % | ||
|
Exercise price
|
$ | 11.50 | ||
|
Fair value of Units
|
$ | 9.95 | ||
On September 28, 2020, the Private Placement Warrants and Public Warrants were determined to be $0.80 per warrant for aggregate values of $6.4 million and $12.0 million, respectively.
| F-42 |
Subsequent Measurement
The Warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public Warrants as of December 31, 2020 is classified as Level 1 due to the use of an observable market quote in an active market. As the transfer of Private Placement Warrants to anyone outside of a small group of individuals who are permitted transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant. As such, the Private Placement Warrants are classified as Level 2.
As of December 31, 2020, the aggregate values of the Private Placement Warrants and Public Warrants were $14.2 million and $26.7 million, respectively.
The following table presents the changes in the fair value of warrant liabilities:
|
Private Placement
|
Level
|
Public
|
Level
|
Warrant Liabilities
|
||||||||||||||||
|
Fair value
|
$ | — | $ | — | $ | — | ||||||||||||||
|
Initial measurement on September 28, 2020
|
6,400,000 | 3 | 12,000,000 | 3 | 18,400,000 | |||||||||||||||
|
Fair Value as of September 30, 2020
|
6,560,000 | 3 | 12,300,000 | 3 | 18,860,000 | |||||||||||||||
|
Change in valuation inputs or other assumptions
|
7,680,000 | 14,400,000 | 22,080,000 | |||||||||||||||||
|
Fair value as of December 31, 2020
|
$ | 14,240,000 | 2 | $ | 26,700,000 | 1 | $ | 40,940,000 | ||||||||||||
Due to the use of quoted prices in an active market (Level 1) to measure the fair value of the Public Warrants, subsequent to initial measurement, the Company had transfers out of Level 3 totaling $18,400,000 during the period from September 28, 2020 through December 31, 2020.
NOTE 11 — SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
On February 15, 2021, the Company entered into a Business Combination Agreement (the “Agreement”), with
Li-Cycle
Corp., a corporation existing under the laws of the Province of Ontario, Canada
(“Li-Cycle”),
and
Li-Cycle
Holdings Corp., a corporation existing under the laws of the Province of Ontario, Canada and a wholly owned subsidiary of
Li-Cycle
(“Newco”). The Agreement and the transactions contemplated thereby were unanimously approved by the boards of directors of each of Peridot and
Li-Cycle.
The Agreement contemplates that the business combination among Peridot,
Li-Cycle
and Newco will be completed through the following series of transactions:
| • |
Peridot will continue as a corporation existing under the laws of the Province of Ontario (the “Continuance” and Peridot as so continued, “Peridot Ontario”), and in connection therewith,
|
| F-43 |
|
(x) the Class A ordinary shares, par value $0.0001 per share, of Peridot (the “Class A Shares”), the Class B ordinary shares, par value $0.0001 per share, of Peridot (the “Class B Shares”), and the warrants to purchase Class A Shares, in each case, issued and outstanding immediately prior to the Continuance will convert into an equal number of Class A common shares, Class B common shares and warrants to purchase Class A common shares of Peridot Ontario;
|
| • |
following the Continuance and any forfeiture by Peridot Acquisition Sponsor, LLC, a Delaware limited liability company (the “Sponsor”), of Class B common shares of Peridot Ontario, as described below under “Sponsor Letter Agreement”, the Class B common shares will convert into Class A common shares of Peridot Ontario on a
one-for-one
|
| • |
Peridot Ontario and Newco will amalgamate (the “Amalgamation” and Peridot Ontario and Newco as so amalgamated, “Amalco”), and in connection therewith, the Class A common shares and warrants to purchase Class A common shares will convert into an equivalent number of common shares of Amalco (the “Amalco Shares”) and warrants to purchase an equivalent number of Amalco Shares; and
|
| • |
following the Amalgamation, the preferred shares of
Li-Cycle
will convert into common shares of
Li-Cycle
and, on the terms and subject to the conditions set forth in a Plan of Arrangement, Amalco will acquire all of the issued and outstanding common shares of
Li-Cycle
from
Li-Cycle’s
shareholders in exchange for Amalco Shares having an aggregate equity value of $975 million assuming a $10 per share equity value (the “Share Exchange”).
|
Concurrently with the execution of the Agreement, Peridot and Newco entered into subscription agreements (the “Subscription Agreements”) with certain investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to subscribe for and purchase, and Newco (as the predecessor to Amalco) agreed to issue and sell to such PIPE Investors, immediately prior to Closing, an aggregate of 31,500,000 Amalco Shares for a purchase price of $10.00 per share, for aggregate gross proceeds of $315,000,000 (the “PIPE Financing”).
The Agreement contains representations and warranties of each of the parties thereto that are customary for transactions of this type, including with respect to the operations of Peridot,
Li-Cycle
and Newco. In addition, the Agreement contains customary
pre-closing
covenants, including the obligation of
Li-Cycle
to conduct its business in the ordinary course consistent with past practice and to refrain from taking specified actions, subject to certain exceptions.
| F-44 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of
Li-Cycle
Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial position of
Li-Cycle
Corp. and subsidiaries (the “Company”) as of October 31, 2020 and 2019, the related consolidated statements of loss and comprehensive loss, changes in equity, and cash flows, for each of the three years in the period ended October 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of October 31, 2020 and 2019, and its financial performance and its cash flows for each of the three years in the period ended October 31, 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Change in Accounting Principles
As discussed in Note 3 to the financial statements, effective November 1, 2019, the Company adopted IFRS 16 – Leases using the cumulative
catch-up
approach.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
June 7, 2021
We have served as the Company’s auditor since 2019.
F-45
Li-Cycle
Corp.
Consolidated statements of financial position
As at October 31, 2020 and 2019
(Expressed in U.S. dollars)
|
2020
|
2019 | |||||||||||
| Notes |
$
|
$ | ||||||||||
|
Assets
|
||||||||||||
|
Current assets
|
||||||||||||
|
Cash
|
|
663,557
|
|
3,783,449 | ||||||||
|
Accounts receivable
|
4 |
|
890,229
|
|
822,679 | |||||||
|
Prepayments and deposits
|
|
963,951
|
|
330,127 | ||||||||
|
Inventory
|
5 |
|
179,994
|
|
46,556 | |||||||
|
|
|
|
|
|||||||||
|
|
2,697,731
|
|
4,982,811 | |||||||||
|
|
|
|
|
|||||||||
|
Non-current
assets
|
||||||||||||
|
Plant and equipment
|
6 |
|
5,602,580
|
|
1,060,792 | |||||||
|
Right of use assets
|
11 |
|
3,859,088
|
|
— | |||||||
|
|
|
|
|
|||||||||
|
|
9,461,668
|
|
1,060,792 | |||||||||
|
|
|
|
|
|||||||||
|
|
12,159,399
|
|
6,043,603 | |||||||||
|
|
|
|
|
|||||||||
|
Liabilities
|
||||||||||||
|
Current liabilities
|
||||||||||||
|
Accounts payable and accrued liabilities
|
14 |
|
4,364,372
|
|
1,148,986 | |||||||
|
Restricted share units
|
9 |
|
171,849
|
|
— | |||||||
|
Lease liabilities
|
12 |
|
591,355
|
|
— | |||||||
|
Loans payable
|
8 |
|
1,468,668
|
|
87,381 | |||||||
|
Deferred government funding
|
18 |
|
—
|
|
1,067,318 | |||||||
|
|
|
|
|
|||||||||
|
|
6,596,244
|
|
2,303,685 | |||||||||
|
|
|
|
|
|||||||||
|
Non-current
liabilities
|
||||||||||||
|
Lease liabilities
|
12 |
|
3,021,815
|
|
— | |||||||
|
Loan payable
|
8 |
|
779,210
|
|
— | |||||||
|
Restoration provisions
|
13 |
|
321,400
|
|
— | |||||||
|
Convertible debt
|
8 |
|
—
|
|
384,207 | |||||||
|
Conversion feature of convertible debt
|
8 |
|
—
|
|
94,985 | |||||||
|
|
|
|
|
|||||||||
|
|
4,122,425
|
|
479,192 | |||||||||
|
|
|
|
|
|||||||||
|
|
10,718,669
|
|
2,782,877 | |||||||||
|
|
|
|
|
|||||||||
|
Shareholders’ equity
|
||||||||||||
|
Share capital
|
9 |
|
15,441,600
|
|
8,467,810 | |||||||
|
Contributed surplus
|
9 |
|
824,683
|
|
123,781 | |||||||
|
Accumulated deficit
|
|
(14,528,941
|
)
|
(5,252,979 | ) | |||||||
|
Accumulated other comprehensive loss
|
|
(296,612
|
)
|
(77,886 | ) | |||||||
|
|
|
|
|
|||||||||
|
|
1,440,730
|
|
3,260,726 | |||||||||
|
|
|
|
|
|||||||||
|
|
12,159,399
|
|
6,043,603 | |||||||||
|
|
|
|
|
|||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-46
Li-Cycle
Corp.
Consolidated statements of loss and comprehensive loss
Years ended October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
2020
|
2019 | 2018 | ||||||||||||
| Notes |
$
|
$ | $ | |||||||||||
|
Revenue
|
||||||||||||||
|
Product sales
|
|
554,914
|
|
— | — | |||||||||
|
Recycling services
|
|
237,340
|
|
48,160 | 5,746 | |||||||||
|
|
|
|
|
|
|
|||||||||
|
|
792,254
|
|
48,160 | 5,746 | ||||||||||
|
Expenses
|
||||||||||||||
|
Professional fees
|
|
2,962,261
|
|
546,647 | 76,650 | |||||||||
|
Employee salaries and benefits, net
|
18 |
|
2,819,195
|
|
607,820 | 201,991 | ||||||||
|
Depreciation
|
|
1,095,250
|
|
183,862 | — | |||||||||
|
Research and development, net
|
18 |
|
776,668
|
|
2,111,658 | 397,070 | ||||||||
|
Raw materials and supplies
|
|
577,859
|
|
— | — | |||||||||
|
Plant facilities
|
|
390,687
|
|
— | — | |||||||||
|
Marketing
|
|
365,820
|
|
65,840 | 34,400 | |||||||||
|
Share-based compensation
|
9 |
|
332,634
|
|
97,258 | 26,523 | ||||||||
|
Office and administrative
|
|
316,401
|
|
355,361 | 93,509 | |||||||||
|
Travel and entertainment
|
|
160,332
|
|
137,943 | 50,702 | |||||||||
|
Freight and shipping
|
|
137,010
|
|
5,785 | — | |||||||||
|
|
|
|
|
|
|
|||||||||
|
|
9,934,117
|
|
4,112,174 | 880,845 | ||||||||||
|
|
|
|
|
|
|
|||||||||
|
Loss from operations
|
|
(9,141,863
|
)
|
(4,064,014 | ) | (875,099 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
|
Other (income) expense
|
||||||||||||||
|
Interest expense
|
|
529,700
|
|
60,329 | 39,226 | |||||||||
|
Interest income
|
|
(34,403
|
)
|
(23,561 | ) | (5,461 | ) | |||||||
|
Fair value loss on restricted share units
|
|
84,454
|
|
— | — | |||||||||
|
Foreign exchange gain
|
|
(445,652
|
)
|
— | — | |||||||||
|
|
|
|
|
|
|
|||||||||
|
|
134,099
|
|
36,768 | 33,769 | ||||||||||
|
|
|
|
|
|
|
|||||||||
|
Net loss
|
|
(9,275,962
|
)
|
(4,100,782 | ) | (908,869 | ) | |||||||
|
Other comprehensive income (loss)
|
||||||||||||||
|
Foreign currency translation adjustment
|
|
(218,726
|
)
|
(37,182 | ) | 125,819 | ||||||||
|
|
|
|
|
|
|
|||||||||
|
Comprehensive loss
|
|
(9,494,688
|
)
|
(4,137,964 | ) | (783,050 | ) | |||||||
|
|
|
|
|
|
|
|||||||||
|
Loss per common share - basic and diluted
|
16 |
|
(4.48
|
)
|
(2.28 | ) | (0.53 | ) | ||||||
|
|
|
|
|
|
|
|||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-47
Li-Cycle
Corp.
Consolidated statements of changes in equity
Years ended October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
Number of
common shares |
Share capital
Amounts |
Contributed
surplus |
Accumulated
deficit |
Accumulated
other comprehensive income (loss) |
Total | |||||||||||||||||||||||
| Notes | $ | $ | $ | $ | $ | |||||||||||||||||||||||
|
Balance, October 31, 2017
|
1,586,038 | 442,814 | — | (243,328 | ) | (166,523 | ) | 32,963 | ||||||||||||||||||||
|
Share-based compensation
|
— | — | 26,523 | — | — | 26,523 | ||||||||||||||||||||||
|
Shares issued for cash
|
188,604 | 2,645,136 | — | — | — | 2,645,136 | ||||||||||||||||||||||
|
Share issue costs
|
— | (118,759 | ) | — | — | — | (118,759 | ) | ||||||||||||||||||||
|
Comprehensive income (loss)
|
— | — | — | (908,869 | ) | 125,819 | (783,050 | ) | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance, October 31, 2018
|
1,774,642 | 2,969,191 | 26,523 | (1,152,197 | ) | (40,704 | ) | 1,802,813 | ||||||||||||||||||||
|
Share-based compensation
|
— | — | 97,258 | — | — | 97,258 | ||||||||||||||||||||||
|
Shares issued for cash
|
132,893 | 5,379,860 | — | — | — | 5,379,860 | ||||||||||||||||||||||
|
Shares issued for
non-cash
costs
|
8,468 | 118,759 | — | — | — | 118,759 | ||||||||||||||||||||||
|
Comprehensive loss
|
— | — | — | (4,101,782 | ) | (37,182 | ) | (4,137,964 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance, October 31, 2019
|
1,916,003 | 8,467,810 | 123,781 | (5,252,979 | ) | (77,886 | ) | 3,260,726 | ||||||||||||||||||||
|
Share-based compensation
|
9 |
|
—
|
|
|
—
|
|
|
245,847
|
|
|
—
|
|
|
—
|
|
|
245,847
|
|
|||||||||
|
Shares issued for cash
|
9 |
|
159,294
|
|
|
6,481,381
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,481,381
|
|
|||||||||
|
Conversion of convertible debt
|
9 |
|
13,436
|
|
|
492,409
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
492,409
|
|
|||||||||
|
Share-based professional fees
|
|
—
|
|
|
—
|
|
|
455,055
|
|
|
—
|
|
|
—
|
|
|
455,055
|
|
||||||||||
|
Comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,275,962
|
)
|
|
(218,726
|
)
|
|
(9,494,688
|
)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance, October 31, 2020
|
|
2,088,733
|
|
|
15,441,600
|
|
|
824,683
|
|
|
(14,528,941
|
)
|
|
(296,612
|
)
|
|
1,440,730
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-48
Li-Cycle
Corp.
Consolidated statements of cash flows
Years ended October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
2020
|
2019 | 2018 | ||||||||||||||
| Notes |
$
|
$ | $ | |||||||||||||
|
Operating activities
|
||||||||||||||||
|
Net loss for the year
|
|
(9,275,962
|
)
|
(4,100,782 | ) | (908,869 | ) | |||||||||
|
Items not affecting cash
|
||||||||||||||||
|
Share-based compensation
|
9 |
|
332,634
|
|
97,258 | 26,523 | ||||||||||
|
Depreciation
|
|
1,095,250
|
|
183,862 | — | |||||||||||
|
Amortization of government grants
|
18 |
|
(2,226,910
|
)
|
(640,350 | ) | (77,215 | ) | ||||||||
|
Loss on disposal of assets
|
|
106,946
|
|
— | — | |||||||||||
|
FX (gain) loss on translation
|
|
(390,901
|
)
|
(33,845 | ) | 5,032 | ||||||||||
|
Share-based professional fees
|
7 |
|
455,055
|
|
— | — | ||||||||||
|
Fair value loss on restricted share units
|
|
84,454
|
|
— | — | |||||||||||
|
Interest and accretion on convertible debt
|
8 |
|
9,931
|
|
60,337 | 39,211 | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
|
(9,809,503
|
)
|
(4,433,520 | ) | (915,318 | ) | ||||||||||
|
Changes in
non-cash
working capital items
|
||||||||||||||||
|
Accounts receivable
|
|
(67,550
|
)
|
(496,545 | ) | (262,276 | ) | |||||||||
|
Prepayments and deposits
|
|
(633,824
|
)
|
(215,537 | ) | (114,538 | ) | |||||||||
|
Inventory
|
|
(133,438
|
)
|
(46,556 | ) | — | ||||||||||
|
Accounts payable and accrued liabilities
|
|
3,215,386
|
|
624,090 | 606,150 | |||||||||||
|
|
|
|
|
|
|
|||||||||||
|
|
(7,428,929
|
)
|
(4,568,068 | ) | (685,982 | ) | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Investing activity
|
||||||||||||||||
|
Purchases of plant and equipment
|
6 |
|
(5,107,663
|
)
|
(998,069 | ) | (244,276 | ) | ||||||||
|
|
|
|
|
|
|
|||||||||||
|
Financing activities
|
20 | |||||||||||||||
|
Proceeds from share issuance, net of share issue costs
|
9 |
|
6,481,381
|
|
5,379,860 | 2,645,136 | ||||||||||
|
Proceeds from loans payable
|
8 |
|
2,153,110
|
|
86,572 | — | ||||||||||
|
Proceeds from government grants
|
|
1,182,599
|
|
1,697,794 | 77,215 | |||||||||||
|
Proceeds from convertible debt
|
|
—
|
|
— | 388,455 | |||||||||||
|
Repayment of lease liabilities
|
|
(387,508
|
)
|
— | — | |||||||||||
|
Repayment of loans payable
|
8 |
|
(12,881
|
)
|
— | — | ||||||||||
|
|
|
|
|
|
|
|||||||||||
|
|
9,416,701
|
|
7,164,226 | 3,110,806 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Net change in cash
|
|
(3,119,891
|
)
|
1,598,089 | 2,180,548 | |||||||||||
|
Cash, beginning of year
|
|
3,783,449
|
|
2,185,360 | 4,812 | |||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Cash, end of year
|
|
663,557
|
|
3,783,449 | 2,185,360 | |||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Non-cash
financing activities
|
||||||||||||||||
|
Shares issued for
non-cash
costs
|
|
492,409
|
|
118,759 | — | |||||||||||
The accompanying notes are an integral part of the consolidated financial statements.
F-49
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
1.
|
Nature of operations and going concern
|
| (i) |
Li-Cycle
Corp.
(“Li-Cycle”
or the “Company”) was incorporated under the laws of Ontario on November 18, 2016. The Company’s registered address is 2351 Royal Windsor Drive, Unit 10, Mississauga, ON L5J 4S7 Canada.
|
Li-Cycle’s
core business model is to build, own and operate recycling plants tailored to regional needs.
Li-Cycle
Technology
™
is an environment friendly and scalable solution that addresses the growing global
lithium-ion
battery recycling challenge.
Li-Cycle
Technology
™
is an economically viable
lithium-ion
resource recovery solution, enabling commercialization and supporting the global transition toward electrification.
On March 28, 2019, the Company incorporated a 100% owned subsidiary in Delaware, U.S., by the name of
Li-Cycle
Inc., under the “General Corporation Law of the State of Delaware”.
On September 2, 2020, the Company incorporated a 100% owned subsidiary in Delaware, U.S., by the name of
Li-Cycle
North America Hub, Inc., under the “General Corporation Law of the State of Delaware”.
|
(ii)
|
Going concern
|
These consolidated financial statements have been prepared by management on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. For the year-ended October 31, 2020, the Company had not achieved a level of revenue from its operations to be profitable and incurred a loss of $9.3 million (loss of $4.1 million in 2019). Cash used in operations for the year-ended October 31, 2020 was $7.4 million (used in operations was $4.6 million in 2019).
In order to continue its long-term operations, the Company must achieve profitable operations and continue to obtain additional equity or debt financing. Until the Company achieves profitability, management plans to fund its operations and capital expenditures through borrowings and issuance of capital stock. Until the Company generates revenue at a level to support its cost structure, the Company expects to continue to incur substantial operating losses and net cash outflows.
There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company. If the Company is unable to raise sufficient additional capital on acceptable terms, it may be compelled to reduce the scope of its operations and planned capital expenditures or sell certain assets, including intellectual property assets. These conditions call into question the Company’s ability to continue as a going concern.
In response to the uncertainty, the Company has successfully secured additional funding subsequent to year end and continues its efforts to raise additional capital. See Note 21 Subsequent Events for more details. The Company expects that after receiving the funds raised in November 2020, the
(approximately $25 million) would be sufficient to fund its current operations and related capital expenditures for the next 12 months. As a result, after considering all relevant information, including its actions completed to date and its future plans, management has concluded that there are no material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern for a period of 12 months from the date these consolidated financial statements are available to be issued.
cash-on-hand
F-50
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
The estimates used by management in reaching this conclusion are based on information available as of the date these financial statements were authorized for issuance and include internally generated cash flow forecasts. Accordingly, actual results could differ from these estimates and resulting variances may be material to management’s assessment.
|
2.
|
Significant accounting policies
|
Effective November 1, 2020, the functional and presentation currency of the Company changed from Canadian dollars to U.S. dollars. For comparative purposes, the consolidated financial statements of the Company have been recast in U.S. dollars.
Financial information for fiscal periods 2018 to 2020 were translated from Canadian dollars into U.S. dollars as if the Company always used U.S. dollars as its presentation currency. In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates:
| (i) |
Assets and liabilities were translated at the closing rate at end of each reporting period.
|
| (ii) |
Items recognized in the statement of net loss and comprehensive loss were translated at the exchange rate at the time of transaction.
|
| (iii) |
Equity items have been translated using the historical rate at the time of transaction.
|
| (iv) |
All resulting exchange differences were recognised in other comprehensive income.
|
The Company’s consolidated financial statements have also been revised to correct a misstatement which was not material to the previously issued consolidated financial statements. This misstatement relates to improper recording of the consulting agreement referred to in Note 7, an equity settled share-based compensation to non-employees, which was classified as a liability instead of equity. As a result of the correction, for the year ended October 31, 2020, $455,055 previously classified as accounts payable and accrued liability on the consolidated statements of financial position has now been classified as contributed surplus under equity and the basic and diluted EPS has been revised from ($4.50) to ($4.48). The consolidated statements of changes in equity, consolidated statements of cash flows and the related disclosures in Note 7 have also been revised accordingly.
|
(a)
|
Statement of compliance
|
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) incorporating interpretations issued by the IFRS Interpretations Committee (“IFRICs”).
These consolidated financial statements were approved and authorized for issue by the Board of Directors on May 28, 2021.
|
(b)
|
Basis of consolidation
|
These consolidated financial statements include the accounts of the Company and its subsidiaries. The Company’s two subsidiaries are entities controlled by the Company. Control exists when the Company has power over an investee, when the Company is exposed, or has rights, to variable returns from the investee and when the Company has the ability to affect those returns through its power over the investee. The subsidiaries are included in the consolidated financial results of the Company from the
F-51
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
effective date of acquisition up to the effective date of disposition or loss of control. The Company’s principal subsidiaries and their geographic location as at October 31, 2020 was as follows:
|
Company
|
Location | Ownership interest | ||||||
|
Li-Cycle
Inc.
|
Delaware, U.S. | 100 | % | |||||
|
Li-Cycle
North America Hub, Inc.
|
Delaware, U.S. | 100 | % | |||||
Intercompany transactions, balances and unrealized gains/losses on transactions between the Company and its subsidiary are eliminated.
|
(c)
|
Basis of preparation
|
These consolidated financial statements are expressed in U.S. dollars unless otherwise indicated, the Company’s presentation currency, and have been translated for presentation from the Candian dollar functional currency which was prepared on a historical cost basis, except for financial instruments that have been measured at fair value. The accounting policies set out in Note 2 have been applied consistently to all years presented in these consolidated financial statements, unless otherwise stated.
|
(d)
|
Cash
|
Cash consists of cash deposits with financial institutions.
|
(e)
|
Inventories
|
Raw materials and finished goods are valued at the lower of cost and net realizable value. Cost is determined on a weighted average basis. The cost of finished goods includes the cost of raw materials and the applicable share of the cost of labour and fixed and variable production overheads. Net realizable value is the estimated selling price less the estimated cost of completion and the estimated costs necessary to make the sale. Costs of idle plant operations are expensed.
At each reporting period, the Company assesses the net realizable value of inventory taking into account current market prices, current economic trends, sales trends and past experiences.
|
(f)
|
Convertible debt instruments
|
The components of convertible debt instruments issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. The debt element of the instruments is classified as a liability and recorded as the present value of the Company’s obligation to make future interest payments in cash and settle the redemption value of the instrument in cash. The carrying value of the debt element is accreted to the original face value of the instruments, over their life, using the effective interest method. If the conversion option is classified as equity, its value is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. If the conversion option is classified as a liability, it is bifurcated as an embedded derivative unless the issuer elects to apply the fair value option to the convertible debt. The embedded derivative is initially recognized at fair value and classified as derivatives in the statement of financial position. Changes in the fair value of the embedded derivatives are subsequently accounted for directly through the income statement.
F-52
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
(g)
|
Loss per share
|
The Company calculated basic and diluted loss per share data for its common shares, calculated by dividing the loss attributable to common shareholders of the Company by the weighted average number of common shares outstanding during the period. Diluted loss per share is based on the weighted average number of common shares, stock options and restricted share units ((“RSUs)”) outstanding at the beginning of or granted during the period, and shares to be issued upon conversion of a convertible instrument, calculated using the treasury stock method. Under this method, the proceeds from the exercise of the options are assumed to be used to repurchase the Company’s shares. The difference between the number of shares assumed purchased and the number of options assumed exercised is added to the actual number of shares outstanding to determine diluted shares outstanding for purposes of calculating diluted earnings per share. Diluted loss per share does not adjust the loss attributable to common shareholders or the weighted average number of common shares outstanding when the effect is anti-dilutive.
|
(h)
|
Plant and equipment
|
Plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses net of any reversals of impairment.
Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of plant and equipment.
Depreciation is charged to the consolidated statement of loss and comprehensive loss on a straight-line basis over the estimated useful lives of each part of an item of plant and equipment. The estimated useful lives are reviewed each reporting period and any changes are accounted for on a prospective basis. The estimated useful lives are as follows:
|
Vehicles
|
5 years | |
|
Plant equipment
|
5 years | |
|
Storage containers
|
10 years | |
|
Leasehold improvements
|
Shorter of term of lease or estimated useful life |
Repairs and maintenance costs are expensed as incurred.
|
(i)
|
Financial instruments
|
Recognition
The Company recognizes a financial asset or financial liability on the consolidated statement of financial position when it becomes party to the contractual provisions of the financial instrument. Financial assets are initially measured at fair value and derecognized either when the Company has transferred substantially all the risks and rewards of ownership of the financial asset, or when cash flows expire. Financial liabilities are initially measured at fair value and are derecognized when the obligations specified in the contract is discharged, cancelled or expired.
A
write-off
of a financial asset (or a portion thereof) constitutes a derecognition event.
Write-off
occurs when the Company has no reasonable expectations of recovering the contractual cash flows on a financial asset.
F-53
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
Classification and measurement
The Company determines the classification of its financial instruments at initial recognition. Financial assets and financial liabilities are classified according to the following measurement categories:
| (i) |
those to be measured subsequently at fair value, either through profit or loss (“FVTPL”) or through other comprehensive income (“FVTOCI”); and
|
| (ii) |
those to be measured subsequently at amortized cost.
|
The classification and measurement of financial assets after initial recognition at fair value depends on the business model for managing the financial asset and the contractual terms of the cash flows. Financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding, are generally measured at amortized cost at each subsequent reporting period. Derivative financial instruments are comprised of the embedded derivative liability representing the conversion option of the convertible debt. The embedded derivative liability is measured at fair value at each reporting date. The embedded derivative liability has been classified as
It is classified as
held-for-trading.
non-current
based on the contractual terms specific to the instrument. Gains and losses on
re-measurement
of the embedded derivative liability are recognized in the consolidated statements of loss and comprehensive loss. All other financial assets are measured at their fair values at each subsequent reporting period, with any changes recorded through profit and loss or through other comprehensive income (which designation is made as an irrevocable election at the time of recognition).
After initial recognition at fair value, financial liabilities are classified and measured at either:
| (i) |
amortized cost;
|
| (ii) |
FVTPL, if the Company has made an irrevocable election at the time of recognition, or when required (for items such as instruments held for trading or derivatives); or,
|
| (iii) |
FVTOCI, when the change in fair market value is attributable to changes in the Company’s credit risk.
|
The classification and measurement basis of the Company’s financial instruments are as follows:
|
Financial Instrument
|
Measurement
|
|
|
Cash
|
Amortized cost | |
|
Trade accounts receivables
|
FVTPL | |
|
Other accounts receivables
|
Amortized cost | |
|
Accounts payable and accrued liabilities
|
Amortized cost | |
|
Restricted share units
|
FVTPL | |
|
Loans payable
|
Amortized cost | |
|
Lease liabilities
|
Amortized cost | |
|
Convertible debt
|
Amortized cost | |
|
Conversion feature of convertible debt
|
FVTPL | |
The Company reclassifies financial assets when and only when its business model for managing those assets changes. Financial liabilities are not reclassified.
F-54
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
Transaction costs that are directly attributable to the acquisition or issuance of a financial asset or financial liability classified as subsequently measured at amortized cost are included in the fair value of the instrument on initial recognition. Transaction costs for financial assets and financial liabilities classified at fair value through profit or loss are expensed in profit or loss.
Impairment
The Company assesses all information available, including on a forward-looking basis the expected credit loss associated with any financial assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. To assess whether there has been a significant increase in credit risk, the Company compares the risk of default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition based on all information available, and reasonable supportive forward-looking information.
|
(j)
|
Foreign currencies
|
The functional currency of the Company is the Canadian dollar. Transactions in currencies other than the Canadian dollar are recorded at the rates of exchange prevailing on the dates of transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date.
|
(k)
|
Government assistance and investment tax credits
|
Government grants
Amounts received or receivable resulting from government assistance programs are recognized when there is reasonable assurance that the amount of government assistance will be received, and all attached conditions will be complied with. When the amount relates to an expense item, it is recognized as a reduction to the related expense. When the amount relates to an asset, it reduces the carrying amount of the asset and is then recognized as income over the useful life of the depreciable asset by way of a reduced depreciation charge. Grants received in advance are recorded as deferred liability and amortized as a reduction to the related expense/carrying amount of asset as and when the related qualifying costs are incurred.
Investment Tax Credits (“ITCs”) receivable are amounts refundable from the Canadian federal and provincial governments under the Scientific Research & Experimental Development incentive program. The amounts claimed under the program represent the amounts submitted by management based on research and development costs paid during the period and include estimates and assumptions made by management in determining the eligible expenditures. ITCs are netted against the related research and development expense when there is reasonable assurance that the Company will realize the ITCs. ITCs are subject to review and approval by tax authorities and, therefore, could be different from the amounts recorded.
|
(l)
|
Impairment of long-term
non-financial
assets
|
At the end of each reporting period the carrying amounts of the Company’s assets are reviewed to determine whether there is any indication that those assets are impaired. If any such indication
F-55
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment, if any. The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and the impairment loss is recognized in period. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
|
(m)
|
Income taxes
|
Income tax expense is comprised of current and deferred tax components. Income tax is recognized in profit or loss except to the extent that it relates to items recognized directly in equity or other comprehensive income, in which case the related tax is recognized in equity or other comprehensive income.
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at year end, adjusted for amendments to tax payable with regards to previous years.
Deferred tax is recorded using the asset and liability method. Under this method, the Company calculates all temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the period end date. Deferred tax is calculated based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply to the year of realization or settlement based on tax rates and laws enacted or substantively enacted at the period end date.
Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences and unused tax losses and tax credits can be utilized. The carrying amount of deferred tax assets is reviewed at each statement of the financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.
|
(n)
|
Provisions
|
Provisions represent liabilities of the Company for which the amount or timing is uncertain. A provision is recognized when, as a result of a past event, the Company has a present obligation (legal or constructive) that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where appropriate, the future cash flow estimates are adjusted to reflect risks specific to the liability. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, considering the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of
F-56
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received, and the amount receivable can be measured reliably.
|
(o)
|
Related party transactions
|
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.
|
(p)
|
Research and development expense
|
Research costs are expensed as incurred. An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following conditions have been demonstrated:
| • |
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
|
| • |
the intention to complete the intangible asset and use or sell it;
|
| • |
the ability to use or sell the intangible asset;
|
| • |
how the intangible asset will generate probable future economic benefits;
|
| • |
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
|
| • |
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
|
The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. Where no internally generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred.
Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses, on the same basis as intangible assets that are acquired separately.
No development costs have been capitalized to date.
|
(q)
|
Revenue recognition
|
The Company’s principal activities generate revenues from the operation of
lithium-ion
battery recycling plants. The Company uses the following five step approach to revenue recognition:
Step 1: Identify the contract(s) with a customer
F-57
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The Company recognizes revenue from the following major sources:
| • |
Services of recycling
lithium-ion
batteries which includes coordination of logistics and destruction of batteries
|
| • |
Sales of products which includes black mass, shredded metal and plastic
|
Revenue is measured based on the consideration to which the Company expects to be entitled to in a contract with a customer. The Company recognizes revenue when it transfers control of a product or service to a customer. There are no significant financing components associated with the Company’s payment terms.
Service revenue is recognized at a point in time upon completion of the services. Prices for services are separately identifiable within each contract. A receivable is recognized by the Company when the services are completed as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due.
For sale of products, revenue is recognized when control of the goods has transferred, being when the goods have been shipped to the customer’s location (delivery). A receivable is recognised by the Company when the goods are delivered to the customer as this represents the point in time at which the right to consideration becomes unconditional, as only the passage of time is required before payment is due. Under the Company’s standard contract terms, customers do not have a right of return. The Company estimates the amount of consideration to which it expects to be entitled to under provisional pricing arrangements. The amount of consideration for products is based on market prices at the date of settlement, weight and assay, subject to customer confirmation. Revenue and the related accounts receivables are measured at fair value at initial recognition and are
re-estimated
by reference to current market prices at each reporting period end and changes in fair value are recognized as an adjustment to profit and loss and the related accounts receivable.
|
(r)
|
Share capital
|
The Company records proceeds from the issuance of its common shares as equity. Incremental costs directly attributable to the issue of new common shares are shown in equity as a deduction, net of tax, from the proceeds.
|
(s)
|
Financing costs
|
Professional, consulting, regulatory and other costs directly attributable to financing transactions are recorded as deferred financing costs until the financing transactions are completed, if the completion of the transaction is considered likely; otherwise they are expensed as incurred. Share issue costs are charged to share capital when the related shares are issued. Deferred financing costs related to financing transactions that are not completed are charged to earnings.
F-58
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
(t)
|
Share-based compensation
|
The Company accounts for stock options using the fair value-based method of accounting for share-based compensation. Fair values are determined using the Black-Scholes-Merton option pricing model (“BSM”). Management exercises judgment in determining the underlying share price volatility, expected life of the option, expected forfeitures and other parameters of the calculations. Compensation costs are recognized over the vesting period as an increase to share-based compensation expense and contributed surplus. If, and when, stock options are ultimately exercised, the applicable amounts of contributed surplus are transferred to share capital.
The Company accounts for outstanding RSUs by recognizing a liability for the goods or services acquired, measured initially at the fair value of the liability. At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
|
(u)
|
Significant accounting estimates and judgments
|
The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which affect the application of accounting policies and the reported amounts of assets, liabilities and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. Significant estimates include:
| (a) |
the determination and valuation of deferred income tax assets and liabilities;
|
| (b) |
the determination of the useful life and impairment of the plant and equipment;
|
| (c) |
the valuation and measurement of the convertible debt and the related conversion feature;
|
| (d) |
the valuation and recognition of ITCs; and
|
| (e) |
the valuation of share-based compensation.
|
Critical judgements in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements include the following:
| (a) |
the determination of the functional currency of the Company and its subsidiaries;
|
| (b) |
the determination of the revenue recognition policy with regards to transaction price;
|
| (c) |
the evaluation of the Company’s ability to continue as a going concern; and
|
| (d) |
the valuation of inventory with regards to incremental cost to completion for raw materials and determination of net realizable value.
|
|
(v)
|
Leases
|
The Company assesses whether a contract is or contains a lease, at inception of the contract. The Company recognises a
asset and a corresponding lease liability with respect to all lease
right-of-use
F-59
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Company recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Company uses its incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise:
| • |
Fixed lease payments (including
in-substance
fixed payments), less any lease incentives receivable;
|
| • |
Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
|
| • |
The amount expected to be payable by the lessee under residual value guarantees;
|
| • |
The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
|
| • |
Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
|
The lease liability is presented as a separate line in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Company remeasures the lease liability (and makes a corresponding adjustment to the related
asset) whenever:
right-of-use
| • |
The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.
|
| • |
The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used).
|
| • |
A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification.
|
The Company did not make any such adjustments during the periods presented. The
assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
right-of-use
F-60
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
Whenever the Company incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a
asset, the costs are included in the related
asset, unless those costs are incurred to produce inventories.
right-of-use
right-of-use
Right-of-use
right-of-use
right-of-use
right-of-use
The
assets are presented as a separate line in the consolidated statement of financial position.
right-of-use
The Company applies IAS 36 to determine whether a
asset is impaired and accounts for any identified impairment loss as described in the ‘Property, Plant and Equipment’ policy.
right-of-use
Variable rents that do not depend on an index or rate are not included in the measurement the lease liability and the
asset. The related payments are recognised as an expense in the period in which the event or condition that triggers those payments occurs.
right-of-use
As a practical expedient, IFRS 16 Leases (“IFRS 16”) permits a lessee not to separate
non-lease
components, and instead account for any lease and associated
non-lease
components as a single arrangement. The Company has used this practical expedient.
|
(w)
|
Restoration provisions
|
Provisions for the costs to restore leased plant assets to their original condition, as required by the terms and conditions of the lease, are recognised when the obligation is incurred, either at the commencement date or as a consequence of having used the underlying asset during a particular period of the lease, at the directors’ best estimate of the expenditure that would be required to restore the assets. Estimates are regularly reviewed and adjusted as appropriate for new circumstances.
Whenever the Company incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a
asset, the costs are included in the related
asset, unless those costs are incurred to produce inventories.
right-of-use
right-of-use
|
(x)
|
Intangible assets
|
|
|
No intangible assets have been recognized to date.
|
3. Adoption of new and revised standards
|
(i)
|
IFRS 16 Leases
|
The Company adopted IFRS 16 Leases as at November 1, 2019. IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by
F-61
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
removing the distinction between operating and finance lease and requiring the recognition of a
asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. Details of these new requirements are described in Note 2. The impact of the adoption of IFRS 16 on the Company’s consolidated financial statements is described below.
right-of-use
The Company has applied IFRS 16 using the cumulative
catch-up
approach which:
| • |
Requires the Company to recognise the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings at the date of initial application.
|
| • |
Does not permit restatement of comparatives, which continue to be presented under IAS 17 and IFRIC 4.
|
|
Impact
|
of the new definition of a lease
|
The Company has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied to those contracts entered or modified before November 1, 2019.
The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration. This is in contrast to the focus on ‘risks and rewards’ in IAS 17 and IFRIC 4.
The Company applies the definition of a lease and related guidance set out in IFRS 16 to all contracts entered into or changed on or after November 1, 2019.
|
Impact
|
on Lessee Accounting
|
|
|
Former operating leases
|
IFRS 16 changes how the Company accounts for leases previously classified as operating leases under IAS 17, which were off balance sheet. Applying IFRS 16, for all leases (except as noted below), the Company:
| a) |
Recognises
right-of-use
|
| b) |
Recognises depreciation of
right-of-use
|
| c) |
Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.
|
Lease incentives (e.g. rent-free period) are recognised as part of the measurement of the
assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortised as a reduction of rental expenses generally on a straight-line basis.
right-of-use
Under IFRS 16,
assets are tested for impairment in accordance with IAS 36. For short-term leases (lease term of 12 months or less) and leases of
right-of-use
low-value
assets (such as tablet and personal
F-62
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
computers, small items of office furniture and telephones), the Company has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within ‘other expenses’ in profit or loss.
The Company has used the following practical expedients when applying the cumulative
catch-up
approach to leases previously classified as operating leases applying IAS 17:
| • |
The Company has applied a single discount rate to a portfolio of leases with reasonably similar characteristics.
|
| • |
The Company has elected not to recognise
right-of-use
|
| • |
The Company has excluded initial direct costs from the measurement of the
right-of-use
|
| • |
The Company has used hindsight when determining the lease term when the contract contains options to extend or terminate the lease.
|
|
Financial
|
impact of the initial application of IFRS 16
|
The weighted average lessees incremental borrowing rate applied to lease liabilities recognised in the statement of financial position on November 1, 2019 is 6.6%.
The following table shows the operating lease commitments disclosed applying IAS 17 at October 31, 2019, discounted using the incremental borrowing rate at the date of initial application and the lease liabilities recognised in the statement of financial position at the date of initial application:
|
Operating lease commitments as of October 31, 2019
|
3,774,826 | |||
|
Short term leases and leases of
low-value
assets
|
(6,452 | ) | ||
|
Effect of discounting the above amounts
|
(931,799 | ) | ||
|
|
|
|||
|
Lease liabilities recognized at November 1, 2019
|
2,836,575 | |||
|
|
|
The application of IFRS 16 to leases previously classified as operating leases under IAS 17 resulted in the recognition of
assets of $2,836,575 and lease liabilities of $2,836,575 at November 1, 2019. For the year ended October 31, 2020, the application of IFRS 16 resulted in an increase in depreciation of $601,220, an increase in interest expense of $208,523, and a decrease in other expenses of $596,235.
right-of-use
|
(ii)
|
Annual Improvements to IFRS Standards 2015–2017
|
The Company has adopted the amendments included in the Annual Improvements to IFRS Standards 2015–2017 Cycle as at November 1, 2019. The Annual Improvements include amendments to IAS 12 Income Taxes, IAS 23 Borrowing Costs, IFRS 3 Business Combinations and IFRS 11 Joint Arrangements. For IAS 23, the amendments clarify that if any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings.
Management has assessed the impact of the adoption of the new standards and concluded it to be not material.
F-63
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
IFRIC
|
23 Uncertainty over Income Tax Treatments
|
The Company has adopted IFRIC 23 as at November 1, 2019. IFRIC 23 sets out how to determine the accounting tax position when there is uncertainty over income tax treatments. The Interpretation requires the Company to:
| • |
determine whether uncertain tax positions are assessed separately or as a group; and
|
| • |
assess whether it is probable that a tax authority will accept an uncertain tax treatment used, or proposed to be used, by an entity in its income tax filings:
|
| • |
If yes, the Company should determine its accounting tax position consistently with the tax treatment used or planned to be used in its income tax filings.
|
| • |
If no, the Company should reflect the effect of uncertainty in determining its accounting tax position using either the most likely amount or the expected value method.
|
Management has assessed the impact of the adoption of the new standard and concluded it to be not material.
|
(iii)
|
Accounting standards or interpretations issued but not yet effective
|
At the date of authorization of these consolidated financial statements, the Company has not applied the following new and revised IFRSs that have been issued but are not yet effective.
|
Amendments
|
to IFRS 3 Definition of a business
|
The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
Additional guidance is provided that helps to determine whether a substantive process has been acquired.
The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets.
The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after the first annual reporting period beginning on or after January 1, 2020, with early application permitted. The adoption of these standards may affect the accounting for acquisitions after October 31, 2020.
|
Amendments
|
to IAS 1 and IAS 8 Definition of material
|
The amendments are intended to make the definition of material in IAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS Standards. The concept of ‘obscuring’ material information with immaterial information has been included as part of the new definition.
F-64
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
The threshold for materiality influencing users has been changed from ‘could influence’ to ‘could reasonably be expected to influence’.
The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term ‘material’ to ensure consistency.
The amendments are applied prospectively for annual periods beginning on or after January 1, 2020, with earlier application permitted. The extent of the impact of the adoption of these standards has not yet been determined.
|
Interest
|
Rate Benchmark Reform
|
In September 2019, the IASB issued Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7). These amendments modify specific hedge accounting requirements to allow hedge accounting to continue for affected hedges during the period of uncertainty before the hedged items or hedging instruments affected by the current interest rate benchmarks are amended as a result of the
on-going
interest rate benchmark reforms.
The amendments are effective for annual periods beginning on or after January 1, 2020, with earlier application permitted. The extent of the impact of the adoption of these standards has not yet been determined.
|
|
Amendments to IFRS 16
COVID-19
Related Rent Concessions
|
The amendments introduce an optional practical expedient that simplifies how a lessee accounts for rent concessions that are a direct consequence of
COVID-19.
A lessee that applies the practical expedient is not required to assess whether eligible rent concessions are lease modifications, and accounts for them in accordance with other applicable guidance. The resulting accounting will depend on the details of the rent concession.
The amendments are effective for annual periods beginning on or after June 1, 2020, with earlier application permitted. The extent of the impact of the adoption of these standards has not yet been determined.
|
|
Interest Rate Benchmark Reform – Phase 2
|
In August 2020, the IASB issued Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16). These amendments address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates.
The amendments are effective for annual periods beginning on or after January 1, 2021, with earlier application permitted. The extent of the impact of the adoption of these standards has not yet been determined.
|
|
Amendments to IAS 37 – Onerous Contracts—Cost of Fulfilling a Contract
|
The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labour or materials) and an allocation of other costs that relate
F-65
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).
The amendments are effective for annual periods beginning on or after January 1, 2022, with early application permitted. The extent of the impact of the adoption of these standards has not yet been determined.
|
|
Amendments to IAS 16 – Property, Plant and Equipment—Proceeds before Intended Use
|
The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced before that asset is available for use, i.e. proceeds while bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Consequently, an entity recognises such sales proceeds and related costs in profit or loss. The entity measures the cost of those items in accordance with IAS 2 Inventories.
The amendments are effective for annual periods beginning on or after January 1, 2022, with earlier application permitted. The extent of the impact of the adoption of these standards has not yet been determined.
|
Amendments
|
to IFRS 3 – Reference to the Conceptual Framework
|
The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. They also add to IFRS 3 a requirement that, for obligations within the scope of IAS 37, an acquirer applies IAS 37 to determine whether at the acquisition date a present obligation exists as a result of past events. For a levy that would be within the scope of IFRIC 21 Levies, the acquirer applies IFRIC 21 to determine whether the obligating event that gives rise to a liability to pay the levy has occurred by the acquisition date. Finally, the amendments add an explicit statement that an acquirer does not recognise contingent assets acquired in a business combination.
The amendments are effective for business combinations for which the date of acquisition is on or after the beginning of the first annual period beginning on or after January 1, 2022. Early application is permitted if an entity also applies all other updated references (published together with the updated Conceptual Framework) at the same time or earlier. The extent of the impact of the adoption of these standards has not yet been determined.
|
Amendments
|
to IAS 1 – Classification of Liabilities as Current or
Non-current
|
The amendments to IAS 1 affect only the presentation of liabilities as current or
non-current
in the statement of financial position and not the amount or timing of recognition of any asset, liability, income or expenses, or the information disclosed about those items.
The amendments clarify that the classification of liabilities as current or
non-current
is based on rights that are in existence at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability, explain that rights are in existence if covenants are complied with at the end of the reporting period, and introduce a definition of ‘settlement’ to make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.
The amendments are applied retrospectively for annual periods beginning on or after January 1,2023, with early application permitted. The extent of the impact of the adoption of these standards has not yet been determined.
F-66
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
All other IFRSs and amendments issued but not yet effective have been assessed by the Company and are not expected to have a material impact on the consolidated financial statements.
|
4.
|
Accounts receivable
|
|
2020
|
2019 | |||||||
|
$
|
$ | |||||||
|
Trade receivables
|
|
571,300
|
|
32,446 | ||||
|
Harmonized Sales Taxes receivable
|
|
274,998
|
|
447,436 | ||||
|
Investment tax credits receivable
|
|
—
|
|
342,797 | ||||
|
Other receivables
|
|
43,931
|
|
— | ||||
|
|
|
|
|
|||||
|
|
890,229
|
|
822,679 | |||||
|
|
|
|
|
|||||
For the years ended October 31, 2020 and 2019, the Company has assessed an allowance for credit loss of $nil based on its past experience, the credit ratings of its existing customers and economic trends.
|
Aging Summary
|
2020
|
2019 | ||||||
|
$
|
$ | |||||||
|
Current
|
|
859,753
|
|
821,033 | ||||
|
1-30
days
|
|
—
|
|
303 | ||||
|
31-60
days
|
|
21,455
|
|
367 | ||||
|
61-90
days
|
|
—
|
|
— | ||||
|
91 days and over
|
|
9,021
|
|
976 | ||||
|
|
|
|
|
|||||
|
|
890,229
|
|
822,679 | |||||
|
|
|
|
|
|||||
|
5.
|
Inventory
|
|
2020
|
2019 | |||||||
|
$
|
$ | |||||||
|
Raw material
|
|
140,419
|
|
21,003 | ||||
|
Finished goods
|
|
39,575
|
|
25,553 | ||||
|
|
|
|
|
|||||
|
|
179,994
|
|
46,556 | |||||
|
|
|
|
|
|||||
The cost of inventories recognised as an expense during the year was $822,792 (2019: $nil).
The cost of inventories recognised as an expense includes $53,764 for raw materials and $4,360 for finished goods (2019: $nil for raw materials and $nil for finished goods) in respect of write-downs of inventory to net realizable value. There have been no reversal of write-downs for the year ended October 31, 2020 and 2019.
F-67
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
6.
|
Plant and equipment
|
|
Plant
equipment |
Storage
containers |
Vehicles |
Leasehold
improvements |
Total | ||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
|
Cost
|
||||||||||||||||||||
|
At October 31, 2018
|
239,248 | — | — | — | 239,248 | |||||||||||||||
|
Additions
|
796,783 | 53,114 | 89,868 | 58,304 | 998,069 | |||||||||||||||
|
Foreign Exchange on Translation
|
7,200 | 496 | 839 | 544 | 9,079 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
At October 31, 2019
|
1,043,231 | 53,610 | 90,707 | 58,848 | 1,246,396 | |||||||||||||||
|
Additions
|
3,519,013 | 13,914 | 68,243 | 1,506,493 | 5,107,663 | |||||||||||||||
|
Disposals
|
(150,690 | ) | — | — | — | (150,690 | ) | |||||||||||||
|
Foreign Exchange on Translation
|
23,320 | 95 | (1,346 | ) | 11,860 | 33,929 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
At October 31, 2020
|
|
4,434,874
|
|
|
67,619
|
|
|
157,604
|
|
|
1,577,201
|
|
|
6,237,298
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Accumulated depreciation
|
||||||||||||||||||||
|
At October 31, 2018
|
— | — | — | — | — | |||||||||||||||
|
Depreciation
|
(169,112 | ) | (1,384 | ) | (2,167 | ) | (11,225 | ) | (183,888 | ) | ||||||||||
|
Foreign Exchange on Translation
|
(1,579 | ) | (13 | ) | (20 | ) | (104 | ) | (1,716 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
At October 31, 2019
|
(170,691 | ) | (1,397 | ) | (2,187 | ) | (11,329 | ) | (185,604 | ) | ||||||||||
|
Depreciation
|
(350,173 | ) | (5,977 | ) | (22,408 | ) | (115,958 | ) | (494,516 | ) | ||||||||||
|
Disposals
|
43,744 | — | — | — | 43,744 | |||||||||||||||
|
Foreign Exchange on Translation
|
2,461 | (36 | ) | (232 | ) | (536 | ) | 1,658 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
At October 31, 2020
|
|
(474,659
|
)
|
|
(7,410
|
)
|
|
(24,827
|
)
|
|
(127,823
|
)
|
|
(634,718
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Carrying amounts
|
||||||||||||||||||||
|
At October 31, 2018
|
239,248 | — | — | — | 239,248 | |||||||||||||||
|
At October 31, 2019
|
872,540 | 52,213 | 88,520 | 47,519 | 1,060,792 | |||||||||||||||
|
At October 31, 2020
|
|
3,960,215
|
|
|
60,209
|
|
|
132,777
|
|
|
1,449,378
|
|
|
5,602,580
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
At October 31, 2020, $1,919,465 of the plant equipment was under construction (2019: $nil; 2018: $nil).
|
7.
|
Related party transactions
|
Remuneration of key management personnel
The remuneration of the directors, who are the key management personnel of the Company, is set out below:
|
2020
|
2019 | 2018 | ||||||||||
|
$
|
$ | $ | ||||||||||
|
Salaries
|
|
231,034
|
|
104,310 | 55,938 | |||||||
|
Share-based compensation
|
|
74,320
|
|
149,993 | 36,212 | |||||||
|
Fees and benefits
|
|
411,184
|
|
159,881 | 39,428 | |||||||
|
|
|
|
|
|
|
|||||||
|
|
716,538
|
|
414,184 | 131,578 | ||||||||
|
|
|
|
|
|
|
|||||||
F-68
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
During the year ended October 31, 2020, the Company paid directors and advisors for providing director services, consulting and fundraising activities. Total amounts paid for fiscal 2020 to directors in respect of these activities was $181,383 (2019: $75,285; 2018: $39,428).
Outstanding balances of remunerations of the directors are summarized as follows:
|
2020
|
2019 | 2018 | ||||||||||
|
$
|
$ | $ | ||||||||||
|
Accounts payable and accrued liabilities
|
|
316,465
|
|
85,386 | — | |||||||
|
Restricted share units
|
|
153,296
|
|
— | — | |||||||
|
|
|
|
|
|
|
|||||||
|
Outstanding balances at October 31
|
|
469,761
|
|
85,386 | — | |||||||
|
|
|
|
|
|
|
|||||||
Related-Party Lease
During the past four years, the Company has leased certain office space from Ashlin BPG Marketing, which is controlled by certain members of the immediate family of the Company’s President and Chief Executive Officer. Under the terms of the lease, the Company is required to pay $4,500 per month plus applicable taxes in Canadian dollars, subject to 60 days’ notice of termination.
Consulting Agreement
On May 1, 2020, Li-Cycle entered into a consulting agreement with Atria Limited (“Atria”), an entity which beneficially owned more than 5% of the outstanding Li-Cycle Shares at that time, to agree upon and finalize the consideration for certain business development and marketing consulting services that were previously performed on behalf of the Company from 2018 through April 2020. The fees for such services were agreed at 12,000 Li-Cycle Shares payable in installments of 1,000 Li-Cycle Shares per month. On January 25, 2021, Li-Cycle issued all of the 12,000 shares to Atria as full and final satisfaction of all obligations of Li-Cycle to Atria under the consulting agreement. Atria also directed the issuance of such shares as follows: 8,000 Shares to Atria; 2,000 Shares to Pella Ventures (an affiliated company of Atria); and 2,000 Shares to a director of the Company, who is not related to Atria.
|
8.
|
Convertible debt and loans payable
|
|
(i)
|
Convertible debt
|
Convertible debt consisted of the following:
|
2020
|
2019 | 2018 | ||||||||||
|
$
|
$ | $ | ||||||||||
|
Proceeds of issue of convertible loan notes
|
|
386,190
|
|
386,190 | 386,190 | |||||||
|
Transaction costs
|
|
—
|
|
— | — | |||||||
|
|
|
|
|
|
|
|||||||
|
Net Proceeds from issue of convertible loan notes
|
|
386,190
|
|
386,190 | 386,190 | |||||||
|
|
|
|
|
|
|
|||||||
|
Convertible component
|
|
96,548
|
|
96,548 | 96,548 | |||||||
|
Transaction costs related to equity component
|
|
—
|
|
— | — | |||||||
|
Conversion into common shares
|
|
(96,548
|
)
|
— | — | |||||||
|
|
|
|
|
|
|
|||||||
|
Total convertion feature of convertible debt
|
|
—
|
|
96,548 | 96,548 | |||||||
|
|
|
|
|
|
|
|||||||
|
Liability component at date of issue (net of transaction costs)
|
|
289,642
|
|
289,642 | 289,642 | |||||||
|
Prior year interest plus accretion
|
|
99,549
|
|
39,212 | — | |||||||
F-69
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
2020
|
2019 | 2018 | ||||||||||
|
$
|
$ | $ | ||||||||||
|
Accrued interest at 8%
|
|
4,956
|
|
30,114 | 20,718 | |||||||
|
Accretion expense during the year
|
|
4,975
|
|
30,223 | 18,494 | |||||||
|
Conversion into common shares
|
|
(395,861
|
)
|
— | — | |||||||
|
Foreign Exchange on Translation
|
|
(3,261
|
)
|
(4,984 | ) | (5,105 | ) | |||||
|
|
|
|
|
|
|
|||||||
|
Carrying amount of liability component at October 31
|
|
—
|
|
384,207 | 323,749 | |||||||
|
|
|
|
|
|
|
|||||||
On March 6, 2018, the Company obtained an investment from Sustainable Chemistry Alliance (“SCA”) for $386,190 with the issuance of a
3-year,
8% unsecured convertible debenture. Upon the completion of a qualified financing, and at either the Company’s or holder’s option, the debenture could be converted to common shares at a 20% discount to the effective share price of the qualifying transaction, or failing conversion, was to be repaid in full with full-term interest. Accrued interest was payable at the maturity date.
The conversion feature has been recorded as an embedded derivative liability as the exercise price may be adjusted upon the issuance or deemed issuance of additional common shares at a price less than the conversion price contained in the convertible debenture. The fair value of the embedded derivative liability upon issuance was $96,548. The residual value of $289,643 was allocated to the convertible loan payable which has an effective interest rate of 9.62%.
On December 27, 2019, the convertible debenture with SCA was converted to common shares as a result of the additional funding exceeding $10 million and thereby triggering the “qualifying transaction” clause of the debenture agreement. Per the terms of the agreement, the principal amount of $386,190 plus accrued interest of $55,788 was converted at a 20% discount to the Series B share price of $40.05 resulting in the issuance of 13,436 common shares.
|
(ii)
|
BDC Capital Loan
|
On December 16, 2019, the Company entered into a binding agreement with BDC Capital Inc. for a loan of $5.3 million (Cdn. $7 million) to help finance the expansion plans of the Company, which is to be distributed in three tranches, the second and third tranches based on certain milestones. The maturity date of the loan is December 14, 2023 and will be funded in three tranches based on the achievement of specific milestones by the Company. The base rate of interest is 16% per annum, paid monthly, plus additional accrued interest of 3% that can be reduced to 0% based on the achievement of certain milestones by the Company. Principal payments will begin on the first anniversary date of the loan and shall be made at approximately $132,00 (Cdn. $175,000) per month with a balloon payment of $532,000 (Cdn. $700,000) at maturity.
On February 10, 2020, the Company received the first tranche of the loan for $2.36 million (Cdn. $3 million). Transaction costs associated with the loan amounted to $95,876 (Cdn. $121,861) and were deducted from the loan balance.
F-70
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
(iii)
|
Loans payable
|
As at October 31, 2020, the Company has the following amounts outstanding:
|
2020
|
2019 | |||||||
|
$
|
$ | |||||||
|
Loan payable, due on demand bearing interest at 3.6% per annum, principal and interest payable monthly in the amount of $601 (C$801)
|
|
42,064
|
|
49,837 | ||||
|
Loan payable, due on demand bearing interest at 4.5% per annum, principal and interest payable monthly in the amount of $526 (C$700)
|
|
30,552
|
|
36,735 | ||||
|
|
|
|
|
|||||
|
72,616
|
86,572 | |||||||
|
|
|
|
|
|||||
|
9.
|
Share capital
|
Authorized share capital
The Company is authorized to issue an unlimited number of voting common shares, Class A
non-voting
common shares and preference shares without par value. All issued shares are fully paid.
On November 16, 2016, the Company issued 1,000,000 common shares to the two founders of the Company for proceeds of $42,215.
On March 20, 2017, the Company completed a
non-brokered
private placement and issued 245,668 common shares for proceeds of $148,968 at $0.60 per share.
On August 9, 2017, the Company completed a
non-brokered
private placement and issued 185,185 common shares for proceeds of $118,064 at $0.64 per share.
On October 17, 2017, the Company completed a
non-brokered
private placement and issued 155,185 common shares for proceeds of $133,567 at $0.86 per share.
On March 23, 2018, the Company completed a
non-brokered
private placement and issued 188,604 common shares for proceeds of $2,645,136 at $14.02 per share.
On February 28, 2019, the Company issued 8,468 common shares to two shareholders as a finder’s fee for the Series A fundraising. These shares were valued at $118,759.
Between July 25 and October 31, 2019, the Company completed a
non-brokered
private placement and issued 132,893 common shares for proceeds of $5,379,860 at $40.57 per share.
Between December 20 and December 27, 2019, the Company completed a
non-brokered
private placement and issued 159,294 common shares for proceeds of $6,481,381 at $40.57 per share.
On December 27, 2019, the convertible debenture with SCA was converted to 13,436 common shares representing proceeds of $492,409. See Note 8 for details.
As of October 31, 2020, no Class A
non-voting
common shares or preference shares have been issued.
Long-term incentive plans
The Company has a stock option plan (the “Plan”) approved by the Company’s shareholders that allows it to grant stock options, subject to regulatory terms and approval, to its officers, directors, employees and service providers. This Plan was effective from September 2017 through October 31, 2019.
F-71
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
Each stock option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. Options are exercisable at a price equal to the average market price of the Company’s shares on the date of grant. The vesting period is
one-third
on the first-year anniversary of the grant, and
one-third
every consecutive year therafter. If the options remain unexercised after a period of 5 years from the date of grant, the options expire. Options are forfeited if the recipient terminates their contract with the Company before the options vest.
On November 1, 2019 the Company adopted a new Long Term Incentive Plan (the “LTIP”) approved by the Company’s shareholders that allows it to grant stock options, restricted share units, deferred share units, stock appreciation rights, and other forms of equity compensation, subject to regulatory terms and approval, to its officers, directors, employees and service providers.
For stock options issued under the LTIP, each stock option converts into one ordinary share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. Options are exercisable at a price equal to the average market price of the Company’s shares on the date of grant. The vesting period is
one-third
on the first-year anniversary of the grant, and
one-third
every consecutive year thereafter. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the recipient terminates their contract with the Company before the options vest.
A summary of activity under the Plan and the LTIP is as follows:
|
Number of
stock options |
Weighted average
exercise price per stock option |
|||||||
| $ | ||||||||
|
Balance – October 31, 2017
|
|
30,000
|
|
0.63 | ||||
|
Granted
|
28,320
|
4.56 | ||||||
|
|
|
|
|
|||||
|
Balance – October 31, 2018
|
|
58,320
|
|
2.49 | ||||
|
Granted
|
41,680
|
13.57 | ||||||
|
|
|
|
|
|||||
|
Balance – October 31, 2019
|
|
100,000
|
|
7.14 | ||||
|
Granted
|
33,500
|
39.66 | ||||||
|
|
|
|
|
|||||
|
Balance – October 31, 2020
|
|
133,500
|
|
15.35 | ||||
|
|
|
|
|
|||||
As at October 31, 2020, 62,607 of the stock options (2019: 29,440; 2018: 10,000) were exercisable.
A summary of outstanding stock options is as follows:
|
Number of
stock options |
Exercise price | |||||||
| $ | ||||||||
|
Expiration dates
|
||||||||
|
September 11, 2022
|
30,000 | 0.61 | ||||||
|
April 10, 2023
|
20,000 | 0.61 | ||||||
|
April 10, 2023
|
8,320 | 13.54 | ||||||
|
April 1, 2024
|
8,500 | 13.54 | ||||||
|
July 17, 2024
|
33,180 | 13.54 | ||||||
F-72
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
Number of
stock options |
Exercise price | |||||||
| $ | ||||||||
|
December 16, 2029
|
2,500 | 40.05 | ||||||
|
April 21, 2030
|
16,500 | 40.05 | ||||||
|
July 19, 2030
|
14,500 | 40.05 | ||||||
|
|
|
|||||||
|
|
133,500
|
|
||||||
|
|
|
|||||||
The Company recognised total expenses of $332,634, $97,258 and $26,523 related to equity-settled share-based payment transactions during the years ended October 31, 2020, 2019 and 2018, respectively.
The fair value of the stock options granted during 2020 was determined to be $940,058 (2019: $309,142; 2018: $103,795) using the Black-Scholes Merton option pricing model. The assumptions used in the stock option pricing model were as follows:
|
Risk free interest rate
|
0.35 – 0.45% | |
|
Expected life of options
|
10 years | |
|
Expected dividend yield
|
0.0% | |
|
Expected stock price volatility
|
65% | |
|
Expected forfeiture rate
|
0.0% |
Expected volatility was determined by calculating the average historical volatility of a group of listed entities that are considered similar in nature to the Company.
During the years ended October 31, 2020, 2019 and 2018 no stock options were exercised.
Under the terms of the LTIP, restricted share units have been issued to participants. The RSUs vest immediately and are exercisable upon issuance. The RSUs represent the right to receive a distribution from the Company in an amount equal to the fair market value of an ordinary share of the Company at the time of distribution. The RSUs can be settled in shares, cash, or any combination of shares and cash, at the option of the holder. The Company granted 2,182 RSUs to certain key executives in 2020 (2019: 0). The Company has recorded a liability of $171,849 as at October 31, 2020 (2019: $nil) that represents the fair value of the RSUs outstanding and has recorded total expense of $171,849 for the year-ended October 31, 2020 (2019: $nil).
|
10.
|
Financial instruments and financial risk factors
|
Fair values
The Company’s financial instruments consist of cash, accounts receivables, accounts payable and accrued liabilities, loans payable, convertible debt and the conversion feature of the convertible debt. The fair values of the cash, trade receivables, accounts payable and accrued liabilities approximate their carrying amounts because of their current nature.
Fair value hierarchy levels 1 to 3 are based on the degree to which the fair value is observable:
| • |
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
| • |
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
|
F-73
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
| • |
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
There were no transfers between the levels during the current or prior year.
The Company’s financial assets measured at fair value on a recurring basis were calculated as follows:
| Balance |
Quoted prices in
active markets for identical assets |
Significant other
observable inputs (Level 2) |
Significant
unobservable inputs (Level 3) |
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
As at October 31, 2020
|
||||||||||||||||
|
Accounts receivable
|
890,229 | — | 890,229 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
890,229
|
— |
890,229
|
— | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
As at October 31, 2019
|
||||||||||||||||
|
Accounts receivable
|
822,679 | — | 822,679 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 822,679 | — | 822,679 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The Company’s financial liabilities measured at fair value on a recurring basis were calculated as follows:
| Balance |
Quoted prices in
active markets for identical assets |
Significant other
observable inputs (Level 2) |
Significant
unobservable inputs (Level 3) |
|||||||||||||
| $ | $ | $ | $ | |||||||||||||
|
As at October 31, 2020
|
||||||||||||||||
|
Restricted share units
|
171,849 | — | 171,849 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
171,849
|
— |
171,849
|
— | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
As at October 31, 2019
|
||||||||||||||||
|
Conversion feature of convertible debt
|
94,985 | — | 94,985 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 94,985 | — | 94,985 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Currency risk
It is management’s opinion that the Company is not exposed to significant currency risk as its cash is denominated in both Canadian and US dollars and funds its operations accordingly.
Interest rate risk
Interest rate risk is the risk arising from the effect of changes in prevailing interest rates on the Company’s financial instruments. The Company is not exposed to significant interest rate risk, as it has no variable interest rate debt.
Credit, liquidity, and market risks
Credit risks associated with cash are minimal as the Company deposits majority of its cash with a large Canadian financial institution. The Company’s credit risks associated with receivables are managed and
F-74
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
exposure to potential loss is assessed as minimal. Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short-term, medium and long-term funding and liquidity requirements. Market risks associated with short-term investments are assessed as minimal as they are considered short
-term
in nature.
All of the Company’s financial liabilities have maturities as follows:
|
Carrying
amount |
Contractual
cash flows |
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Thereafter | |||||||||||||||||||||||||
| $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||
|
As at October 31, 2020
|
||||||||||||||||||||||||||||||||
|
Accounts payable and accrued liabilities
|
4,364,372 | 4,364,372 | 4,364,372 | — | — | — | — | — | ||||||||||||||||||||||||
|
Restricted share units
|
171,849 | 171,849 | 171,849 | — | — | — | — | — | ||||||||||||||||||||||||
|
Lease liabilities
|
3,613,170 | 4,529,662 | 805,946 | 680,943 | 568,434 | 584,269 | 479,833 | 1,410,237 | ||||||||||||||||||||||||
|
Loan payable
|
2,247,878 | 2,628,652 | 1,782,888 | 845,763 | — | — | — | — | ||||||||||||||||||||||||
|
Restoration provisions
|
321,400 | 333,866 | — | 81,166 | — | — | 52,627 | 200,074 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
10,718,669
|
|
|
12,028,401
|
|
|
7,125,055
|
|
|
1,607,872
|
|
|
568,434
|
|
|
584,269
|
|
|
532,460
|
|
|
1,610,311
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
As at October 31, 2019
|
||||||||||||||||||||||||||||||||
|
Accounts payable and accrued liabilities
|
1,148,986 | 1,148,986 | 1,148,986 | — | — | — | — | — | ||||||||||||||||||||||||
|
Convertible debt
|
384,207 | 471,126 | — | — | 471,126 | — | — | — | ||||||||||||||||||||||||
|
Conversion feature of convertible debt
|
94,985 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
|
Loan payable
|
87,381 | 87,381 | 7,282 | 7,282 | 7,282 | 7,282 | 7,282 | 50,971 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| 1,715,559 | 1,707,493 | 1,156,268 | 7,282 | 478,408 | 7,282 | 7,282 | 50,971 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Capital risk management
The Company manages its capital to ensure that entities in the Company will be able to continue a going concern while maximising the return to shareholders through the optimisation of the debt and equity balance.
The capital structure of the Company consists of net debt (borrowings disclosed in notes 8 after deducting cash and bank balances) and equity of the Company (comprising issued share capital, contributed surplus and accumulated deficit as disclosed in Note 9).
The Company is not subject to any externally imposed capital requirements. The Company’s risk management committee reviews the capital structure on a semi-annual basis. As part of this review, the committee considers the cost of capital and the risks associated with each class of capital.
|
11.
|
Right-of-use
assets
|
| Premises | Equipment | Total | ||||||||||
|
Cost
|
||||||||||||
|
At November 1, 2019
|
2,783,313 | 53,262 | 2,836,575 | |||||||||
|
Additions & modifications
|
1,550,957 | 61,176 | 1,612,133 | |||||||||
F-75
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
| Premises | Equipment | Total | ||||||||||
|
Foreign Exchange on Translation
|
19,731 | (629 | ) | 19,102 | ||||||||
|
|
|
|
|
|
|
|||||||
|
At October 31, 2020
|
|
4,354,001
|
|
|
113,809
|
|
|
4,467,810
|
|
|||
|
|
|
|
|
|
|
|||||||
|
Accumulated depreciation
|
||||||||||||
|
At November 1, 2019
|
— | — | — | |||||||||
|
Depreciation
|
(584,343 | ) | (16,391 | ) | (600,734 | ) | ||||||
|
Foreign Exchange on Translation
|
(7,810 | ) | (178 | ) | (7,988 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
At October 31, 2020
|
|
(592,153
|
)
|
|
(16,569
|
)
|
|
(608,722
|
)
|
|||
|
|
|
|
|
|
|
|||||||
|
Carrying amounts
|
||||||||||||
|
At November 1, 2019
|
2,783,313 | 53,262 | 2,836,575 | |||||||||
|
|
|
|
|
|
|
|||||||
|
At October 31, 2020
|
|
3,761,848
|
|
|
97,240
|
|
|
3,859,088
|
|
|||
|
|
|
|
|
|
|
|||||||
The average lease term is 4 years.
|
12.
|
Lease liabilities
|
| Maturity analysis | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Thereafter | Total | |||||||||||||||||||||
| Undiscounted | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
|
Premises
|
769,865 | 650,087 | 549,908 | 565,742 | 462,851 | 1,410,237 | 4,408,690 | |||||||||||||||||||||
|
Equipment
|
36,081 | 30,856 | 18,526 | 18,526 | 16,982 | — | 120,972 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total
|
|
805,946
|
|
|
680,943
|
|
|
568,434
|
|
|
584,268
|
|
|
479,833
|
|
|
1,410,237
|
|
|
4,529,662
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Lease liabilities | Current |
Non-Current
|
Total | |||||||||
| Discounted | $ | $ | $ | |||||||||
|
Premises
|
565,296 | 2,949,707 | 3,515,003 | |||||||||
|
Equipment
|
26,059 | 72,108 | 98,167 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total
|
|
591,355
|
|
|
3,021,815
|
|
|
3,613,170
|
|
|||
|
|
|
|
|
|
|
|||||||
|
13.
|
Restoration provisions
|
The Company has a legal obligation to complete the site restoration and decommissioning of its leased plant properties in New York and Ontario. The provision for decommissioning and site restoration is determined using the estimated costs provided by the New York Department of Environmental Conservation and Ontario Ministry of the Environment, Conservation and Parks.
The following table represents the continuity of the restoration provision associated with the Company’s leased plant properties:
|
Restoration provisions at October 31, 2019 and 2018
|
$ | — | ||
|
Initial recognition in 2020
|
321,400 | |||
|
|
|
|||
|
Restoration provisions at October 31, 2020
|
$
|
321,400
|
|
|
|
|
|
The present value of the restoration provision of $321,400 was calculated using an average risk-free rate of 0.61%.
F-76
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
14.
|
Accounts payable and accrued liabilities
|
|
2020
|
2019 | |||||||
|
$
|
$ | |||||||
|
Accounts payable
|
|
2,454,421
|
|
195,716 | ||||
|
Accrued expenses
|
|
1,177,377
|
|
819,833 | ||||
|
Accrued compensation
|
|
732,574
|
|
133,437 | ||||
|
|
|
|
|
|||||
|
|
4,364,372
|
|
1,148,986 | |||||
|
|
|
|
|
|||||
|
15.
|
Commitments
|
The Company is committed to director and consulting fees of $181,000 (2019: $159,840) in total per year to six directors and Advisory Board members, until cancellation of their respective agreements, which requires notice of 30 days by either party.
|
16.
|
Loss per share
|
|
2020
|
2019 | 2018 | ||||||||||
|
Net loss
|
$
|
(9,275,962
|
)
|
$ | (4,100,782 | ) | $ | (908,869 | ) | |||
|
Weighted average number of ordinary shares
|
|
2,068,952
|
|
1,801,338 | 1,700,751 | |||||||
|
|
|
|
|
|
|
|||||||
|
Basic and diluted loss per share
|
$
|
(4.48
|
)
|
$ | (2.28 | ) | $ | (0.53 | ) | |||
|
|
|
|
|
|
|
|||||||
Adjustments for diluted loss per share were not made for the year ended October 31, 2020, 2019 and 2018 as they would be anti-dilutive in nature. The following potential ordinary shares are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purpose of diluted earnings per share:
|
2020
|
2019 | 2018 | ||||||||||
|
Stock options
|
|
133,500
|
|
99,500 | 58,320 | |||||||
|
Convertible debt
|
|
—
|
|
13,436 | 13,436 | |||||||
|
Restricted share units
|
|
2,182
|
|
— | — | |||||||
|
|
|
|
|
|
|
|||||||
|
|
135,682
|
|
112,936 | 71,756 | ||||||||
|
|
|
|
|
|
|
|||||||
The number of potential ordinary shares to be issued upon the conversion of the convertible debt was determined based on the Series B share price. See Note 8 for details.
|
17.
|
Segment reporting
|
The consolidated financial data presented in these financial statements is reviewed regularly by the Company’s chief operating decision maker (“CODM”) for making strategic decisions, allocations resources and assessing performance, in consultation with the Board of Directors.
During the year ended October 31, 2020, the Company operated in Canada with a plan to begin operations in the U.S. Management has concluded that the customers, and the nature and method of distribution of goods and services delivered, if any, to these geographic regions are similar in nature. The risks and returns across the geographic regions are not dissimilar; therefore, the Company operates as a single operating segment.
F-77
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
The following is a summary of the Company’s geographical information:
| Canada | United States | Total | ||||||||||
| $ | $ | $ | ||||||||||
|
For the year ended October 31, 2020
|
||||||||||||
|
Revenue
|
792,254 | — | 792,254 | |||||||||
|
Non-current
assets
|
3,395,049 | 6,066,619 | 9,461,668 | |||||||||
|
For the year ended October 31, 2019
|
||||||||||||
|
Revenue
|
48,160 | — | 48,160 | |||||||||
|
Non-current
assets
|
1,060,792 | — | 1,060,792 | |||||||||
|
For the year ended October 31, 2018
|
||||||||||||
|
Revenue
|
5,746 | — | 5,746 | |||||||||
|
Non-current
assets
|
239,248 | — | 239,248 | |||||||||
|
|
|
|
|
|
|
|||||||
For the year ended October 31, 2020, one customer accounted for 66% of total revenue (2019: 0%; 2018: 0%). This same customer accounted for 58% of accounts receivable at October 31, 2020 (2019: 0%; 2018: 0%).
|
18.
|
Government funding
|
The Company has received government grants and investment tax credits from the Government of Canada and the Government of Ontario for research and development activities.
|
2020
|
2019 | 2018 | ||||||||||
|
$
|
$ | $ | ||||||||||
|
Research and development expenses, gross
|
|
2,809,537
|
|
3,134,468 | 677,235 | |||||||
|
Less: Government grants
|
|
(2,032,869
|
)
|
(629,346 | ) | (46,843 | ) | |||||
|
Less: Investment tax credits
|
|
—
|
|
(393,464 | ) | (233,322 | ) | |||||
|
|
|
|
|
|
|
|||||||
|
Research and development expenses, net
|
|
776,668
|
|
2,111,658 | 397,070 | |||||||
|
|
|
|
|
|
|
|||||||
In addition, for year ended October 31, 2020, the Company has received $168,027 in other government grants recognized as an offset against employee salaries and benefits expenses (2019: $10,916; 2018: 23,892).
The following table summarizes the deferred government funding at end of each year relating to services in future periods.
|
2020
|
2019 | 2018 | ||||||||||
|
$
|
$ | $ | ||||||||||
|
Current
|
|
—
|
|
1,067,318 | — | |||||||
|
Non-current
|
|
—
|
|
— | — | |||||||
|
|
|
|
|
|
|
|||||||
|
Deferred government funding at October 31
|
|
—
|
|
1,067,318 | — | |||||||
|
|
|
|
|
|
|
|||||||
F-78
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
19.
|
Income taxes
|
The recovery of income taxes differs from the amount obtained by applying the statutory Canadian Federal provincial income tax rates to the loss for the year as follows:
|
2020
|
2019 | 2018 | ||||||||||
|
$
|
$ | $ | ||||||||||
|
Net loss and comprehensive loss for the period before tax
|
|
(9,275,962
|
)
|
(4,100,782 | ) | (908,869 | ) | |||||
|
Statutory tax rates
|
|
26.5
|
%
|
26.5 | % | 26.5 | % | |||||
|
|
|
|
|
|
|
|||||||
|
|
(2,458,130
|
)
|
(1,086,707 | ) | (240,850 | ) | ||||||
|
Change in unrecognized deferred tax amounts
|
|
2,365,715
|
|
993,703 | 233,735 | |||||||
|
Non-deductible
item and others
|
|
92,415
|
|
93,004 | 7,115 | |||||||
|
|
|
|
|
|
|
|||||||
|
Income tax expense
|
|
—
|
|
— | — | |||||||
|
|
|
|
|
|
|
|||||||
At October 31, 2020, 2019 and 2018 the Company has aggregate
non-capital
losses for Canadian income tax purposes of approximately $13,000,000, $3,700,000 and $1,200,000 respectively that expire in the period 2037 to 2040. In addition, the Company has net operating losses for US income tax purposes of approximately $450,000 that carryforward indefinitely. Management cannot assert that the realization of the income tax benefits related to these losses and other potential deferred income tax assets is more likely than not to be realized. Accordingly, the Company has not recognized the following deferred income tax assets in the consolidated financial statements:
|
2020
|
2019 | 2018 | ||||||||||
|
$
|
$ | $ | ||||||||||
|
Tax losses and credits carryforwards
|
|
3,799,216
|
|
1,163,353 | 349,238 | |||||||
|
Reserves and provisions
|
|
84,464
|
|
24,164 | — | |||||||
|
Plant and equipment, due to differences in amortization
|
|
(205,158
|
)
|
(184,536 | ) | — | ||||||
|
Right of use assets, net of lease liabilities
|
|
(65,395
|
)
|
— | — | |||||||
|
|
|
|
|
|
|
|||||||
|
|
3,613,127
|
|
1,002,981 | 349,238 | ||||||||
|
Deferred tax assets not recognized
|
|
(3,613,127
|
)
|
(1,002,981 | ) | (349,238 | ) | |||||
|
|
|
|
|
|
|
|||||||
|
|
—
|
|
— | — | ||||||||
|
|
|
|
|
|
|
|||||||
|
20.
|
Notes to the Consolidated Statements of Cash Flows
|
Changes in liabilities arising from financing activities comprise the following:
|
Restricted
share units |
Lease
liabilities |
Loans
payable |
Restoration
provisions |
Convertible
debt |
Conversion
feature of convertible debt |
Deferred
government funding |
||||||||||||||||||||||
|
Balance, October 31, 2017
|
— | — | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Cash changes:
|
||||||||||||||||||||||||||||
|
Proceeds from convertible debt
|
293,470 | 94,985 | ||||||||||||||||||||||||||
|
Proceeds from government grants
|
77,215 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total changes from financing cash flows
|
— | — | — | — | 293,470 | 94,985 | 77,215 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
F-79
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
|
Restricted
share units |
Lease
liabilities |
Loans
payable |
Restoration
provisions |
Convertible
debt |
Conversion
feature of convertible debt |
Deferred
government funding |
||||||||||||||||||||||
|
Non-cash
changes:
|
||||||||||||||||||||||||||||
|
Accrued interest and accretion
|
39,211 | |||||||||||||||||||||||||||
|
Amortization of government grants
|
(77,215 | ) | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance, October 31, 2018
|
— | — | — | — | 332,681 | 94,985 | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Cash changes:
|
||||||||||||||||||||||||||||
|
Proceeds from loans payable
|
86,572 | |||||||||||||||||||||||||||
|
Proceeds from government grants
|
1,697,794 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total changes from financing cash flows
|
— | — | 86,572 | — | — | — | 1,697,794 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Non-cash
changes:
|
||||||||||||||||||||||||||||
|
Accrued interest and accretion
|
60,337 | |||||||||||||||||||||||||||
|
Amortization of government grants
|
(850,568 | ) | ||||||||||||||||||||||||||
|
Foreign Exchange on Translation
|
809 | (8,811 | ) | 9,874 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance, October 31, 2019
|
— | — | 87,381 | — | 384,207 | 94,985 | 1,067,318 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Cash changes:
|
||||||||||||||||||||||||||||
|
Repayments of lease liabilities
|
(387,508 | ) | ||||||||||||||||||||||||||
|
Proceeds from loans payable
|
2,153,110 | |||||||||||||||||||||||||||
|
Repayment of loans payable
|
(12,881 | ) | ||||||||||||||||||||||||||
|
Proceeds from government grants
|
1,182,599 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total changes from financing cash flows
|
— | (387,508 | ) | 2,140,229 | — | — | — | 1,182,599 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Non-cash
changes:
|
||||||||||||||||||||||||||||
|
New leases
|
4,141,153 | |||||||||||||||||||||||||||
|
Grant of restricted share units
|
88,425 | |||||||||||||||||||||||||||
|
Fair value loss on restricted share units
|
84,454 | |||||||||||||||||||||||||||
|
Accrued interest and accretion
|
9,931 | |||||||||||||||||||||||||||
|
Foreign exchange gain on lease liabilities
|
(140,475 | ) | ||||||||||||||||||||||||||
|
New restoratiion provisions
|
321,400 | |||||||||||||||||||||||||||
|
Conversion of convertible debt
|
(397,424 | ) | (94,985 | ) | ||||||||||||||||||||||||
|
Amortization of government grants
|
(2,226,910 | ) | ||||||||||||||||||||||||||
|
Foreign Exchange on Translation
|
(1,030 | ) | 20,268 | 3,286 | (23,007 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance, October 31, 2020
|
|
171,849
|
|
|
3,613,170
|
|
|
2,247,878
|
|
|
321,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
21.
|
Subsequent events
|
On November 2, 2020, as part of its loan facility with BDC Capital, the Company received the second tranche of $1.5 million (C$2 million) upon the completion of the milestone for such additional funding.
On November 13, 2020, the Company completed a private placement with two entities to purchase 281,138 Class A preferred shares at a price of $81.81 per share, for total proceeds of $23 million. As part of the
F-80
Li-Cycle Corp.
Notes to the consolidated financial statements
October 31, 2020, 2019 and 2018
(Expressed in U.S. dollars)
Agreement, the shareholders of the Company consented to amending the Shareholder Agreement to provide the investors with substantially the same rights as common shareholders.
On February 16, 2021, the Company entered into a definitive business combination agreement with Peridot Acquisition Corp. (NYSE: PDAC). Upon closing, the combined company will be renamed
Li-Cycle
Holdings Corp. and will be listed on the New York Stock Exchange under the new ticker symbol “LICY”. Under the terms of the business combination agreement, the Company is expected to receive approximately $615 million in gross transaction proceeds and 100% of the Company’s existing shares will roll into the combined company.
On April 7, 2021, as part of its loan facility with BDC Capital, the Company received the third tranche of $1.6 million (C$2 million) upon the completion of the milestone for such additional funding.
F-81
Li-Cycle Corp.
Condensed consolidated interim statements of financial position
As at July 31, 2021 and October 31, 2020
(Unaudited - expressed in U.S. dollars)
|
|
|
Notes
|
|
|
July 31, 2021
$ |
|
|
October 31, 2020
$ |
|
|||
|
Assets
|
|
|
|
|||||||||
|
Current assets
|
|
|
|
|||||||||
|
Cash
|
|
|
|
2,350,722
|
|
663,557 | ||||||
|
Accounts receivable
|
|
3 |
|
|
3,255,981
|
|
890,229 | |||||
|
Prepayments and deposits
|
|
4 |
|
|
7,911,436
|
|
963,951 | |||||
|
Inventory
|
|
5 |
|
|
1,502,921
|
|
179,994 | |||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
15,021,060
|
|
2,697,731 | |||||||
|
|
|
|
|
|
|
|||||||
|
Non-current
assets
|
|
|
||||||||||
|
Plant and equipment
|
|
6 |
|
|
18,113,712
|
|
5,602,580 | |||||
|
Right of use assets
|
|
7 |
|
|
16,277,652
|
|
3,859,088 | |||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
34,391,364
|
|
9,461,668 | |||||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
49,412,424
|
|
12,159,399 | |||||||
|
|
|
|
|
|
|
|||||||
|
Liabilities
|
|
|
||||||||||
|
Current liabilities
|
|
|
||||||||||
|
Accounts payable and accrued liabilities
|
|
|
|
15,778,982
|
|
4,364,372 | ||||||
|
Restricted share units
|
|
9 |
|
|
3,259,010
|
|
171,849 | |||||
|
Lease liabilities
|
|
11 |
|
|
1,190,086
|
|
591,355 | |||||
|
Loans payable
|
|
8 |
|
|
1,688,853
|
|
1,468,668 | |||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
21,916,931
|
|
6,596,244 | |||||||
|
|
|
|
|
|
|
|||||||
|
Non-current
liabilities
|
|
|
||||||||||
|
Lease liabilities
|
|
11 |
|
|
15,044,408
|
|
3,021,815 | |||||
|
Loans payable
|
|
8 |
|
|
9,776,681
|
|
779,210 | |||||
|
Restoration provisions
|
|
|
|
332,420
|
|
321,400 | ||||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
25,153,509
|
|
4,122,425 | |||||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
47,070,440
|
|
10,718,669 | |||||||
|
|
|
|
|
|
|
|||||||
|
Shareholders’ equity
|
|
|
||||||||||
|
Share capital
|
|
9 |
|
|
37,805,879
|
|
15,441,600 | |||||
|
Contributed surplus
|
|
9 |
|
|
952,441
|
|
824,683 | |||||
|
Accumulated deficit
|
|
|
|
(36,119,724
|
)
|
(14,528,941 | ) | |||||
|
Accumulated other comprehensive loss
|
|
|
|
(296,612
|
)
|
(296,612 | ) | |||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
2,341,984
|
|
1,440,730 | |||||||
|
|
|
|
|
|
|
|||||||
|
|
|
|
49,412,424
|
|
12,159,399 | |||||||
|
|
|
|
|
|
|
|||||||
The accompanying notes are an integral part of the condensed consolidated interim statements.
F-82
Li-Cycle Corp.
Condensed consolidated interim statements of loss and comprehensive loss
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
|
|
|
|
|
|
Three months ended July 31,
|
|
|
Nine months ended July 31,
|
|
|||||||||||
|
|
|
Notes
|
|
|
2021
$
|
|
|
2020
$ |
|
|
2021
$
|
|
|
2020
$ |
|
|||||
|
Revenue
|
|
|
|
|
|
|||||||||||||||
|
Product sales
|
|
|
|
1,593,563
|
|
107,040 |
|
2,682,531
|
|
185,156 | ||||||||||
|
Recycling services
|
|
|
|
115,560
|
|
74,692 |
|
301,216
|
|
137,877 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
1,709,123
|
|
181,732 |
|
2,983,747
|
|
323,033 | |||||||||||
|
Expenses
|
|
|
||||||||||||||||||
|
Employee salaries and benefits, net
|
|
|
|
2,481,939
|
|
547,080 |
|
5,358,953
|
|
1,415,661 | ||||||||||
|
Raw materials, supplies and finished goods
|
|
|
|
2,261,304
|
|
142,161 |
|
4,876,561
|
|
344,704 | ||||||||||
|
Professional fees
|
|
|
|
1,176,310
|
|
897,224 |
|
4,095,596
|
|
1,560,108 | ||||||||||
|
Research and development, net
|
|
|
|
576,551
|
|
(282,541 | ) |
|
1,928,582
|
|
(19,357 | ) | ||||||||
|
Share-based compensation
|
|
9 |
|
|
298,489
|
|
57,383 |
|
1,307,874
|
|
220,440 | |||||||||
|
Office and administrative
|
|
|
|
369,113
|
|
64,786 |
|
987,820
|
|
134,337 | ||||||||||
|
Depreciation, net
|
|
6,7 |
|
|
272,724
|
|
327,806 |
|
788,830
|
|
717,278 | |||||||||
|
Freight and shipping
|
|
|
|
155,456
|
|
(5,450 | ) |
|
587,953
|
|
57,303 | |||||||||
|
Marketing
|
|
|
|
160,479
|
|
65,570 |
|
465,269
|
|
188,500 | ||||||||||
|
Plant facilities
|
|
|
|
74,818
|
|
59,774 |
|
232,358
|
|
223,767 | ||||||||||
|
Travel and entertainment
|
|
|
|
102,768
|
|
30,754 |
|
188,712
|
|
125,535 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
7,929,951
|
|
1,904,547 |
|
20,818,508
|
|
4,968,276 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Loss from operations
|
|
|
|
(6,220,828
|
)
|
(1,722,815 | ) |
|
(17,834,761
|
)
|
(4,645,243 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Other (income) expense
|
|
|
||||||||||||||||||
|
Foreign exchange (gain) loss
|
|
|
|
(214,496
|
) | (73,931 | ) |
|
536,216
|
|
(109,297 | ) | ||||||||
|
Interest expense
|
|
|
|
382,639
|
|
164,819 |
|
788,335
|
|
340,695 | ||||||||||
|
Interest income
|
|
|
|
(503
|
)
|
(2,722 | ) |
|
(1,725
|
)
|
(34,178 | ) | ||||||||
|
Fair value loss on restricted share units
|
|
|
|
508,850
|
|
— |
|
2,433,196
|
|
— | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
676,490
|
|
88,166 |
|
3,756,022
|
|
197,220 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net loss
|
|
|
|
(6,897,318
|
)
|
(1,810,981 | ) |
|
(21,590,783
|
)
|
(4,842,463 | ) | ||||||||
|
Other comprehensive income (loss)
|
|
|
||||||||||||||||||
|
Foreign currency translation
|
|
|
|
—
|
|
249,607 |
|
—
|
|
(276,873 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Comprehensive loss
|
|
|
|
(6,897,318
|
)
|
(1,561,374 |
)
)
|
|
(21,590,783
|
)
|
(5,119,336 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Loss per common
share - basic and
diluted
|
|
13 |
|
|
(2.88
|
)
|
(0.86 | ) |
|
(9.10
|
)
|
(2.35 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
F-83
Li-Cycle Corp.
Condensed consolidated interim statements of changes in equity
For the six months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
|
|
|
Notes
|
|
|
Number of
common shares |
|
|
Share capital
$ |
|
|
Contributed
surplus $ |
|
|
Accumulated
deficit $ |
|
|
Accumulated
other comprehensive income (loss) $ |
|
|
Total
$ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 31, 2020
|
2,088,733 | 15,441,600 | 824,683 | (14,528,941 | ) | (296,612 | ) | 1,440,730 | ||||||||||||||||||||
|
Stock option expense
|
9 |
|
—
|
|
|
—
|
|
|
702,932
|
|
|
—
|
|
|
—
|
|
|
702,932
|
|
|||||||||
|
Exercise of stock options
|
|
|
9
|
|
|
|
25,664
|
|
|
|
289,224
|
|
|
|
(120,119
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
169,105
|
|
|
Shares issued for cash
|
9 |
|
281,138
|
|
|
21,620,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21,620,000
|
|
|||||||||
|
Shares issued for
non-cash
costs
|
9 |
|
12,000
|
|
|
455,055
|
|
|
(455,055
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||||
|
Comprehensive loss
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,590,783
|
)
|
|
—
|
|
|
(21,590,783
|
)
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance,
July 31
, 2021
|
|
2,407,535
|
|
|
37,805,879
|
|
|
952,441
|
|
|
(36,119,724
|
)
|
|
(296,612
|
)
|
|
2,341,984
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
Notes
|
|
|
Number of
common shares |
|
|
Share capital
$ |
|
|
Contributed
surplus $ |
|
|
Accumulated
deficit $ |
|
|
Accumulated
other comprehensive income (loss) $ |
|
|
Total
$ |
||||||||
|
Balance, October 31, 2019
|
1,916,003 | 8,467,810 | 123,781 | (5,252,979 | ) | (77,886 | ) | 3,260,726 | ||||||||||||||||||||
|
Stock option expense
|
9 | — | — | 132,568 | — | — | 132,568 | |||||||||||||||||||||
|
Shares issued for cash
|
9 | 159,294 | 6,481,381 | — | — | — | 6,613,949 | |||||||||||||||||||||
|
Shares issuable for non-cash cost
s
|
|
|
9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
455,055
|
|
|
|
—
|
|
|
|
—
|
|
|
|
455,055
|
|
|
Conversion of convertible debt
|
9 | 13,436 | 492,409 | — | — | — | 492,409 | |||||||||||||||||||||
|
Comprehensive loss
|
— | — | — | (4,842,463 | ) | (276,873 | ) | (5,119,336 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Balance,
July 31
, 2020
|
2,088,733 | 15,441,600 | 711,404 | (10,095,442 | ) | (354,759 | ) | 5,702,803 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
F-84
Li-Cycle Corp.
Condensed consolidated interim statements of cash flows
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
|
Three months ended
July 31
,
|
Nine months ended July 31
,
|
|||||||||||||||||||
|
2021
|
2020
|
2021
|
2020
|
|||||||||||||||||
| Notes |
$
|
$
|
$
|
$
|
||||||||||||||||
|
Operating activities
|
||||||||||||||||||||
|
Net loss for the period
|
|
(6,897,318
|
)
|
(1,810,981 | ) |
|
(21,590,783
|
)
|
(4,842,463 | ) | ||||||||||
|
Items not affecting cash
|
|
|
|
|||||||||||||||||
|
Share-based compensation
|
9 |
|
298,489
|
|
57,383 |
|
1,307,874
|
|
220,440 | |||||||||||
|
Depreciation
|
6,
|
|
697,604
|
|
327,806 |
|
1,830,603
|
|
717,278 | |||||||||||
|
Amortization of government grants
|
|
(26,887
|
)
|
(1,086,133 | ) |
|
(92,926
|
)
|
(2,176,041 | ) | ||||||||||
|
Loss on disposal of assets
|
|
—
|
|
— |
|
13,399
|
|
— | ||||||||||||
|
FX (gain) loss on translation
|
|
(152,562
|
) | 153,808 |
|
509,195
|
|
(451,238 | ) | |||||||||||
|
Fair value loss on restricted share units
|
|
508,850
|
|
— |
|
2,433,196
|
|
— | ||||||||||||
|
Share-based professional fees
|
|
|
9
|
|
|
|
—
|
|
|
|
455,055
|
|
|
|
—
|
|
|
|
455,055
|
|
|
Interest and accretion on convertible debt
|
|
—
|
|
— |
|
—
|
|
9,931 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
(5,571,824
|
)
|
(1,903,062 | ) |
|
(15,589,442
|
)
|
(6,067,038 | ) | |||||||||||
|
Changes in
non-cash
working capital items
|
||||||||||||||||||||
|
Accounts receivable
|
|
(1,504,376
|
) | 218,432 |
|
(2,365,752
|
)
|
327,776 | ||||||||||||
|
Prepayments and deposits
|
|
(2,668,131
|
)
|
(631,538 | ) |
|
(7,118,905
|
)
|
(1,938,325 | ) | ||||||||||
|
Inventory
|
|
(719,231
|
)
|
(711 | ) |
|
(1,322,927
|
)
|
(191,310 | ) | ||||||||||
|
Accounts payable and accrued liabilities
|
|
5,218,663
|
|
155,725 |
|
9,830,211
|
|
214,656 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
(5,244,899
|
)
|
(2,161,153 | ) |
|
(16,566,815
|
)
|
(7,654,241 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Investing activity
|
||||||||||||||||||||
|
Purchases of plant and equipment
|
6 |
|
(5,298,447
|
)
|
(836,378 | ) |
|
(12,066,848
|
)
|
(1,748,271 | ) | |||||||||
|
Proceeds from disposal of plant and equipment
|
|
—
|
|
— |
|
16,866
|
|
— | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
(5,298,447
|
)
|
(836,378 | ) |
|
(12,049,982
|
)
|
(1,748,271 | ) | |||||||||||
|
Financing activities
|
||||||||||||||||||||
|
Proceeds from share issuance, net of share issue costs
|
9 |
|
—
|
|
— |
|
21,620,000
|
|
6,481,381 | |||||||||||
|
Proceeds from exercise of stock options
|
|
|
9
|
|
|
|
169,105
|
|
|
|
—
|
|
|
|
169,105
|
|
|
|
—
|
|
|
Proceeds from loans payable
|
8
|
|
7,000,000
|
|
5,663 |
|
10,091,220
|
|
2,149,335 | |||||||||||
|
Proceeds from government grants
|
|
26,887
|
|
429,537 |
|
92,926
|
|
1,131,730 | ||||||||||||
|
Repayment of lease liabilities
|
|
(204,231
|
)
|
(137,173 | ) |
|
(530,953
|
)
|
(250,371 | ) | ||||||||||
|
Repayment of loans payable
|
|
(423,595
|
)
|
(3,871 | ) |
|
(1,138,336
|
)
|
(10,051 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
6,568,166
|
|
|
294,156
|
|
|
30,303,962
|
|
|
9,502,024
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Net change in cash
|
|
(3,975,180
|
)
|
(2,703,375 | ) |
|
1,687,165
|
|
99,512 | |||||||||||
|
Cash, beginning of period
|
|
6,325,902
|
|
6,586,336 |
|
663,557
|
|
3,783,449 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Cash, end of period
|
|
2,350,722
|
|
3,882,961 |
|
2,350,722
|
|
3,882,961 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Non-cash
investing activities
|
||||||||||||||||||||
|
Accrual for purchase of plant and equipment
|
|
251,802
|
|
— |
|
1,584,399
|
|
— | ||||||||||||
|
Non-cash
financing activities
|
||||||||||||||||||||
|
Equity issued for non-cash costs
|
|
—
|
|
— |
|
—
|
|
947,464 | ||||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
F-85
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
|
1.
|
Nature of operations and going
|
| (i) |
Li-Cycle
Corp.
(“Li-Cycle”
or the “Company”) was incorporated under the
Business Corporations Act
a
nada.
|
Li-Cycle’s core business model is to build, own and operate recycling plants tailored to regional needs. Li-Cycle’s Spoke and Hub Technologies™ provide an environment friendly and scalable solution that address the growing global lithium-ion battery recycling challenge and provide an economically viable resource recovery solution, supporting the global transition toward electrification.
On March 28, 2019, the
Li-Cycle
Inc., under the
General Corporation Law of the State of Delaware.
On September 2, 2020, the
Li-Cycle
North America Hub, Inc., under the
General Corporation Law of the State of Delaware
On February 12, 2021, the
Li-Cycle
Holdings Corp., under the
Business Corporations Act
On February 16, 2021, the Company entered into a definitive business combination agreement with Peridot Acquisition Corp. (NYSE: PDAC) and Li-Cycle Holdings Corp. Upon closing, the combined company will be renamed Li-Cycle Holdings Corp.
On August 10, 2021, in accordance with the plan of arrangement to reorganize Li-Cycle Corp., the Company finalized the business combination with Peridot Acquisition Corp. (NYSE: PDAC). Upon closing, the combined company was renamed Li-Cycle Holdings Corp.
|
|
(ii)
|
Going concern
|
These condensed consolidated interim statements have been prepared by management on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. For the three and nine months ended July 31, 2021, the Company had not achieved a level of revenue from its operations to be profitable and incurred a loss of
$6.7 million and $21.4
million, respectively (losses of
$1.8 million and $4.8
million in the three and nine months ended July 31, 2020). Cash used in operations for the three and nine months ended July 31, 2021 was
$5.2 million and $16.6
million, respectively (used in operations was
$2.1 million and $7.6
million in the three and nine months ended July 31, 2020).
In order to continue its long-term operations, the Company must achieve profitable operations and continue to obtain additional equity or debt financing. Until the Company achieves profitability, management plans to fund its operations and capital expenditures through borrowings and issuance of capital stock. Until the Company generates revenue at a level to support its cost structure, the Company expects to continue to incur substantial operating losses and net cash outflows.
There can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to the Company. If the Company is unable to raise sufficient additional capital on acceptable terms, it may be compelled to reduce the scope of its
F-86
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
operations and planned capital expenditures or sell certain assets, including intellectual property assets. These conditions call into question the Company’s ability to continue as a going concern.
Subsequent to the quarter end, the Company finalized the business combination with Peridot Acquisition Corp. (NYSE: PDAC) in August 2021. The new combined company Li-Cycle Holdings Corp received
million of gross transaction proceeds, before deduction of
million of transaction costs. These funds are sufficient to fund the current operations and capital expenditures related to the Company’s expansion plans for the next 12 months. As a result, after considering all relevant information, including its actions completed to date and its future plans, management has concluded that there are no material uncertainties related to events or conditions that may cast significant doubt upon the Company’s ability to continue as a going concern for a period of 12 months from the date these condensed consolidated interim financial statements are available to be issued.
The estimates used by management in reaching this conclusion are based on information available as of the date these condensed consolidated interim financial statements were authorized for issuance and include internally generated cash flow forecasts. Accordingly, actual results could differ from these estimates and resulting variances may be material to management’s
assessment
.
|
2.
|
Significant accounting policies
|
|
(a)
|
Statement of compliance
|
These condensed consolidated interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) under International Accounting Standard (IAS) 34 – Interim Financial Reporting. Except as described below, these financial statements were prepared using the same basis of presentation, accounting policies and methods of computation as outline in Note 2, Significant accounting policies in the Company’s consolidated financial statements for the year ended October 31, 2020. These financial statements do not include all the notes required in annual financial statements.
These condensed consolidated interim consolidated interim financial statements were approved and authorized for issue by the Board of Directors on September 8, 2021.
|
(b)
|
Basis of consolidation
|
These condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries. The Company’s three subsidiaries are entities controlled by the Company. Control exists when the Company has power over an investee, when the Company is exposed, or has rights, to variable returns from the investee and when the Company has the ability to affect those returns through its power over the investee. The subsidiaries are included in the condensed consolidated interim financial results of the Company from the effective date of incorporation up to the effective date of disposition or loss of control. The Company’s principal subsidiaries and their geographic location as at
July
3
1
, 2021 was as follows:
|
Company
|
|
Location
|
|
Ownership interest
|
|
|
|
Li-Cycle
Inc.
|
Delaware, U.S. | 100 | % | |||
|
Li-Cycle
North America Hub, Inc.
|
Delaware, U.S. | 100 | % | |||
|
Li-Cycle
Holdings Corp.
|
Ontario, Canada | 100 | % | |||
Intercompany transactions, balances and unrealized gains/losses on transactions between the Company and its subsidiary are eliminated.
F-87
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
|
(c)
|
Basis of preparation
|
Change in Functional Currency: Prior to November 1, 2020, the Company had determined its functional currency was the Canadian dollar on the basis that its operating expenditures, capital expenditures and financing were primarily denominated in Canadian dollars. With increasing volume of operations, new contracts with US based suppliers, commencement of operations at its US Spoke and increasing capital expenditures in its US facilities, the Company’s operating expenditures are becoming predominantly denominated in US dollars. Additionally, due to the increase in US dollar expenses and its expansion plans in the US, the Company has obtained, and plans to continue to seek, financing in US dollars. As a result of the increasing activities in US dollars, the Company has changed its functional currency to the U.S. dollar effective November 1, 2020.
Accordingly, beginning with the three month period ended January 31, 2021, the Company transitioned its functional and presentation currency to U.S. dollars. Transactions in currencies other than the U.S. dollar are recorded at the exchange rates on the dates of transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the closing rate on that date.
Comparative financial information for the 2020 fiscal periods was translated from Canadian dollars into U.S. dollars in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates:
|
|
(i)
|
Assets and liabilities were translated at the closing rate at end of each reporting period;
|
|
|
(ii)
|
Items recognized in the statement of loss and comprehensive loss were translated at the exchange rate at the time of transaction;
|
|
|
(iii)
|
Equity items have been translated using the historical rate at the time of transaction;
|
|
|
(iv)
|
All resulting exchange differences were recognized in other comprehensive loss.
|
|
3.
|
Accounts receivable
|
|
|
|
July 31, 2021
$ |
|
|
October 31, 2020
$ |
|
||
|
Trade receivables
|
|
2,877,970
|
|
571,300 | ||||
|
Harmonized Sales Taxes receivable
|
|
378,011
|
|
274,998 | ||||
|
Other receivables
|
|
—
|
|
43,931 | ||||
|
|
|
|
|
|||||
|
|
3,255,981
|
|
890,229 | |||||
|
|
|
|
|
|||||
For product sales, the Company estimates the amount of consideration to which it expects to be entitled under provisional pricing arrangements. The amount of consideration for black mass and mixed copper/aluminum sales is based on the mathematical product of: (i) market prices of the constituent metals at the date of settlement, (ii) product weight, and (iii) assay results (ratio of the constituent metals initially estimated by management and subsequently trued up to customer confirmation). Certain adjustments like handling and refining charges are also made per contractual terms with customers. Depending on the contractual terms with customers, the payment of receivables may take up to 12 months from date of shipment. Product sales and the related trade accounts receivables are measured at fair value at initial recognition and are re-estimated at each reporting period end using the market prices of the constituent metals at the respective measurement dates. Changes in fair value are recognized as an adjustment to profit and loss and the related accounts receivable. For the three and
F-88
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
nine months ended July 31, 2021, the fair value gain arising from changes in estimates was
and
, respectively (three and nine months ended July 31, 2020
An insignificant portion of
July
3
1
, 2021 and 2020, the Company has assessed an allowance for credit loss of $nil for service-related receivables based on its past experience, the credit ratings of its existing customers and economic trends.
|
4.
|
Prepayments and deposits
|
|
|
|
July 31, 2021
$ |
|
|
October 31, 2020
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
Prepaid lease deposits
|
|
675,773
|
|
33,501 | ||||
|
Prepaid transaction costs
|
|
6,176,806
|
|
— | ||||
|
Other
prepaids
|
|
1,058,857
|
|
930,450 | ||||
|
|
|
|
|
|||||
|
|
7,911,436
|
|
963,951 | |||||
|
|
|
|
|
|||||
Prepaid transactions costs principally relate to the business combination with Peridot Acquisition Corp. (NYSE: PDAC) discussed in Note 1.
Other prepaids consist principally of prepaid insurance, environmental financial assurance, subscriptions, and parts and consumables.
|
5.
|
Inventory
|
|
|
|
July 31, 2021
$ |
|
|
October 31, 2020
$ |
|
||
|
Raw material
|
|
342,591
|
|
140,419 | ||||
|
Finished goods
|
|
1,160,330
|
|
39,575 | ||||
|
|
|
|
|
|||||
|
|
1,502,921
|
|
179,994 | |||||
|
|
|
|
|
|||||
The cost of inventories recognized as an expense during the three and nine month ended July 31, 2021 was
$2,156,737and $4,647,469
, respectively (three and nine months ended July 31, 2020:
$142,161 and $344,704).
The cost of inventories recognized as an expense during the three months ended July 31, 2021 includes a write down of
$571,947
for finished goods and write down of
$148,522
for raw materials (three months ended July 31, 2020:
$nil for finished goods and $nil
for raw materials) in respect of adjustments of inventory to net realizable value. Net realizable value of inventory is calculated as the estimated consideration under provisional pricing arrangements (as described in Note 3) less the estimated cost of completion and the estimated costs necessary to make the sale.
F-89
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
|
6.
|
Plant and equipment
|
|
|
|
Plant
equipment $ |
|
|
Storage
containers $ |
|
|
Vehicles
$ |
|
|
Leasehold
improvements $ |
|
|
Total
$ |
|
|||||
|
Cost
|
||||||||||||||||||||
|
At October 31, 2020
|
4,434,874 | 67,619 | 157,604 | 1,577,201 | 6,237,298 | |||||||||||||||
|
Additions
|
11,757,027 |
—
|
62,017 | 1,832,204 | 13,651,248 | |||||||||||||||
|
Disposals
|
— | — | (40,323 | ) | — | (40,323 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
At
July 31
, 2021
|
|
16,191,901
|
|
|
67,619
|
|
|
179,298
|
|
|
3,409,405
|
|
|
19,848,223
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Accumulated depreciation
|
||||||||||||||||||||
|
At October 31, 2020
|
(474,658 | ) | (7,410 | ) | (24,827 | ) | (127,823 | ) | (634,718 | ) | ||||||||||
|
Depreciation expensed
|
(290,685 | ) | (1,927 | ) | (9,421 | ) | (118,140 | ) | (420,173 | ) | ||||||||||
|
Depreciation capitalized into Inventory
|
(477,727 | ) | (3,127 | ) | (15,880 | ) | (192,944 | ) | (689,678 | ) | ||||||||||
|
Disposals
|
— | — | 10,058 | — | 10,058 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
At
July 31
, 2021
|
|
(1,243,070
|
)
|
|
(12,464
|
)
|
|
(40,070
|
)
|
|
(438,907
|
)
|
|
(1,734,511
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Carrying amounts
|
||||||||||||||||||||
|
At October 31, 2020
|
3,960,216 | 60,209 | 132,777 | 1,449,378 | 5,602,580 | |||||||||||||||
|
At
July 31
, 2021
|
|
14,948,831
|
|
|
55,155
|
|
|
139,228
|
|
|
2,970,498
|
|
|
18,113,712
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
At July 31, 2021,
$10,254,820
of the plant equipment was under construction (October 31,
2020: $
1,919,465).
The depreciation expense displayed on the statement of loss and comprehensive loss is the net depreciation expensed, excluding the depreciation capitalized into inventory in the table above.
|
7.
|
Right-of-use assets
|
| Premises | Equipment | Total | ||||||||||
|
Cost
|
$ | $ | $ | |||||||||
|
At October 31, 2020
|
4,354,001 | 113,809 | 4,467,810 | |||||||||
|
Additions & modifications
|
13,119,356 | 19,960 | 13,139,316 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
July 31
, 2021
|
|
17,473,357
|
|
|
133,769
|
|
|
17,607,126
|
|
|||
|
|
|
|
|
|
|
|||||||
|
Accumulated depreciation
|
||||||||||||
|
At October 31, 2020
|
(592,153 | ) | (16,569 | ) | (608,722 | ) | ||||||
|
Depreciation expensed
|
(357,195 | ) | (11,462 | ) | (368,657 | ) | ||||||
|
Depreciation capitalized into Inventory
|
(340,969 | ) | (11,126 | ) | (352,095 | ) | ||||||
|
|
|
|
|
|
|
|||||||
|
At
July 31
, 2021
|
|
(1,290,317
|
)
|
|
(39,157
|
)
|
|
(1,329,474
|
)
|
|||
|
|
|
|
|
|
|
|||||||
|
Carrying amounts
|
||||||||||||
|
At October 31, 2020
|
3,761,848 | 97,240 | 3,859,088 | |||||||||
|
|
|
|
|
|
|
|||||||
|
At
July 31
, 2021
|
|
16,183,040
|
|
|
94,612
|
|
|
16,277,652
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-90
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
The average
lease term is 5 years.
The depreciation expense displayed on the statement of loss and comprehensive loss is the net depreciation ex
p
ensed, excluding the depreciation capitalized into inventory in the table above.
|
8.
|
Loans Payable
|
|
BDC Loan
|
Other
|
Total
|
||||||||||
|
$
|
$
|
$
|
||||||||||
|
Balance at October 31, 2020
|
|
2,174,540
|
|
|
73,338
|
|
|
2,247,878
|
|
|||
|
Proceeds from loans payable
|
3,091,220 |
7,000,000
|
|
10,091,220
|
|
|||||||
|
Repayment of loans payable
|
(1,102,833 | ) | (35,503 | ) |
|
(1,138,336
|
)
|
|||||
|
Foreign exchange gain or loss
|
261,598 | 3,174 |
|
264,772
|
|
|||||||
|
|
|
|
|
|
|
|||||||
|
Balance at
July 31
, 2021
|
|
4,424,525
|
|
|
7,041,009
|
|
|
11,465,534
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
BDC Capital Loan
|
On December 16, 2019, the Company entered into a binding agreement with BDC Capital Inc. for a secured loan of Canadian dollars (C$7
is December 14, 2023. The base rate of interest is 16% per annum, paid monthly, plus additional accrued interest of 3% that can be reduced to 0% based on the achievement of certain milestones by the Company. Principal payments began on the first anniversary date of the loan and are being made at C$175,000 per month with
million) to help finance the expansion plans of the Company (the “BDC Capital Loan”), which is to be distributed in up to three tranches, with the second and third tranches to be distributed based on the achievement of certain milestones by the Company. Pursuant to the BDC Capital Loan, each of the Company and Li-Cycle Inc. have entered into general security agreements with BDC Capital Inc. granting the lender a general security interest over all assets of the Company and Li-Cycle Inc., respectively. In addition, Li-Cycle Inc. has guaranteed the Company’s obligations under BDC Capital Loan under a guarantee agreement. The maturity date of the BDC Capital Loan
a balloo
n payment of C$700,000 at maturity. As of
July 31, 2021
, a total of C$1.4
million has been repaid.
On February 10, 2020, the Company received the first tranche of the BDC Capital Loan for C$3 million. Transaction costs associated with the loan amounted to C$121,861 and were deducted from the loan balance.
On November 2, 2020, the Company received the second tranche of the BDC Capital Loan for C$2,000,000 upon the completion of the milestone for such additional funding.
On April 7, 2021, the Company received the third tranche of the BDC Capital Loan for C$2,000,000
upon the completion of the milestone for such additional funding.
On July 20, 2021, Li-Cycle signed an agreement with BDC Capital Inc to repay the BDC Capital Loan in full, conditional upon the closing of Li-Cycle’s business combination with Peridot Acquisition Corp on August 10, 2021.
|
(Ii)
|
Promissory Notes
|
On June 16, 2021, Li-Cycle issued promissory notes (the “Promissory Notes”) for an aggregate principal amount of $7,000,000 as consideration for loans received from companies related to the Chief Executive Officer and the Executive Chair of Li-Cycle, respectively. The Promissory Notes bear interest at the rate of
F-91
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
10% per annum and mature on December 15, 2023. The Promissory Notes are unsecured and subordinate to indebtedness owing to Li-Cycle’s senior lender, BDC Capital Inc. Li-Cycle has the option of prepaying all or any portion of the principal and accrued interest of the Promissory Notes prior to the maturity date without penalty, subject to certain conditions.
|
9.
|
Share capital
|
Authorized share capital
The Company is authorized to issue an unlimited number of voting common shares, Class A
non-voting
common shares, preference shares and Class A preferred shares, in each case without par value. All issued shares are fully paid.
Between December 20 and December 27, 2019, the Company completed a
non-brokered
private placement and issued 159,294 common shares for proceeds of $6,481,381 at $40.05 per share.
On December 27, 2019
, a convertible debenture was converted to 13,436 common shares representing proceeds of $492,409.
On November 13, 2020, the Company completed a private placement with two entities to purchase 281,138 Class A preferred shares at a price of $81.81 per share, for total proceeds of $23,000,000 and incurred transaction fees of $1,380,000.
On January 25, 2021, the Company issued 12,000
shares as full and final satisfaction of all obligations under a consulting agreement for services the Company received up to May 2020.
Between June 11 and June 24, 2021, four employees exercised stock options for a total of 25,664 common shares at an aggregate exercise price of $169,105.
Long-term incentive plans
Stock options
The Company has a stock option plan (the “Plan”) approved by the Company’s shareholders that allows it to grant stock options, subject to regulatory terms and approval, to its officers, directors, employees and service providers. This Plan was effective from September 2017 through October 31, 2019.
Each stock option converts into one common share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. Options are exercisable at a price equal to the average market price of the Company’s common shares on the date of grant. The vesting period is
one-third
on the first-year anniversary of the grant, and
one-third
every consecutive year thereafter. If the options remain unexercised after a period of 5 years from the date of grant, the options expire. Options are forfeited if the recipient terminates their contract with the Company before the options vest.
On November 1, 2019, the Company adopted a new Long Term Incentive Plan (the “LTIP”) approved by the Company’s shareholders that allows it to grant stock options, restricted share units, deferred share units, stock appreciation rights, and other forms of equity compensation, subject to regulatory terms and approval, to its officers, directors, employees and service providers.
F-92
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
For stock options issued under the LTIP, each stock option converts into one common share of the Company on exercise. No amounts are paid or payable by the recipient on receipt of the option. The options carry neither rights to dividends nor voting rights. Options may be exercised at any time from the date of vesting to the date of their expiry. Options are exercisable at a price equal to the fair market value of the Company’s common shares on the date of grant. The vesting period is one-third on the first-year anniversary of the grant, and one-third every consecutive year thereafter. If the options remain unexercised after a period of 10 years from the date of grant, the options expire. Options are forfeited if the recipient terminates their contract with the Company before the options vest.
A summary of activity under the Plan and the LTIP is as follows:
|
Number of
stock options |
Weighted average
exercise price per stock option |
|||||||
|
Balance – October 31, 2020
|
133,500 | 15.35 | ||||||
|
Granted
|
31,750 | 85.29 | ||||||
|
Exercised
|
|
|
(25,664
|
)
|
|
|
6.59
|
|
|
Forfeited
|
(4,500 | ) | 42.43 | |||||
|
|
|
|
|
|||||
|
Balance –
July 31
, 2021
|
135,086 | 33.74 | ||||||
As at July 31, 2021
,
of the stock options (October
31
,
2020
:
62,773
) were exercisable.
A summary of outstanding stock options is as follows:
|
|
|
Number of
stock option
s
|
|
|
Exercise
|
|
||
|
$
|
||||||||
|
Expiration dates
|
||||||||
|
September 11, 2022
|
10,000 | 0.65 | ||||||
|
April 10, 2023
|
20,000 | 0.65 | ||||||
|
April 10, 2023
|
6,656 | 14.45 | ||||||
|
April 1, 2024
|
8,500 | 14.45 | ||||||
|
July 17, 2024
|
31,680 | 14.45 | ||||||
|
December 16, 2029
|
2,500 | 42.75 | ||||||
|
April 21, 2030
|
12,000 | 42.75 | ||||||
|
July 19, 2030
|
12,000 | 42.75 | ||||||
|
November 30, 2030
|
16,000 | 85.94 | ||||||
|
February 11, 2031
|
15,750 | 85.94 | ||||||
|
|
|
|
|
|||||
|
|
135,086
|
|
||||||
|
|
|
|
|
|
|
|
|
|
The Company recognized total expenses of $298,489 and $702,932
related to equity-settled share-based compensation during the three and nine months ended July 31, 2021 (three and nine months ended July 31, 2020:
$57,383 and $132,015).
F-93
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
The fair value of the stock options granted during the nine months ended July 31,2021 was determined to be
$1,899,350
(nine months ended July 31, 2020:
$996,823) using the Black-Scholes Merton option pricing model. The assumptions used in the stock option pricing model were as follows:
|
Risk free interest rate
|
0.46 | % | ||
|
Expected life of options
|
10 years | |||
|
Expected dividend yield
|
0.0 | % | ||
|
Expected stock price volatility
|
65 | % | ||
|
Expected forfeiture rate
|
0.0 | % |
Expected volatility was determined by calculating the average historical volatility of a group of listed entities that are considered similar in nature to the Company.
During the three and nine months ended July 31, 2021, four employees exercised 25,664 stock options to acquire a total of 25,664 common shares at an aggregate exercise price aggregate exercise of $169,105. During the three and nine months ended July 31, 2020
, no stock options were exercised.
Restricted share units
Under the terms of the LTIP, restricted share units have been issued to executives and directors. The RSUs vest immediately and are exercisable upon issuance. The RSUs represent the right to receive a distribution from the Company in an amount equal to the fair market value of an ordinary share of the Company at the time of distribution. The RSUs can be settled in shares, cash, or any combination of shares and cash, at the option of the holder. The Company grant
ed 7,319
RSUs to certain key executives and recognized share-based compensation expense of $nil and
$604,942
in the three and nine months ended July 31, 2021, respectively (three and nine months ended July 31, 2020: nil grants and grant
of 2,182
units at an expense o
f $88,425
, respectively). The Company has recorded a liability of
$3,259,010
as at July 31, 2021 (October 31, 2020:
that represents the fair value of the RSUs outstanding and has recorded fair value loss of
$508,850
and $2,433,196 for the three and nine months ended July 31, 2021, respectively (three and nine months ended July 31, 2020:
$nil).
|
10.
|
Financial instruments and financial risk factors
|
Fair values
The Company’s financial instruments consist of cash, accounts receivables, accounts payable and accrued liabilities, loans payable. The fair values of the cash, trade receivables, accounts payable and accrued liabilities approximate their carrying amounts because of their current nature.
Fair value hierarchy levels 1 to 3 are based on th
e
degree to which the fair value is observable:
|
|
•
|
|
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;
|
|
|
•
|
|
Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
|
|
|
•
|
|
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
|
F-94
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
There were no transfers between the levels during the current or prior year.
The Company’s financial assets measured at fair value on a recurring basis were calculated as follows:
|
Balance
$ |
Quoted prices in
active markets for identical assets (Level 1) $ |
Significant
other observable inputs (Level 2) $ |
Significant
unobservable inputs (Level 3) $ |
|||||||||||||
|
As at
July 31
, 2021
|
||||||||||||||||
|
Accounts receivable
|
3,255,981 | — | 3,255,981 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 3,255,981 | — | 3,255,981 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
As at October 31, 2020
|
||||||||||||||||
|
Accounts receivable
|
890,229 | — | 890,229 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 890,229 | — | 890,229 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
See note 3 above for additional details related to measurement of accounts receivable. The Company’s financial liabilities measured at fair value on a recurring basis were calculated as follows:
|
Balance
$ |
Quoted prices
in active markets for identical assets (Level 1) $ |
Significant
other observable inputs (Level 2) $ |
Significant
unobservable inputs (Level 3) $ |
|||||||||||||
|
As at
July 31
, 2021
|
||||||||||||||||
|
Restricted share units
|
3,259,010 | — | 3,259,010 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 3,259,010 | — | 3,259,010 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
As at October 31, 2020
|
||||||||||||||||
|
Restricted share units
|
171,849 | — | 171,849 | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| 171,849 | — | 171,849 | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
Currency risk
It is management’s opinion that the Company is not exposed to significant currency risk as its cash is denominated in both Canadian and U.S. dollars and funds its operations accordingly.
Interest rate risk
Interest rate risk is the risk arising from the effect of changes in prevailing interest rates on the Company’s financial instruments. The Company is not exposed to significant interest rate risk, as it has no variable interest rate debt.
Credit, liquidity, and market risks
Credit risks associated with cash are minimal as the Company deposits majority of its cash with a large Canadian financial institution. The Company’s credit risks associated with receivables are managed and
F-95
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
exposure to potential loss is assessed as minimal. Ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for the management of the Company’s short-term, medium and long-term funding and liquidity requirements. Market risks associated with short-term investments are assessed as minimal as they are considered short
-term
in nature.
Capital risk management
The Company manages its capital to ensure that entities in the Company will be able to continue a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance.
The capital structure of the Company consists of net debt (borrowings after deducting cash and bank balances) and equity of the Company (comprising issued share capital, contributed surplus and accumulated deficit as disclosed in Note 9).
The Company is not subject to any externally imposed capital requirements. The Company’s Board of Directors reviews the capital structure on a semi-annual basis. As part of this review, the Board considers the cost of capital and the risks associated with each class of capital.
|
11.
|
Lease liabilities
|
The Company has the following lease liabilities as of July 31, 2021.
|
Maturity analysis
Undiscounted
|
Year 1
$ |
Year 2
$ |
Year 3
$ |
Year 4
$ |
Year 5
$ |
Thereafter
$ |
Total
$ |
|||||||||||||||||||||
|
Premises
|
2,113,752 | 2,827,686 | 2,712,935 | 2,393,353 | 2,271,673 | 10,176,525 | 22,495,924 | |||||||||||||||||||||
|
Equipment
|
41,386 | 26,574 | 25,058 | 25,058 | 6,818 | — | 124,894 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Total
|
|
2,155,138
|
|
|
2,854,260
|
|
|
2,737,993
|
|
|
2,418,411
|
|
|
2,278,491
|
|
|
10,176,525
|
|
|
22,620,818
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Lease liabilities Discounted
|
Current
$ |
Non-Current
$ |
Total
$ |
|||||||||
|
Premises
|
1,158,790 | 14,972,348 | 16,131,138 | |||||||||
|
Equipment
|
31,296 | 72,060 | 103,356 | |||||||||
|
|
|
|
|
|
|
|||||||
|
Total
|
|
1,190,086
|
|
|
15,044,408
|
|
|
16,234,494
|
|
|||
|
|
|
|
|
|
|
|||||||
The Company’s lease obligations include leases for plant operations, storage facilities, and office space for employees. In the nine months ended July 31, 2021, the company has added
4 new premises leases, 1 new equipment lease and modified 3 leases.
|
12.
|
Commitments
|
The Company is committed to director and consulting fees of $180,000 (Year ended October 31, 2020: $181,000
) in total per year to nine directors and Advisory Board members, until cancellation of their respective agreements, which requires notice
o
f 30 days by
either party.
F-96
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
As of July 31, 2021, there were
$7.3
million in committed purchase orders for equipment and services (As of October 31, 2020:
$4.2 million).
|
13.
|
Loss per share
|
|
Three months ended
July 31
,
|
Nine months ended July 31,
|
|||||||||||||||
|
2021
|
2020 |
2021
|
2020 | |||||||||||||
|
Net loss
|
$
|
(6,897,318
|
)
|
$ | (1,810,981 | ) |
$
|
(21,590,783
|
)
|
$ | (4,842,463 | ) | ||||
|
Weighted average number of ordinary shares
|
|
2,394,475
|
|
2,100,603 |
|
2,372,731
|
|
2,057,723 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Basic and diluted loss per share
|
$
|
(2.88
|
)
|
$ | (0.86 | ) |
$
|
(9.10
|
)
|
$ | (2.35 | ) | ||||
|
|
|
|
|
|
|
|
|
|||||||||
Adjustments for diluted loss per share were not made for the three and nine months ended July 31, 2021 and 2020 as they would be anti-dilutive in nature
. The following potential common shares are anti-dilutive and are therefore excluded from the weighted average number of common shares for the purpose of diluted earnings per share:
|
Three months ended
July 31
,
|
Nine months ended July 31,
|
|||||||||||||||
|
2021
|
2020 |
2021
|
2020 | |||||||||||||
|
Stock options
|
|
135,086
|
|
133,500 |
|
135,086
|
|
133,500 | ||||||||
|
Restricted share units
|
|
9,501
|
|
2,182 |
|
9,501
|
|
2,182 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|
144,587
|
|
135,682 |
|
144,587
|
|
135,682 | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
14.
|
Segment reporting
|
The consolidated financial data presented in these financial statements is reviewed regularly by the Company’s chief operating decision maker (“CODM”) for making strategic decisions, allocations resources and assessing performance, in consultation with the Board of Directors. The Corporation’s CODM is its Chief Executive Officer.
During the three and nine months ended July 31, 2021, the Company operated in Canada and began operations in the United States. Management has concluded that the customers, and the nature and method of distribution of goods and services delivered, if any, to these geographic regions are similar in nature. The risks and returns across the geographic regions are not dissimilar; therefore, the Company operates as a single operating segment.
The following is a summary
of the Company’s geographical information:
|
Canada
$ |
United States
$ |
Total
$ |
||||||||||
|
For the
nine
months ended
July 31
, 2021
|
||||||||||||
|
Revenue
|
2,042,730 | 941,017 | 2,983,747 | |||||||||
|
Non-current
assets
|
7,872,842 | 26,518,522 | 34,391,364 | |||||||||
|
For the
nine
months ended
July 31
, 2020
|
||||||||||||
|
Revenue
|
323,033 | — | 323,033 | |||||||||
|
Non-current
assets
|
2,945,214 | 3,204,621 | 6,149,835 | |||||||||
|
For the year ended October 31, 2020
|
||||||||||||
|
Revenue
|
792,254 | — | 792,254 | |||||||||
|
Non-current
assets
|
3,395,049 | 6,066,619 | 9,461,668 | |||||||||
|
|
|
|
|
|
|
|||||||
F-97
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
The following is a summary of th
e
Company’s main customers:
|
|
|
Three months ended July 31,
|
|
|
Nine months ended July 31,
|
|
||||||||||
|
|
|
2021
|
|
|
|
2020
|
|
|
|
2021
|
|
|
|
2020
|
|
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
||||||||||||
|
Customer A
|
|
|
44
|
%
|
|
|
59
|
%
|
|
|
61
|
%
|
|
|
57
|
%
|
|
Customer B
|
|
|
49
|
%
|
|
|
0
|
%
|
|
|
28
|
%
|
|
|
0
|
%
|
|
Accounts Receivable
|
|
|
|
|
||||||||||||
|
Customer A
|
|
|
|
|
47
|
%
|
|
|
58
|
%
|
||||||
|
Customer B
|
|
|
|
|
24
|
%
|
|
|
0
|
%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.
|
Subsequent events
|
On August 3, 2021, Li-Cycle entered into a ground lease agreement covering the future site of the Rochester Hub. The lease covers approximately
acres and has an original term o
f
20
years plus multiple renewal terms totallin
g
29
additional years. It also includes an option to purchase the land. The lease increases the Company’s contractual obligations by undiscounted cash flows of approximately
$
9.3
million over the original term of the lease.
On August 10, 2021, in accordance with the plan of arrangement to reorganize Li-Cycle Corp., the Company finalized the business combination with Peridot Acquisition Corp. (“Peridot”) (NYSE: PDAC). Upon closing, the combined company was renamed Li-Cycle Holdings Corp. (NYSE: LICY). The new combined company Li-Cycle Holdings Corp. received $582 million of gross transaction proceeds, before deduction of $55 million of transaction costs.
The business combination with Peridot will be accounted for as a reverse acquisition in accordance with IFRS. Under this method of accounting, Peridot will be treated as the “acquired” company for accounting purposes. Since Peridot does not meet the definition of a business under IFRS, net assets of Peridot will be stated at historical cost, with no goodwill or other intangible assets recorded. Li-Cycle Corp. has been determined to be the accounting acquirer based on an evaluation of the following facts and circumstances, and accordingly the Business Combination is treated as an equivalent to an acquisition of Peridot accompanied by a recapitalization.
The acquisition of Peridot is outside the scope of IFRS 3, “Business Combinations”, and it is accounted for as an equity-settled, share-based payment transaction in accordance with IFRS 2, “Share-based Payments” (“IFRS 2”). Li-Cycle Holdings Corp. is considered to be a continuation of Li-Cycle Corp, with the net identifiable assets of Peridot deemed to have been acquired by Li-Cycle Corp. in exchange for shares of Li-Cycle Corp. Under IFRS 2, the transaction is measured at the fair value of the consideration deemed to have been issued by Li-Cycle Corp. in order to acquire 100% of Peridot Acquisition Corp. Any difference in the fair value of the consideration deemed to have been issued by Li-Cycle Corp and the fair value of Peridot Acquisition Corp’s identifiable net assets represents a listing service received by Li-Cycle Corp, recorded through profit and loss.
The Company expects the business combination with Peridot to result in an increase in assets of $522 million, an increase in liabilities of $53 million, and an increase in equity of $469 million. The Company expects to recognize a listing expense of approximately $153 million for the difference between fair value of the share capital given up and the fair value of the net assets received.
F-9
8
Li-Cycle Corp.
Notes to the condensed consolidated interim financial statements
Three and nine months ended July 31, 2021 and 2020
(Unaudited - expressed in U.S. dollars)
On August 11, 2021, in accordance with the agreement to repay the BDC Capital Loan in full upon the closing of Li-Cycle’s business combination with Peridot Acquisition Corp, Li-Cycle paid BDC Capital Inc $5.3 million (C$6.6 million) to settle the BDC Capital Loan, including additional interest expense of $0.7 million (C$0.9 million).
On August 17, 2021, Li-Cycle repaid the $7 million Promissory Notes and accrued interest in full.
On September 7, 2021, Li-Cycle entered into a warehouse lease for the Arizona Spoke. The Arizona Spoke warehouse lease covers approximately 67,000 square feet and has an original term of 5 years 3 months plus a renewal term totaling 5 additional years. The lease increases the Company’s contractual obligations by undiscounted cash flows of approximately $3.7 million over the original term of the lease.
On September 8, 2021, Li-Cycle entered into a premises lease for the Alabama Spoke. The Alabama Spoke premises lease covers approximately 108,000 square feet and has an original term of 20 years plus multiple renewal terms totaling 10 additional years. The lease increases the Company’s contractual obligations by undiscounted cash flows of approximately $21.0 million over the original term of the lease.
F-99
Opinion on the Financial Statements
We have audited the accompanying statement of financial position of
Li-Cycle
Holdings Corp. (the “Company”) as of May 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of May 31, 2021 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Deloitte LLP
Chartered Professional Accountants
Licensed Public Accountants
Toronto, Canada
August 10, 2021
We have served as the Company’s auditor since 2021.
F-
100
Li-Cycle
Holdings Corp.
Statement of Financial Position
As of May 31, 2021
(Expressed in US dollars)
|
As of May 31,
2021 |
||||
|
$
|
|
|
||
|
|
|
|||
|
Assets
|
||||
|
Current Assets
|
||||
|
Cash
|
1
|
|||
|
|
|
|||
|
Total Assets
|
|
1
|
|
|
|
|
|
|||
|
Shareholder’s Equity
|
||||
|
Share capital
|
|
1
|
|
|
|
|
|
|||
|
Total Liabilities and Shareholder’s Equity
|
|
1
|
|
|
|
|
|
|||
The accompanying notes are an integral part of the financial statements.
F-
101
Li-Cycle
Holdings Corp.
Statement of Financial Position
As of May 31, 2021
(Expressed in US dollars)
|
1.
|
Organization
|
Li-Cycle
Holdings Corp. (the “Company”) was incorporated under the laws of Ontario on February 12, 2021, as part of a plan of arrangement (the “Arrangement”) to reorganize
Li-Cycle
Corp. The Company’s intended business activity is the resource recovery from
lithium-ion
batteries. To date, the Company has not commenced operations and is expected to commence operations concurrent with the offering in accordance with the Arrangement. The Company’s registered address is 2351 Royal Windsor Drive, Unit 10, Mississauga, ON L5J 4S7 Canada.
The Company issued one common share for $1 upon incorporation with
Li-Cycle
Corp. being the sole shareholder. The common shares have no par value and the number of authorized common shares is unlimited.
|
2.
|
Summary of significant accounting policies
|
|
(a)
|
Statement of Compliance
|
The statement of financial position has been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) incorporating interpretations issued by the IFRS Interpretations Committee (“IFRICs”). Separate Statements of Income and Comprehensive Income, Changes in Shareholder’s Equity and Cash Flows have not been presented as there have been no activities for the Company from inception to May 31, 2021.
These financial statements were approved and authorized for issue by the Board of Directors on August 10, 2021.
|
(b)
|
Cash
|
Cash include cash on hand with original maturities of three months or less.
|
3.
|
Subsequent events
|
On August 10, 2021, in accordance with the plan of arrangement to reorganize
Li-Cycle
Corp.,
Li-Cycle
Corp. finalized the business combination with Peridot Acquisition Corp. (NYSE: PDAC) and upon closing, the combined company was renamed
Li-Cycle
Holdings Corp.
F-10
2
Li-Cycle
Holdings Corp.
PROSPECTUS
, 2021
PART II
Information Not Required in Prospectus
Item 6. Indemnification of Directors and Officers
In accordance with the Business Corporations Act (Ontario) and pursuant to the Company’s
by-laws
subject to certain conditions, the Company shall indemnify, to the maximum extent permitted by law, (i) any director or officer of the Company; (ii) any former director or officer of the Company; (iii) any individual who acts or acted at the Company’s request as a director or officer, or in a similar capacity, of another entity, against all costs, charges and expenses reasonably incurred by the individual in respect of any civil, criminal, administrative, investigative or other proceeding in which the individual is involved because of that association with the Company or other entity. The Company shall advance monies to a director, officer or other individual for costs, charges and expenses reasonably incurred in connection with such a proceeding; provided that such individual must repay the monies if the individual does not fulfill the conditions described below.
Indemnification is prohibited under the OBCA unless the individual (i) acted honestly and in good faith with a view to best interests of the Company, or the best interests of the other entity for which the individual acted as director or officer or in a similar capacity at the Company’s request; and (ii) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the individual had reasonable grounds for believing that his or her conduct was lawful.
Item 7. Recent Sales of Unregistered Securities
The following list sets forth information regarding all securities sold or granted by us within the past three years that were not registered under the Securities Act and the consideration, if any, received by us for such securities.
In connection with the Business Combination, on August 10, 2021, we issued 96,476,955 common shares to former shareholders of
Li-Cycle
Corp. in exchange for their shares of
Li-Cycle
Corp. pursuant to the Business Combination Agreement.
In connection with the Business Combination, on August 10, 2021, we issued 7,500,000 common shares to Peridot Class B Holders pursuant to the Business Combination Agreement.
In connection with the closing of the PIPE Financing, on August 10, 2021, we issued 31,549,000 common shares for a purchase price of $10.00 per share for aggregate proceeds of $315,490,000.
On September 29, 2021, we entered into the Note Purchase Agreement with the selling shareholder and issued to the selling shareholder the Spring Creek Capital Convertible Note in the principal amount of $100,000,000.
The foregoing securities issuances were made in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D or Regulation S promulgated thereunder.
Item 8. Exhibits and Financial Statement Schedules.
(a) The following exhibits are included or incorporated by reference in this registration statement on
Form F-1:
The exhibits filed as part of this registration statement are listed in the index to exhibits immediately following the signature page to this registration statement, which index to exhibits is incorporated herein by reference.
II-1
Exhibit Index
II-2
II-3
II-4
|
Exhibit
No. |
Description
|
|
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | InlineXBRL Taxonomy Extension Definition Linkbase Document | |
| 104 | Cover Page Interactive Data File. The cover page XBRL tags are embedded within the inline XBRL document. | |
| * |
To be filed by amendment.
|
| ** |
Previously filed.
|
| † |
Indicates management contract or compensatory plan or arrangement.
|
| †† |
Certain of the exhibits and schedules to these exhibits have been omitted in accordance with Regulation
S-K
Item 601(a)(5). The registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.
|
| ††† |
Pursuant to Item 601(b)(10)(iv) of Regulation
S-K,
portions of this exhibit have been omitted because
Li-Cycle
Corp. customarily and actually treats the omitted portions as private or confidential, and such portions are not material and would likely cause it competitive harm if publicly disclosed.
Li-Cycle
Holdings Corp. will supplementally provide an unredacted copy of this exhibit to the SEC or its staff upon request.
|
All schedules have been omitted because they are not required, are not applicable or the information is otherwise set forth in the financial statements or notes thereto.
Item 9. Undertakings.
The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
II-5
That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, will be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
That, for the purpose of determining any liability under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
| • |
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
|
| • |
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
|
| • |
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
|
| • |
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
|
To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A of Form
20-F
at the start of any delayed offering or throughout a continuous offering.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed pursuant to the immediately preceding paragraph, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration
II-6
statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes: (i) to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means, and (ii) to arrange or provide for a facility in the United States for the purposes of responding to such requests. The undertaking in subparagraph (i) above include information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form
F-1
and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Toronto, Ontario, Canada, on the 17th day of November, 2021.
|
Li-Cycle
Holdings Corp.
|
||||
| By: |
/s/ Ajay Kochhar
|
|||
| Name: | Ajay Kochhar | |||
| Title: |
Co-Founder,
President & CEO and Executive Director
|
|||
Power of Attorney
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below does hereby constitute and appoint Ajay Kochhar, Bruce MacInnis and Carl DeLuca, and each of them singly, as his or her true and lawful
and agents, each with full power of substitution and
and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said
and agents, or any of them, or their or his or her substitutes or substitutes, may lawfully do or cause to be done by virtue hereof.
attorneys-in-fact
re-substitution,
for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and any subsequent registration statement filed by the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file or cause to be filed the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact
attorneys-in-fact
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
|
Signature
|
Capacity
|
Date
|
||
|
/s/ Ajay Kochhar
Ajay Kochhar
|
Co-Founder,
President & CEO and
Executive Director
(Principal Executive Officer)
|
November 17, 2021 | ||
|
/s/ Bruce MacInnis
Bruce MacInnis
|
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
November 17, 2021 | ||
|
/s/ Mark Wellings
Mark Wellings
|
Non-Executive
Director
|
November 17, 2021 | ||
|
/s/ Rick Findlay
Rick Findlay
|
Non-Executive
Director
|
November 17, 2021 | ||
|
/s/ Alan Levande
Alan Levande
|
Non-Executive
Director
|
November 17, 2021 | ||
|
/s/ Scott Prochazka
Scott Prochazka
|
Non-Executive
Director
|
November 17, 2021 | ||
|
/s/ Anthony Tse
Anthony Tse
|
Non-Executive
Director
|
November 17, 2021 | ||
II-8
AUTHORIZED REPRESENTATIVE
Pursuant to the requirement of the Securities Act of 1933, the undersigned, the duly undersigned representative in the United States of
Li-Cycle
Holdings Corp., has signed this registration statement in the City of Newark, State of Delaware, on November 17, 2021.
| PUGLISI & ASSOCIATES | ||||
| By: |
/s/ Donald J. Puglisi
|
|||
| Name: | Donald J. Puglisi | |||
| Title: | Managing Director | |||
II-9
