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Basis of Presentation and Summary of Significant Accounting Polices
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Basis of Presentation and Summary of Significant Accounting Polices Basis of Presentation and Summary of Significant Accounting Polices
The accompanying unaudited condensed consolidated interim financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting and applicable quarterly reporting regulations of the SEC and are presented in U.S. Dollars.
These condensed consolidated interim financial statements of the Company, including the condensed consolidated interim balance sheet as of September 30, 2024, the condensed consolidated interim statements of operations and comprehensive loss, condensed consolidated interim statement of equity and condensed consolidated interim statement of cash flows for the nine months ended September 30, 2024 and 2023, as well as other information disclosed in the accompanying notes, are unaudited. The condensed consolidated balance sheet at December 31, 2023, has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of its financial position as of September 30, 2024, and the results of operations for the three and nine months ended September 30, 2024, and 2023, and cash flows for the nine months ended September 30, 2024, and 2023, have been included. Interim results are not necessarily indicative of financial results for a full year or any future years or interim periods.
The Company reclassified certain amounts in the condensed consolidated interim financial statements to conform to the current period's presentation.
Going concern
The going concern basis of accounting assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.
The Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated interim financial statements are issued. Based on its recurring losses from operations since inception, which included losses from operations of $25.2 million and $96.3 million for the three and nine months ended September 30, 2024 ($44.0 million and $125.9 million for the three and nine months ended September 30, 2023), net cash used in operating activities of $92.5 million during the nine months ended September 30, 2024 ($89.3 million for the nine months ended September 30, 2023), and the pause on construction of the Rochester Hub project (as described below), the Company has concluded that there is substantial doubt about its ability to continue as a going concern for a period of one year from the date that these unaudited condensed consolidated interim financial statements were issued.
As of September 30, 2024, the Company had $9.9 million in restricted cash of which $3.0 million was held as security for waste disposal obligations related to the Germany Spoke operations, and $5.6 million was a bank guarantee against a reservation fee for future battery waste recycling services. Additionally, the Company has $1.3 million held as cash collateral with its bank as security for credit cards and a performance bond. As these funds are contractually restricted, and the Company cannot use them for general operating purposes, they are classified as restricted cash in the consolidated balance sheets.
To date, the Company has financed its operations primarily through proceeds received in connection with: (i) the Business Combination; (ii) the concurrent $315.5 million private placement of common shares; (iii) other private placements of Li-Cycle securities (including convertible notes and common shares); (iv) the ATM Program; and (v) government grants. On March 11, 2024, the Company entered a private placement agreement (the “Glencore Senior Secured Convertible Note Purchase Agreement”) to issue a senior secured convertible note in an aggregate principal amount of $75.0 million to an affiliate of Glencore plc (the “Glencore Senior Secured Convertible Note”) which closed on March 25, 2024. On November 7, 2024, the Company entered an agreement for a loan facility (“DOE Loan Facility”) of up to $475 million (including up to $445 million of principal and up to $30 million in deferred and accrued interest) through the United States Department of Energy’s ("DOE") Loan Programs Office’s Advanced Technology Vehicles Manufacturing Program (“ATVM Program”). The Company is actively exploring additional financing and strategic alternatives for a complete funding package needed to restart construction at the Rochester Hub (of which the DOE Loan Facility is a key component) and for general corporate purposes. The funding package would assist in satisfying the conditions required to draw against the DOE Loan Facility, including funding the remaining Base Equity Contribution (which includes reserve account requirements) and a minimum cash balance. There can be no assurance that the Company will be able to secure additional funding at attractive commercial terms or at all. Furthermore, any additional financing, including the recent Glencore Senior Secured Convertible Note investment, and any borrowings that
become available under the DOE Loan Facility, and any future sales made under the ATM Program may be insufficient to provide adequate liquidity for ongoing operations, to fund the Company’s future growth or capital projects, including the Rochester Hub, or otherwise satisfy any of the Company’s funding needs and obligations. The Glencore Convertible Notes, and the DOE Loan Facility have, or will have restrictive covenants that significantly limit the Company’s operating and financial flexibility or its ability to obtain future funding.
In addition, there are inherent risks associated with the Company’s ability to execute its growth strategy. There can be no assurance that the Company will develop the manufacturing capabilities and processes, secure reliable sources of component supply to meet quality, engineering, design or production standards, or meet the required production volumes to grow into a viable, cash-flow-positive business successfully.
These factors, in addition to potential rising inflation, commodity and labor prices and other challenging macroeconomic conditions, have led the Company to undertake mitigation initiatives to strengthen its financial position, enhance liquidity and preserve cash flow, including:
•On October 23, 2023, Li-Cycle announced that it had paused construction work on its Rochester Hub, pending completion of a comprehensive review of the project’s future strategy.
•In connection with the comprehensive review of the go-forward strategy of the Rochester Hub project, the Board of Directors (the “Board”) established the Special Committee to, among other things, (1) oversee and supervise a strategic review of all or any of the Company’s operations and capital projects including its sales, general and administration functions, and (2) consider financing and other strategic alternatives.

•The Special Committee selected Moelis and other advisors to assist with exploring financing options to increase the liquidity of Li-Cycle and strategic alternatives managing short-term liquidity and implementing liquidity generating initiatives.
•On November 1, 2023, the Company initiated the implementation of the Cash Preservation Plan which continued to be updated and executed during the quarter ended September 30, 2024. Preservation activities include reducing staffing in its corporate support functions, pausing production and working towards closure of the Company’s Ontario Spoke and warehouse facility, suspending other development projects pending strategic review, and pursuing reductions in overhead and selling, general and administrative costs.
These factors represent material uncertainties that cast substantial doubt about the Company’s ability to continue as a going concern. These unaudited consolidated interim financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. If the going concern basis were not appropriate for these unaudited condensed consolidated interim financial statements, adjustments to the carrying value of assets and liabilities or reported expenses may be necessary, and these adjustments could be material.
Impairment of long-lived assets
The Company reviews long-lived assets such as plant and equipment, intangible assets with finite useful lives and right-of-use assets (“ROU assets”) for impairment whenever events or changes in circumstances indicate that the carrying value of the asset or asset group may not be recoverable. These events and circumstances may include significant decreases in the market price of an asset or asset group, significant changes in the extent or manner in which an asset or asset group is being used by the Company or in its physical condition, a significant change in legal factors or in the business climate, a history or forecast of future operating or cash flow losses, significant disposal activity, a significant decline in the Company’s share price, a significant decline in revenue or adverse changes in the economic environment. The existence of an individual indicator outlined above, or otherwise, is not automatically an indicator that a long-lived asset may not be recoverable. Instead, management exercises judgment and considers the combined effect of all potential indicators and developments present, potentially positive or negative, when determining whether a long-lived asset may not be recoverable.
For further information and details of the Company’s significant accounting policies, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K, and “Part I. Financial Information—Item 2. Management’s discussion and analysis of financial condition and results of operations - Material Accounting Policies and Critical Estimates” in this Quarterly Report on Form 10-Q.