The attached amended and restated interim unaudited condensed consolidated financial statements (the “Financial Statements”) for the three months ended March 31, 2023 and 2022, is current as of May 15, 2023 and provides financial information for the three months ended March 31, 2023, as amended and restated on April 29, 2024, solely to reflect the filing of the amended and restated unaudited condensed consolidated financial statements three months ended March 31, 2023 and 2022 in accordance with U.S. GAAP. Other than as expressly set forth above, the revised Financial Statements do not, and do not purport to, update or restate the information in the original financial statements or reflect any events that occurred after the date of the filing of the original financial statements.

Li-Cycle Holdings Corp.
Unaudited condensed consolidated balance sheets
All dollar amounts presented are expressed in millions of US dollars except share and per share amounts
						March 31,			December 31,
						2023			2022
Assets
Current assets
Cash and cash equivalents						$	409.2		$	517.9
Accounts receivable (net of allowance for credit losses of $0)						3.7			4.3
Other receivables						5.7			9.8
Prepayments, deposits and other current assets						78.2			95.2
Inventories, net						5.1			7.7
Total current assets						501.9			634.9
Non-current assets
Property, plant and equipment, net						300.9			210.0
Operating lease right-of-use assets						42.1			43.2
Finance lease right-of-use assets						0.1			—
Other assets						4.7			4.6
						347.8			257.8
Total assets						$	849.7		$	892.7
Liabilities
Current liabilities
Accounts payable						$	26.7		$	20.1
Accrued liabilities						26.8			51.8
Operating lease liabilities						4.2			4.3
Total current liabilities						57.7			76.2
Non-current liabilities
Operating lease liabilities						40.7			41.7
Finance lease liabilities						0.1			—
Convertible debt						282.3			272.8
Warrants						—			—
Asset retirement obligations						0.4			0.4
						323.5			314.9
Total liabilities						$	381.2		$	391.1
Commitments and Contingencies (Note 17)
Equity
Common stock and additional paid-in capital Authorized unlimited shares, Issued and outstanding - 176.5 million shares (176.1 million shares at December 31, 2022)						638.7			635.3
Additional paid-in capital
Accumulated deficit						(170.1)			(133.6)
Accumulated other comprehensive loss						(0.3)			(0.3)
Equity attributable to the shareholders of Li-Cycle Holdings Corp.						468.3			501.4
Non-controlling interest						0.2			0.2
Total equity						468.5			501.6
Total liabilities and equity						$	849.7		$	892.7

    

1.Corporate information

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Annual Report. The Company's significant accounting policies are disclosed on the referenced Annual Report. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of its financial position as of March 31, 2023, and the results of operations for the three months ended March 31, 2023, and 2022, and cash flows for the three months ended March 31, 2023, and 2022, have been included. The December 31, 2022 consolidated balance sheet data is derived from those audited consolidated financial statements.

The Company consolidates all entities that it controls through a majority voting interest and all variable interest entities (“VIE”) for which it is the primary beneficiary. As at March 31, 2023, and comparative reporting periods, the Company does not hold any interest in companies that qualify as VIE. The Company has controlling financial interest in various voting interest entities (“VOE”) through its ownership of majority voting interests in the entities.

i.the determination of net realizable value of inventory;

ii.the determination of the useful life of property, plant and equipment;

iii.the determination of recoverable amount of property, plant and equipment;

v.the valuation and measurement of the convertible debt and the related conversion and redemption features;

As of the three months ended March 31, 2023, the Company had two separate asset groups: its integrated Spoke and future Hub network in North America, and the EMEA Spoke network.

When indicators of impairment exist, long-lived asset impairment is tested using a two-step process. The Company performs a cash flow recoverability test as the first step, which involves comparing the asset group’s estimated undiscounted future cash flows to the carrying value of its net assets. If the net undiscounted cash flows of the asset group exceed the carrying value of its net assets, long-lived assets are not considered to be impaired. If the carrying value exceeds the net undiscounted cash flows, there is an indication of potential impairment and the second step of the long-lived asset impairment test is performed to measure the impairment amount. The second step involves determining the fair value of the asset group. Fair values are determined using valuation techniques that are in accordance with U.S. GAAP, including the income approach. If the carrying value of the asset group’s net assets exceeds its fair value, then the excess represents the maximum amount of potential impairment that will be allocated to long-lived assets in the asset group, with the limitation that the carrying value of each separable asset cannot be reduced to a value lower than its fair value. There were no impairments of long-lived assets for the three months ended March 31, 2023.

The Company's principal lines of business are the sale of products and lithium-ion battery recycling services which together account for 100% of sales. The principal markets for the Company's products and recycling services are the United States and Canada.

The allowance for credit losses as at March 31, 2023 was $nil (December 31, 2022 : $nil) and no expected credit loss provisions were recognized for the three months ended March 31, 2023.

Bad debt expense for the three months ended March 31, 2023 was $1.0 million (for the three months ended March 31, 2022 : $nil).

The inventory balances for finished goods and raw materials have been adjusted to reflect the lower of cost or net realizable value. For the three months ended March 31, 2023, the adjustment for finished goods inventory was $2.2 million (2022: $nil). For the three months ended March 31, 2023, the adjustment for raw materials inventory was a $0.1 million partial reversal of prior period write-down (2022: write-down reversal of $0.6 million). The write-offs are recorded in the unaudited condensed consolidated interim statement of operations and comprehensive income (loss).

For the three months ended March 31, 2023, $7.7 million in borrowing costs (for the three months ended March 31, 2022: $nil) were capitalized to assets under construction. The capitalization rate used to determine the amount of borrowing costs eligible for capitalization in the period was 12.6% which is the weighted average effective interest rate of the Company's effective interest rates on its leases and convertible debt.

Refer to Note 17 for details of contractual commitments to purchase fixed assets.

The Company’s lease portfolio is predominately operating leases for plant operations, storage facilities, and office space for employees. The Company presents operating lease and finance lease balances separately on the unaudited condensed consolidated balance sheets. The Company’s finance leases relate to plant operations. The Company does not include options to extend leases in the lease term until they are reasonably certain to be exercised. The following table presents the Company's lease balances and their classification on the unaudited condensed consolidated balance sheets:

The weighted average remaining lease term of the Company's premises and equipment operating leases is 16.17 years as at March 31, 2023 and 16.11 years as at December 31, 2022. The weighted average remaining lease term of the Company's premises and equipment finance leases is 2.90 years as at March 31, 2023 and 2.69 years as at December 31, 2022.

The weighted average lease discount rate of the Company's premises and equipment operating leases is 7.18% as at March 31, 2023 and 7.12% as at December 31, 2022. The weighted average lease discount rate of the Company's premises and equipment finance leases is 10.80% as at March 31, 2023 and 11.83% as at December 31, 2022.

At March 31, 2023, none of the Company's executed leases that had not yet commenced will create significant rights or obligations in the future and sublease transactions are not material. There were no restrictions or covenants imposed by its leases.

As of March 31, 2023 and December 31, 2022, the Company's intangible assets consisted of the following:

For three months ended March 31, 2023 and three months ended March 31, 2022 the cloud computing arrangement projects were in process and not required to be amortized.

12.    Related party transactions

The Company has convertible debt instruments with Glencore Ltd. (“Glencore”), refer to Note 14 for more information.

The Company has agreements with Glencore, pursuant to which Glencore purchases for its internal consumption or on-sale to third party end customers, certain by-products produced at the Company's Spokes, including shredded metal. Product revenue from Glencore was $0.9 million for the three months ended March 31, 2023 ($0.4 million for the three months ended March 31, 2022, respectively). Trade receivables from Glencore as of March 31, 2023 were $0.7 million ($0.3 million as of December 31, 2022).

Related-Party Expenses

On May 31, 2022, the Company entered into agreements with Glencore, pursuant to which Glencore earns (i) sourcing fees on feed purchased for the Company's Spokes; and (ii) marketing fees on the sale of Black Mass & Equivalents sold to third parties. Sourcing fees and marketing fees payable to Glencore as of March 31, 2023 were $nil (December 31, 2022: $nil).

(a)KSP Convertible Notes

On September 29, 2021, the Company entered into a Note Purchase Agreement (the “KSP Note Purchase Agreement”) with Spring Creek Capital, LLC (an affiliate of Koch Strategic Platforms, LLC, being a subsidiary of Koch Investments Group) and issued an unsecured convertible note (the "KSP Convertible Note”) for a principal amount of $100 million to Spring Creek Capital, LLC. The KSP Convertible Note will mature on September 29, 2026, unless earlier repurchased, redeemed or converted. Interest on the KSP Convertible Note is payable semi-annually, and Li-Cycle is permitted to pay interest on the KSP Convertible Note in cash or by payment in-kind (“PIK”), at its election. Interest payments made in cash are based on an interest rate of LIBOR plus 5.0% per year, and PIK interest payments were based on an interest rate of LIBOR plus 6.0% per year, with a LIBOR floor of 1% and a cap of 2%. Once LIBOR interest rate is no longer published, the interest rate will instead be based on the sum of the Secured Overnight Financing Rate ("SOFR") and the average spread between the SOFR and LIBOR during the three-month period ending on the date on which LIBOR ceases to be published, subject to a floor of 1% and cap of 2%. The effective interest rate of the KSP Convertible Note is 14.0%.

The PIK election results in the issuance of a new note under the same terms as the KSP Convertible Note, issued in lieu of interest payments with an issuance date on the applicable interest date. On May 1, 2022, Spring Creek Capital, LLC assigned the KSP Convertible Note and the PIK note outstanding at that time to an affiliate, Wood River Capital, LLC. The Company has elected to pay interest by PIK since the first interest payment date of December 31, 2021. The KSP Convertible Note and the PIK notes issued thereunder are referred to collectively as the "KSP Convertible Notes”, and as at March 31, 2023, comprised the following:

At the option of the holder, the KSP Convertible Notes may be converted into common shares of the Company at a conversion price of $13.43, subject to customary anti-dilutive adjustments. If the Company's share price is equal to or greater than $17.46, for a period of twenty consecutive days, the Company can force conversion of the KSP Convertible Notes at an amount equal to the sum of principal, accrued but unpaid interest, plus any make-whole amount which equal to the undiscounted interest that would have been payable from the date of conversion to the maturity date. At the Company's option at any time, the Company can also redeem all of the KSP Convertible Notes at any time for a cash purchase price equal to 130% of the principal plus unpaid interest until maturity. The conversion feature under the KSP Convertible Notes has been recorded as a bifurcated embedded derivative liability since the conversion ratio does not always result in a conversion of a fixed dollar amount of liability for a fixed number of shares due to the optionality of the interest rate utilized on conversion at the Company's option. The KSP Convertible Notes are also subject to redemption upon a change of control event or an event of default. Under an event of default, redemption happens upon occurrence of an event at the holder’s discretion. Under a change of control event, mandatory redemption happens upon occurrence of an event. Both the change of control and event of default options under the KSP Convertible Notes have been recorded as bifurcated embedded derivative liabilities as the redemption price triggered by these features represents a substantial premium over the principal amount. The bifurcated embedded derivatives are measured at fair value bundled together as a single compound embedded derivative. As at March 31, 2023, no conversions or redemptions had taken place.

The fair value of the compound embedded derivative upon issuance of the KSP Convertible Notes was determined to be a liability of $27.7 million whereas the remaining $72.3 million, net of transaction costs of $1.6 million, was allocated to the principal portion of the debt. During the three months ended March 31, 2023, the Company recognized a fair value loss of $0.2 million on the embedded derivatives. The embedded derivatives were valued using the Binomial Option Pricing Model. The assumptions used in the model were as follows:

(b)Glencore Convertible Notes

The Company has elected to pay interest by PIK since the first interest payment on November 30, 2022. The Glencore Note and the PIK notes issued thereunder are referred to collectively as the “Glencore Convertible Notes”, and as at March 31, 2023, comprised the following:

At the option of the holder, the Glencore Convertible Notes may be converted into common shares of the Company at a conversion price of $9.95, subject to customary anti-dilutive adjustments. The conversion feature under the Glencore Convertible Notes has been recorded as an embedded derivative liability as the conversion ratio does not always result in a conversion of a fixed dollar amount of liability for a fixed number of shares due to the optionality of the interest rate utilized on conversion at the Company's option. The Glencore Convertible Notes are also subject to redemption upon a change of control event or an event of default. Under an event of default, redemption happens upon occurrence of an event at the holder’s discretion. Under a change of control event, mandatory redemption happens upon occurrence of an event. The change of control, event of default, and optional redemption options under the Glencore Convertible Notes have been recorded as bifurcated embedded derivative liabilities. The bifurcated embedded derivatives are measured at fair value bundled together as a single compound embedded derivative. As at March 31, 2023, no conversion or redemption had taken place.

The fair value of the embedded derivative liability upon issuance of the Glencore Convertible Notes was determined to be $46.2 million with the remaining $153.8 million, net of transaction costs of $1.3 million, allocated to the initial amortized cost of the host debt instrument. During the three months ended March 31, 2023, the Company recognized a fair value loss of $0.5 million on the embedded derivatives. The embedded derivatives were valued using the Finite Difference Method. The assumptions used in the model were as follows:

The following details the changes in issued and outstanding common shares for the three months ended March 31, 2023.

Interest rate risk is the risk arising from the effect of changes in prevailing interest rates on the Company’s financial instruments. The Company is exposed to interest rate risk, as it has variable interest rate debt that includes an interest rate floor and cap. Refer to Note 14.

As of March 31, 2023, there were $12.7 million in committed purchase orders or agreements for equipment and services (December 31, 2022: $9.5 million).

Adjustments for diluted loss per share were not made for the three months ended March 31, 2023 and March 31, 2022, as they would be anti-dilutive in nature. The following table presents shares from instruments that could dilute basic loss per share in the future, but were not included in the calculation of diluted loss per share because they are antidilutive for the periods presented:

During the three months ended March 31, 2023 and the three months ended March 31, 2022, the Company operated in Canada and the United States. As of March 31, 2023, there have not been sales of Black Mass & Equivalents and as such, product revenue has not been recognized in Europe. Management has concluded that the customers, and the nature and method of distribution of goods and services delivered, if any, to these geographic regions are similar in nature. The risks and returns across the geographic regions are similar; therefore, the Company operates as a single operating segment.

The attached amended and restated management’s discussion and analysis (“MD&A”) for the three months ended March 31, 2023 and 2022, is current as of May 15, 2023 and provides financial information for the three months ended March 31, 2023, as amended and restated on April 29, 2024, solely to reflect the filing of the amended and restated unaudited condensed consolidated financial statements three months ended March 31, 2023 and 2022 in accordance with U.S. GAAP. Other than as expressly set forth above, the revised MD&A does not, and does not purport to, update or restate the information in the original MD&A or reflect any events that occurred after the date of the filing of the original MD&A.

The following amended and restated discussion and analysis of financial condition and results of operations (“MD&A”) is prepared as of May 15, 2023, as amended and restated on April 29, 2024, solely to reflect the filing of the amended and restated unaudited condensed consolidated financial statements for the three months ended March 31, 2023 and 2022 prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”), for interim reporting. Other than as expressly set forth above, the MD&A does not, and does not purport to, update or restate the information in the original MD&A or reflect any events that occurred after the date of the filing of the original MD&A.

In addition to historical financial information, the MD&A contains forward-looking statements based upon current expectations that involve risks, uncertainties and assumptions. For more information about forward-looking statements, refer to the section entitled “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 under the section entitled “Key Factors Affecting Li-Cycle’s Performance” and under “Item 1A. Risk Factors” included in the Annual Report.

Li-Cycle’s annual consolidated financial statements have been prepared in accordance with U.S. GAAP. Li-Cycle’s unaudited condensed consolidated interim financial statements have been prepared in accordance with ASC 270 - Interim Reporting. The MD&A should be read in conjunction with Li-Cycle’s annual consolidated financial statements included in Item 8 of the Annual Report for the year ended December 31, 2023. All amounts are in U.S. dollars except as otherwise indicated. For more information about the basis of presentation of Li-Cycle’s financial statements, see the section entitled "Components of Results of Operations—Basis of Presentation."

Li-Cycle is an industry leader in lithium-ion battery (“LIB”) resource recovery and the leading LIB recycler in North America. When Li-Cycle refers to itself as the leading LIB recycler in North America, it is referring to its status based on installed permitted capacity for LIB recycling measured in tonnes per year. The Company’s proprietary “Spoke & Hub” recycling and resource recovery process is designed (a) at its Spokes, to process battery manufacturing scrap and end-of-life batteries to produce “black mass” and other intermediate products, and (b) at its Hubs, to process black mass to produce battery grade materials, including nickel sulphate, cobalt sulphate, and lithium carbonate. The Company produces certain 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 and black mass equivalents (“Black Mass & Equivalents” or “BM&E”). Li-Cycle has a market-leading position in North America through its four operational Spokes in Kingston, Ontario (the “Ontario Spoke”), Rochester, New York (the “New York Spoke”), Gilbert, Arizona (the “Arizona Spoke”) and Tuscaloosa, Alabama (the “Alabama Spoke”). The Company is currently developing its first commercial-scale Hub in Rochester, New York (the “Rochester Hub”). Li-Cycle is working on plans to develop an expanded Spoke and warehouse facility that will replace its existing Spoke in Kingston, Ontario (the “New Ontario Spoke”). Li-Cycle is also developing new Spokes in Europe, including in Magdeburg, Germany (the “Germany Spoke”), which is expected to commence operations in mid-2023, in Moss, Norway (the “Norway Spoke”), which is expected to commence logistics operations in 2023 and operations in 2024, and in Harnes, France (the “France Spoke”), which is expected to commence operations in 2024. Refer to the section entitled “Operational Updates” for additional details.

•Capitalizing on strong secular market and government policy – The U.S. Inflation Reduction Act of 2022 favors the development of a domestic electric vehicle (“EV”) supply chain which will help the Company as a U.S. domestic operator. In addition, growing mega-factory investments in North America and globally are expected to drive significant increases in the Company's total addressable market;

•Advancing first mover roll-out of the Spoke & Hub network in North America and Europe – The Rochester Hub is on track to commence commissioning in stages in late 2023. The Company is also scheduled to open its first European Spoke in 2023 with two additional European Spokes expected in 2024. The Company expects to continue to add key commercial contracts underpinning its investments in both North America and Europe;

•Funding flexibility and building further balance sheet strength – The Company intends to pursue potential debt financing options from both traditional and government sources in support of future growth;

•Optimizing European asset rollout plan – The Company is scheduled to commence operations at its first European Spoke in Magdeburg, Germany in the second half of 2023. The Germany Spoke is expected to have total capacity of 30,000 tonnes of LIB input per year including two main lines with the capacity to process 20,000 tonnes of LIB per year and ancillary processing of a further 10,000 tonnes of LIB per year. Li-Cycle is also advancing additional Spoke projects in France and Norway;

•Maximizing significant lithium value within black mass – The lithium content within the Black Mass & Equivalents has no payable value under the Company’s current third-party sales contracts. To unlock that value, which has increased in the current market context, Li-Cycle is planning to gradually shift to a strategy of retaining BM&E production for future internal use as feedstock at the Rochester Hub, which is on track to commence commissioning in stages in late 2023. The Rochester Hub will produce battery grade lithium carbonate, among other battery grade materials, from the Company’s BM&E feedstock and the sale of these finished products is expected to unlock the additional metal value contained within the Company’s BM&E.

•Funding flexibility and building further balance sheet strength – On February 27, 2023, the Company announced that it had entered into a conditional commitment with the United States Department of Energy (“DOE”) Loan Programs Office for a loan of up to $375.0 million (the “DOE Loan”) through the DOE’s Advanced Technology Vehicles Manufacturing program. The DOE Loan, which is to be used for the development of the Rochester Hub, would have a term of up to 12 years from financial close, and interest on the loan would be the 10-year U.S. Treasury rates from the date of each advance under the loan. The Company expects to close this transaction in Q2 2023, subject to completion of long form agreements and certain conditions to be satisfied prior to closing. The DOE Loan will build further balance sheet strength and liquidity in support of future growth for the Company;

•Advancing first mover roll-out of the Spoke & Hub network in North America and Europe – Li-Cycle has made significant progress on the construction and development of the Rochester Hub to date, with life to date spending at $178.4 million as at March 31, 2023, which includes the achievement of key engineering, permitting, procurement and construction milestones and is on track to initiate commissioning in stages in late 2023. Refer to the section entitled “Operational Updates” for further details. The Company continues to diversify its strategic long-term commercial agreements by working with a broad pool of customers over multiple year agreements to underpin its capital investments;

•Optimizing European Spoke rollout plan – The Company continues to advance the Germany Spoke which is expected to have two main lines operational in the second half of 2023. The Company has also announced the development of the France Spoke, a facility with an initial main line processing capacity of 10,000 tonnes of LIB input per year, and the optionality to expand to up to 25,000 tonnes per year. Refer to the section entitled “Operational Updates” for additional details on the Company’s Spoke network rollout plan;

On May 9th, 2023, the Company announced it has signed a letter of intent with Glencore International AG, a wholly owned subsidiary of Glencore plc (“Glencore”), to jointly study the feasibility of, and later, develop a Hub facility in Portovesme, Italy (the “Portovesme Hub”) to produce critical battery materials. The Portovesme Hub would repurpose part of the existing Glencore metallurgical complex, which would enable a cost-efficient and expedited development plan. The definitive feasibility study (“DFS”) is expected to be completed by mid-2024. Subject to a final investment decision, the project would proceed to construction with commissioning of the Portovesme Hub expected to commence in late 2026 to early 2027. The project also contemplates competitive long-term financing from Glencore to fund Li-Cycle’s share of the capital investment. The Portovesme Hub could have processing capacity of up to 50,000 to 70,000 tonnes of Black Mass & Equivalents annually.

Li-Cycle produced 1,853 tonnes of Black Mass & Equivalents in the three months ended March 31, 2023. The production outlook is based on current mainline and ancillary capacity of the Company’s operating Spokes, being the Ontario Spoke, New York Spoke, Arizona Spoke and Alabama Spoke, combined with the Germany Spoke, which is currently in development and expected to have two operational main lines by the second half of 2023.

The Company’s 2023 capital spending outlook is primarily related to the Rochester Hub, which is expected to enter the commissioning phase by late 2023, and developing the Spoke network. The Company continues to advance its Spokes in development in 2023, including the installation of the first and second main lines at the Germany Spoke, initial work on the France Spoke and the New Ontario Spoke, and further work on the Norway Spoke. Refer to the section entitled “Operational Updates” for further details.

The Company expects to have other capital expenditures in 2023 related to sustaining and improvement capital for the existing Spoke network, research and development, capital spare parts and other items which are not included in the growth capital outlook above.

1 Capital spend outlook does not include capitalized labour.

_____________________________________

1Adjusted 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.

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 destruction of batteries. Sales of intermediate products are presented net of fair value losses recognized in the period. Refer to the section entitled “Material Accounting Policies and Critical Estimates” for additional details on the Company’s revenue recognition policy.

For the three months ended March 31, 2023, revenues were $3.6 million, compared to $8.0 million in the corresponding period of 2022. Sales of Black Mass & Equivalents were 881 tonnes for the period, compared to 774 tonnes in the corresponding period of 2022. Revenue from product sales and recycling services before FMV adjustments of $7.7 million increased by 114% during the period, due to higher product sales volume from the continued expansion of the Company’s customer base, the expanding operations of the Company’s Spoke facilities, and the benefit of a higher product sales value mix of BM&E, partially offset by a reduction in market prices of cobalt and nickel. There were unfavorable FMV adjustments on product revenue of $4.1 million for three months ended March 31, 2023, compared to favorable adjustments of $4.4 million in the corresponding period of 2022, driven by decreasing cobalt and nickel prices in the period.

As of March 31, 2023, 4,359 metric tonnes of Black Mass & Equivalents are subject to fair value pricing adjustments which, depending on the contractual terms, could take up to 12 months to settle after shipment. The table below shows the expected settlement dates for the metric tonnes of BM&E subject to fair value price adjustments by quarter for the last twelve months:

For the three months ended March 31, 2023, cost of sales was $19.1 million, $10.6 million higher than in the corresponding period in 2022. Variable and fixed costs related to BM&E and shredded metal products sold in the period were $7.1 million, compared to $3.8 million in 2022. The increase was due to increases in raw material acquisition costs and other production costs. Fixed and other costs for the Spoke network expensed in the period were $6.7 million, compared to $0.9 million in 2022. Li-Cycle’s Spoke network expanded between the periods, with the Arizona Spoke and the Alabama Spoke both operating during 2023 and not during 2022. As a result of this expansion, Spoke costs including personnel costs, leases, and depreciation increased compared to the prior year. Due to increased BM&E inventory levels and BM&E costs exceeding net realizable value, inventory provisions expense was $2.1 million in Q1 2023, compared to a reduction in provision of $0.6 million in the corresponding period in 2022. The balance of $3.2 million in cost of sales for Q1 2023, compared to $4.4 million for Q1 2022, included overhead costs required for operations but not allocated to a specific Spoke, costs from Spokes in development and Hub operations costs.

For the three months ended March 31, 2023, selling, general and administrative expenses were $22.7 million, $2.5 million higher than in the corresponding period in 2022. The change was driven by personnel costs, which increased by $3.2 million in the period. Between the three months ended March 31, 2022 and 2023, the Company increased its headcount during the first quarter of 2023 to support the expanding Spoke network, capital projects, and corporate requirements. Additionally, the Company experienced increased costs of $2.7 million related to insurance, IT expenses, professional fees and leases, to support organizational growth. Depreciation also increased by $0.3 million between the three months ended March 31, 2022 and 2023. The above increases were partially offset by a decrease in stock-based compensation expense of $3.7 million, due to accelerated stock-based compensation expense recognition in three months ended March 31, 2022 associated with certain grants.

For the three months ended March 31, 2023, research and development was $0.9 million, $0.3 million higher than in the corresponding period in 2022. The increase primarily relates to personnel costs and professional fees incurred for initial research and development for the Planned Portovesme Hub.

For the three months ended March 31, 2023, other income (expense) was $2.7 million, a decrease of $8.8 million, compared to the corresponding period of 2022, primarily related to a decrease in fair value gains on the revaluations of the conversion feature of our convertible debt of $3.8 million, driven primarily by the changes in inputs for the Company’s option pricing models. Additionally, the Company recorded a fair value gain on the redemption of warrants in the three months ended March 31, 2022, of $11.1 million, compared to $nil in the three months ended March 31, 2023 as all warrants were redeemed in 2022. Interest on convertible debt increased during the period, related to the higher convertible debt balance on the KSP Convertible Notes and the Glencore Convertible Notes from PIK interest. The decrease in other income was partially offset by an increase in interest capitalized to qualifying Rochester Hub capital assets in the three months ended March 31, 2023.

Net loss was $36.5 million in the three months ended March 31, 2023, compared to net loss of $9.8 million in the comparative period in 2022. Net loss for the three months ended March 31, 2023 was driven by the factors discussed above, primarily the increase the cost of sales and the decrease in other income.

Adjusted EBITDA loss was $37.9 million in the three months ended March 31, 2023, compared to $20.9 million in the corresponding period of 2022. The primary difference between Adjusted EBITDA loss and net loss for the period is the exclusion of unrealized fair value gains on financial instruments of $0.7 million, as well as interest income, interest expense, and depreciation.

For the three months ended March 31, 2023, cash flows used in operating activities were $20.4 million compared to cash flows used in operating activities of $19.8 million in the comparative period of 2022. The increase in cash flows used in operating activities was primarily driven by the growth and expansion of Li-Cycle’s operations and commercial footprint, and the ramp up of operations in the period, and working capital changes related to the timing of receipts and payments.

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.

1Fair value gain on financial instruments relates to convertible debt, and to warrants. Warrants were redeemed and no longer outstanding as of March 31, 2022.

Capital expenditures for the three months ended March 31, 2023 were $88.3 million, compared to $16.4 million in the three months ended March 31, 2022. Capital expenditures for the three months ended March 31, 2023 were primarily driven by purchases of equipment and construction materials for the Rochester Hub of $77.2 million. Capital spend for detailed engineering, equipment and installation and facility related expenditures for the Company’s Spokes for the three months ended March 31, 2023 were $9.1 million, and include the Germany Spoke, as well as other sustaining and improvement capital for the existing Spoke network.

Included in the capital expenditures for the three months ended March 31, 2023 are $2.0 million in personnel costs, which were capitalized to assets under construction as they are costs that are directly attributable to bringing the Company’s Rochester Hub and Spoke development projects to a condition and location necessary for the assets to be capable of operating in the manner intended by management (2022: $nil).

The Company produced 1,853 tonnes of Black Mass & Equivalents in the three months ended March 31, 2023, compared to 702 tonnes in the corresponding period of 2022. The increase in production of BM&E was primarily attributable to the Company’s expanding Spoke network, including the addition of the Arizona Spoke, the Alabama Spoke, and ancillary processing lines at the New York Spoke subsequent to the comparative period.

The Company has a major design and build project underway to establish its first Hub and is developing and evolving a network of Spokes. The Company prioritizes the fastest growing electrification demand centers and prudently directing capital.

Li-Cycle completed a definitive feasibility study for the Rochester Hub in December 2021. Based on the definitive feasibility study, Li-Cycle expects the Rochester Hub will have nameplate input capacity to process 35,000 tonnes of Black Mass & Equivalents annually (equivalent to approximately 90,000 tonnes or 18 GWh of LIB equivalent feed annually). Based on the definitive feasibility study, the facility is expected to have an output capacity of battery grade materials of approximately 42,000 to 48,000 tonnes per annum of nickel sulphate, 7,500 to 8,500 tonnes per annum of lithium carbonate and 6,500 to 7,500 tonnes per annum of cobalt sulphate.

Li-Cycle has engaged Hatch Associates Consultants, Inc. as its engineering and procurement contractor for the Rochester Hub. Hatch Associates Consultants, Inc. is also providing select construction management services such as onsite field engineering support and overall project scheduling for the project. Li-Cycle has engaged MasTec Inc. as its general contractor. Procurement activities are well advanced and have commenced on all equipment and select construction materials for the Rochester Hub. Site works and construction commenced on the Rochester Hub site in January 2022. The Rochester Hub has made significant progress to date on key engineering, procurement and construction milestones and is expected to initiate commissioning in stages in late 2023.

Li-Cycle estimates that the Rochester Hub will require a total capital investment of approximately $486 million (+/-15%) based on the definitive feasibility study. Costs for the Rochester Hub are trending towards the higher end of the budgeted range, with spend to date of $178.4 million at March 31, 2023.

Li-Cycle expects that the Rochester Hub will result in a workforce of approximately 270 employees.

Li-Cycle currently has four operational Spokes in North America: the Ontario Spoke, the New York Spoke, the Arizona Spoke and the Alabama Spoke. As of March 31, 2023 the Alabama Spoke was in the ramp-up phase. The Company is also continuing to add capacity to its Spoke network with new development and expansions, as described below.

The Company continues to innovate its Spoke technology with each Spoke roll out, incorporating upgrades and improvements from the development of the preceding Spokes. Since the build and installation of the Company’s first Spoke (the “Generation 1” Ontario Spoke in 2020), the Company has significantly evolved its Spoke design. The Ontario Spoke was a stick build format with a single shredder design. The Company’s next Spoke facility (the “Generation 2” New York Spoke) was a modular build with increased recovery rates, including added ancillary processing capacity. Both the Arizona Spoke and the Alabama Spoke are “Generation 3” Spokes and incorporate a modular build, multi-stage shredding with capabilities to shred full-pack EV batteries, further increases to recovery rates, and optionality for multiple main lines and flex capacity with ancillary processing.

The table below outlines current available Spoke capacity and additional 2023 expected Spoke capacity, by Spoke location:

Notes

4 Processes electrode foils into formed cubes for optimizing logistics and downstream processing.

In 2022, Li-Cycle announced the development of a European Spoke to be based in Magdeburg, Germany, approximately 160 kilometers from Berlin. The Germany Spoke was planned to have an initial recycling capacity of at least 10,000 tonnes (2 GWh equivalent) per year, with the first main line expected to be operational in mid-2023. To meet customer demand and increase cost efficiencies, Li-Cycle now plans to install a second main line with capacity of 10,000 tonnes (2 GWh equivalent) per year in Germany by the end of 2023. In addition, the Germany Spoke is expected to have capacity of 10,000 tonnes per year for ancillary processing.

In 2022, Li-Cycle entered into a joint venture agreement with ECO STOR AS (“ECO STOR”) and Morrow Batteries AS (“Morrow”) to form Li-Cycle Norway AS for the purpose of constructing the Norway Spoke. Li-Cycle is the majority owner of Li-Cycle Norway AS, with ECO STOR and Morrow being minority owners and Nordic-headquartered strategic partners. The Norway Spoke will be a Generation 3 Spoke, expected to have a main line recycling capacity of 10,000 tonnes (2 GWh equivalent). The Company has leased a site in Moss, Norway, approximately 60 kilometers from Oslo, for this operation, and the building is currently under construction. To prioritize the expansion plans for the Germany Spoke, the Company will initially use the Norway Spoke as a consolidation and warehouse facility, with the installation of a Generation 3 Spoke line and start of operations at this facility now planned for 2024.

Li-Cycle completed improvements to its New York Spoke in November 2022 including upgrading the shredder and adding baling to supplement ancillary processing capacity. The New York Spoke now has variable capacity of up to 18,000 tonnes per year for processing a range of LIB feedstock types.

Li-Cycle intends to meet its currently anticipated capital requirements through cash on hand, cash flow from operations, the DOE Loan (expected to close in Q2 2023), and additional ongoing fund-raising activities. Li-Cycle has no material debt maturities until September 29, 2026. As at March 31, 2023, the Company had $409.2 million of cash and cash equivalents on hand and convertible debt of $282.3 million.

The Company’s primary need for liquidity is to fund working capital requirements of its business, capital expenditures related to the development and construction of its Rochester Hub and new Spoke facilities, and general corporate purposes.

Li-Cycle expects that its capital investments and operating expenditures will continue to increase and will require funding, in connection with its ongoing activities and growth, as the Company: completes the development and construction of the Rochester Hub; progresses the development of the Spoke network; develops additional Hubs, including through joint ventures or other contractual arrangements; continues to invest in its technology, R&D efforts and the expansion of its intellectual property portfolio; obtains, maintains and improves its operational, financial and management information systems; and hires additional personnel.

Presented below is a summary of Li-Cycle’s operating, investing, and financing cash flows for the three months ended March 31, 2023 and March 31, 2022:

Cash and cash equivalents were $409.2 million as at March 31, 2023, compared to $517.9 million as at December 31, 2022. The Company incurred capital expenditure of $88.3 million in the period, primarily comprising purchases of equipment and construction related activities for the Rochester Hub project and the Germany Spoke in addition to outflows for ongoing operating expenses of $20.4 million.

For the three months ended March 31, 2023, cash flows used by operating activities were approximately $20.4 million, compared to $19.8 million in the corresponding period of 2022 reflecting the growth and expansion of Li-Cycle’s operations and commercial footprint. The cash flows used in operating activities were driven by an increase in raw material costs, as well as increased operating expenses including personnel costs and changes in non-cash working capital.

For the three months ended March 31, 2022, cash flows used by operating activities were primarily driven by the growth of Li-Cycle’s operations and commercial footprint, which included increases in raw material costs, additional personnel costs, production costs from the ramp-up phase at the Alabama Spoke, R&D expenses, and consulting costs relating to the development of the Rochester Hub.

For the three months ended March 31, 2023, cash flows used in investing activities were $88.3 million, compared to $16.4 million in the corresponding period of 2022, and were primarily driven by the capital investment in the Rochester Hub and acquisition of equipment and construction materials for the Rochester Hub and the Germany Spoke. Cash flows used in investing activities in the prior year were for similar activities for the Rochester Hub and Arizona Spoke at a lesser scale.

On September 29, 2021, the Company entered into a Note Purchase Agreement (the “KSP Note Purchase Agreement”) with Spring Creek Capital, LLC (an affiliate of Koch Strategic Platforms, LLC, being a company within the Koch Investments Group) and issued a convertible note (the “KSP Convertible Note”) in the principal amount of $100 million to Spring Creek Capital, LLC. The KSP Convertible Note will mature on September 29, 2026. Interest on the KSP Convertible Note is payable semi-annually, and Li-Cycle is permitted to pay interest on the KSP Convertible Note in cash or by payment in-kind (“PIK”), at its election. Interest payments made in cash are based on an interest rate of LIBOR plus 5.0% per year, and PIK interest payments are based on an interest rate of LIBOR plus 6.0% per year. Under the terms of the KSP Convertible Note, LIBOR has a floor of 1% and a cap of 2%. Once LIBOR interest rate is no longer published, the interest rate will instead be based on the sum of the Secured Overnight Financing Rate (“SOFR”) and the average spread between the SOFR and LIBOR during the three-month period ending on the date on which LIBOR ceases to be published. The PIK election results in the issuance of a new note under the same terms as the KSP Convertible Note, issued in lieu of interest payments with an issuance date on the applicable interest date. The Company has elected to pay interest by PIK since the first interest payment date on the KSP Convertible Note of December 31, 2021. The KSP Convertible Note and the PIK notes issued thereunder are referred to collectively as the “KSP Convertible Notes”, and as at March 31, 2023, comprised the following:

On May 31, 2022, the Company issued to Glencore a convertible note in the aggregate principal amount of $200.0 million (the “Glencore Convertible Note”), in a transaction exempt from registration under the U.S. Securities Act of 1933, as amended. The Glencore Convertible Note matures five years from the date of issuance and interest on the Glencore Convertible Note is payable on a semi-annual basis, either in cash or by PIK, at the Company’s option.

The Glencore Convertible Note accrues interest from the date of issuance at the forward-looking term rate based on SOFR for a tenor comparable to the relevant interest payment period plus 0.42826% (the “Floating Rate”) plus 5% per annum if interest is paid in cash and plus 6% per annum if interest is paid in PIK. The Floating Rate has a floor of 1% and a cap of 2%. The Company has elected to pay interest by PIK since the first interest payment date on the Glencore Convertible Note of November 30, 2022. The Glencore Convertible Note and the PIK notes issued thereunder are referred to collectively as the “Glencore Convertible Notes”, and as at March 31, 2023, comprised the following:

The following table summarizes Li-Cycle’s contractual obligations and other commitments for cash expenditures as of March 31, 2023, and the years in which these obligations are due:

As of March 31, 2023, there were $12.7 million in committed purchase orders or agreements for equipment and services, compared to $9.5 million as of March 31, 2022.

Li-Cycle expects to enter into premises leases for additional Spokes and Hubs in the twelve months following March 31, 2023.

Currency Risk

The following table sets out the Company’s exposure, as of March 31, 2023 and December 31, 2022, in relation to the impact of movements in the cobalt and nickel price for the provisionally invoiced sales volume of Black Mass & Equivalents by metric tonne:

The following table sets out the period end commodity prices for cobalt and nickel as at March 31, 2023 and December 31, 2022:

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. The Company maintains commercial contracts with leaders in the EV and LIB ecosystem, including battery manufacturers and automotive original equipment manufacturers, as well as energy storage, consumer electronics and transportation companies. Li-Cycle currently has over 150 suppliers of end-of-life lithium-ion batteries and battery manufacturing scrap and expects to 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.

Li-Cycle relies on a limited number of customers from whom it generates most of its revenue. Li-Cycle has entered into two agreements with Traxys North America LLC (“Traxys”) covering the off-take of black mass from its Spokes in North America and certain specialty products from the Rochester Hub. Refer to the section titled “Item 4. Information on the Company—B. Business Overview —our Broad and Diversified Intake and Off-Take Commercial Contracts” in the Annual Report. Li-Cycle has also entered into additional off-take agreements with Glencore, covering substantially all of its other Spoke and Hub products. If the Company's off-take partners are unwilling or unable to fulfil their contractual obligations to the Company, if either party fails to perform under the relevant contract, or if these off-take partners otherwise terminate these agreements prior to their expiration, the Company's business could suffer and Li-Cycle may not be able to find other off-take partners on similar or more favorable terms, which could have a material adverse effect on its business, results of operations and financial condition.

The prices that Li-Cycle pays for battery feedstock for its Spokes, and the revenue that Li-Cycle currently 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 and copper. As a result, fluctuations in the prices of these commodities will affect Li-Cycle’s costs and revenues. After 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, nickel sulphate and cobalt sulphate. The amount of revenue that Li-Cycle will recognize from the sale of these end products will also be impacted by the commodity prices for the metals contained in these end products, notably lithium, nickel, and cobalt. While Li-Cycle’s costs and revenues may vary with commodity prices and specialty product prices, the Company believes the wide range of end products that Li-Cycle expects to produce will result in a diversification effect that will provide it with a natural hedge against significant variations in the commodity pricing related to a single product.

Li-Cycle’s continued growth is dependent on its ability to scale the business as currently planned, and build out additional facilities in North America and internationally. Li-Cycle has a market-leading position in North America through its operational Spokes in Kingston, Ontario, Rochester, New York, Gilbert, Arizona and Tuscaloosa, Alabama. Li-Cycle is also advancing the construction of its first commercial Hub, in Rochester, New York. Li-Cycle has also announced its first European Spokes, in Germany and Norway, and is evaluating additional opportunities to scale its operations with a range of potential partners and expansion opportunities that may include acquisitions, joint ventures or other commercial arrangements in North America, Europe, and Asia Pacific.

The development of Li-Cycle’s Rochester Hub, its Spoke network and other future projects is subject to risks, including engineering, permitting, procurement, construction, commissioning and ramp-up, and Li-Cycle cannot guarantee that these projects will be completed within expected timeframes or at all, that costs will not be significantly higher than estimated, that it will have sufficient capital to cover any increased costs or that the completed projects will meet expectations with respect to their production rates, unit costs or specifications of their end products, among others. While the expansion of Li-Cycle’s business in international markets, including the construction and operation of the Germany Spoke, the Norway Spoke and the France Spoke is an important element of its strategy, but it also involves exposure to risks inherent in doing business globally, which could delay or otherwise adversely affect the Company’s expansion plans.

The COVID-19 pandemic and geopolitical events, including Russia’s invasion of Ukraine, have resulted in significant disruptions in 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 operational or construction slowdowns. Such disruptions to the global supply chain may have a material adverse effect on Li-Cycle’s operations, development and construction activities and financial condition.

i.Sale of products which includes BM&E and shredded metal

ii.Services for recycling lithium-ion batteries which includes coordination of logistics and destruction of batteries

Convertible instruments are assessed to determine classification of the whole instrument and to determine how to account for any conversion features or non-equity derivative instruments. The host instrument (i.e., convertible note element of the outstanding instruments) is classified as a financial liability and recorded at the present value of the Company’s obligation to make future interest payments in cash and settle the redemption value of the instrument in cash. The carrying value of the host instrument is accounted for at amortized cost and is therefore accreted to the original face value of the instrument, over the life, using the effective interest method. Where any embedded elements are noted, these elements are assessed for bifurcation in accordance with ASC 815 - Derivatives and Hedging. The conversion option components of convertible debt instruments issued by the Company are recorded as financial liabilities, in accordance with the substance of the contractual arrangements and the definitions of a financial liability. If any conversion options require bifurcation as embedded derivatives, such embedded derivative liabilities are initially recognized at fair value and classified as derivatives in the balance sheet. Changes in the fair value of the embedded derivative liabilities are subsequently accounted for directly through the unaudited condensed consolidated statements of operations and comprehensive income (loss) and are included in operating activities in the unaudited condensed consolidated statements of cash flows as non-cash adjustment.

Li-Cycle's management, with the participation of its Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Canadian Securities Administrators National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings) as of the end of the period covered by this report. Based on such evaluation, its Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2023, its disclosure controls and procedures were not effective, due to the material weaknesses in the Company's internal control over financial reporting described below.

Management is responsible for establishing, maintaining and assessing the effectiveness of adequate internal control over financial reporting (“ICFR”) as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act and Canadian Securities Administrators National Instrument 52-109, Certification of Disclosure in Issuers’ Annual and Interim Filings. The Company’s ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

Prior to August 10, 2021, Li-Cycle was a private company and addressed internal control over financial reporting with internal accounting and financial reporting personnel and other resources. In the course of preparing for the Business Combination, Li-Cycle identified material weaknesses in its internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of Li-Cycle’s annual or unaudited interim condensed consolidated interim financial statements may not be prevented or detected on a timely basis.

As of March 31, 2023, management assessed the effectiveness of the Company’s ICFR based on the criteria established in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO 2013 Framework”). Based on this assessment, management identified the following material weaknesses as of March 31, 2023:

•an ineffective control environment, resulting from an insufficient number of experienced personnel with the appropriate technical training to allow for a detailed review of transactions that would identify errors in a timely manner;

•an ineffective risk assessment process to identify all relevant risks of material misstatement and to evaluate the implications of relevant risks on its internal control over financial reporting, resulting from the insufficient number of experienced personnel described above;

•an ineffective information and communication process to ensure the relevance, timeliness and quality of information used in control activities, resulting from: (i) insufficient communication of internal control information, including objectives and responsibilities; and (ii) ineffective general IT controls and controls over information from a service organization;

•an ineffective monitoring process, resulting from the evaluation and communication of internal control deficiencies not being performed in a timely manner; and,

•ineffective control activities related to the design, implementation and operation of process level controls and financial statement close controls, as a consequence of the above, which had a pervasive impact on the Company’s internal control over financial reporting.

As a result, management has concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2023, based on the COSO 2013 Framework described above. These material weaknesses create a reasonable possibility that a material misstatement to the Company’s unaudited condensed consolidated interim financial statements will not be prevented or detected on a timely basis.

Li-Cycle has taken steps to address these material weaknesses and continues to implement its remediation plan, which Li-Cycle believes will address the underlying causes. The Company has engaged external advisors with subject matter expertise and additional resources to provide assistance with all elements of the Company's internal control over financial reporting program, including: performance of a risk assessment; documentation of process flows; design and remediation of control deficiencies; and evaluation of the design and operational effectiveness of the Company's internal controls. Li-Cycle has also engaged additional external advisors to provide assistance in the areas of information technology and financial accounting. The Company continues to monitor the longer-term resource needs of its various financial functions, as the Company grows its capability, capacity, and competency. Li-Cycle has made some improvements to its various IT platforms, including our enterprise resource planning (“ERP”) system, and work on further upgrades is ongoing with the intent to further improve and enhance system functionality.

Except for the steps taken to address the material weaknesses in the Company’s ICFR as described above in “Plan for Remediation of Material Weakness”, no changes in the Company's ICFR occurred during the three months ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, the Company's ICFR.

Certain statements contained in this MD&A may be considered “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the U.S. Securities Act of 1933, as amended, Section 21 of the U.S. Securities Exchange Act of 1934, as amended, and applicable Canadian securities laws. Forward-looking statements may generally be identified by the use of words such as “believe”, “may”, “will”, “continue”, “anticipate”, “intend”, “expect”, “should”, “would”, “could”, “plan”, “potential”, “future”, “target” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters, although not all forward-looking statements contain such identifying words. Forward-looking statements in this MD&A include but are not limited to statements about: anticipated growth in global demand for and production of lithium-ion batteries and the growth of related industries; the expectation that the U.S. Inflation Reduction Act of 2022 will help the Company as a U.S.

domestic operator; the expectation that growing megafactory investments in North America and globally will drive significant increases in the Company’s total addressable market; Li-Cycle’s ability to capitalize on global growth opportunities; Li-Cycle’s expectation that it will attract new suppliers and that its supply pipeline will grow; the Company’s intention to pursue potential debt financing options from both traditional and government sources in support of future growth; Li-Cycle’s expectation that it will secure a loan of up to $375 million through United States Department of Energy Loan Programs Office Advanced Technology Vehicles Manufacturing program and that the transaction will close in Q2 2023; the expectation that the DOE Loan will build further balance sheet strength and liquidity in support of Li-Cycle’s future growth; the expectation to jointly study with Glencore plc the feasibility of, and later develop, a Hub facility in Portovesme, Italy to produce critical battery materials; the expectation regarding the completion of the definitive feasibility study; the expectations regarding the construction and commissioning of the Portovesme Hub, and its processing capacity, subject to a final investment decision; the expectation regarding the long-term financing from Glencore plc to fund Li-Cycle’s share of the capital investment in Portovesme Hub; Li-Cycle’s expectation to recognize revenue from the sale of end products; expected settlement dates for the metric tonnes of BM&E subject to fair value price adjustments; the Company’s plan to gradually shift to a strategy of retaining BM&E production for future internal use as feedstock at the Rochester Hub; the expectation that the Rochester Hub will produce battery grade lithium carbonate, among other battery grade materials, from Li-Cycle’s BM&E feedstock and that the sale of these finished products will unlock the additional metal value contained within Li-Cycle’s BM&E; the timing of expected commencement of commissioning of the Rochester Hub, its input and output capacities, its total capital cost and the expected size of its workforce; the expected timing and capital investment requirements for the Company’s Spokes in development and the expected main line processing capacity and ancillary processing capacity of the Germany, Norway, France and expanded Ontario Spokes; Li-Cycle’s expectation that it will enter into premises leases for additional Spokes and Hubs in the twelve months following March 31, 2023; Li-Cycle’s expectation that it will invest $35 million to $45 million towards its Spoke expansion plans in 2023 and that it will invest $250 million to $300 million towards the Rochester Hub project in 2023; Li-Cycle’s expectation regarding other capital expenditures in 2023; Li-Cycle’s expectation that its capital investments and operating expenditures will continue to increase and that it will need to secure additional equity and debt financing to fund its growth strategy; and Li-Cycle’s intention to meet its currently anticipated capital requirements through cash on hand, cash flow from operations, the DOE Loan (expected to close in Q2 2023), and additional ongoing fund-raising activities. These statements are based on various assumptions, whether or not identified in this communication, including but not limited to assumptions regarding the timing, scope and cost of Li-Cycle’s projects; the processing capacity and production of Li-Cycle’s facilities; Li-Cycle’s ability to source feedstock and manage supply chain risk; Li-Cycle’s ability to increase recycling capacity and efficiency; Li-Cycle’s ability to obtain financing on acceptable terms; Li-Cycle’s ability to retain and hire key personnel and maintain relationships with customers, suppliers and other business partners; Li-Cycle’s ability to attract new suppliers or expand its supply pipeline from existing suppliers; general economic conditions; currency exchange and interest rates; compensation costs; and inflation. There can be no assurance that such assumptions will prove to be correct and, as a result, actual results or events may differ materially from expectations expressed in or implied by the forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and many of which are beyond the control of Li-Cycle, and which may cause actual results to differ materially from the forward-looking information. Li-Cycle believes that these risks and uncertainties include, but are not limited to, the following: Li-Cycle’s inability to economically and efficiently source, recover and recycle lithium-ion batteries and lithium-ion battery manufacturing scrap, as well as third party black mass, and to meet the market demand for an environmentally sound, closed-loop solution for manufacturing waste and end-of-life lithium-ion batteries; Li-Cycle’s inability to successfully implement its global growth strategy, on a timely basis or at all; Li-Cycle’s inability to manage future global growth effectively; Li-Cycle’s inability to develop the Rochester Hub, and other future projects including its Spoke network expansion projects in a timely manner or on budget or that those projects will not meet expectations with respect to their productivity or the specifications of their end products; Li-Cycle’s failure to materially increase recycling capacity and efficiency; Li-Cycle may engage in strategic transactions, including acquisitions, that could disrupt its business, cause dilution to its shareholders, reduce its financial resources, result in incurrence of debt, or prove not to be successful; one or more of Li-Cycle’s current or future facilities becoming inoperative, capacity constrained or disrupted; additional funds required to meet Li-Cycle’s capital requirements in the future not being available to Li-Cycle on acceptable terms or at all when it needs them; Li-Cycle expects to continue to incur significant expenses and may not achieve or sustain profitability; problems with the handling of lithium-ion battery cells that result in less usage of lithium-ion batteries or affect Li-Cycle’s operations; Li-Cycle’s inability to maintain and increase feedstock supply commitments as well as secure new customers and off-take agreements; a decline in the adoption rate of EVs, or a decline in the support by governments for “green” energy technologies; decreases in benchmark prices for the metals contained in Li-Cycle’s products; changes in the volume or composition of feedstock materials processed at Li-Cycle’s facilities; the development of an alternative chemical make-up of lithium-ion batteries or battery alternatives; Li-Cycle’s revenues for the Rochester Hub are derived significantly from a single customer; Li-Cycle’s insurance may not cover all liabilities and damages; Li-Cycle’s heavy reliance on the experience and expertise of its management; Li-Cycle’s reliance on third-party consultants for its regulatory compliance; Li-Cycle’s inability to complete its recycling processes as quickly as customers may require; Li-Cycle’s inability to compete successfully; increases in income tax rates, changes in income tax laws or disagreements with tax authorities; significant variance in Li-Cycle’s operating and financial results from period to period due to fluctuations in its operating costs and other factors; fluctuations in foreign currency exchange rates which could result in declines in reported sales and net earnings; unfavourable economic conditions, such as consequences of the global COVID-19 pandemic; natural disasters, unusually adverse weather, epidemic or pandemic outbreaks, cyber incidents, boycotts and geo-political events; failure to protect or enforce Li-Cycle’s intellectual property; Li-Cycle may be subject to intellectual property rights claims by third parties; Li-Cycle’s failure to effectively remediate the material weaknesses in its internal control over financial reporting that it has identified or its failure to develop and maintain a proper and effective internal control over financial reporting.

These and other risks and uncertainties related to Li-Cycle’s business and the assumptions on which the forward-looking information is based are described in greater detail in the section entitled “Item 3. Key Information—D. Risk Factors” included in the Annual Report, under “Key Factors Affecting Li-Cycle’s Performance” hereof and elsewhere in this MD&A. Because of these risks, uncertainties and assumptions, readers should not place undue reliance on these forward-looking statements. Actual results could differ materially from those contained in any forward-looking statement.

The attached amended and restated interim unaudited condensed consolidated financial statements (the “Financial Statements”) for the three and six months ended June 30, 2023 and 2022, is current as of August 11, 2023 and provides financial information for the three and six months ended June 30, 2023, as amended and restated on April 29, 2024, solely to reflect the filing of the amended and restated unaudited condensed consolidated financial statements three and six months ended June 30, 2023 and 2022 in accordance with U.S. GAAP. Other than as expressly set forth above, the Financial Statements do not, and do not purport to, update or restate the information in the original financial statements or reflect any events that occurred after the date of the filing of the original financial statements.

1.Corporate information

Li-Cycle Holdings Corp. and its subsidiaries, (collectively “Li-Cycle” or the “Company”) started their business as Li-Cycle Corp., which was incorporated in Ontario, Canada under the Business Corporations Act (Ontario) (“OBCA”) on November 18, 2016. The Company's registered address is 207 Queens Quay West, Suite 590, Toronto, Ontario, Canada.

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Annual Report. The Company's significant accounting policies are disclosed on the referenced Annual Report. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of its financial position as of June 30, 2023, and the results of operations for the three and six months ended June 30, 2023, and 2022, and cash flows for the three and six months ended June 30, 2023, and 2022, have been included. The December 31, 2022 consolidated balance sheet data is derived from those audited consolidated financial statements.

The Company consolidates all entities that it controls through a majority voting interest and all variable interest entities (“VIE”) for which it is the primary beneficiary. As at June 30, 2023, and comparative reporting periods, the Company does not hold any interest in companies that qualify as VIE. The Company has controlling financial interest in various voting interest entities (“VOE”) through its ownership of majority voting interests in the entities.

The preparation of unaudited condensed consolidated interim financial statements in conformity with US GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, that affect the amounts reported in the Company's unaudited condensed consolidated interim financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable at the time in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and disclosure, if any, of contingent assets and liabilities and reported amounts of revenues and expenses. Actual results could differ from those estimates and judgments.

i.the determination of net realizable value of inventory;

ii.the determination of the useful life of property, plant and equipment;

iii.the determination of recoverable amount of property, plant and equipment;

v.the valuation and measurement of the convertible debt and the related conversion and redemption features;

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 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.

As of the three months ended June 30, 2023, the Company had two separate asset groups: its integrated Spoke and future Hub network in North America, and the EMEA Spoke network.

When indicators of impairment exist, long-lived asset impairment is tested using a two-step process. The Company performs a cash flow recoverability test as the first step, which involves comparing the asset group’s estimated undiscounted future cash flows to the carrying value of its net assets. If the net undiscounted cash flows of the asset group exceed the carrying value of its net assets, long-lived assets are not considered to be impaired. If the carrying value exceeds the net undiscounted cash flows, there is an indication of potential impairment and the second step of the long-lived asset impairment test is performed to measure the impairment amount. The second step involves determining the fair value of the asset group. Fair values are determined using valuation techniques that are in accordance with U.S. GAAP, including the income approach. If the carrying value of the asset group’s net assets exceeds its fair value, then the excess represents the maximum amount of potential impairment that will be allocated to long-lived assets in the asset group, with the limitation that the carrying value of each separable asset cannot be reduced to a value lower than its fair value. There were no impairments of long-lived assets for the three and six months ended June 30, 2023.

			For the three months ended June 30, 2023			For the three months ended June 30, 2022			For the six months ended June 30, 2023			For the six months ended June 30, 2022
Product revenue recognized in the period			$	5.0		$	4.3		$	12.2		$	7.6
Fair value pricing adjustments			(1.9)			(4.7)			(6.0)			(0.3)
Product revenue			$	3.1		$	(0.4)		$	6.2		$	7.3
Recycling service revenue recognized in the period			0.5			0.4			1.0			0.7
Revenue			$	3.6		$	—		$	7.2		$	8.0

The Company's principal lines of business are the sale of products and lithium-ion battery recycling services which together account for 100% of sales. The principal markets for the Company's products and recycling services are the United States of America and Canada.