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YoY shift: Unscored
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Risk Factors (Item 1A)
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ITEM 1A. RISK FACTORS
An investment in our securities carries a significant degree of risk. You should carefully consider all risk factors set forth in this Annual Report on Form 10-K, including our Consolidated Financial Statements and related notes in connection with your ownership of our securities. If any of these risks actually occur, our business and financial results could be materially affected. This could cause the trading price of our securities to , perhaps significantly, and you therefore may all or part of your investment. These risks 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 effect on our business, financial condition and results of operations.
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Summary of Risk Factors
The following summarizes some, but not all, of the risks provided below. Please carefully consider all of the information discussed in these “ Item 1A. Risk Factors ” for a more thorough description of these and other risks:
Risks Relating to Li-Cycle’s Business
• There is substantial doubt about Li-Cycle's ability to continue as a going concern and to achieve or sustain profitability. The Cash Preservation Plan, including the efforts to pursue financing options or strategic alternatives, may not achieve its intended results.
• The development of Li-Cycle’s Rochester Hub is dependent on drawing on the DOE Loan Facility and the development of the Rochester Hub, Spokes and other future projects may not be completed on time or at the cost estimated and may not meet productivity or end product expectations.
• We require additional-third party financing or investment to fund our operations, satisfy the conditions to draw down on our DOE Loan Facility and to repay our liabilities, and we can provide no assurance that we will be able to obtain additional third-party financing or investment in our business, on attractive terms or at all.
• Li-Cycle may not be able to service its indebtedness or sustain its operations, the terms of its debt contain restrictive covenants, Li-Cycle may not be able to obtain necessary waivers or cure events of default under its debt instruments and its indebtedness is secured by a substantial portion of its assets.
• Li-Cycle may not be able to successfully implement its growth strategy, including any international expansion, and may be unable to manage future growth effectively. Any strategic transaction that Li-Cycle may engage in may be disruptive, dilute shareholders or otherwise adversely affect Li-Cycle’s business.
• Li-Cycle may not be able to economically and efficiently source, recover and recycle lithium-ion battery materials, as well as third-party black mass, and to meet the market demand.
• Failure to materially increase recycling capacity and efficiency could materially adversely affect Li-Cycle. Li-Cycle is and will be dependent on the continuing operation and capacity of its recycling facilities and maintaining and sourcing sufficient feedstock.
• Problems with the handling of lithium-ion battery cells, the development of an alternative chemical make-up of lithium-ion batteries or battery alternatives or a decline in EV adoption rates or government support for “green” energy technologies could materially adversely affect Li-Cycle’s revenues and results of operations.
• Li-Cycle’s business is subject to operational and project development risks and the unavailability or cancellation of insurance coverage.
• Li-Cycle relies on a limited number of commercial partners to generate most of its current and expected revenue.
• Decreases in demand and fluctuations in benchmark prices for the metals contained in Li-Cycle’s products and changes in the volume and composition of lithium-ion battery feedstock materials processed by Li-Cycle could significantly impact Li-Cycle’s costs, revenues and results of operations.
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• Li-Cycle’s reliance on the experience and expertise of its senior management and key personnel may cause material adverse impacts on it if a senior management member or key employee departs.
• Li-Cycle relies on third-party consultants for its regulatory compliance and could be materially adversely impacted if the consultants do not correctly inform Li-Cycle of the regulatory changes. Further, Li-Cycle is subject to the risk of litigation, foreclosure or regulatory proceedings, which could materially adversely impact its financial results.
• 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 operates in an emerging, competitive industry and failure to compete successfully could materially adversely affect revenue and profitability.
• Increases in income tax rates, changes in income tax laws or disagreements with tax authorities could materially adversely affect Li-Cycle’s business, results of operations and financial condition.
• Li-Cycle’s operating and financial results may vary significantly from period to period and fluctuations in foreign currency exchange rates could result in increases in Li-Cycle’s operating costs.
• Unfavorable economic or geopolitical conditions, including disruptions in the global supply chain and inflation, natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, cyber incidents, boycotts and geo-political events could have a material adverse effect on Li-Cycle’s business, results of operations and financial condition.
• Failure to protect or enforce Li-Cycle’s intellectual property could materially adversely affect its business, and 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.
Risks Relating to Ownership of Our Securities
• Our by-laws could limit shareholders’ ability to obtain a favorable judicial forum for disputes.
• We may issue additional common shares or other equity securities without shareholder approval, which would dilute the ownership interests of existing shareholders and may depress the market price of our common shares. Our executive officers and directors may also have interests that are different than yours.
• The market price of our common shares has been and may continue to be volatile and we do not currently intend to pay dividends.
• An active, liquid trading market for our common shares may not be sustained.
• We have identified material weaknesses in our ICFR. Failure to develop and maintain an effective ICFR could have a material adverse effect on our business, results of operations and trading price of our common shares.
• We need to incur significant expense, time and resources to comply with the rules applicable to “U.S. domestic issuers”.
• The Company becoming a “passive foreign investment company” could have material adverse U.S. federal income tax consequences for U.S. Holders.
• Our inability to meet expectations and projections in any analyst reports, or a lack of coverage by securities or industry analysts, could result in a depressed market price and limited liquidity for its shares.
• The Company’s substantial convertible debt may cause substantial dilution or, depending on certain future events, a change of control of the Company, affecting the trading price of our common shares and the shareholders’ interests.
• We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and share price.
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• We may not be able to repurchase or make cash payments required by the Warrants and the provisions of the Warrants may discourage an acquisition of us by a third party.
Risks Relating to Li-Cycle’s Business
There is substantial doubt about Li-Cycle’s ability to continue as a going concern.
As of December 31, 2024, Li-Cycle held cash and cash equivalents of $22.6 million. For the year ended December 31, 2024, Li-Cycle’s net loss and net cash used in operating activities amounted to $137.7 million and $106.4 million, respectively. Li-Cycle has also incurred significant losses since inception, expects to incur net losses in the future and has a declining cash balance. Li-Cycle expects to continue to have a net cash outflow from operations for the foreseeable future. Li-Cycle will require significant additional capital in order to satisfy the conditions to draw on the DOE Loan Facility and to restart the Rochester Hub project. The Company can provide no assurance as to when, if ever, or how much, if any, funds will be available or received from the DOE Loan Facility. The Company also requires capital to fund existing and remaining capital commitments related to the Rochester Hub, as well as for general business operations. Certain contractors, subcontractors, consultants and suppliers (together, the “ lienors ”) have filed purported mechanic’s liens against the Company’s interests in certain properties in New York State related to the Rochester Hub project, under New York Lien Law, given allegeddelays in making payments to those lienors. On April 9, 2024, one of the lienors, MasTec, commenced arbitration proceedings to seek recovery of $48.7 million allegedly due under the construction contract for the Rochester Hub project, plus interest, fees, costs and expenses, and also commenced a lien foreclosure action, which has been stayed pending completion of the arbitration proceedings. See “—Risks Relating to Li-Cycle’s Business—The development of Li-Cycle’s Rochester Hub, Spoke network and other future projects is subject to risks, including with respect to financing, engineering, permitting, procurement, construction, commissioning and ramp-up, and Li-Cycle cannot guarantee that these projects will be resumed, completed in a timely manner or at all, that their costs will not be significantly higher than estimated, that financing will be sufficient to cover costs or escalated costs, or that the completed projects will meet expectations with respect to their productivity or the specifications of their respective end products, among others ” and "Item 3. Legal Proceedings" . In addition, there are inherent risks associated with the ability of the Company to execute its growth strategy and there can be no assurance that the Company will develop the manufacturing capabilities and processes, meet quality, engineering, design or production standards, or meet the required production volumes to successfully grow into a viable, cash flow positive business. Other circumstances such as a continued rise in inflation, commodity and labor prices, adverse regulatory and policy changes and other challenging macroeconomic conditions, may also arise, which could have a material and adverse effect on the Company’s cash flow and anticipated cash needs, which in turn could result in significant additional funding needs. As a result, Li-Cycle requires additional short or long-term financing in the near term in order to have sufficient cash and cash equivalents on hand to support current operations for the twelve months following the filing of this Annual Report on Form 10-K. This casts substantial doubt upon the Company’s ability to continue as a going concern without access to additional capital through financing transactions or otherwise. There are no assurances that Li-Cycle will be able to address its liquidity needs, including by raising sufficient capital in the near term and may therefore need to significantly modify or terminate operations or dissolve and liquidate its assets under applicable bankruptcy laws or otherwise file for bankruptcy protection.
The development of Li-Cycle’s Rochester Hub, Spoke network and other future projects is subject to risks, including with respect to financing, engineering, permitting, procurement, construction, commissioning and ramp-up, and Li-Cycle cannot guarantee that these projects will be resumed, completed in a timely manner or at all, that their costs will not be significantly higher than estimated, that financing will be sufficient to cover costs or escalated costs, or that the completed projects will meet expectations with respect to their productivity or the specifications of their respective end products, among others.
Li-Cycle’s Rochester Hub, Spoke network 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, including as a result of unfavorable market conditions, 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, Spoke network or other future projects. Further, Li-Cycle’s estimates of the amount of time and cost it will take to complete the Rochester Hub, Spoke network or other future projects are based on assumptions about the timing of engineering studies, financing and availability of financing, 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.
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On October 23, 2023, Li-Cycle announced that it was pausing construction work on its Rochester Hub, pending completion of a comprehensive review of the go-forward strategy for the project. The pause in construction was due to escalating costs and the expectation that aggregate costs to complete the existing scope of the project would exceed the previously disclosed budget of $560.0 million. As at December 31, 2024, the Company had incurred total costs of $566.6 million on the project including costs incurred but not yet paid of $89.7 million. Total costs incurred also includes the contribution for the construction of process buildings and warehouse of $96.7 million.
As part of the comprehensive review, Li-Cycle completed a technical review of the MHP scope for the Rochester Hub and confirmed the technical viability of the MHP scope through an internal study that allows the project to proceed on a schedule aligned with the Company’s current expectations regarding the timing and evolution of the battery recycling and EV markets, subject to obtaining required permits and regulatory approvals, if needed, and additional financing. The construction, commissioning and operating costs for process areas associated with production of nickel sulphate and cobalt sulphate, as originally planned for the Rochester Hub, were not included in the technical review, and there are no current plans that include production of nickel sulphate and cobalt sulphate. However, the areas dedicated to the production of nickel sulphate and cobalt sulphate would be left intact under the MHP scope, to allow for the potential construction, completion, and integration of these areas in the future, although no such plans are contemplated at this time. As previously reported, Li-Cycle’s estimated project cost for the Rochester Hub project is approximately $960.2 million for the MHP scope, which excludes costs for project commissioning, ramp-up, working capital or financing. The Company's current estimate of cost to complete is approximately $483.3 million, including $89.7 million of costs incurred but not yet paid related to the Rochester Hub project as of December 31, 2024. As a result, the Company has determined that it will require significant additional funding before restarting the Rochester Hub project on the basis of the MHP scope or otherwise. In addition, in connection with the comprehensive review, Li-Cycle also paused or slowed down operations at its North American Spokes and is currently re-evaluating the Company’s strategy for its North American Spokes, which may include further pauses or slowdowns. For additional details, see the section titled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Management Priorities, Challenges and Business Outlook - Operational Initiatives."
Certain contractors, subcontractors, consultants and suppliers (together, the “ lienors ”) have filed purported mechanic’s liens against the Company’s interests in certain properties in New York State related to the Rochester Hub project, under New York Lien Law, given allegeddelays in making payments to those lienors. As at March 18, 2025, there were liens on the Company’s interests in the Rochester Hub property filed by contractors and suppliers to the Company of approximately $64.0 million and filed by subcontractors to the Company’s contractors of approximately $36.0 million, as well as liens on the Company’s interests in the warehouse and administrative building for the Rochester Hub filed by the Warehouse Landlord of approximately $5.1 million. Such liens may restrict the Company’s ability to dispose of its interest in such properties or pledge its interests in such properties as collateral for future financing arrangements while they remain in place. In addition, the lienors may enforce their liens by court action and courts may cause the Company’s interest in the applicable properties to be sold to satisfy such liens. On April 9, 2024, one of the lienors, MasTec, commenced arbitration proceedings to seek recovery of $48.7 million allegedly due under the construction contract for the Rochester Hub project, plus interest, fees, costs and expenses, and also commenced a lien foreclosure action, which has been stayed pending completion of the arbitration proceedings. There can be no assurances that any efforts by the Company to negotiate payment plans with the lienors will be successful, timely or on terms favorable to the Company. Further, the lienors could have priority over the Company’s shareholders in the event of bankruptcy or similar proceedings and, as a result, the amount of distributions our shareholders could receive in such bankruptcy or a similar proceeding could be reduced. Fo r additional details, see the section titled “Item 3. Legal Proceedings” .
Li-Cycle cannot guarantee that the costs of the Rochester Hub, the Spoke network or other future projects will not be higher than estimated, or that it will have sufficient capital to cover such costs, or that it will be able to complete the Rochester Hub, Spoke network 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 Rochester Hub, the Spoke network or any other future project cannot be completed. Further, there can be no assurance that the Rochester Hub or the Spoke network will perform at the expected production rates or unit costs, or that their respective end products will meet the intended specifications.
Completion of our Rochester Hub is substantially contingent on our ability to fully draw down on our DOE Loan Facility, which contains a number of restrictive covenants and conditions precedent to the first and each draw. Failure to satisfy the conditions required to fully draw down on our DOE Loan Facility would have a material adverse effect on our business, financial condition and results of operations.
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As part of our Cash Preservation Plan, we paused construction work on our Rochester Hub in October 2023, pending completion of a comprehensive review of the project's future strategy. The cost to recommence and complete construction of the Rochester Hub under the proposed MHP scope is currently estimated at $483.3 million. Our DOE Loan Facility, which closed on November 7, 2024, provides for up to $475.0 million of loans under the DOE’s ATVM Program to recommence construction on the Rochester Hub Project. We cannot, however, access these funds immediately or at once, but only through periodic draws, assuming eligible costs are incurred, and the first draw must occur prior to November 7, 2025. Our ability to draw on the DOE Loan Facility is subject to satisfaction of additional conditions and requirements, including, among others (i) obtaining financing of approximately $173.0 million of the base equity contribution to fund reserve accounts required under the DOE Loan Facility (the “ Reserve Accounts ”) (of which up to approximately $97.0 million can be satisfied via letters of credit), and (ii) satisfying a minimum unrestricted cash condition, both prior to and following completion of the Rochester Hub. We are presently aware of no such sources of financing to fund the base equity contribution we are required to provide as a condition to drawing on the DOE Loan Facility. There can be no assurance that the Company will be able to secure such additional funding, under reasonable commercial terms or at all.
If we are unable to satisfy the conditions required to borrow under the DOE Loan Facility, we may not have access to sufficient funding to complete the Rochester Hub, which would have a material adverse effect on our business, financial condition, and results of operations. On January 20, 2025, U.S. President Donald Trump signed the “Unleashing American Energy” Executive Order, which, among other things, paused the disbursement of funds appropriated through the Inflation Reduction Act of 2022 or the Infrastructure Investment and Jobs Act by all federal agencies, including the DOE. While we intend to continue to work closely with the DOE with respect to the DOE Loan Facility, there can be no assurances that we will be able to draw down the anticipated funds under the DOE Loan Facility. If we are unable to draw down the anticipated funds under the DOE Loan Facility, or we are delayed in making such draw downs, we will need to obtain additional or alternative financing to complete our Rochester Hub. Such additional or alternative financing may not be available on attractive terms, if at all, and could be more costly for us to obtain.
The DOE Loan Facility documents contain covenants that include, among others, a requirement that the Rochester Hub project be conducted in accordance with the business plan for the project, compliance with all requirements of the DOE’s ATVM Program, and limitations on our and our subsidiaries’ ability to incur indebtedness, incur liens, make investments or loans, enter into mergers or acquisitions, dispose of assets, pay dividends or make distributions on capital stock, prepay indebtedness, pay management, advisory or similar fees to affiliates, enter into certain material agreements and affiliate transactions, enter into new lines of business and enter into certain restrictive agreements. These restrictions may limit our ability to operate our business and may cause us to take actions or prevent us from taking actions we believe are necessary from a competitive standpoint or that we otherwise believe are necessary to grow our business. In addition, if we are unable to comply with the restrictive covenants under the DOE Loan Facility, we may default under the terms of the DOE Loan Facility. If there is an event of a default, we would not be eligible to draw funds under the DOE Loan Facility and such event of default, if not cured or waived, could result in the acceleration of outstanding loans under the DOE Loan Facility.
Li-Cycle has a history of losses and expects to incur significant expenses for the foreseeable future and may never achieve or sustain profitability.
Li-Cycle was until 2020 a development stage company with no commercial revenues. The Company incurred a net loss of $137.7 million for the year ended December 31, 2024, a net loss of $138.0 million for the year ended December 31, 2023, a net income of $1.6 million for the two months ended December 31, 2022, and net losses of $50.3 million for the year ended October 31, 2022 and $70.5 million for the year ended October 31, 2021. Li-Cycle expects to incur net losses in the future and may never achieve sustained profitability. Net losses have had, and will continue to have, an adverse effect on working capital, total assets and shareholders’ equity. The Company has concluded that under ASC 205 – Presentation of financial statements , there is substantial doubt about its ability to continue to as a going concern.
Our ability to continue as a going concern is dependent on our ability to obtain the necessary financing to meet our obligations and repay our liabilities arising from the ordinary course of business operations when they become due. Li-Cycle expects to continue to have a net cash outflow from operations for the foreseeable future as it continues its efforts to pursue a financing or alternative strategic transaction in addition to funding existing and remaining capital commitments related to its Rochester Hub and general business operations. In addition, certain contractors, subcontractors, consultants and suppliers (together, the “ lienors ”) have filed purported mechanic’s liens against the Company’s interests in certain properties in New York State related to the Rochester Hub project, under New York Lien Law, given allegeddelays in making payments to those lienors. On April 9, 2024, one of the lienors, MasTec, commenced arbitration proceedings to
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seek recovery of $48.7 million allegedly due under the construction contract for the Rochester Hub project, plus interest, fees, costs and expenses, and also commenced a lien foreclosure action, which has been stayed pending completion of the arbitration proceedings. See “ – Risks Relating to Li-Cycle’s Business—The development of Li-Cycle’s Rochester Hub, Spoke network and other future projects is subject to risks, including with respect to financing, engineering, permitting, procurement, construction, commissioning and ramp-up, and Li-Cycle cannot guarantee that these projects will be resumed, completed in a timely manner or at all, that their costs will not be significantly higher than estimated, that financing will be sufficient to cover costs or escalated costs, or that the completed projects will meet expectations with respect to their productivity or the specifications of their respective end products, among others ”. As a result, the Company’s ability to satisfyclaims of all its creditors in full as well as any other payment obligations is uncertain. There are also inherent risks associated with the ability of the Company to execute its growth strategy and 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 to meet the required production volumes to successfully grow into a viable, cash flow positive, business. Other circumstances such as a continued rise in inflation, commodity and labor prices, adverse regulatory and policy changes and other challenging macroeconomic conditions may also arise, which could have a material and adverse effect on the Company’s cash flow and anticipated cash needs, which in turn could result in significant additional funding needs. In addition, the closed loop resource recovery, logistics management, secure destruction and add-on services of Li-Cycle’s lithium-ion battery recycling operations are capital-intensive. While we have implemented the Cash Preservation Plan in order to reduce expenses and slow cash outflows and have been evaluating financing and strategic alternatives, including the letter received from Glencore on March 14, 2025 expressing its interest in a potential transaction involving Li-Cycle, the outcome of these initiatives cannot be predicted with any certainty at this time. There are no assurances that Li-Cycle will be able to address its liquidity needs, including by raising sufficient capital in the near term and may therefore need to significantly modify or terminate our operations or dissolve and liquidate our assets under applicable bankruptcy laws or otherwise file for bankruptcy protection.
Because of the numerous risks and uncertainties associated with the current status of Li-Cycle’s business, even if Li-Cycle is able to address its liquidity needs, Li-Cycle is unable to predict if it will become profitable or maintain profitability. Li-Cycle’s inability to achieve, and then maintain, profitability would negatively impact its business, financial condition, results of operations, and cash flows.
There can be no assurance that the Cash Preservation Plan or the efforts to pursue financing options or strategic alternatives will achieve any of the intended results.
On November 1, 2023, the Company initiated the implementation of the Cash Preservation Plan, which has resulted in a reduction of staffing in the Company’s corporate support functions, commencement of closure activities at its Ontario Spoke, curtailing of operations at its New York Spoke and implementing a plan to manage lower levels of BM&E production, and slow down operations at its remaining operating Spoke locations. The Cash Preservation Plan also involves reviewing existing plans for bringing on additional Spoke capacity and taking other steps to preserve the Company’s available cash while pursuing funding alternatives for the Company and continuing to review the go-forward strategy for the Rochester Hub project. There can be no assurances that the Cash Preservation Plan will be successful.
In light of our liquidity position and anticipated funding requirements, the Special Committee engaged Moelis to assist with exploring financing options and evaluate strategic alternatives. While Li-Cycle was successful in closing the Glencore Senior Secured Convertible Note investment, the Company will require a significant amount of financing in addition to the proceeds of the Glencore Senior Secured Convertible Note, the ATM Program and the Underwritten Offering in order to meet its funding needs. While we have been evaluating financing and strategic alternatives, including the letter from Glencore on March 14, 2025 expressing its interest in a potential transaction involving Li-Cycle, we can provide no assurance as to the outcome of any of these efforts. The process of evaluating any funding options or strategic alternatives is costly, time-consuming and complex. Li-Cycle has incurred, and may in the future incur, significant costs related to this evaluation, as well as additional unanticipated expenses. A considerable portion of these costs have been and will continue to be incurred regardless of whether any such course of action is implemented, or any transaction is completed. Any such costs will decrease the remaining cash available for use in Li-Cycle’s business. Any delays in this process will cause Li-Cycle’s cash balance to continue to deplete, which could make it less attractive as a counterparty. The continued review of Li-Cycle’s options may also create continued uncertainty for its employees, including as a result of the past and future reductions in workforce, and the Cash Preservation Plan. This uncertainty may adversely affect the Company’s ability to retain key employees necessary to maintain its ongoing operations or to execute any potential financing or a strategic transaction. In addition, a strategic alternative process can require a significant amount of management and other employee’s time and focus, which diverts attention from operating the business. If we fail to achieve some or all of the expected benefits of the financing options and strategic alternatives review, we may need to
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significantly modify or terminate our operations or dissolve and liquidate our assets under applicable bankruptcy laws or otherwise file for bankruptcy protection.
Further, the market capitalization of Li-Cycle has sharplydeclined following the announcement of the construction pause on the Rochester Hub project on October 23, 2023, as well as following the suspension of trading of our common shares on the NYSE after market close on February 26, 2025 and the commencement of trading of our common shares on the OTCQX on February 27, 2025. As a result, there is a risk that minimal or no value will be assessed on Li-Cycle’s assets by potential counterparties, and that Li-Cycle may not be able to complete any transaction before its cash position is reduced such that it will need to terminate operations or dissolve and liquidate its assets under applicable bankruptcy laws or otherwise file for bankruptcy protection.
The Cash Preservation Plan and any financing or other strategic transaction that Li-Cycle may consummate in the future could harm our business, operating results and financial condition and there can be no assurances that any future financing or strategic transaction will lead to increased shareholder value or achieve any of the anticipated results. If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant further dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common shares. See “ Risks Relating to the Ownership of Our Common Shares—The issuance of our common shares in connection with the conversion of the KSP Convertible Notes and the Glencore Convertible Notes would cause substantial dilution, and could materially affect the trading price of our common shares and your interests and any future financings may cause further dilution ”. Furthermore, any additional financing may be insufficient to provide sufficient liquidity for ongoing operations, fund the Company’s future growth or capital projects, including the Rochester Hub, or otherwise satisfy any of the Company’s funding needs, and additional financing may have restrictive covenants that significantly limit the Company’s operating and financial flexibility or its ability to obtain future financing.
If Li-Cycle is successful in continuing to implement the Cash Preservation Plan or completing any further financing or other strategic alternative, it may still be subject to other operational and financial risks, including but not limited to, increased near-term and long-term expenditures; higher than expected financing or other strategic transaction costs; the incurrence of substantial debt or dilutive issuances of equity securities to fund future operations; write-downs of assets; impairment of relationships with key suppliers or customers due to changes in structure, management or ownership; the inability to retain key employees; and the possibility of future litigation.
Li-Cycle may not be able to generate or raise sufficient cash to service its debt and sustain its operations.
As of December 31, 2024, we had substantial indebtedness outstanding, including an aggregate principal amount of $133.7 million outstanding under the KSP Convertible Note, $124.1 million outstanding under the First A&R Glencore Note , $121.8 million outstanding under the Second A&R Glencore Convertible Note and $81.6 million outstanding under the Glencore Senior Secured Convertible Note. Our ability to make principal or interest payments when due on our indebtedness, including obligations under the KSP Convertible Notes and the Glencore Convertible Notes, and to fund our ongoing operations, will depend on our future performance and ability to generate cash, which, to a certain extent, is subject to the success of our business strategy as well as general economic, financial, competitive, legislative, legal, regulatory and other factors, as well as other factors discussed in these “ Item 1A. Risk Factors ”, many of which are beyond our control.
We cannot assure you that our business will generate sufficient cash flows from operations, will achieve revenue growth, or that cost savings and operating improvements will be realized or that future debt and/or equity financing will be available to us in an amount sufficient to enable us to pay our debts when due, including the KSP Convertible Notes and the Glencore Convertible Notes, or to fund our other liquidity needs. See “—Risks Relating to Li-Cycle’s Business—Li-Cycle has a history of losses and expects to incur significant expenses for the foreseeable future and may never achieve or sustain profitability” and “—Risks Relating to Li-Cycle’s Business—There can be no assurance that the Cash Preservation Plan or the efforts to pursue financing options or strategic alternatives will achieve any of the intended results.” In addition, the terms of the KSP Convertible Notes and the Glencore Convertible Notes contain mandatory redemption provisions that are triggered upon the occurrence of certain events. See Note 13 (Convertible debt) to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. We may not have sufficient available cash or be able to obtain financing at the time of a mandatory redemption. Our failure to redeem any or all of the KSP Convertible Notes and the Glencore Convertible Notes, as applicable, as required by their respective terms, will constitute a default thereunder, as applicable. Such a default could also lead to a default and cross-acceleration under agreements
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governing our other present or future indebtedness. If the payment of the related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay the interest on such indebtedness.
If our future cash flows from operations and other capital resources are insufficient to service our debt obligations and repay the same as they mature, or to fund our liquidity needs, we may be forced to:
• reduce or delay our business activities and capital expenditures;
• sell assets;
• obtain additional debt or equity capital; or
• restructure or refinance all or a portion of our debt, including the KSP Convertible Notes and the Glencore Convertible Notes, on or before maturity.
The type, timing and terms of any future financing, restructuring, asset sales or other capital-raising transactions will depend on our cash needs and the prevailing conditions in the financial markets. We cannot assure you that we would be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In such an event, we may not have sufficient assets to repay all of our debt.
Any failure to make payments on our existing debt on a timely basis could result in a reduction of our credit rating, which could also harm our ability to incur additional indebtedness. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business, financial condition and results of operations. There can be no assurance that any assets that we could be required to dispose of could be sold or that, if sold, the timing of such sale and the amount of proceeds realized from such sale would be acceptable. If our business does not generate sufficient cash flows from operations and if we are unsuccessful in raising additional capital, we may not have sufficient cash to service our debts and repay the same when due, including the KSP Convertible Notes and the Glencore Convertible Notes, or to fund our other liquidity needs.
We require additional-third party financing or investment to fund our operations, satisfy the conditions to draw down on our DOE Loan Facility and to repay our liabilities, and we can provide no assurance that we will be able to obtain additional third-party financing or investment in our business, on attractive terms or at all.
We require additional financing to meet our obligations and repay our liabilities arising from the ordinary course of business operations when they become due in order to continue as a going concern. We are presently aware of no such additional sources of financing to meet our obligations and repay our liabilities arising from the ordinary course of business. In addition, in order to draw on the DOE Loan Facility we must, among other things, obtaining financing of approximately $173.0 million of the base equity contribution to fund reserve accounts required under the DOE Loan Facility. We are presently aware of no such sources of financing to fund the base equity contribution we are required to provide as a condition to drawing on the DOE Loan Facility. The Special Committee continues to explore financing options and evaluate strategic alternatives. On March 14, 2025, we received a letter from Glencore, expressing its interest in a potential transaction involving Li-Cycle. We can provide no assurance that we will enter into a strategic transaction with Glencore, on terms attractive to our shareholders and other stakeholders, or at all. Given the Company’s current financial position, the terms of any such strategic transaction may assign limited or no value to the Company’s existing equity. If we are unable to obtain additional financing or enter into a strategic transaction, we will need to significantly modify or terminate operations and may need to dissolve and liquidate our assets under applicable bankruptcy laws or otherwise file for bankruptcy protection. See the section titled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”
The Glencore Senior Secured Convertible Note contains restrictive debt covenants that limit our operating and financial flexibility, including a liquidity covenant that requires the Company to maintain a minimum amount of liquidity.
The Glencore Senior Secured Convertible Note contains covenants that impose significant operating and financial restrictions on us. These covenants limit our ability to, among other things:
• incur or guarantee additional indebtedness;
• make certain restricted payments, restricted debt payments and investments;
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• merge, consolidate or transfer or sell assets;
• enter into transactions with affiliates;
• create or incur certain liens;
• make certain loans, investments or acquisitions; and
• create or incur restrictions on the ability of our subsidiaries to pay dividends or to make other payments to us.
All of these restrictions are subject only to limited exceptions and qualifications. In particular, we have very limited ability to incur or guarantee additional debt, create or incur liens and make loans, investments or acquisitions. In addition, we will be required to redeem a portion of the Glencore Senior Secured Convertible Note upon the occurrence of certain events and to redeem the Glencore Senior Secured Convertible Note as well as the First A&R Glencore Note and the Second A&R Glencore Note upon the occurrence of a change of control. The covenants to which we are subject pursuant to the Glencore Senior Secured Convertible Note could limit our ability to implement our business plan, to finance our future operations and capital needs and to pursue business opportunities and activities that may be in our interest. The Glencore Senior Secured Convertible Note also contains a minimum liquidity covenant that requires us to maintain a minimum amount of liquidity of $10.0 million, tested monthly. In addition, the Glencore Senior Secured Convertible Note also contains a capital expenditure covenant that restricts our ability to make capital expenditures in excess of $2.0 million in any transaction or series of related transactions, subject to certain exceptions. Any uncured breach of the covenants contained in the Glencore Senior Secured Convertible Note, including the minimum liquidity covenant, could result in the occurrence of an event of default under the Glencore Senior Secured Convertible Note, which would enable the holder of the Glencore Senior Secured Convertible Note to potentially accelerate the maturity of the principal amount due under the Glencore Senior Secured Convertible Note and foreclose on the collateral which secures the obligations under the Glencore Senior Secured Convertible Note.
The Glencore Senior Secured Convertible Note, the First A&R Glencore Note and the DOE Loan Facility are, and the Second A&R Glencore Note will be, secured by a substantial portion of the assets of the Company and its subsidiaries, resulting in the lack of substantial remaining assets available for incurring additional secured indebtedness.
The Glencore Senior Secured Convertible Note and the First A&R Glencore Note are, and the Second A&R Glencore Note will be, guaranteed by certain subsidiaries of the Company and the Glencore Senior Secured Convertible Note and the First A&R Glencore Note are, and the Second A&R Glencore Note will be, secured by perfected first priority security interests (subject to customary exceptions and permitted liens) over the assets of the Company and of its U.S. and Canadian subsidiaries, including intellectual property, and a pledge of the equity interests of each U.S. and Canadian subsidiary. In addition, the Glencore Senior Secured Convertible Note and the First A&R Glencore Note are, and the Second A&R Glencore Note will be, secured by grants of perfected first-priority security interests (subject to customary exceptions and permitted liens) in all the material intragroup receivables and the material bank accounts of Li-Cycle Germany GmbH and Li-Cycle Europe AG held by such entities in their respective jurisdictions of organization, and by the equity interests in Li-Cycle Germany GmbH and Li-Cycle Europe AG held by Li-Cycle Europe AG and the Company, respectively.
The obligations under the DOE Loan Facility are secured on a first priority basis (subject to customary exceptions and permitted liens) by, and among other things, the assets of the Borrower Entities, the shares of the Borrower Entities, and certain rights, title and interests in the Rochester Hub.
Because a substantial portion of the Company’s assets secure the Glencore Senior Secured Convertible Note, the First A&R Glencore Note and the DOE Loan Facility, and will secure the Second A&R Glencore Note, we do not have substantial remaining assets available to secure other indebtedness. Accordingly, we may not be able to incur additional secured indebtedness in the future. In addition, the terms of each of the Glencore Convertible Notes and the DOE Loan Facility significantly limit our ability to incur additional debt, including secured debt. If we are unable in the future to incur additional indebtedness, including secured indebtedness, to finance our operations and projects, such limitation could have an adverse effect on our business plans or our ability to obtain future financing, financial condition and results of operations.
Li-Cycle may not be able to successfully implement its global growth strategy, on a timely basis or at all.
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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 LIB and meet customers’ business needs;
• Effectively introduce methods for higher recovery rates and solutions to recycling of LIB;
• Complete the construction of its future facilities, including the Rochester Hub, the Planned Portovesme Hub and the Spoke network, at a reasonable cost 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;
• Secure and maintain leases for future Spoke & Hub facilities at competitive rates and in favorable locations;
• Apply for and obtain the permits necessary to operate Spoke & Hub facilities on a timely basis;
• 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 successfullyachieve any or all of the above initiatives in the manner or time period that it expects. On October 23, 2023, Li-Cycle announced that it was pausing construction work on its Rochester Hub, pending completion of a comprehensive review of the go-forward strategy for the project. In view of the pause in construction of the Rochester Hub project, the Company has commenced closure activities at the Ontario Spoke, curtailed operations at the New York Spoke, and slowed down operations at its operating Spokes in North America and Europe. The Company is also re-evaluating its strategy for bringing on additional Spoke and Hub capacity in the near-term and has paused the expansion of its Spoke network. See the section titled “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Management Priorities, Challenges and Business Outlook - Cash Preservation Plan. As a result, the Company’s global growth strategy is subject to significant change. Further, achieving growth strategy 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 and financial condition.
Li-Cycle may be unable to manage future global growth effectively.
Our plans for future global growth are currently paused as we continue to review the go-forward strategy of our business. Even if we are subsequently able to successfully implement a global growth strategy, any failure to manage our growth effectively could materially and adversely affect Li-Cycle’s business, results of operations and financial condition. Any such expansion would require us to hire and train new employees in different countries; accurately forecast supply and demand, production and revenue; source and maintain supplies of LIB and third-party black mass; 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.
Li-Cycle’s success will depend on its ability to economically and efficiently source, recover and recycle lithium-ion battery-grade materials, as well as third-party black mass, and to meet the market demand for an environmentally sound, closed-loop solution for lithium-ion battery manufacturing scrap and end-of-life lithium-ion batteries.
Li-Cycle’s future business depends in large part on its ability to economically and efficiently source, recycle and recover lithium-ion battery-grade materials (including end-of-life batteries and battery manufacturing scrap), as well as
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third-party black mass, and to meet the market demand for an environmentally sound, closed-loop solution for lithium-ion battery manufacturing scrap and end-of-life lithium-ion batteries. Although it currently recycles and recovers lithium-ion battery-grade materials at Spoke facilities in Arizona, Alabama and Germany, Li-Cycle will need to scale its recycling capacity in order to implement its growth strategy. In view of the pause in construction of the Rochester Hub, the Company has commenced closure activities at the Ontario Spoke, curtailed operations at the New York Spoke and slowed down operations at its operating Spokes in North America and Europe. The Company is also re-evaluating its strategy for bringing on additional Spoke and Hub capacity in the near-term and expects to continue to pause or slow down operations at its operational Spokes in North America and has paused the expansion of its Spoke network. See the section titled “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Management Priorities, Challenges and Business Outlook - Cash Preservation Plan . As a result, there can be no assurances that Li-Cycle can scale its recycling capacity on a timely basis or at all.
Although Li-Cycle has experience in recycling lithium-ion battery-grade materials in its existing Spoke facilities, Li-Cycle has not yet developed or operated a Hub facility on a commercial scale to produce and sell battery grade materials. 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 LIB 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, which are currently under review and subject to change, and its ability to reduce long-term expenses is constrained by its need to continue investment in its future growth. 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 and financial condition.
Failure to materially increase recycling capacity and efficiency could have a material adverse effect on Li-Cycle’s business, results of operations and financial condition.
Although Li-Cycle’s operating Generation 3 Spokes in Arizona, Alabama and Germany currently have total main line processing capacity and ancillary processing capacity of over 50,000 tonnes of LIB per year, the future success of Li-Cycle’s business depends in part on its ability to significantly increase recycling capacity and efficiency at its facilities. Li-Cycle may be unable to expand its business, satisfy demand from its current and new customers, maintain its competitive position and achieveprofitability if it is unable to build and operate future facilities. The construction of future 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 the Rochester Hub, construction of any future planned Spoke network and/or the future construction of other Spoke & 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. In view of the pause in construction of the Rochester Hub project, the Company has slowed operations at its North American Spokes by commencing closure activities at the Ontario Spoke, curtailing operations at the New York Spoke and slowing down operations at its Arizona and Alabama Spokes. The Company is also re-evaluating its strategy for bringing on additional Spoke and Hub capacity in the near-term and has paused the expansion of its Spoke network. See the section titled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Management Priorities, Challenges and Business Outlook - Cash Preservation Plan" . As a result, there can be no assurances that Li-Cycle can increase its recycling capacity on a timely basis or at all. 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 and 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 the incurrence of debt, or prove not to be successful.
From time to time, 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. As previously announced, Li-Cycle and Glencore recently resumed collaboration to assess the technical and economic viability of developing a new Hub facility in Portovesme, Italy, including a concept and pre-feasibility study. Li-Cycle will
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be dependent on its strategic partners with respect to any joint ventures in the future. Conflicts or disagreements between Li-Cycle and its strategic partners, or failure of Li-Cycle’s strategic partners to commit sufficient resources to a joint venture may, among other things, delay or prevent the successful development or operation of any joint ventures, which could have a material adverse effect on Li-Cycle’s business, financial condition, results of operations and prospects. Li-Cycle’s acquisitions or other strategic transactions could include the payment of the purchase price in whole or in part using Li-Cycle’s common shares, 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 acquisitions, joint ventures or other 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 we failed to or were unable to discover or were unable to quantify in the course of performing due diligence and 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 responsibilities, increase 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, joint ventures or other strategic transitions or be successful in leveraging any of them 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 results of operations. Accordingly, although there can be no assurance that Li-Cycle will undertake or successfully complete any acquisitions, joint ventures 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.
Operating or expanding internationally involves risks that could delay any of our future 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 are subject to certain risks inherent in doing business abroad, including:
• political, civil and economic instability;
• risks of war and other hostilities;
• corruption risks;
• trade, customs and tax risks;
• currency exchange rates and currency controls;
• limitations on the repatriation of funds;
• insufficient infrastructure;
• economic sanctions;
• 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 complying with data privacy and protection laws and regulations; and
• different and less established legal systems.
Expanding our business in international markets, including the operation of the Germany Spoke and any construction of additional international Spokes was an important element of our strategy prior to the pause in the
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construction of the Rochester Hub, and it is currently on pause. There is a risk that any future workforce reductions could exacerbate our exposure to the risks described above if there is less oversight to address them. 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 a material adverse effect on our ability to execute our strategy and accordingly on our business, results of operations and 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 and financial condition could be materially adversely affected.
Li-Cycle’s revenue is and will be dependent on the continued operations of its existing Spoke facilities as well as its future facilities, including its planned Rochester Hub, and any other facilities it develops in the future. To the extent that Li-Cycle experiences any operational risk events including, among other things, fire and explosions, severe weather and natural disasters (such as floods, windstorms, wildfires and earthquakes), failures in water supply, major power failures, equipment failures (including any failure of its process equipment, information technology, air conditioning, and cooling and compressor systems), a cyber-attack or other incident, 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 or make operational changes even though it may not have sufficient available resources at such time. Additionally, there is no guarantee that the proceeds available from any of Li-Cycle’s insurance policies will be sufficient to cover such capital expenditures or operational changes. 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 and financial condition could be materially adversely affected.
Problems with the storage and handling of lithium-ion battery cells that affect Li-Cycle’s operations or result in less usage of lithium-ion batteries could materially adversely affect Li-Cycle’s business, results of operations and financial condition.
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 mining for critical minerals or incidents involving lithium-ion battery cells, such as a vehicle or warehouse fires, even if such incidents do 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, Li-Cycle is subject to risks associated with storage and handling of lithium-ion battery cells, which could cause disruption to the operation of Li-Cycle’s current or future facilities. Li-Cycle stores a significant number of lithium-ion battery cells at the warehouse facilities associated with its Spokes and Li-Cycle transports lithium-ion batteries from its customer facilities to its Spokes and, for inventory management purposes, between its Spokes. While Li-Cycle has implemented safety procedures related to the handling of these materials, fires or safety issues have in the past and could in the future disrupt Li-Cycle’s recycling operations. Any impact on revenue from the interruption of operations at Li-Cycle’s own facilities, or resulting from reduced demand for lithium-ion batteries from actual or perceived safety or security issues, could materially adversely affect Li-Cycle’s business, results of operations and financial condition.
Li-Cycle’s business is subject to operational and project development risks that could disrupt our business, some of which may not be insured or fully covered by insurance.
Our operations (including any potential future operations such as our Rochester Hub, the Planned Portovesme Hub project and possible future additions to our Spoke network), notwithstanding the current pause on those projects and future expansion plans, are subject to risks inherent in the lithium-ion battery recycling industry and risks associated with the construction and development of new facilities, including potential liability which could result from, among other circumstances, personal injury, environmental claims or property damage, some of which risks may not be insured or fully covered at any time by insurance.
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Unavailability or cancellation of third-party insurance coverage would increase our overall risk exposure, as well as disrupt our operations.
We maintain insurance coverage from third-party insurers as part of our overall risk management strategy, including coverage for director and officer liability, general liability, property liability, automobile liability, U.S. workers’ compensation liability as well as coverage for our U.S. facilities. In addition, our operations (including any potential future operations such as our Rochester Hub, the Planned Portovesme Hub project and possible future additions to our Spoke network, notwithstanding the current pause on those projects) and future expansion plans, are subject to risks inherent in the lithium-ion battery recycling industry and risks associated with the construction and development of new facilities, including potential liability which could result from, among other circumstances, personal injury, environmental claims or property damage, some of which may not be insured or fully covered at any time by insurance. The availability of, and the ability to collect on, insurance coverage is subject to various factors some of which are beyond our control and is not guaranteed to cover any or all of our losses in every circumstance. Li-Cycle’s insurance coverage at any time may also be inadequate to fully cover hazard risk exposures related to any such operational risks.
Li-Cycle has no control over changing conditions and pricing in the insurance marketplace and the cost or availability of various types of insurance may change dramatically in the future. Moreover, Li-Cycle may not be able to maintain adequate insurance in the future at rates we consider reasonable and commercially justifiable, and insurance may not continue to be available on terms as favorable as our current arrangements or at all. In addition, if any of Li-Cycle’s landlords for its Spoke facilities are unable to obtain insurance coverage, Li-Cycle may have to seek such coverage from its own insurance providers and there can be no assurance that such efforts will be successful. Any failure to obtain adequate insurance as well as the occurrence of a significant uninsuredloss, or a loss in excess of the insurance coverage limits maintained by Li-Cycle, could materially adversely affect Li-Cycle’s business, results of operations and financial condition.
Li-Cycle’s revenue depends on maintaining and increasing feedstock supply commitments as well as securing new sources of supply.
Li-Cycle is reliant on obtaining lithium-ion batteries and battery manufacturing scrap for recycling at its Spokes through its contracts with third-party suppliers. Li-Cycle also expects to procure black mass from third parties for processing at any future Hubs, to supplement its internal production. Li-Cycle’s cash flows are premised on the expectation that it will attract new suppliers by differentiating itself based on the sustainability of its process and the robustness of its technology, which in turn will enable Li-Cycle to offer competitive terms to suppliers. However, it is difficult to predict whether and when Li-Cycle will secure such commitments due to the current state of its business, competition for suppliers and the lengthy process of negotiating supplier agreements, which may be affected by factors that Li-Cycle does not control, such as market and economic conditions, the level of competition for feedstock, Li-Cycle's ability to differentiate itself from its competitors to secure feedstock including on price and service delivery levels, financing arrangements, commodity prices, environmental issues and government approvals. Suppliers may change or delay supply under their contracts for any number of reasons, including force majeure or government approval factors that are unrelated to Li-Cycle.
There can be no assurance that Li-Cycle will attract new suppliers or expand its supply pipeline from existing suppliers or that its relationship, including payment terms, with current suppliers will not continue to be adversely affected as a result of the current status of its business, the continued slow down of production at the Company's operating Spokes, the Cash Preservation Plan or any other actions taken by the Company. Any decline in supply volume from existing suppliers, the discontinuation of any supplier relationships or an inability to source new supplier relationships could have a negative impact on Li-Cycle’s results of operations and financial condition.
Li-Cycle relies on a limited number of commercial partners to generate most of its current and expected revenue.
Li-Cycle relies on a limited number of customers from whom we generate most of our revenue. Li-Cycle has focused its commercial activities on supporting key OEM and strategic partners. By focusing on the intake of lithium-ion battery packs and modules, including damaged and defective materials, we are increasing our opportunity to earn recycling service revenues. We also seek to maximize the commercial value of our purchased battery cell manufacturing scrap by re-selling a portion of these materials, whether directly or after processing through the ancillary lines at our Spokes, directly to third parties, primarily in the Asia-Pacific region. In selling directly to third parties, we may assume additional risks, including credit risk and transportation risk. Given that these third-party contracts are generally short-term commitments, there can be no assurances that we will continue to obtain or renew such contracts on similarly favorable terms, which could have a material adverse effect on our business, results of operation and financial condition.
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Our commercial agreements with Glencore provide for the procurement of feedstock for our Spoke facilities, and procurement of black mass for our future Hub facilities, to supplement the volumes we are currently either independently sourcing or producing. Although these agreements are not exclusive for either party, they also do not commit either party to a specific performance threshold, and therefore a substantial reduction in Glencore’s supply of either product or an unwillingness or inability to fulfill its contractual obligations to us could have a material adverse effect on our business, results of operations and financial condition.
Li-Cycle has entered into two off-take agreements with Traxys covering (i) 100% of its production of black mass, from Li-Cycle’s North American Spokes, other than such black mass as Li-Cycle has determined (in its sole discretion) is required for internal purposes at Li-Cycle’s Hubs, and (ii) 100% of its production of certain refined products from Li-Cycle’s Rochester Hub, including lithium carbonate. The Company’s commercial agreements with Glencore cover the off-take of substantially all of our other Spoke and Hub products. Effective March 25, 2024, pursuant to the terms of the Allocation Agreement, Traxys waived its rights to 50% of the volume of black mass and refined products under its off-take agreements with the Company, and such material has been deemed to be Glencore-committed material under the terms of the Company’s commercial agreements with Glencore. If we or our off-take partners are unwilling or unable to fulfill our respective contractual obligations to each other, if either party fails to perform under the relevant contract, or if these off-take partners otherwise terminate such agreements prior to their expiration, our business could suffer and we may not be able to find other off-take partners on similar or more favorable terms, which could have a material adverse effect on our business, results of operations and financial condition.
On October 31, 2024, the Company amended and restated certain of its commercial agreements with Glencore and Traxys to provide that, should the Company complete the Rochester Hub under the MHP scope, Glencore will purchase 100% of the MHP produced at the Rochester Hub on agreed commercial terms, based on market prices for the nickel and cobalt contained within the MHP. The Company’s off-take arrangements for MHP with Glencore remain subject to further finalization of commercial terms as a condition for the Company to draw under the DOE Loan Facility. There can be no assurances that the Company will be successful in finalizing its agreement for MHP off-take on favorable terms or at all, and any failure to secure or maintain customer relationships for the anticipated products of the Rochester Hub could have a material adverse effect on our business, results of operations and financial condition.
Any change from the original scope of the Rochester Hub, including the development of the Rochester Hub under the MHP scope could adversely affect our existing commercial agreements related to Rochester Hub products. For example, our commercial contracts with LGC and LGES require the supply of at least 20,000 tonnes of nickel contained in nickel sulphate over the period from 2025 to 2032, or 2028 to 2032 in the case of LGES, including approximately 1,850 tonnes of nickel contained in nickel sulphate (being approximately 840 tonnes of nickel sulphate) in 2025. Any failure to satisfy such volume commitments, could lead to indemnification obligations for us in favor of LGC and LGES, which in turn could have a material adverse effect on our business, results of operations and financial condition.
A decline in the adoption rate of EVs, or a decline in the support by governments for “green” energy technologies, could adversely affect the demand for Li-Cycle’s recycling services and products, and materially harm Li-Cycle’s financial results and ability to grow its business.
The demand for Li-Cycle’s recycling services and 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 or a decline in the support by governments for “green” energy technologies could reduce the demand for Li-Cycle’s recycling services and products, which could materially harm Li-Cycle’s financial results and ability to grow its business. A decline in volume under existing contracts or an inability to source new supplier relationships could also have a material adverse effect on Li-Cycle’s results of operations and cash flow.
In addition, incentives set by federal or state governments, as well as other government commitments and initiatives, may expire on a particular date, end when the allocated funding is exhausted, or may be reduced, modified, paused or terminated as a matter of regulatory, executive or legislative policy. The impact of the U.S. Inflation Reduction Act of 2022 and other governmental initiatives to support energy transition, including regulatory requirements and restrictions that may impact our ability, as well as the ability of our competitors, to take advantage of such initiatives, cannot be known with any certainty at this time, and we may not reap any or all of the expected benefits of the Inflation Reduction Act of 2022 or other governmental initiatives to support energy transition.
Decreases in demand and fluctuations in benchmark prices for the metals contained in Li-Cycle’s products could significantly impact Li-Cycle’s costs, revenues and results of operations.
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The prices that Li-Cycle pays for battery feedstock for its Spokes, and the revenue that Li-Cycle recognizes from the sale of Black Mass & Equivalents and shredded metal produced at Li-Cycle’s Spokes, are impacted by the commodity prices for the metals contained in those battery feedstocks or products, notably nickel, cobalt, lithium and copper. If the Rochester Hub becomes operational, and Li-Cycle starts processing black mass internally, Li-Cycle expects to recognize revenue from the sale of end products, including lithium carbonate and MHP, which it expects would be priced relative to reference prices for the metals contained in these products, notably lithium, nickel and cobalt. As a result, fluctuations in the prices of these commodities will affect Li-Cycle’s costs and revenues and declines in the prices of these commodities could have a material adverse impact on Li-Cycle’s revenues and result in fluctuations in its margins. Any significant decline in Li-Cycle’s revenues and margins will have a material impact on its results of operations and cash flow.
In addition to commodity prices, Li-Cycle’s revenues are primarily driven by the volume and composition of LIB processed at its facilities and changes in the volume or composition of LIB processed could significantly impact Li-Cycle’s revenues and results of operations.
Li-Cycle’s revenues depend on processing high volumes of LIB at its facilities, and its revenues are directly impacted by the chemistry of the LIB processed, particularly as market chemistries shift. Certain feedstock chemistries such as those containing higher amounts of nickel and cobalt command higher prices than others. A decline in overall volume of feedstock processed, or a decline in volume of LIB chemistries with higher-priced content relative to other LIB 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 materially adversely affect Li-Cycle’s revenues and results of operations.
The development and adoption of alternative battery technologies could materially adversely affect 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.
Li-Cycle’s reliance on the experience and expertise of its senior management and key personnel may cause material adverse impacts on it if a senior management member or key employee departs.
Li-Cycle depends on key personnel for the success of its business. Li-Cycle’s business may be severelydisrupted 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 and professional 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 severelydisrupted. 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.
On October 31, 2023, the Board authorized a reduction in workforce plan across Li-Cycle, on March 25, 2024, the Board approved additional plans to reduce approximately 17% of the Company’s global workforce, and additional steps may be taken based on our go-forward strategic objectives and the Cash Preservation Plan to right-size and right-shape our organization. Li-Cycle cannot provide any assurance that it will be able to retain adequate staffing levels among its remaining workforce or retain key employees who would not otherwise be subject to a workforce reduction. If employees who were not affected by any reduction in workforce seek alternative employment, this could require us to seek contractor support at unplanned additional expense or otherwise harm our productivity. Furthermore, the inability to retain highly skilled employees could adversely affect its business.
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Li-Cycle relies on third-party consultants for its regulatory compliance and Li-Cycle could be materially adversely impacted if the consultants do not correctly inform Li-Cycle of legal changes.
Li-Cycle depends on third-party consultants to work with it across all of its projects to ensure correct permitting, maintain regulatory compliance and keep Li-Cycle apprised of legal changes, as well as to assist with finance and accounting functions. This reliance on third-party consultants has grown following the workforce reductions authorized by the Board on October 31, 2023 and March 25, 2024 and may grow further following additional steps that the Company may take based on its go-forward strategic objectives and the Cash Preservation Plan to right-size and right-shape the organization. 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, including the ability to pay them in a timely manner. If Li-Cycle is not in compliance with the current regulations, it could face litigation, sanctions and fees, which could materially adversely impact its business, results of operations and financial condition.
Li-Cycle is subject to the risk of litigation or regulatory proceedings, which could materially adversely impact its financial results.
From time to time, we are subject to various litigation and regulatory proceedings arising in the normal course of business. Due to the inherent uncertainty of the litigation process, we may not be able to predict with any reasonable degree of certainty the outcome of any litigation or the potential for future litigation. Regardless of the outcome, any legal or regulatory proceeding, including any legal proceeding related to purported mechanic’s liens against the Company’s interests in certain properties in New York State related to the Rochester Hub project (see “— Risks Relating to Li-Cycle’s Business—The development of Li-Cycle’s Rochester Hub, Spoke network and other future projects is subject to risks, including with respect to financing, engineering, permitting, procurement, construction, commissioning and ramp-up, and Li-Cycle cannot guarantee that these projects will be resumed, completed in a timely manner or at all, that their costs will not be significantly higher than estimated, that financing will be sufficient to cover costs or escalated costs, or that the completed projects will meet expectations with respect to their productivity or the specifications of their respective end products, among others ” for additional details) could have a material adverse impact on Li-Cycle’s business, financial condition and results of operations due to defense costs, the diversion of management resources, potential reputational harm and other factors.
Three shareholder suits were launched following the Company’s announcement on October 23, 2023 that it would be pausing construction on the Rochester Hub project, being (i) Davis v. Li-Cycle Holdings Corp., et al. , 1:23-cv-09894 (a putative U.S. federal securities class action filed in the U.S. District Court for the Southern District of New York), (ii) Wyshynski v. Li-Cycle Holdings Corp. et al. , Court File No. CV-23-00710373-00CP (a putative Ontario securities class action claim filed in the Ontario Superior Court of Justice), and (iii) Nieves v. Johnston, et. Al. , Index No. E2023014542 (a shareholder derivative action filed in the Supreme Court of the State of New York, Monroe County). See also Note 17 (Commitments and contingencies) i n our Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K and the section titled “ Item 3. Legal Proceedings .” Regardless of the outcome, these suits could result in substantial costs to the Company, divert management’s attention and resources and harm our business, prospects, financial condition and results of operations.
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 LIB, 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
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fashion may also jeopardize existing orders and cause Li-Cycle to lose potential supply contracts and be forced to pay penalties.
Li-Cycle operates in an emerging, competitive industry and if it is unable to compete successfully its revenue and profitability will be materially adversely affected.
The lithium-ion battery-grade materials recycling market is competitive. As the industry evolves and the demand increases, Li-Cycle anticipates that competition will increase. Li-Cycle currently competes against companies that may have a substantial competitive advantage because of factors such as greater financial and workforce resources, more extensive recycling infrastructure, stronger existing customer relationships, greater name recognition or longer operating histories. National or global competitors could enter Li-Cycle’s traditional markets in North America and Europe. Competitors could focus their substantial resources on developing a more efficient recovery solution than Li-Cycle’s recovery solutions. Competition also places pressure on Li-Cycle’s contract prices and gross margins, which presents it with significant challenges in its ability to maintain strong growth rates and acceptable gross margins. If Li-Cycle is unable to meet these competitive challenges, it could lose market share to its competitors and experience a material 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 materially adversely affect Li-Cycle’s business, results of operations and financial condition.
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 materially adversely affect its business, financial condition and results of operations. Li-Cycle’s operations outside the United States generate a significant portion of its revenue. 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, including changes in how existing tax laws are interpreted or enforced, could materially adversely affect Li-Cycle’s business, results of operations and financial condition.
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. 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 a material adverse impact on its business, financial condition and 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 operating and financial results to vary based on a multitude of factors, some of which are outside of Li-Cycle’s control. Li-Cycle expects its period-to-period financial results to vary based on operating costs, which it anticipates will fluctuate with the pace at which it increases its operating capacity. As a result of these factors and others, Li-Cycle believes that quarter-to-quarter comparisons of its operating or financial results, especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Moreover, 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.
Fluctuations in foreign currency exchange rates could result in increases in Li-Cycle’s operating costs when translated to U.S. dollars for reporting purposes.
Li-Cycle reports its financial results in U.S. dollars. Its sales are mainly made in U.S. dollars and its cash is mainly denominated in U.S. dollars, but its operating costs and capital expenditure are also realized in currencies other than the U.S. dollar, including Canadian dollars, Euros, Swiss Francs and certain other currencies. If the value of any of the other currencies in which Li-Cycle’s operating costs and capital expenditure are realized appreciates relative to the U.S. dollar, Li-Cycle’s operating costs and capital expenditure will increase when translated to U.S. dollars for reporting purposes. Fluctuations in foreign currency exchange rates, particularly the U.S.-Canadian dollar exchange rate, could create
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discrepancies between Li-Cycle’s operating costs and capital expenditure in a given currency that could have a material adverse effect on its business, results of operations and financial condition.
While Li-Cycle monitors its exposure to foreign-exchange rate fluctuations and may enter into hedging contracts from time to time, Li-Cycle does not currently have foreign-exchange hedging contracts in place. 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 or geopolitical conditions, including disruptions in the global supply chain and inflation, could have a material adverse effect on Li-Cycle’s business, results of operations and financial condition.
Li-Cycle’s operations, costs and timelines may be affected by global economic or geopolitical conditions, including recessions, slow economic growth, economic and pricing instability, inflation levels, increase of interest rates and credit market volatility and adverse regulatory and policy changes, all of which could impact demand in the worldwide transportation industries or otherwise have a material adverse effect on Li-Cycle’s business, results of operations and financial condition. For example, Russia’s invasion of Ukraine and the war in the Middle East have and may continue to disrupt the global supply chain. Shortages, price increases and/or delays in shipments of supplies, equipment and raw materials have occurred and may continue to occur in the future which may result in increased operational or construction costs or operational or construction slowdowns. Increased tensions between the United States, China and their significant trading partners has and may continue to give rise to unexpected changes in regulatory requirements, tariffs and trade barriers, including policies targeting the flow of batteries and related materials, which may lead to challenges in managing Li-Cycle’s inventory and operations, as well as increased costs. In addition inflation can also adversely affect us by increasing the costs of labor, materials, and other costs required to manage and grow our business. This may affect our capital projects, including the Rochester Hub project, which could increase our capital costs, and our Spoke operations, which could reduce our profit margins and returns. In addition, inflation is often accompanied by higher interest rates. The potential impact of high interest rates and uncertainty regarding future rate increases, may increase uncertainty and volatility in the global financial markets. In addition, the possibility of high inflation and an extended economic downturn could reduce our ability to incur debt or access capital and adversely impact our business, results of operations and financial condition. If current global market and political conditions continue or worsen, Li-Cycle’s business, results of operations and financial condition could be materially adversely affected.
Changes to regulations and regulatory agencies to which Li-Cycle is subject could materially adversely affect its business
In January 2025, the current U.S. Administration began making changes to regulatory agencies to restructure federal agencies and spending, which potentially includes the DOE, which administers the DOE Loan Facility that Li-Cycle intends to use in the completion of its planned Rochester Hub. The scope and magnitude of these changes are potentially significant, and may result in unexpected changes in regulatory requirements, unanticipated changes regarding agency funding and availability of funds. There is limited visibility in the timing of potential future regulatory changes which may increase Li-Cycle’s cost of compliance and/or impair its ability to plan and execute critical business matters with those Departments. In addition, future changes to regulations or regulatory agencies could potentially affect Li-Cycle’s ability to draw on the DOE Loan Facility. Any of the above may adversely impact Li-Cycle’s business, financial condition, results of operations, and cash flows.
Natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, cyber incidents, boycotts and geo-political events could materially adversely affect Li-Cycle’s business, results of operations and financial condition.
The occurrence of one or more natural disasters, such as fires, hurricanes and earthquakes, unusually adverse weather, epidemic or pandemic outbreaks, cyber incidents such as ransomware attacks, boycotts and geo-political events, such as civil unrest and acts of terrorism (including cyber terrorism or other cyber incidents), or similar disruptions could materially adversely affect Li-Cycle’s business, power supply, results of operations and 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, new Spoke facilities or other facilities being developed, notwithstanding the current pause on those projects, 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, results of operations and financial condition.
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Failure to protect or enforce Li-Cycle’s intellectual property could materially 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 materially adversely affect the Company’s business, prospects, financial condition and results of operations.
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. If and when Li-Cycle resumes expanding its international activities, its exposure to unauthorized copying and use of its technology and proprietary information will likely increase. 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. 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. Despite these agreements and the Company’s reasonable precautions, its intellectual property is vulnerable to misappropriation, 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 and may remain undiscovered or unknown for a significant period of time. 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. 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.
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 materially adversely impacted if it cannot detect infringement or enforce its intellectual property rights quickly or successfully. 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, for example, the Company’s efforts to enforce its intellectual property rights may be met with defenses, counterclaims attacking the scope, validity, and enforceability of
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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 materially adversely affect its brand and its business, any of which could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.
Li-Cycle may be subject to intellectual property rights claims by third parties, which could be costly to defend, could require payment of significant damages and could limit the Company’s ability to use certain technologies.
Li-Cycle is subject to the risk of third parties asserting claims of infringement of intellectual property rights or violation of other statutory, license or contractual rights in technology or data. Any such claim by a third party, even if without merit, could cause Li-Cycle to incur substantial costs defendingagainst 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 or commercially reasonable and the failure to obtain a license or the costs associated with any license could cause the Company’s business, prospects, financial condition, and results of operations to be materially 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 willfullyinfringed the claimant’s patents, copyrights, trade secrets or other statutory rights, or other fees. Any of these events could have a material adverse effect on the Company’s business, prospects, financial condition and results of operations.
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 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.
As of December 31, 2024, Li-Cycle’s management assessed the effectiveness of the Company’s internal control over financial reporting and concluded that the Company did not maintain effective internal control over financial reporting as of that date. Management has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024, and concluded that, as of that date, the Company’s disclosure controls and procedures were not effective, due to the material weaknesses in the Company’s internal control over financial reporting.
While we have taken steps to address these material weaknesses and expect to continue to implement a remediation plan to address the underlying causes, any gaps or deficiencies in our internal control over financial reporting may result in us being unable to provide required financial information in a timely and reliable manner and/or incorrectly reporting financial information. We have slowed certain aspects of the remediation plan, in view of resource constraints, including in relation to the Cash Preservation Plan. In addition, there can be no assurance that these measures will remediate the material weaknesses in our internal control over financial reporting or that additional material weaknesses in our internal control over financial reporting will not be identified in the future. For more information, see “Item 9A. Controls and Procedures” .
Risks Relating to the Ownership of Our Common Shares
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 (“ 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
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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 will 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 by-laws 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, results of operations and financial condition.
We may issue additional common shares or other equity securities without shareholder approval, which would dilute the ownership interests of existing shareholders in the Company and may depress the market price of our common shares.
We may issue additional common shares or other equity securities in the future in connection with, among other things, capital raises, future acquisitions, repayment of outstanding indebtedness or grants under the Company’s 2021 Incentive Award Plan (the “Long-Term Incentive Plan” ), without shareholder approval in a number of circumstances. We are currently actively exploring financing options and strategic alternatives. If we raise additional funds through further issuances of equity or convertible debt securities, our existing shareholders could suffer significant further dilution, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our common shares. Pursuant to the terms of the KSP Convertible Notes and the Glencore Convertible Notes, we may issue common shares upon conversion or redemption of the KSP Convertible Notes or the Glencore Convertible Notes, as applicable, upon exercise of the Glencore Warrants, or pursuant to any other term of the KSP Convertible Notes or the Glencore Convertible Notes, as applicable, including as a result of any of the PIK provisions of the KSP Convertible Notes or the Glencore Convertible Notes, as applicable. We may also issue common shares upon the exercise of the Warrants issued to investors as part of the Underwritten Offering.
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 common shares may decline.
The market price of our common shares has been and may be volatile.
The trading price of our common shares could be subject to wide fluctuations due to a variety of factors, including:
• our liquidity position, including our ability to continue as a going concern;
• updates related to our planned capital projects, including further closures, pauses or slow downs;
• 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, management, or key personnel;
• market conditions in our industry;
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• general economic conditions such as recessions, inflation, interest rates, fuel prices, international currency fluctuations;
• rumors and market speculation involving us or other companies in our industry;
• announcements by us or our competitors of significant innovations, new products, services or capabilities, acquisitions, strategic investments, partnerships, joint venture 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-litigationdisputes 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 shareholders, and employees.
The stock market in general has experienced price and volume fluctuations unrelated or disproportionate to the operating performance of the companies affected.
From March 1, 2024 to March 18, 2025, the market price of Li-Cycle’s common shares fluctuated from a high of $10.80 per share to a low of $0.16 per share after adjustment for the Share Consolidation. The market capitalization of Li-Cycle sharplydeclined following the announcement of the pause on the Rochester Hub project on October 23, 2023, and again following the release of Li-Cycle’s earnings report for the third quarter ended September 30, 2023, on November 13, 2023. These declines in the market price of our common shares have led to securities class action litigationagainst the Company. See also Note 17 (Commitments and contingencies) in the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K and the section titled “Item 3. Legal Proceedings" . Regardless of the outcome, these suits could result in substantial cost to the Company, divert management’s attention and resources and harm our business, financial condition and results of operations.
Our executive officers and directors may have interests different than yours and may take actions with which you disagree.
Li-Cycle’s executive officers and directors have a significant stake in the Company and are likely to have influence over any critical decisions relating to Li-Cycle. Li-Cycle’s executive officers and directors collectively hold, directly or indirectly, approximately 7.54% of the Company’s outstanding common shares as of March 18, 2025. In particular, our co-founder, Ajay Kochhar, held approximately 7.04% of the Company’s outstanding common shares as of March 18, 2025. As a result, Mr. Kochhar is likely to continue to have a significant influence in determining any matters submitted to the shareholders for approval, and to have significant influence in the management and affairs of the Company. The interests of the executive officers and directors may differ from the interests of other shareholders of Li-Cycle due to various factors and as a result, our executive officers and directors may take actions with which you disagree or which are in conflict with your interests.
An active, liquid trading market for our common shares may not be sustained.
On February 26, 2025, the Company received written notice from the NYSE indicating that it had determined to commence proceedings to delist the Common Shares as a result of the Company being not in compliance with Section 802.01C of the NYSE Listed Company Manual because the average closing price of the Common Shares was less than $1.00 over a consecutive 30 trading-day period and the Company had effected a reverse stock split over the prior one-year period. Trading in the Common Shares on the NYSE was suspended immediately after market close on February 26, 2025. On February 27, 2025, our common shares began trading in the over-the-counter markets on the OTCQX tier of the OTC Markets, under the symbol “LICYF”. The over-the-counter markets, including the OTCQX, are not stock exchanges and trading of securities on the OTCQX is more limited than on the NYSE. Quotation on the over-the-counter markets may result in a less liquid market available for existing and potential security holders to trade our common shares and could depress the trading price of our common shares. We cannot assure you that an active public market for our common shares will be sustained in the future. If an active market for our common shares is not sustained, then the price may decline. These factors may result in investors having difficulty reselling any of our common shares. Further, an inactive trading
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market may also impair our ability to raise capital by selling our securities, to attract and motivate employees through equity incentive awards, or to acquire other companies, products, or technologies by using our securities as consideration.
As of January 1, 2024, we are no longer reporting to the SEC as a “foreign private issuer” and we are required to comply with the provisions of the Exchange Act, applicable to “U.S. domestic issuers”, and filing under U.S.GAAP, which will continue to require us to incur significant expense and expend time and resources.
As of June 30, 2023, we determined that we no longer qualify as a "foreign private issuer" as such term is defined in Rule 405 under the Securities Act. As a result, as of January 1, 2024, we are no longer eligible to use the rules and forms designated for foreign private issuers and we are considered a U.S. domestic issuer. We are now required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, we are required to comply with U.S. proxy requirements and Regulation FD (Fair Disclosure) and our officers, directors and principal shareholders are subject to the beneficial ownership reporting and short-swing profit recovery requirements in Section 16 of the Exchange Act. We are also no longer eligible to rely upon exemptions from corporate governance requirements that are available to foreign private issuers or to benefit from other accommodations for foreign private issuers under the rules of the SEC, which may involve additional costs. As a result of our transition to being a “U.S. domestic issuer”, we were required to restate our financial statements for past periods from IFRS to U.S. GAAP, and implement additional corporate governance and public disclosure processes, which in turn have increased our legal and financial compliance costs and the amount of management attention that must be devoted to compliance matters.
The regulatory and compliance costs applicable to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher than the costs we previously incurred as a foreign private issuer. We expect to continue to incur significant legal, accounting, insurance and other expenses and to expend greater time and resources to comply with these requirements. In addition, we may need to develop our reporting and compliance infrastructure and may face challenges in complying with the new requirements applicable to us. If we fall out of compliance, we risk becoming subject to litigation or being delisted, among other potential problems. Further, it may be more expensive for us to maintain adequate director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and members of our board of directors.
Failure to develop and maintain effective internal control over financial reporting could have a material adverse effect on our business, results of operations and the trading price of our common shares.
We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), which requires, among other things, that we evaluate annually the effectiveness of our internal control over financial reporting. Section 404(a) of the Sarbanes-Oxley Act requires management to assess and report annually on the effectiveness of internal control over financial reporting and to identify any material weaknesses in internal control over financial reporting.
We have identified material weaknesses in our internal control over financial reporting as discussed in greater detail in the sections titled “ Item 1A. Risk Factors — Risks Relating to Li-Cycle’s Business — 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 ” and “Item 9A. Controls and Procedures”.
If we continue to identify, or are unable to remediate existing, deficiencies in our internal control over financial reporting or if we are unable to comply with the requirements applicable to us as a public company 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.
Our management may not be able to effectively or on a timely basis implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that are applicable to the Company, including under Section 404 of the Sarbanes-Oxley Act, including because of attrition and the impact of the workforce reductions and any additional steps that we may take to right-size and right-shape our organization based on our go-forward strategic objectives and the Cash Preservation Plan, including with respect to corporate positions, specifically in accounting. In addition, if we are unable to assert that our internal control over financial reporting is effective, investors
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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 materially adversely affected.
We expect to continue to incur costs related to our internal control over financial reporting in the upcoming years to further improve our internal control environment.
The issuance of our common shares in connection with the conversion of the KSP Convertible Notes and/or the Glencore Convertible Notes would cause substantial dilution, and could materially affect the trading price of our common shares and your interests and any future financings may cause further dilution.
As of December 31, 2024, there was an aggregate principal amount of $133.7 million outstanding under the KSP Convertible Notes, $124.1 million outstanding under the First A&R Glencore Note, $121.8 million outstanding under the Second A&R Glencore Note and $81.6 million outstanding under the Glencore Senior Secured Convertible Note.
To the extent the holders of the KSP Convertible Notes or the Glencore Convertible Notes, as applicable, convert any of their convertible notes into our common shares, substantial amounts of our common shares will be issued. In addition, under the terms of the First A&R Glencore Note, on the First Modification Date (as defined therein), which occurred on December 9, 2024, the conversion price was adjusted to $3.03. The terms of the KSP Convertible Notes and the Glencore Convertible Notes contain anti-dilution adjustments that could be triggered by the future issuance of common shares or instruments convertible into or exchangeable for common shares, including as a result of the Underwritten Offering. Any such adjustments could significantly increase the number of common shares issuable upon conversion of the KSP Convertible Notes and/or the Glencore Convertible Notes. Any issuances of our common shares upon conversion of any of the KSP Convertible Notes and/or the Glencore Convertible Notes could result in substantial decreases to our share price and dilution to our existing shareholders.
Conversion of the Glencore Convertible Notes may result in a change of control of the Company. As of December 31, 2024, Glencore’s beneficial ownership of the Company on a pro forma fully-diluted basis was approximately 67.26%. As a result, Glencore may be able to exert significant voting influence on votes requiring shareholder approval and may take actions with which you disagree or which are in conflict with your interests. Furthermore, if Glencore is an investor in any future financing, it may result in Glencore acquiring additional beneficial ownership of the issued and outstanding common shares on an actual or as-converted basis. Any concentration of share ownership may also have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combinations, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would benefit other shareholders. This concentration of share ownership may not be in the best interests of all of our shareholders. In addition, on March 25, 2024, in connection with the closing of the Glencore Senior Secured Convertible Note, the Company entered into a governance letter agreement ( the " Governance Letter Agreement ") with Glencore Ltd., Glencore Canada Corporation and Glencore, in which it granted Glencore the right to nominate two additional directors (the “ Glencore Nominees ”) to the Board, for a total of three nominees. We cannot assure you that any of the governance protections Glencore committed to in the Governance Letter Agreement, including the standstill provisions, among others, would remain in place following any such future financing, which loss of governance protections may further affect your interests and shareholder rights.
It is expected that the Company will seek additional financing or strategic alternatives in the future, including to satisfy the funding condition under the DOE Loan Facility, which financing alternatives in particular could result in the issuance of additional equity or equity-linked securities, in turn resulting in further dilution to existing shareholders.
We do not currently intend to pay dividends on our common shares and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common shares.
We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements and future agreements and financing instruments, business prospects and such other factors as our Board deems relevant. As a result, a shareholder’s ability to achieve a return on their investment in our common shares will depend solely on appreciation in the price of our common shares.
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Our inability 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 our common shares may be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. If securities or industry analysts do not cover the Company, our share price would likely be lower than if we had such coverage, and the liquidity, or trading volume, of our common shares may be limited, making it more difficult for a shareholder to sell common shares at an acceptable price or amount. If securities or industry analysts do cover the Company, their projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections of analysts covering the Company. Similarly, if one or more of the analysts who write reports on the Company downgrades our common shares or publishes inaccurate or unfavorable research about our business, our share price could decline. Some of our analysts have ceased to cover the Company or publish reports. If in the future, traditional analysts cease coverage of the Company or fail to publish reports on it regularly, our share price or trading volume could decline.
We may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and share price, which could cause you to lose some or all of your investment.
We may be forced to write down or write off assets, restructure our 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 our liquidity, the fact that we may report charges of this nature could contribute to negative market perceptions about the Company or our securities. In addition, charges of this nature may cause us to be unable to obtain future financing on favorable terms or at all.
We may not be able to repurchase the Warrants upon a Fundamental Transaction, or make other cash payments that may be required under the Warrants.
Upon the occurrence of a Fundamental Transaction (as defined in the Warrants), holders of Warrants may require us to purchase their Warrants for an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of their Warrants on the date of the consummation of such Fundamental Transaction. The occurrence of a change of control under the terms of certain of our existing indebtedness, including the KSP Convertible Notes and the Glencore Convertible Notes, obligates us to redeem such indebtedness at a specified price. In addition, indebtedness that we incur in the future may include similar provisions. The source of funds for any repurchase of Warrants and the redemption or other repurchase of our other indebtedness would be our available cash or cash generated from our subsidiaries’ operations or other sources, including borrowings, sales of assets or sales of equity. We may not be able to repurchase the Warrants upon a Fundamental Transaction because we may not have sufficient financial resources to purchase the Warrants that holders submit for repurchase or to repurchase and repay any other indebtedness that is required to be redeemed or may otherwise become due. We may require additional financing from third parties to fund payments due upon repurchase of our indebtedness and/or the Warrants, and we may be unable to obtain such financing on satisfactory terms or at all.
In addition, the terms of our current indebtedness limits, and our future indebtedness may limit, our ability to (i) repurchase the Warrants upon the occurrence of a Fundamental Transaction, (ii) from paying the consideration in the form otherwise due to holders of the Warrants upon exercise of their Warrants following a Fundamental Transaction, which would otherwise cause the Warrants to be exercisable for common shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and if applicable any additional consideration receivable as a result of the Fundamental Transaction, or (iii) from paying cash to holders of the Warrants if we ever make cash distributions to holders of our common shares. In addition, while we have entered into a consent and waiver with the holder of the Glencore Convertible Notes in connection with the Underwritten Offering, the repurchase of the Warrants upon the occurrence of a Fundamental Transaction and the payment of consideration to the holders of the Warrants upon exercise of their Warrants following a Fundamental Transaction is only permitted to the extent that the Company shall have complied with its obligations to redeem the Glencore Convertible Notes in accordance with their terms in connection with such Fundamental Transaction prior to the Company redeeming any Warrants or paying consideration in connection with the Fundamental Transaction to holders of the Warrants. There can be no assurance that we will be successful in obtaining any similar waivers or amendments should the terms of any of our other current or future indebtedness conflict with our obligations under the Warrants.
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Provisions of the Warrants could discourage an acquisition of us by a third-party.
Certain provisions of the Warrants could make it more difficult or expensive for a third-party to acquire us. Among other things, the Warrants require any successor entity in a Fundamental Transaction to assume in writing the obligations of the Company under the Warrants. Upon the occurrence of a Fundamental Transaction (as defined in the Warrants), holders of the Warrants may require us to purchase their Warrants for an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of their Warrants on the date of the consummation of such Fundamental Transaction. These and other provisions of the Warrants could prevent or deter a third-party from acquiring us even where the acquisition could be beneficial to you.
We could be or may become a passive foreign investment company, which could result in materially adverse U.S. federal income tax consequences.
It is possible that we could be classified as a “passive foreign investment company” or “PFIC” for U.S. federal income tax purposes, which could have materially adverse U.S. tax consequences for U.S. persons holding the Company’s common shares. Although we were not a PFIC for our taxable year ended December 31, 2024, and do not expect to be classified as a PFIC for the current taxable year or any taxable year in the foreseeable future, whether the Company is a PFIC is a factual determination made annually, and the Company’s status will depend among other things upon changes in the composition and relative value of its gross receipts and assets. Accordingly, no assurance can be given that we will not be classified as a PFIC for our current taxable year ending December 31, 2025, or in any future taxable year.
MD&A (Item 7)
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of operations (“ MD&A ”) should be read together with the annual Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K (the “ Consolidated Financial Statements ”). All per share amounts, common shares outstanding and stock-based compensation amounts for all periods reflect the effect of our Share Consolidation.
In addition to historical financial information, this MD&A contains forward-looking statements based upon current expectations about the Company's financial condition, results of operations, and industry that involve risks, uncertainties and assumptions. For more information about forward-looking statements, refer to the section in this Annual Report on Form 10-K titled “ Cautionary Note Regarding Forward-Looking Statements ”. Actual results and timing of selected events may differ materially from those anticipated by these forward-looking statements as a result of various factors, including those set forth in the section of this Annual Report on Form 10-K titled “ Item 1A. Risk Factors ”, and elsewhere in this Annual Report on Form 10-K. The risk factors in this Annual Report on Form 10-K in the section titled “ Item 1A. Risk Factors ” should be carefully read to gain an understanding of the important factors that could cause actual results to differ materially from the Company's forward-looking statements.
Certain figures, such as interest rates and other percentages included in this MD&A, have been rounded for ease of presentation. Percentage figures included in this MD&A have in all cases been calculated on the basis of the amounts prior to rounding. For this reason, percentage amounts in this MD&A may vary slightly from those obtained by performing the same calculations using the figures in Li-Cycle’s financial statements or in the associated text. Certain other amounts that appear in this MD&A may similarly not sum due to rounding.
Company Overview
Li-Cycle (OTCQX: LICYF) is a leading global LIB resource recovery company. Established in 2016, and with major customers and partners around the world, Li-Cycle's mission is to recover critical battery-grade materials to create a domestic closed-loop battery supply chain for a clean energy future. The Company leverages its innovative, sustainable and patent-protected Spoke & Hub Technologies TM to recycle all different types of lithium-ion batteries. At its Spokes, or pre-processing facilities, Li-Cycle recycles manufacturing scrap and end-of-life batteries to produce black mass, a powder-like substance which contains a number of valuable metals, including lithium, nickel and cobalt. At its future Hubs, or post-processing facilities, Li-Cycle plans to process black mass to produce critical battery-grade materials, including lithium-carbonate, for the lithium-ion battery supply chain. At its Spokes, the Company produces certain other products analogous to black mass that have a similar metal content, and, as a result, the Company tracks its production using a unit of measure called Black Mass & Equivalents or BM&E.
As at December 31, 2024, Li-Cycle had three operational Generation 3 Spokes in North America and Europe, which were located in Gilbert, Arizona (the “ Arizona Spoke ”), Tuscaloosa, Alabama (the “ Alabama Spoke ”), and Magdeburg, Germany (the “ Germany Spoke ”).
We continue to focus on reviewing critical projects, executing against our Cash Preservation Plan and advancing funding opportunities.
In 2024, we recycled 9,113 tonnes of battery material consisting of full packs, manufacturing scrap and other battery types, produced 5,385 tonnes of BM&E and sold 5,919 tonnes of BM&E. Through our recycling services, we helped 13 prominent EV manufacturers and 15 key battery cell and material producers fulfill their commitments to responsibly dispose of their battery waste.
In 2024, we recognized total revenues of $28.0 million, representing an increase of $9.7 million, compared to the prior year. In 2024, our net loss attributable to shareholders was $137.7 million, representing a decrease of $0.3 million, compared to the prior year.
We have been evaluating the development of our first planned commercial scale Hub in Rochester, New York (the " Rochester Hub "). We have completed our technical review of the MHP scope for the Rochester Hub project and expect annual production of up to approximately 8,250 tonnes of lithium carbonate and up to approximately 72,000 tonnes of MHP. We continue to implement our Spoke optimization initiatives, which we believe will improve cash flows from our
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Generation 3 Spokes in Arizona, Alabama and Germany, to establish a self-sufficient and financially accretive Spoke business.
We ended 2024 with $22.6 million in cash and cash equivalents, representing a decrease of $48.0 million from the end of 2023 and a decrease of $9.6 million compared to September 30, 2024. Our cash outflows from operating activities in 2024 and 2023 were $106.4 million and $99.8 million, respectively, representing an increase of $6.6 million. Capital expenditures amounted to $23.9 million in 2024, compared to $334.9 million in 2023, representing a decrease of $311.0 million. Capital expenditures have declined since we paused construction of the Rochester Hub and other development projects. We expect to continue to incur reduced capital expenditures until the restart of Rochester Hub construction. We expect to recommence construction on the Rochester Hub after securing additional financing toward the cost to complete the project, which is currently estimated at $483.3 million.
Management Priorities, Challenges and Business Outlook
Market Update - EV and Battery Material Demand and Feedstock Availability
The trends in the geographical markets in which we operate present the Company with opportunities and challenges. Our estimates, informed by available market data and our views, of the long-term demand for EVs remains robust in North America and Europe, with an expected approximately 23% compound annual growth rate in the number of vehicles forecasted to be sold between 2025 and 2030, based on an estimated 5.2 million vehicles in 2025 versus an estimated 14.9 million vehicles in 2030. However, current macroeconomic and industry trends (e.g., inflationary pressures) have reduced project commitments to build EV-related supply chains in North America and Europe. Notwithstanding the current challenging global economic environment, the long-term demand for EVs remains strong.
Our operational activities and product revenue are influenced by the commodity prices for nickel and cobalt. Both nickel and cobalt have experienced recent pricing softness, broadly driven by macroeconomic uncertainties, seasonal patterns and reduced supply-side pressures. Based on observable trends and industry data, we forecast a potential tightening of supply relative to demand in 2025. In addition to pricing for nickel and cobalt, lithium pricing is pertinent to the potential revenue from the Rochester Hub. During 2024, lithium had a surplus of available production relative to perceived market demand. We believe there has been a reduction in project commitments relating to lithium production outside of China, which is likely to contribute to a forecasted tightening of the balance of the available output relative to demand in 2025.
Considering the dynamics of planned LIB production in North America and Europe, we expect to continue to see significant growth in the amount of LIB materials available for recycling. We estimate that between 2025 and 2027, the potential amount of LIB materials available for recycling in North America and Europe could grow at a compound annual growth rate of approximately 30% . This potential growth in the available feedstock is expected to primarily be driven by manufacturing scrap, alongside further growth in EV batteries, BESS and consumer electronic batteries available for recycling. By comparison, we believe the level of post-processing capacity (i.e., capacity for the processing of black mass) in North America and Europe in 2025 may be substantially lower than the amount of black mass available in those regions. These forecasts illustrate that a significant deficit of post-processing capacity for black mass is currently expected in the medium term in North America and Europe. Additionally, we see potential for continued strong support for the localization of the battery supply chain, including post-processing of black mass (as is planned at Li-Cycle’s Rochester Hub and the Planned Portovesme Hub) due to customer and regulatory drivers. These market and demand considerations continue to underpin the long-term proposition for the Rochester Hub.
Rochester Hub Project Review
We have completed our technical review of the MHP scope for the Rochester Hub and confirmed the technical viability of the MHP scope through an internal study that allows the project to proceed on a schedule aligned with our current expectations regarding the timing and evolution of the battery recycling and EV markets, subject to obtaining required permits, regulatory approvals, if needed, and additional financing. As previously communicated, we have also advanced the go-forward execution plan for the Rochester Hub and refined cost estimates with the local market as part of the evaluation of the project’s total cost estimate. We are continuing to refine our detailed project plan and financing
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strategy in line with the MHP scope. We will require significant additional funding before restarting the Rochester Hub project, on the basis of the MHP scope or otherwise.
Our estimated project cost for the Rochester Hub project, being approximately $960.2 million for the MHP scope, remains the same as prior year, and excludes costs for project commissioning, ramp-up, working capital or financing. Our current estimate of cost to complete (“ CTC ”) is approximately $483.3 million, including $89.7 million of costs incurred but not yet paid related to the Rochester Hub project as of December 31, 2024. If in the future we decide to shift to a project scope that includes the production of nickel sulphate and cobalt sulphate, or any other changes to the MHP scope, then the estimated project costs would be higher.
The CTC estimates for the MHP scope are based solely upon our internal technical review, are subject to a number of assumptions, including refining detailed engineering, procurement, construction activities engineering, procurement and construction activities, including the cost of labor and may materially change when re-engaging and re-bidding construction subcontracts. In addition to the CTC, we will continue to incur costs during the construction pause until the potential project re-start date, which we expect to fund with current cash and required additional interim funding, including any borrowings that become available under the DOE Loan Facility. We will also incur other costs such as working capital, commissioning and ramp-up costs and financing costs which will be included in the full funding package.
Certain contractors, subcontractors, consultants and suppliers (together, the “ lienor s”) have filed purported mechanic’s liens against our interests in certain properties in New York State, under New York Lien Law, given allegeddelays in making payments to those lienors. See the section titled “ Item 3. Legal Proceedings” for additional details.
Cash Preservation Plan
In 2024, we continued to action our Cash Preservation Plan, announced in November 2023. Among other things, we commenced closure activities at the Ontario Spoke, curtailed operations at the New York Spoke and reduced expenditures at our other operating Spokes, as we continued to review the timing and BM&E needs of the Rochester Hub. The Ontario Spoke is expected to complete its closure activities in 2025.
On March 25, 2024, we made the strategic decision to transition from a regional management structure to a centralized model, which resulted in certain leadership changes, which are anticipated to generate approximately $10.0 million of annualized savings in payroll and benefits. Effective as of March 26, 2024, Debbie Simpson ceased serving as the Chief Financial Officer of the Company, Richard Storrie ceased serving as the Company’s Regional President, EMEA, and Tim Johnston ceased serving as the Company’s Executive Chair and transitioned to the role of interim non-executive Chair of the Company’s Board, which he held until May 31, 2024, after which he ceased serving on the Board and as an employee. Conor Spollen was appointed as the Chief Operating Officer of the Company, Dawei Li was appointed as the Chief Commercial Officer of the Company, and Craig Cunningham was appointed as the interim Chief Financial Officer and was later appointed to the role of Chief Financial Officer of the Company, effective July 20, 2024. In conjunction with the Cash Preservation Plan at various times throughout 2024, other non-executive senior and middle management roles were eliminated.
Consistent with previous disclosures, we continue to re-evaluate our strategy for bringing on additional Spoke and Hub capacity, as well as our strategy for our Spoke and Hub network, specifically:
• Germany Spoke (Expansion Deferred) : Line 1 capacity of 10,000 tonnes per year was operationalized in August 2023. The Company had previously announced that Line 2 capacity of 10,000 tonnes per year and ancillary capacity of up to 10,000 tonnes per year were expected to be built by the end of 2023, but these plans have been deferred (including the application to expand permitted capacity from 25,000 tonnes to 35,000 tonnes per year) and the timing of the Germany Spoke expansion is being re-evaluated as part of the go-forward strategy.
• France Spoke (Paused indefinitely) : The Company had expected to start constructing the France Spoke in 2023 and to commence operations in 2024. We have terminated our lease in Harnes, France.
• Norway Spoke (Paused indefinitely) : We paused the Norway Spoke project in 2023 and in 2024 we agreed with the landlord on an exit strategy which will allow us to sublease the property. We expect to continue to incur costs associated with the lease until such time as a sublease has been completed or we have otherwise exited the lease.
• New Ontario Spoke (Paused indefinitely) : The Company had planned on replacing the existing Ontario Spoke in 2023 with an expanded Generation 3 Spoke and warehouse facility. The Ontario Spoke paused operations in 2023,
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commenced closure activities in 2024 and is expected to complete closure activities in 2025. The replacement plans for a new/replacement Spoke have been postponed indefinitely as part of the go-forward strategy.
• New York Spoke (Operations Curtailed) : Operations have been curtailed in alignment with the Company's Spoke optimization plan and focus on Generation 3 Spokes.
• Other Spoke Development Projects (Paused Indefinitely) : The Company had previously disclosed that it was undertaking a site selection process for a potential new Spoke in Hungary. These plans have been postponed indefinitely as part of the go-forward strategy.
• Planned Portovesme Hub Project : The Planned Portovesme Hub would repurpose part of an existing Glencore metallurgical complex in Portovesme, Italy, as new Hub facility to produce critical battery grade materials, which would enable what we expect would be a cost-efficient and expedited development plan. Work on the definitive feasibility study had been paused until December 2024, when Li-Cycle and Glencore announced that they had resumed their collaboration to assess technical and economic viability of the Planned Portovesme Hub, including a concept and pre-feasibility study. Glencore is expected to lead and fund the pre-feasibility study, with Li-Cycle providing technical support.
Liquidity and Financing Initiatives
We have incurred net negative operating cash flow since inception and we expect to continue to generate net negative operating cash flow prior to completing, commissioning and operating the currently paused Rochester Hub project. Our liquidity sources include our existing cash and cash equivalents, debt, grants, and other receivables.
Notwithstanding the potential impacts of the Cash Preservation Plan and other cost reducing activities, we require material funds to support our operations and continue our business. Accordingly, without additional financing in the near term, we will not have adequate liquidity during the 12-month period following December 31, 2024, casting substantial doubt about the Company’s ability to continue as a going concern.
We are actively exploring financing options that will address the Company’s immediate liquidity needs. For further discussion, refer to the sections “—Liquidity and Capital Resources” below.
On November 7, 2024, we entered into the LARA and the Financing Documents (as defined in the LARA) related thereto (collectively, the “ DOE Loan Facility ”), providing for a loan facility of up to $475.0 million (including up to $445.0 million of principal and up to $30.0 million in deferred and accrued interest). The interest rate for each advance will be set by the Federal Financing Bank based on the cost of funds to the United States Department of the Treasury for obligations of comparable maturity at the date of the advance, with 0% spread.
Our ability to borrow under the DOE Loan Facility is subject to the satisfaction or waiver of certain conditions precedent, including, among others:
• completing the first draw on the DOE Loan Facility (the “ First Advance ”) prior to the date that is twelve months after the Effective Date (November 7, 2025);
• fully satisfying the obligation to make certain base equity contributions to the Rochester Hub Project (the “ Base Equity Contribution ”), on or prior to the date of First Advance; and
• settling certain existing commitments relating to the Rochester Hub Project for costs incurred but not yet paid, on or prior to the date of First Advance (approximately $89.7 million as of December 31, 2024).
The amount of the Base Equity Contribution includes an estimated approximately $173.0 million to fund certain reserve accounts required under the DOE Loan Facility (the “ Reserve Accounts ”), of which up to approximately $97.0 million can be satisfied through delivery of letters of credit. The estimated amount of the Reserve Accounts required is based on the Company’s current forecasts and may change prior to First Advance. The Reserve Accounts include project construction, ramp-up, and Spoke capital expenditure reserves. The majority of the Reserve Account funds are expected to be released to the Borrower on or before the completion of the Rochester Hub Project.
We are 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,
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including funding the remaining Base Equity Contribution (which includes reserve account requirements) and a minimum cash balance. There can be no assurances that the closing of the DOE Loan Facility or any other financing transaction would be sufficient to restart construction or complete the development of the Rochester Hub. The DOE Loan Facility contains customary operational and financial covenants with which we must comply, and imposes restrictions on additional financing, and other aspects of our business.
On June 28, 2024, the Company entered into an ATM Agreement to offer and sell up to an aggregate of $75.0 million of our common shares. As of December 31, 2024, the Company generated net proceeds of $15.5 million (gross proceeds of $16.4 million offset by fees paid of $0.9 million) by issuing an aggregate of 7,228,200 of the Company’s common shares. As of December 31, 2024, the remaining capacity under the ATM Program was $58.6 million.
On April 30, 2024, we received €5.3 million ($5.8 million) of the €6.4 million ($6.9 million) approved grant from the State of Saxony-Anhalt, Germany as a part of the “Improving the Regional Economic Structure” program. Under the financing plan, we are required to fund a proportion of the eligible investment expenditures, to engage at least 38 full-time employees and to provide a security interest in relation to certain equipment. At December 31, 2024, we satisfied and, although there can be no guarantee, we expect to continue to satisfy the conditions of the grant through the required period. In the future, should we not meet the conditions of the grant, all or part of the grant could be cancelled, and we could be required to return funds provided by the grant.
On March 25, 2024, the Company issued the Glencore Senior Secured Convertible Note in an aggregate principal amount of $75.0 million to an affiliate of Glencore plc. Concurrently, Glencore and the Company amended and restated the terms of the Glencore Unsecured Convertible Notes into two tranches, being the First A&R Glencore Note and the Second A&R Glencore Note. Following the closing of the DOE Loan Facility, the terms of the First A&R Glencore Note were modified to align with the terms of the Glencore Senior Secured Convertible Note, the First A&R Glencore Note was secured, and the guarantees were provided in respect thereof, consistent with the security and the guarantees provided by the Note Guarantors in respect of the Glencore Senior Secured Convertible Note. For more information about the Glencore Convertible Notes, see Note 13 (Convertible debt) to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Operational Initiatives
In 2024, Li-Cycle focused its commercial activities on supporting key OEM and strategic partners. By focusing on the intake of lithium-ion battery packs and modules, including damaged and defective materials, we are increasing our opportunity to earn recycling service revenues and leveraging the main line processing capabilities of our Generation 3 Spokes in Arizona, Alabama and Germany. We are also seeking to maximize the commercial value of our purchased battery manufacturing scrap by re-selling some of these materials, whether directly or after processing through our ancillary lines at its Spokes, directly to third parties, primarily in the Asia-Pacific region.
In 2024, in North America, Li-Cycle entered into a new recycling agreement with a prominent EV OEM for full battery pack batteries and extended an existing agreement with a leading battery cell manufacturer. In 2024, in Europe, we also signed new recycling agreements, and expanded and amended existing agreements, for modules and full battery pack batteries with the largest automotive EV original equipment manufacturers (OEMs) in Europe as well as signed a new agreement with a major lithium-ion battery supplier and a global battery cell manufacturer. Li-Cycle now has recycling contracts with four of the largest automotive EV OEMs in Europe.
Material Accounting Policies and Critical Estimates
Li-Cycle’s Consolidated Financial Statements have been prepared in accordance with U.S. GAAP. While our significant accounting policies are more fully described in Note 2 to our Consolidated Financial Statements, the following items inv olve a greater degree of judgment and complexity. Accordingly, these are the accounting policies that we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.
Impairment of long-lived assets
The Company reviews long-lived assets such as plant and equipment, intangible assets with finite useful lives and 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
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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 the years ended December 31, 2024 and December 31, 2023, the Company had two separate asset groups: its integrated Spoke and future Hub network in North America, and the EMEA Spoke network.
For the year ended December 31, 2023, management determined that the pause on the construction work on its Rochester Hub project pending completion of a comprehensive strategic review to be an indicator for potential impairment requiring it to perform a recoverability assessment. These actions represented a trigger requiring management to perform a recoverability test in line with Step 1 of the impairment assessment which compares the expected net undiscounted cash flows to be derived from the asset group for the remaining useful life of the asset group’s primary asset compared to its carrying value. For the year ended December 31, 2023, the Company had not experienced impairmentlosses on its long-lived assets on the basis that the net undiscounted cash flows for the asset groups exceeded their carrying values.
Impairment was most recently tested as of March 31, 2024 in connection with the ongoing pause on the construction work and review of the Rochester Hub project. Refer to Note 2 Summary of Significant Accounting Policies in the Company’s unaudited condensed interim financial statements included in the Company’s Form 10-Q for the three months ending March 31, 2024. For the third quarter ended September 30, 2024, the Company has not experienced impairmentlosses on its long-lived assets on the basis that the net undiscounted cash flows for the asset groups exceed their carrying values.
The determination of the future net undiscounted cash flows used in the last completed recoverability test required significant judgment and estimate, specifically related to the North America asset group and included:
• The determination of the primary asset of the North American asset group being the combination of the ROU asset arising from the ground lease related to the Rochester Hub and the Rochester Hub buildings, due to the fact that they have the longest remaining useful life, the location of the land together with the buildings that are fundamental to the overall future operations of the Rochester Hub site and that the remainder of the equipment for this asset group would have not otherwise been acquired if not for this location and buildings.
• The life of the net undiscounted cash flow model was determined to be approximately 40 years, to address estimation uncertainty relative to the remaining useful life of 49 years for the primary asset and aligning with the renewal options for the ground lease related to the Rochester Hub. The Company considered that it is reasonably certain that it will exercise each renewal option beyond the initial term, up to the maximum of 49 years inclusive of the initial non-cancellable period. To maintain the assets in good working order to generate cash flows over the projected term, sustaining capital expenditures were included based on widely accepted industry guidance from engineering, procurement, construction management firms and institutions such as the Chemical Engineering Plant Cost Index. The total cash flows were reviewed over the 40 years relative to the asset carrying value and it was noted that the cash flows could support the carrying value of the asset group.
Significant cash inflows:
• Financing to complete the construction of the Rochester Hub is assumed to be available to Li-Cycle. The Company is pursuing funding alternatives in the form of bridge financing, project financing, and additional long-term funding alternatives. Two separate models were considered to reflect the impact of potential financing in a binary situation. The model that assumed no funding included significantly lower undiscounted net cash flows, which do not exceed the carrying amount of the North America asset group. If over time Li-Cycle does not obtain financing, there could be an impairment. The model which assumed no funding received a remote weighting when determining the amount of undiscounted net cash flows, but nevertheless, was considered for completeness. When sensitized to consider an equal weighting to the receipt of funding and lack thereof, the undiscounted net cash flows were still higher than the carrying value of the North American asset group.
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• Revenues are driven by the sale of end products from the Rochester Hub in an MHP scope scenario and do not include the construction costs of the process areas required to produce nickel sulphate and cobalt sulphate. The key end product outputs are lithium carbonate and MHP. End product revenues can be further broken into price and volume.
• The Company was required to estimate the commodity prices of the constituent metals under the MHP scope over the 40-year period included in the recoverability test. The Company benchmarked the commodity prices based on external industry publications. Lithium is the most significant metal contributing to the value of net undiscounted cash flows. Additionally, the Company was required to estimate the percentage of metal payables that the Company would receive on MHP products being sold (“ MHP payable s”), which was benchmarked to historical actuals and the commercial basis per the agreement with Glencore for MHP off-take. The Company further sensitized for the price of commodities (including nickel, cobalt, and lithium) increasing or decreasing by 15% of the forecasted prices for the model’s life. Separately, the Company sensitized MHP payables to increase or to decrease by 10% for the model’s life. Under either sensitized assumption the undiscounted net cash flows were still higher than the carrying value of the North American asset group.
• End product volumes are based on the Spoke network’s and Rochester Hub’s capacities and are further impacted by the Company’s metal recoveries through the Spoke & Hub processes. When sensitized for the Rochester Hub's recoveries increasing or decreasing by 5% the undiscounted net cash flows were still higher than the carrying value of the North American asset group.
Significant cash outflows:
• Rochester Hub forecasted commissioning and operating costs which are primarily driven by the cost of reagents, labor, and utilities were developed through an internal engineering and technical report based on the Association for the Advancement of Cost Engineering to a Class 2 standard. When sensitized such that operating costs were to increase or decrease by 10%, the undiscounted net cash flows were still higher than the carrying value of the North American asset group.
• The prices that Li-Cycle pays for battery feedstock (as applicable) for the Spoke network are generally tied to commodity prices for the metals contained in those battery feedstocks or products, notably nickel and cobalt. The Company estimated forecasted commodity prices as discussed above. When sensitized for the price of commodities (including nickel, cobalt, and lithium) increasing or decreasing by 15% of the forecasted prices, the undiscounted net cash flows were still higher than the carrying value of the North American asset group.
• Construction costs to complete the Rochester Hub were developed based on the technical report for an MHP process. While these construction costs are not significant to the overall model, as proven through the sensitivity exercise whereby an increase or decrease of 5% in either direction does not impact the overall conclusion that the undiscounted net cash flows are higher than the carrying value of the North America asset group, they are significant in determining the funding gap which is assumed to be secured as discussed above.
The Company performed a sensitivity analysis to identify the impact of changes in its significant assumptions on the results of the recoverability test. As part of the sensitivity analysis, management stress tested the point in which a change in each significant assumption will cause the net undiscounted cash flows to no longer exceed the carrying amount of the asset group. Then, it assessed whether such a change was reasonable, considering the nature of the assumption. Further details on the sensitivity of the most critical inputs are noted above. It was determined that the recoverability test, including the considered impact of the sensitivities analysis, showed that the undiscounted net cash flows were still higher than the carrying value of the North America asset group.
Except as described above, for the year ended December 31, 2024, we did not identify any impairment triggers and we did not recognize any impairment of long-lived assets.
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Results of Operations
Year ended December 31,
$ millions, except per share data
Change
Financial highlights
Revenue
Cost of sales
Selling, general and administrative expense
Research and development
Other income (expense)
Income tax
Net loss
Adjusted EBITDA 1 loss
Loss per common share - basic and diluted
Net cash used in operating activities
December 31, 2024
December 31, 2023
Change
Cash and cash equivalents
Cash, cash equivalents and restricted cash
1 Adjusted EBITDA is a non-GAAP financial measure and does not have a standardized meaning under U.S. GAAP. Refer to the section titled “ Non-GAAP Reconciliations and Supplementary Information ” below, including a reconciliation to comparable U.S. GAAP financial measures.
Revenue
Li-Cycle recognizes revenue from: (i) sales of intermediate products from Li-Cycle’s Spokes, being Black Mass & Equivalents, and shredded metal; and (ii) providing services relating to recycling of LIB, which includes coordination of logistics and recycling and destruction of batteries. Sales of intermediate products are presented net of fair value gains or losses recognized in the period.
Year ended December 31,
$ millions, except sales volume
Product revenue recognized in the period
Fair value pricing adjustments
Product revenue
Recycling service revenue recognized in the period
Revenue
Tonnes of BM&E sold
For the year ended December 31, 2024, revenue increased to $28.0 million, compared to $18.3 million in the year ended December 31, 2023, primarily due to an increase in recycling service revenue as well as favorable fair value pricing adjustments of $0.7 million, primarily related to the timing of settlements received from customers. This was partially offset by a decrease in product revenue as a result of product mix as well as decrease commodity prices for nickel and cobalt, despite an increase in volume as compared to December 31, 2023.
Recycling service revenue increased by $6.2 million in the year ended December 31, 2024 compared to the year ended December 31, 2023. This increase was primarily due to new recycling service contracts entered into in 2024, including from the Germany Spoke, which commenced operations in August 2023 and completed its first full year of operations in 2024.
As of December 31, 2024, 247.9 tonnes of Black Mass & Equivalents were subject to fair value pricing adjustments. Depending on the contractual terms, the BM&E could take up to 12 months to settle after shipment. The table below shows the expected settlement dates for the tonnes of BM&E subject to fair value price adjustments by quarter for the last sixteen months:
Expected settlement dates for tonnes subject to fair value pricing adjustments
December 31, 2024
September 30, 2024
June 30, 2024
March 31, 2024
December 31, 2023
271+ days
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181-270 days
91-180 days
1-90 days
Total metric tonnes
The following tables set out the period end and period average commodity prices for cobalt and nickel:
Market price per tonne
Average market price per tonne
As at December 31,
Year ended December 31,
Cobalt
Nickel
Cost of sales
For the year ended December 31,
$ millions
Cost of Sales - Product Revenue
Cost of Sales - Recycling Service Revenue
Total Cost of Sales
Cost of sales attributable to product revenue includes battery-grade materials, direct and indirect consumables, labor costs, manufacturing overheads, including depreciation, logistics, maintenance, and facility related expenses. Cost of sales attributable to product revenue also includes charges to write down the carrying value of inventory when it exceeds its estimated net realizable value.
The Company’s Generation 3 Spokes continued to advance through the early operational phase during the year ended December 31, 2024. Cost of sales attributable to product revenue decreased $7.3 million or 9% for the year ended December 31, 2024 as compared to the year ended December 31, 2023 due to lower unfavorable inventory adjustments, and lower material costs, offset by increased operating costs related to the paused Rochester Hub and an increase in depreciation of processing equipment due to the first full year of operations at the Germany Spoke.
Cost of sales attributable to service revenue includes the cost of the battery-grade materials acquired with the service contract with the remaining product conversion cost being included in cost of sales attributable to product sales. Cost of sales attributable to service revenue increased by $2.1 million for the year ended December 31, 2024, compared to the year ended December 31, 2023, due to the increase in service revenue in 2024.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased $18.1 million or 19% for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to a net decrease in personnel costs as a result of restructuring activities of $9.5 million offset by an increase of $4.3 million of personnel costs previously capitalized in 2023 as a element of the Company's Hub and Spoke expansion projects. As a result of the implementation of the cash preservation plan, other administrative costs decreased $3.5 million and we experienced a net reduction in consulting and legal services of $2.9 million. As of December 31, 2024 we also recovered trade receivables previously written of as disclosed in Note 3 of $2.2 million and had a favorable variance of $2.9 million related to project costs previously written off during 2023.
Research and development
For the year ended December 31, 2024, research and development expense was $1.6 million, $4.1 million lower than in the corresponding period in 2023. The decrease primarily relates to a decrease in consulting and professional fees as a result of the pause in the Company’s development projects, a decrease in employee salaries and benefits, and reimbursements received from Glencore in accordance with a cost sharing agreement in relation to the Planned Portovesme Hub.
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Other income (expense)
Other income (expense) consists of interest income, foreign exchange gain or loss, interest expense, fair value gain (loss) on financial instruments, and debt extinguishment loss. Interest expense represents interest paid in kind (“ PIK interest ”), actual cash interest costs incurred and any accrued interest payable at a future date, net of interest costs capitalized for qualifying assets where they are directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset.
For the year ended December 31, 2024, other expense was $12.2 million, a decrease of $36.9 million, compared to the corresponding period of 2023. Other expense for the year ended December 31, 2024 consisted of interest expense of $61.9 million due primarily to PIK interest expense on Li-Cycle's convertible notes, debt extinguishment loss of $58.9 million related to the Glencore Unsecured Convertible Notes, interest income of $2.4 million, and foreign exchange gain of $1.1 million, offset by fair value gain on embedded derivatives revaluation in the amount of $105.1 million.
Refer to the section titled “— Liquidity and Capital Resources ” below for further details on the Company’s convertible debt.
Net loss
Net loss was $137.7 million in the year ended December 31, 2024, compared to net loss of $138.0 million in the comparative period in 2023. Net loss for the year ended December 31, 2024 was driven by the factors discussed above.
Non-GAAP Reconciliations and Supplementary Information
The Company uses the non-GAAP measure of Adjusted EBITDA. Management believes that this non-GAAP measure provides useful information to investors in measuring the financial performance of the Company and is provided as additional information to complement U.S. GAAP measures by providing a further understanding of the Company’s results of operations from management’s perspective. Adjusted EBITDA does not have a standardized meaning prescribed by U.S. GAAP and the term therefore may not be comparable to similarly titled measures presented by other publicly traded companies and should not be construed as an alternative to other financial measures determined in accordance with U.S. GAAP. Accordingly, it should not be considered in isolation nor as a substitute for the analysis of the Company’s financial information reported under U.S. GAAP.
Adjusted EBITDA is defined as earnings before depreciation and amortization, interest expense, interest income, income tax expense (recovery), adjusted for items that are not considered representative of ongoing operational activities of the business and items where the economic impact of the transactions will be reflected in earnings in future periods. The following table provides a reconciliation of net profit (loss) to Adjusted EBITDA loss.
Year ended December 31,
Unaudited $ millions
Net loss
Income tax
Depreciation and amortization
Interest expense
Interest income
EBITDA loss
Restructuring fees adjustment 1
Debt extinguishment loss
Fair value gain on financial instruments 2
Adjusted EBITDA loss
1. Restructuring fees adjustment include: net expense related to the workforce reduction approved by the Board on March 25, 2024 which provided certain executives and non-executives with contractual termination benefits as well as one-time termination benefits; Special Committee retainers; professional fees, including legal fees incurred as a result of the three shareholder suits and the mechanic’s liens filed following the construction pause at the Rochester Hub; and expenses related to the implementation of the Cash Preservation Plan.
2. Fair value gain on financial instruments relates to convertible debt.
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Operational Updates
Year ended December 31,
Unaudited $ millions, except production data in tonnes
Change
Operational Highlights
Capital Expenditures
Production - Black Mass & Equivalents
Capital Expenditure
Capital expenditures for the year ended December 31, 2024 were $23.9 million, compared to $334.9 million in the year ended December 31, 2023. The $23.9 million capital expenditures in the year ended December 31, 2024 primarily consisted of payments for and receipts of equipment and construction materials purchased during previous periods for the Rochester Hub and the Germany Spoke. The decrease in capital expenditures for the year ended December 31, 2024, was due to the pause of construction at the Rochester Hub which was the primary driver for capital expenditures for the year ended December 31, 2023.
Production – Black Mass & Equivalents
The Company produced 5,385 tonnes of Black Mass & Equivalents in the year ended December 31, 2024, compared to 6,825 tonnes in the corresponding period of 2023. The decrease in production of BM&E was primarily attributable to the slowdown of operations at our North America Spokes offset by an increase attributable to our Germany Spoke operations during the year ended December 31, 2024 as operations in Germany began in August 2023.
Spoke & Hub Network
Li-Cycle has two operational Generation 3 Spokes in North America (the Arizona Spoke and the Alabama Spoke) and one operational Generation 3 Spoke in Europe (the Germany Spoke, which commenced operations in August 2023). In view of the pause in construction of the Rochester Hub project, the Company has slowed operations at its North American Spokes by commencing closure activities at the Ontario Spoke, curtailing operations at the New York Spoke and slowing down operations at its Arizona and Alabama Spokes.
The Company processes end-of-life batteries and certain manufacturing scrap at its Spoke main lines to produce black mass and shredded metal. Other manufacturing scrap acquired by the Company may be processed at the Company’s ancillary lines to produce intermediate products or sold directly to third parties.
Li-Cycle’s first commercial Hub was under construction in Rochester, New York until October 23, 2023, when the Company announced a construction pause on its Rochester Hub project, pending completion of a comprehensive review of the go-forward strategy for the project. As part of the comprehensive review, the Company examined the scope, expected capital cost, financing, timing of completion and go-forward construction strategy options and have since completed the technical review on the construction, commissioning and operating process areas related to the MHP scope. We are continuing to refine our detailed project plan and financing strategy in line with the MHP scope. We will require significant additional funding before restarting the Rochester Hub project, on the basis of the MHP scope or otherwise.
Liquidity and Capital Resources
Overview
To date, Li-Cycle 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, (v) the Underwritten Offering, and (vi) government grants. We have incurred net negative operating cash flow since our inception and expect to continue to generate negative operating cash flow. Cash generated at our operating Spokes is consumed by those operations and any shortfalls as well as funds required for general and all other needs are provided through our existing cash, debt, grants and other receivables. Inherently, there can be no guarantee that we can execute our growth
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strategy, secure appropriate feedstock supply, or develop the operating capabilities necessary to grow into a cash flow positive business.
Accordingly, without additional financing in the near term, we will not have adequate liquidity during the 12 months following December 31, 2024, casting substantial doubt about our ability to continue as a going concern.
There can be no assurance that we will be able to secure sufficient, additional funding, under reasonable commercial terms or at all, to provide liquidity for ongoing operations, to fund future growth or capital projects, including completion of the Rochester Hub or otherwise satisfy any of our funding needs and obligations. The Glencore Convertible Notes, and borrowings that may become available under the DOE Loan Facility have, or are expected to have restrictive covenants that would significantly limit our operating and financial flexibility or our ability to obtain future financing.
See the following sections for more details regarding our material cash requirements and sources and conditions of liquidity.
Material Cash Requirements
As discussed in and subject to the factors in Management’s Discussion and Analysis of Financial Condition and Results of Operations - Management Priorities, Challenges and Business Outlook - Rochester Hub Project Review in this Annual Report on Form 10-K, our primary need for liquidity is to fund on-going working capital requirements of our business during the pause of the Rochester Hub project and existing capital commitments. We will require additional funding to restart the construction of the Rochester Hub which has an estimated cost to complete of $483.3 million inclusive of $89.7 million to settle various existing Hub commitments included in accounts payable as at December 31, 2024.
We have no material short-term debt maturities or requirements to pay cash interest associated with our convertible debt under the Company’s option to elect PIK interest. See Note 13 (Convertible debt) to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further details on our convertible debt.
Excluding the Rochester Hub related commitments referred to above, we had $43.0 million of accounts payable as of December 31, 2024. In the year following December 31, 2024, we anticipate cash lease payments of $12.2 million primarily associated with our facilities and $2.4 million of cash severance costs related to the March 2024 restructuring.
We continue to experience net negative cash flows from operations, and notwithstanding the potential impacts of the Cash Preservation Plan and other cost reducing activities, we require material funds to support our operations and continue our business.
Sources and Conditions of Liquidity
Our sources of liquidity to fund our on-going operations, corporate and other costs are predominantly from our existing available cash, unreceived grants, sales of BM&E and recycling services, other receivables and proceeds from future financing, if and when available.
On June 28, 2024, we entered into an ATM Agreement with B. Riley, covering the sale of up to $75.0 million aggregate amount of our common shares. In 2024, we raised $16.4 million in gross proceeds by issuing an aggregate of 7,228,200 of our common shares under the ATM Program. As of December 31, 2024, approximately $58.6 million of our common shares remain available for issuance under the ATM Program. In connection with the Underwritten Offering the Company agreed to suspend the ATM program for 90 days following the closing of the offering on January 14, 2025.
On November 7, 2024, we entered into the DOE Loan Facility, providing for a loan facility in the amount of up to $475.0 million (including up to $445.0 million of principal and up to $30.0 million in deferred and accrued interest). We are actively exploring other financing options and strategic alternatives for a complete funding package needed to restart the construction at the Rochester Hub (of which the DOE Loan Facility is a key component). We will require significant additional funding before drawing down on the DOE Loan Facility and we cannot know or guarantee when, if ever, or how much, if any, funds will be available or received from the DOE Loan Facility.
On January 15, 2025, the Company entered into an underwriting agreement with Aegis Capital Corp., pursuant to which the Company offered and sold, in an underwritten public offering in the United States (the "Underwritten Offering"),
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an aggregate of (i) 5,000,000 units at a public offering price of $1.00, each unit consisting of (a) one common shares, (b) one eight-month warrant to purchase one common share (the "Series A Warrants") and (c) one five-year warrant to purchase one common share (the "Series B Warrants") and (ii) in lieu of units, 10,000,000 pre-funded units at a public offering price per pre-funded unit of $0.99999, each consisting of (a) one pre-funded warrant to purchase one common share (the "Pre-Funded Warrants" and, together with the Series A Warrants and the Series B Warrants, the "Warrants"), (b) one Series A Warrant and (c) one Series B Warrant. As a result of the full exercise of by Aegis Capital Corp. of its 15% over-allotment option, which was completed by January 27, 2025, the Company also issued to Aegis Capital Corp. an aggregate of 2,250,000 common shares at a price of $0.99998 each, 2,250,000 Series A Warrants at a price of $0.00001 each and 2,250,000 Series B Warrants at a price of $0.00001 each. The Underwritten Offering resulted in gross proceeds to the Company of $17.3 million.
See Note 7 (Property, plant and equipment, net) to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for details of the $5.8 million (€5.3 million) conditional grant received from the State of Saxony-Anhalt, Germany. By financing a portion of eligible capital expenditures before May 31, 2025, we may become eligible to receive the remaining €1.1 million of the approved grant. At December 31, 2024, we satisfied the conditions of the grant and we expect to continue to satisfy the conditions of the grant through the required period, although there can be no assurances that we will be able to do so. In the future, should we not meet the conditions of the grant, all or part of the grant could be cancelled and we could be required to return funds provided by the grant.
During the year ended December 31, 2024, we reached new agreements and renegotiated certain previous agreements with certain suppliers to extend payment terms for $1.5 million of trade accounts payable beyond one year. We expect to pay, in aggregate, less than $0.1 million in interest over the remaining terms of the deferrals. We recorded these amounts as non-current accounts payable in the consolidated balance sheet as of December 31, 2024.
At December 31, 2024, we had convertible debt of $363.1 million. For details regarding our indebtedness, see Note 13 (Convertible debt) to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Cash Flows Summary
Cash, cash equivalents and restricted cash were $31.9 million as at December 31, 2024, compared to $80.3 million as at December 31, 2023. Cash, cash equivalents and restricted cash as at December 31, 2024 included proceeds received from the issuance of the Glencore Senior Secured Convertible Note and restricted cash of $9.3 million. Presented below is a summary of Li-Cycle’s operating, investing, and financing cash flows for the periods indicated:
Year ended December 31,
$ millions
Net cash used in operating activities
Net cash used in investing activities
Net cash provided (used in) by financing activities
Net change in cash
Net Cash Used in Operating Activities
For the year ended December 31, 2024, net cash used in operating activities was $106.4 million compared to $99.8 million in the corresponding period of 2023, and were driven were driven by an increase in selling, general and administrative disbursements included in expenses in prior periods and expenses related to legal fees incurred as a result of the three shareholder suits and mechanic’s liens filed following the construction pause at the Rochester Hub and other non-recurring restructuring costs.
The cash expenditures related to the shareholder lawsuits and lien related activities during the year ended December 31, 2024 were $6.1 million. The other non-recurring cash restructuring costs of $9.0 million during the year ended December 31, 2024 include severance costs for certain executives and non-executives pursuant to contractual termination benefits related to the March 2024 workforce reduction, as well as consulting, legal and Special Committee fees.
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Net Cash Used in Investing Activities
For the year ended December 31, 2024, net cash used in investing activities was $23.9 million, and primarily consisted of payments for equipment and construction materials purchased during previous periods and delivered during 2024 for the Rochester Hub and the Germany Spoke, compared to net cash used in investing activities of $334.9 million in the corresponding period of 2023. The decrease in net cash used in investing activities for the year ended December 31, 2024 as compared to the corresponding period of 2023 was due to the pause of construction at the Rochester Hub and other development projects.
Net cash Provided by (Used in) From Financing Activities
For the year ended December 31, 2024, net cash provided by financing activities was $81.9 million, compared to $2.9 million used in the corresponding period of 2023, and was primarily driven by $75.0 million of gross proceeds received from the issuance of the Glencore Senior Secured Convertible Note on March 25, 2024 net of $8.6 million of transaction costs and $15.5 million net proceeds raised from issuance of common shares under our ATM Program.
Off-Balance Sheet Arrangements
As of December 31, 2024, we are not party to any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.
Recent Accounting Pronouncements
From time to time, new accounting standards, amendments to existing standards, and interpretations are issued by the FASB. Unless otherwise discussed, and as further highlighted in Note 2 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K, Li-Cycle is in the process of assessing the impact of recently issued standards or amendments to existing standards that are not yet effective.
