SIGMA LITHIUM CORPORATION
CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 2023 and 2022
(EXPRESSED IN THOUSANDS OF
CANADIAN DOLLARS)
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of Sigma Lithium Corporation (the "Company") are the responsibility of management and have been approved by the Company's Board of Directors (the "Board").
The consolidated financial statements have been prepared by management on a going concern basis in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. When alternative accounting methods exist, management has chosen those it deems most appropriate in the circumstances. Financial statements are not exact since they include certain amounts based on estimates and judgments. Management has determined such amounts on a reasonable basis in order to ensure that the financial statements are presented fairly, in all material respects.
The Board is responsible for ensuring that management fulfills its responsibilities for financial reporting and is ultimately responsible for reviewing and approving the financial statements. The Board carries out this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board, and all of its members are independent directors. The Audit Committee meets at least four times a year with management, and with the external auditors, to discuss internal controls over the financial reporting process, auditing matters and financial reporting issues, to satisfy
itself that each party is properly discharging its responsibilities, and to review the quarterly and the annual reports, the consolidated financial statements and the external auditor's reports. The Audit Committee reports
its findings to the Board for consideration when approving the consolidated financial statements for issuance to the shareholders. The Audit Committee also considers, for review by the Board and approval by the shareholders, the engagement or reappointment of the external auditors.
"Ana Cabral Gardner"
Chief Executive Officer and Co-Chairperson
"Caio Márcio Martins de Araújo"Chief Financial Officer
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of
Sigma Lithium Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statement of financial position of Sigma Lithium Corporation and its subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of loss, comprehensive loss, changes in shareholders' equity and cash flows for the year then
ended and the related notes (collectively referred to the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operation and its cash flows for the year then ended, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023,
based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission, and our report dated April, 29 2024 expressed an adverse opinion on the effectiveness of the Company's internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
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Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relate.
Accounting for RSU stock-based compensation awards
As discussed in Note 28 to the consolidated financial statements, under the Company's equity incentive plan, selected participants are granted restricted share units (RSUs). RSUs are measured at fair value on either the grant date or a proxy for such date in certain circumstances. For RSUs that are subject to performance-basedconditions, vesting of the awards depends on meeting certain performance-basedmilestones. At each reporting date, the Company considers whether achievement of a milestone is probable and, if so, records compensation expense based on the portion of the service period elapsed to date with respect to that milestone, with a cumulative catch-up,net of estimated forfeitures. The Company will recognize remaining compensation expense with respect to a milestone, if any, over the remaining estimated service period. During the year ended December 31, 2023, the Company recorded $64,330 thousand in relation to RSUs
in stock-based compensation.
We identified the evaluation of the Company's accounting for RSU stock-based compensation awards as a critical audit matter. Challenging auditor judgment was required to evaluate the assumptions relating to the Company's determination of the probability and timing of when the performance-based milestones will be achieved. Specifically, the assumptions include when the grant date was achieved and the probability and timing of the achievement of non-market performance conditions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated management's accounting conclusions with respect to the determination of when the
grant date of the RSUs was achieved by comparing against the date of approval by the Board of Directors and the Compensation Committee. We evaluated the probability and timing of
achievement of the non-market performance conditions used to estimate the vesting period of each award granted by comparing to the Company's actual and future operating and development plans.
We also inquired of others outside of the accounting function as to the probability and timing of achievement of the non-market performance conditions and read publicly available market information.
KPMG Auditores Independentes Ltda.
We have served as the Company's auditor since 2023.
São Paulo, Brazil
April 30, 2024
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Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Sigma Lithium Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Sigma Lithium Corporation's (the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of financial position of the Company as of
December 31, 2023, the related consolidated statements of loss, comprehensive loss, changes in stockholders' equity, and cash flows for the year then ended, and the related notes (collectively, the
consolidated financial statements), and our report dated April xx, 2024 expressed an unqualified opinion on those consolidated financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual
or interim financial statements will not be prevented or detected on a timely basis. Material weaknesses related to the following have been identified and included in management's assessment.
- An ineffective control environment resulting from the failure to disseminate a translated Code of Ethics and relevant training thereon, an insufficient number of trained personnel with the appropriate skills and knowledge, including an appropriate assigned level of authority, responsibility and accountability related to the design, implementation and operating effectiveness of financial reporting, as well as insufficient board oversight over the development and performance of internal controls;
- An ineffective risk assessment process necessary to identify all relevant risks of material misstatement, including fraud risks, and to evaluate changes that could impact internal control over financial reporting, as well as the implications of relevant risks on the achievement of objectives, including financial reporting objectives;
-
An ineffective internal and external information and communication process to ensure the relevance,
timeliness and quality of information used in control activities, including the communication of the
Company's whistleblower policy and the preparation and selection of appropriate methods for communicating external information; - An ineffective monitoring process to ensure controls are periodically evaluated, results of testing are communicated to senior management and the board of directors and the control deficiencies are tracked for remediation on a timely basis; and
- Ineffective control activities due to the (i) failure to deploy general control activities over information technology (ii) failure to document policies and procedures and (iii) failure to document control activities to mitigate risks.
The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.
Basis for Opinion | - 5 - |
The Company's management is responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying "Internal Control over Financial Reporting" in Management`s Discussion and Analysis.]. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on
our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting 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 generally accepted accounting principles. A company's internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
- provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
KPMG Auditores Independentes Ltda.
São Paulo, Brazil
April 30, 2024
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Sigma Lithium Corporation
Consolidated Statements of Financial Position Years Ended December 31, 2023 and 2022 (Expressed in thousands of Canadian dollars)
Notes | 12/31/2023 | 12/31/2022 | ||||
ASSETS | ||||||
Current assets | ||||||
Cash and cash equivalents | 5 | 64,403 | 96,354 | |||
Trade accounts receivable | 6 | 29,693 | - | |||
Inventories | 7 | 19,442 | - | |||
Accounts receivable from related parties | 13 | 14 | 4,984 | |||
Advance to suppliers | 8 | 7,062 | 1,624 | |||
Prepaid expenses and other assets | 4,380 | 11,113 | ||||
Recoverable VAT and other taxes | 9 | 17,682 | 419 | |||
Total current assets | 142,676 | 114,494 | ||||
Non-current assets | ||||||
Loan and accounts receivable from related parties | 13 | 13,160 | - | |||
Prepaid expenses and other assets | 66 | 204 | ||||
Deferred income tax and social contribution | 19 | 2,070 | - | |||
Collateral and guarantees | 10 | 15,269 | - | |||
Property, plant and equipment | 11 | 239,742 | 158,574 | |||
Deferred exploration and evaluation expenditure | 12 | 74,255 | 35,636 | |||
Total non-current assets | 344,562 | 194,414 | ||||
Total assets | 487,238 | 308,908 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
Current liabilities | ||||||
Suppliers | 14 | 59,826 | 24,307 | |||
Loans and export prepayment | 15 | 28,907 | - | |||
Lease liability | 16 | 2,132 | 680 | |||
Prepayment from customer | 17 | 2,154 | - | |||
Taxes payable | 18 | 13,566 | 3,070 | |||
Accounts payable | 11,326 | 1,936 | ||||
Founder's royalty option | 11 | - | 5,081 | |||
Payroll and related charges | 2,528 | 409 | ||||
Other liabilities | 1,934 | 1,959 | ||||
Total current liabilities | 122,373 | 37,442 | ||||
Non-current liabilities | ||||||
Loans and export prepayment | 15 | 141,999 | 77,438 | |||
Lease liability | 16 | 3,595 | 2,989 | |||
Taxes payable | 18 | 138 | - | |||
Labor contingencies | 1,013 | 1,386 | ||||
Asset retirement obligations | 20 | 3,836 | 6,547 | |||
Total Non-current liabilities | 150,581 | 88,360 | ||||
Shareholders' equity | ||||||
Share capital | 22 | 386,035 | 276,711 | |||
Stock-based compensation reserve | 58,974 | 103,936 | ||||
Accumulated other comprehensive income (loss) | 2,032 | (3,030) | ||||
Accumulated losses | (232,757) | (194,511) | ||||
Total shareholders' equity | 214,284 | 183,106 | ||||
Total liabilities and shareholders' equity | 487,238 | 308,908 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
Basis of preparation (note 2)
Related parties (note 13)
Approved on behalf of the Board:
(Signed) "Ana Cabral Gardner" | , Director |
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Sigma Lithium Corporation
Consolidated Statements of Loss
Years Ended December 31, 2023 and 2022
(Expressed in thousands of Canadian dollars, except for number of shares and per share amounts)
Note | 2023 | 2022 | ||||
Sales revenue | 24 | 181,231 | - | |||
Cost of goods sold | 25(a) | (92,335) | - | |||
Gross profit | 88,896 | - | ||||
Operating expenses | ||||||
Sales expenses and commissions | (2,485) | - | ||||
General and administrative expenses | 25(b) | (54,398) | (15,962) | |||
Other operating income (expenses), net | 26 | (6,657) | (1,692) | |||
Settlement of founder's royalty option | 11(d) | - | (4,892) | |||
Stock-based compensation | 28 | (46,990) | (111,580) | |||
Operating loss before financial results and income taxes | (21,634) | (134,126) | ||||
Financial income (expenses), net | 27 | (9,893) | 6,916 | |||
Loss before income tax and social contribution | (31,527) | (127,210) | ||||
Income tax and social contribution - current | 19 | (8,979) | - | |||
Income tax and social contribution - deferred | 19 | 2,260 | - | |||
Net loss for the year | (38,246) | (127,210) | ||||
Basic and diluted net loss per common share | 23 | (0.35) | (1.26) | |||
Weighted average number of common shares outstanding - | 107,985,916 | 101,017,241 | ||||
basic and diluted |
The accompanying notes are an integral part of the consolidated financial statements.
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Sigma Lithium Corporation
Consolidated Statements of Comprehensive Loss Years Ended December 31, 2023 and 2022
(Expressed in thousands of Canadian dollars, except for number of shares and per share amounts)
2023 | 2022 | |||
Net loss for the year | (38,246) | (127,210) |
Items that may be subsequently reclassified to net income (loss):
Foreign currency translation adjustment of subsidiary
5,062468
(33,184) (126,742)
Net loss and comprehensive loss for the year
The accompanying notes are an integral part of the consolidated financial statements.
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Sigma Lithium Corporation
Consolidated Statements of Cash Flows Years Ended December 31, 2023 and 2022 (Expressed in thousands of Canadian dollars)
Note | 2023 | 2022 | |
Operating activities | |||
Net loss for the year | (38,246) | (127,210) | |
Adjustments for: | |||
Stock-based compensation | 28 | 46,990 | 111,580 |
Interest on loans and leases | 15&16 | 17,728 | 344 |
Depreciation and depletion | 11 | 7,547 | 102 |
Reversal of present value of assets retirement obligation | 20 | 414 | - |
Labor contingencies | - | 388 | |
Amortization of transaction costs | 15 | 1,059 | - |
Foreign exchange gain, net | 21 | (12,325) | (6,879) |
Income tax and social contribution - current and deferred | 19 | 6,719 | - |
Loss on agreement termination | - | 1,048 | |
Settlement of agreement termination | - | (5,055) | |
Interest on loans with related parties | (555) | - | |
Fair value of founder's royalty option | 11(c) | - | 4,892 |
Social projects provision | 1,308 | - | |
Realized foreign exchange loss (gain) on notes payable | - | 41 | |
Other | 368 | - | |
31,007 | (20,749) | ||
(Increase) Decrease in operating assets | |||
Trade accounts receivable | 6 | (30,436) | - |
Prepaid expenses and other assets | (10,784) | (12,412) | |
Inventories | 7 | (18,567) | - |
Advance to suppliers | 8 | (5,141) | - |
Accounts receivable from related parties - reimburse of geology | 5,902 | - | |
expenditures | |||
Recoverable VAT and other taxes, net | 9 | (17,271) | - |
Increase (decrease) in operating liabilities | |||
Suppliers | 14 | 14,851 | 24,683 |
Prepayment from customer for by-products | 17 | 1,757 | - |
Taxes payables | 3,966 | - | |
Payroll and related charges | 1,960 | 3,035 | |
Founder's royalty option | 11(c) | (5,372) | - |
Other liabilities | 121 | - | |
Income taxes paid | (2,310) | - | |
Interest payment on loans | 15 | (475) | - |
Net cash used in operating activities | (30,792) | (5,443) | |
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Sigma Lithium Corporation published this content on 01 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 May 2024 11:52:28 UTC.