8-K: Li-Cycle Restates Interim Financials Following Change to US GAAP Reporting

Li-Cycle Holdings Corp. restated its interim financial reports for 2023 to comply with US GAAP after ceasing to qualify as a foreign private issuer.

Summary

• Li-Cycle Holdings Corp. has restated its interim financial reports for the fiscal year ended December 31, 2023, to comply with U.S. Generally Accepted Accounting Principles (US GAAP).
• This change was required because Li-Cycle no longer qualifies as a foreign private issuer, effective January 1, 2024.
• The restated financials include unaudited consolidated interim financial statements and management's discussion and analysis for the three months ended March 31, 2023 and 2022, the three and six months ended June 30, 2023 and 2022, and the three and nine months ended September 30, 2023 and 2022.
• The original interim financial statements were prepared in accordance with International Financial Reporting Standards (IFRS).
• The restated financials do not reflect any events that occurred after the date of the original filings.

Sentiment

Score: 3

Explanation: The document presents a mix of positive and negative information, but the negative aspects, such as increased losses, reduced cash, and the pause of the Rochester Hub project, outweigh the positives. The company's future is uncertain, and there are significant risks to its ability to continue as a going concern.

Positives

• The company has expanded its Spoke network, leading to increased production of Black Mass & Equivalents.
• The company is working to unlock the value of lithium within black mass by retaining it for internal use at the Rochester Hub.

Negatives

• The company experienced unfavorable fair value adjustments on product revenue due to decreasing cobalt and nickel prices.
• The company's net losses have increased in the reported periods compared to the previous year.
• The company's cash and cash equivalents have decreased from $517.9 million at December 31, 2022 to $137.4 million at September 30, 2023.
• The company has identified material weaknesses in its internal control over financial reporting.

Risks

• The company is reliant on obtaining lithium-ion batteries and battery manufacturing scrap for recycling.
• The company's revenues are sensitive to the market prices of the constituent payable metals in its products, notably cobalt and nickel.
• The company's continued growth is dependent on its ability to scale the business and build out additional facilities.
• The company is exposed to risks inherent in doing business globally.
• The company is subject to various claims and legal proceedings in the ordinary course of its business.
• The company has paused construction work on its Rochester Hub project pending completion of a comprehensive review of the go-forward strategy for the project.
• The company has implemented a cash preservation plan including reducing staffing in its corporate support functions, pausing production at its Ontario Spoke and implementing a plan to manage lower levels of BM&E production at its remaining operating Spoke locations.
• The company has material uncertainties related to its ability to obtain short and long-term financing, which casts substantial doubt upon the company's ability to continue as a going concern.

Future Outlook

The company is reviewing its go-forward strategy for the Rochester Hub and its Spoke network, and is exploring financing options to increase liquidity. The company expects to continue to incur significant expenses and may not achieve or sustain profitability.

Management Comments

• Management believes that the company's performance and future success is dependent on multiple factors that present significant opportunities for Li-Cycle, but also pose significant risks and challenges.
• Management has concluded that there are material uncertainties related to the Company's ability to obtain short and long-term financing, which casts substantial doubt upon the Company's ability to continue as a going concern.

Industry Context

The document highlights the challenges and opportunities in the lithium-ion battery recycling industry, including the impact of commodity price fluctuations and the need for sustainable resource recovery solutions. The company is working to establish a closed-loop battery supply chain.

Comparison to Industry Standards

• The document does not provide specific comparisons to industry standards or competitors.
• However, it does mention that Li-Cycle is the largest pure-play lithium-ion battery recycler in North America, based on installed permitted capacity.
• The company's Spoke & Hub technology is a proprietary process, making direct comparisons difficult.

Legal Proceedings

• The company is subject to a putative securities class action lawsuit filed in the U.S. District Court for the Southern District of New York against the Company and certain of its officers and directors on behalf of a proposed class of purchasers of the Company's publicly traded securities during the period from June 14, 2022, through October 23, 2023.

Related Party Transactions

• The company has convertible debt instruments with Glencore Ltd.
• The company has agreements with Glencore, pursuant to which Glencore purchases certain by-products produced at the Company's Spokes.
• The company has engaged Fade In Production Pty. Ltd., which is controlled by certain members of the immediate family of the Executive Chair of Li-Cycle, to provide it with corporate video production services.

Stakeholder Impact

• Shareholders are impacted by the decreased share price and the uncertainty surrounding the company's future.
• Employees are impacted by the reduction in workforce and the uncertainty surrounding the company's future.
• Customers and suppliers are impacted by the slowed operations and the uncertainty surrounding the company's future.
• Creditors are impacted by the company's declining cash balance and the uncertainty surrounding its ability to repay its liabilities.

Next Steps

• The company will complete a comprehensive review of the go-forward strategy for the Rochester Hub project.
• The company will explore financing options to increase liquidity.
• The company will continue to work with the United States Department of Energy on the loan initiative.
• The company will continue to implement its remediation plan to address the material weaknesses in its internal control over financial reporting.

Key Dates

Keywords

lithium-ion battery recycling, US GAAP, black mass, Spoke & Hub, financial restatement, convertible debt, Rochester Hub, material weaknesses, commodity prices, capital expenditures