EX-99.30 31 tm2121440d1_ex99-30.htm EXHIBIT 99.30

 

Exhibit 99.30

 

 

 

 

SIGMA LITHIUM CORPORATION

 

(FORMERLY SIGMA LITHIUM RESOURCES CORPORATION)

 

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

 

THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

(EXPRESSED IN CANADIAN DOLLARS)

 

(UNAUDITED)

 

 

 

 

 

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

 

The accompanying unaudited condensed interim consolidated financial statements of Sigma Lithium Corporation (formerly Sigma Lithium Resources Corporation) (the "Company") are the responsibility of management and have been approved by the Board of Directors ("Board").

 

The unaudited condensed interim consolidated financial statements have been prepared by management in accordance with International Accounting Standards 34 Interim Financial Reporting of 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 the majority of its members are independent directors. The Audit Committee meets at least four times a year with management, as well as 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 auditors’ 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.

 

"Calvyn Gardner"  "Guilherme Guimarães"
Chairman and Chief Executive Officer  Chief Financial Officer

 

- 2 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation) 

Condensed Interim Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
(Unaudited)

 

   June 30,   December 31, 
   2021   2020 
ASSETS        
Current assets          
Cash and cash equivalents (note 4)  $40,576,508   $13,543,024 
Receivables and other assets (notes 5 and 12)   582,534    503,420 
Total current assets   41,159,042    14,046,444 
Non-current assets          
Receivables and other assets (notes 5 and 12)   124,104    111,098 
Exploration and evaluation assets (note 7)   3,203,346    18,354,148 
Property, plant and equipment (note 6)   23,194,434    686,308 
Total assets  $67,680,926   $33,197,998 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
Current liabilities          
Accounts payable  $351,220   $1,953,633 
Revolving credit facility (note 8)   1,378,353    2,683,880 
Payroll and other taxes   435,753    267,666 
Note payable (note 10)   280,173    1,941,349 
Lease liability (notes 11 and 12)   9,713    9,082 
Other liabilities   -    72,127 
Total current liabilities   2,455,212    6,927,737 
           
Long-term liabilities          
Deferred revenue (note 9)   4,007,100    4,007,100 
Note payable (note 10)   -    262,696 
Lease liability (notes 11 and 12)   240,762    243,117 
Total liabilities   6,703,074    11,440,650 
           
Shareholders' equity          
Share capital (note 13)   92,646,319    53,910,946 
Contributed surplus   11,780,884    3,930,885 
Accumulated other comprehensive loss   (2,828,689)   (2,858,091)
Accumulated deficit   (40,620,662)   (33,226,392)
Total shareholders' equity   60,977,852    21,757,348 
Total liabilities and shareholders' equity  $67,680,926   $33,197,998 

 

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

 

Related parties (notes 5, 8, 11 and 12)
Subsequent event (note 8)

 

Approved on behalf of the Board:

 

(Signed) "Calvyn Gardner"         , Director   (Signed) "Marcelo Paiva"       , Director

 

- 3 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Condensed Interim Consolidated Statements of Net Loss and Comprehensive income (loss)
(Expressed in Canadian Dollars)

(Unaudited)

 

   Three Months Ended
June 30,		   Six Months Ended
June 30,

 
   2021   2020   2021   2020 
Operating expenses                    
General and administrative expenses (note 17)  $855,184   $445,626   $6,947,427   $870,667 
Accretion and interest on notes payable (note 10)   5,460    79,919    43,282    166,460 
Interest expense on revolving credit facility and suppliers (note 8)   57,732    22,335    125,661    57,110 
Fair value adjustment on restructuring of note payable (note 10)   -    124,109    -    9,977 
Foreign exchange loss (gain)   87,011    (544,846)   250,825    (845,230)
Depreciation   13,729    14,452    27,075    31,617 
Net loss for the period   (1,019,116)   (141,595)   (7,394,270)   (290,601)
                     
Other comprehensive loss                    
                    
Amounts that may be reclassified subsequently to profit and loss                    
Cumulative translation adjustment   1,056,722    (724,454)   29,402    (2,444,350)
Net loss and comprehensive income (loss) for the period  $37,606   $(866,049)  $(7,364,868)  $(2,734,951)
                     

Loss per common share

                    
                     
Equity holders of the Company                    
Basic and diluted net loss per common share (note 14)  $(0.01)  $(0.00)  $(0.09)  $(0.00)
Weighted average number of common shares outstanding - basic and diluted   87,368,212    68,878,891    85,062,054    68,878,891 

 

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

 

- 4 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Condensed Interim Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
(Unaudited)

 

Six months ended June 30,  2021   2020 
Operating activities          
Net loss for the period  $(7,394,270)  $(290,601)
Adjustments for:          
Depreciation   27,075    31,617 
Stock-based compensation   5,511,152    211,349 
Accretion and interest on notes payable (note 10)   43,282    166,460 
Interest expense on credit revolver and suppliers (note 8)   125,661    57,110 
Fair value adjustment on restructuring of note payable (note 10)   -    9,977 
Unrealized foreign exchange gain on notes payable (note 10)   (91,578)   (911,914)
Unrealized foreign exchange gain   48,417    - 
Provision   -    (9,465)
Changes in non-cash working capital items:          
Receivables and other assets   (87,767)   87,091 
Accounts payable and other liabilities   (1,650,143)   864 
Other taxes   154,189    (85,733)
Net cash provided by (used in) operating activities   (3,313,982)   (733,245)
           
Investing activities          
Addition to exploration and evaluation assets   (5,365,659)   (568,010)
Purchase of property, plant and equipment   (21,027)   - 
Net cash used in investing activities   (5,386,686)   (568,010)
           
Financing activities          
Lease payments (notes 11 and 12)   (18,799)   (18,968)
(Repayment)/drawdown of revolving credit facility (note 8)   (1,330,579)   2,238,151 
Payment of note payable (note 10)   (1,875,576)   (868,474)
Proceeds from warrants exercised   132,000    - 
Issue of common shares (note 13)   39,380,157    - 
Net cash provided by financing activities   36,287,203    1,350,709 
Effect of exchange rate changes on cash held in foreign currency   (553,051)   (2,778)
Net increase in cash   27,033,484    46,676 
Cash, beginning of period   13,543,024    103,640 
Cash, end of period  $40,576,508   $150,316 

 

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

 

- 5 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation) 

Condensed Interim Consolidated Statements of Changes in Shareholders' Equity

(Expressed in Canadian Dollars) 

(Unaudited)

 

    Number of
common shares		     Share
capital		     Contributed
Surplus		     Accumulated
other
comprehensive
loss		     Deficit     Total  
Balance, January 1, 2020   68,878,891     $ 36,190,313     $ 4,440,281     $ (213,118 )   $ (31,678,201 )   $ 8,739,275  
Stock-based compensation (notes 18 and 19)   -       -       656,467       -     -     656,467  
Net loss for the period   -       -       -       -     (290,601 )   (290,601 )
Other comprehensive loss for the period   -       -       -       (2,444,350 )   -     (2,444,350 )
Balance, June 30, 2020   68,878,891     $ 36,190,313     $ 5,096,748     $ (2,657,468 )   $ (31,968,802 )   $ 6,660,791  
Balance, January 1, 2021   77,782,757     $ 53,910,946     $ 3,930,885     $ (2,858,091 )    $ (33,226,392 )  $ 21,757,348  
Private placement (note 13)   9,545,455       42,000,000       -       -      -     42,000,000  
Share issue costs (note 13)   -       (2,619,843 )     -       -     -     (2,619,843 )
Agent warrants issued (note 15)   -       (873,121 )     873,121       -     -     -  
Exercise of RSUs (note 18)   10,000       49,800       (49,800 )     -     -     -  
Exercise of warrants   30,000       178,537       (46,537 )     -     -     132,000  
Stock-based compensation (notes 18 and 19)   -       -       7,073,215       -     -     7,073,215  
Net loss for the period   -       -       -       -     (7,394,270 )   (7,394,270 )
Other comprehensive income for the period   -       -       -       29,402     -     29,402  
Balance, June 30, 2021   87,368,212     $ 92,646,319     $ 11,780,884     $ (2,828,689 )   $ (40,620,622 )   $ 60,977,852  

 

The accompanying notes to the unaudited condensed interim consolidated financial statements are an integral part of these statements.

 

- 6 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020

(Expressed in Canadian Dollars, unless otherwise indicated)

(Unaudited)

 

1.Nature of operations

 

Sigma Lithium Corporation (formerly Sigma Lithium Resources Corporation) (the “Company”) is a Canada based lithium exploration and development company incorporated under the Canada Business Corporations Act. The Company changed its name from Sigma Lithium Resources Corporation to Sigma Lithium Corporation on June 29, 2021 after receiving approval from shareholders at the Annual General Meeting. Its shares are listed on the TSX Venture Exchange (the “TSXV”) under the symbol SGMA and on the American Stock Exchange Over-the-Counter QB under the symbol SGMLF. The head office of the Company is at Suite 2200, 885 West Georgia Street, Vancouver, British Columbia, V6E 3E8.

 

These unaudited condensed interim consolidated financial statements are presented in Canadian dollars and include the Company’s wholly-owned subsidiary: Sigma Lithium Holdings Inc. (“Sigma Holdings”), which is domiciled in Canada and incorporated under the Business Corporations Act (British Columbia), and its indirect wholly-owned Brazil-incorporated subsidiary Sigma Mineração S.A. ("SMSA"). Sigma Holdings was incorporated for the purpose of developing SMSA's lithium properties located in the State of Minas Gerais, Brazil.

 

SMSA holds a 100% interest in four mineral properties: Grota do Cirilo, São Jose, Santa Clara and Genipapo, located in the municipalities of Araçuaí and Itinga, in the Vale do Jequitinhonha region in the State of Minas Gerais, Brazil (together, the "Lithium Properties").

 

2.Basis of preparation

 

These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis and are presented in Canadian Dollars except when otherwise indicated. They have been prepared on a going concern basis on the assumption that the Company will continue to operate for the next 12 (twelve) months and foreseeable future and be able to realize its assets and discharge its liabilities in the normal course of business.

 

As disclosed in note 13, the Company completed a non-brokered private placement in February 2021 with aggregate gross proceeds of $42 million.

 

The Company has approximately $40.6 million cash and cash equivalents available as at June 30, 2021. As described in note 3, the Company has decided to proceed with development activities in preparation for the construction of the commercial production plant at the Lithium Properties (the “Production Plant”). Although the Company has sufficient cash and cash equivalents to fund these development activities in the near-term, the Company has not yet committed to all expenditures related to the construction of the Production Plant. The Company will require additional debt financing when such long-term expenditures are committed in the future.

 

3.Significant Accounting Policies Statement of compliance

 

Statement of compliance

 

The accounting policies and estimates applied in these condensed consolidated interim financial statements are consistent with those used in the Company’s audited annual consolidated financial statements for the year ended December 31, 2020, except as described below. The Company applies International Financial Reporting Standards as issued by the International Accounting Standards Board. These unaudited condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 - Interim Financial Reporting. Accordingly, they do not contain all of the required disclosures and should be read in conjunction with the Company’s December 31, 2020 audited annual consolidated financial statements.

 

- 7 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020

(Expressed in Canadian Dollars, unless otherwise indicated)

(Unaudited)

 

3.Significant Accounting Policies (continued)

 

Adoption of a new accounting policy

 

Effective June 30, 2021, the Project´s Xuxa deposit (the “Xuxa Mine”) has transitioned from the exploration and evaluation stage (under IFRS 6) to the development stage and, as a result, $22,516,500 of the exploration and evaluation expenditures were transferred from exploration and evaluation assets to property, plant, and equipment (IAS 16). An impairment test was performed using a lithium price of US$ 750.00 per ton, an exchange rate of BRL 5.20/US$1.00 and a discount rate of 8%, which resulted in no impairment. The Xuxa Mine forms part of the Grota do Cirilo cash generating unit that also includes assets in the exploration and evaluation stage. Judgement is required in determining when an asset transitions from the exploration and evaluation to the development stage.

 

Property, plant, and equipment

 

Work-in-progress

 

Assets under construction are capitalized as work-in-progress until the asset is available for use. The cost of work-in-progress comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use. Directly attributable costs are capitalized until the asset is in a location and condition necessary for operation as intended by management. These costs include: the purchase price, installation costs, site preparation costs, survey costs, freight charges, transportation insurance costs, duties, testing and preparation charges and estimated costs of dismantling and removing the item and restoring the site on which it is located.

 

Costs incurred on mineral properties in the development stage are included in the carrying amount of the development project in work-in-progress. Development stage expenditures are costs incurred to obtain access to proven and probable mineral reserves or mineral resources and provide facilities extracting, treating, gathering, transporting, and storing the minerals. All expenditures incurred during the development stage until when the asset is ready for its intended use are capitalized.

 

Work-in-progress is not depreciated. When an asset becomes available for use, its costs are transferred from work-in-progress into the appropriate asset classification such as mineral properties, buildings, machinery, fixture, and plant. Depreciation commences once the asset is complete and available for use.

 

- 8 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020

(Expressed in Canadian Dollars, unless otherwise indicated)

(Unaudited)

 

4.Cash and cash equivalents

 

Cash and cash equivalents include cash, immediately redeemable deposits, and short-term investments with an insignificant risk of change in value. They are readily convertible to cash being comprised by different currency as follows:

 

   June 30, 2021   December 31, 2020 

 

 

Denominated Currencies

 

 

Amount in
denominated
currency

   Equivalent
Amount in
Canadian
Dollars		  

 

Amount in
denominated
currency

   Equivalent
Amount in
Canadian
Dollars		 
Deposits in Brazilian Reais   606,834   $150,486    16,811   $4,124 
Deposits in United States Dollars   28,030,990    34,769,640    10,613,332    13,529,876 
Deposits in Canadian Dollars   5,656,382    5,656,382    9,024    9,024 
        $40,576,508        $13,543,024 

 

5.Receivables and other assets

 

    June 30,
2021		     December 31,
2020		  
Current                
Prepaid land lease (note 12(b))   $ 12,186     $ 12,055  
Prepaid expenses     173,847       175,840  
Sales tax receivable     390,650       313,803  
Travel advances     5,851       1,722  
Total Current     582,534       503,420  
Non-current - Prepaid land lease (note 12(b))     124,104       111,098  
    $ 706,638     $ 614,518  

 

- 9 -

 

Sigma Lithium Corporation 

(Formerly Sigma Lithium Resources Corporation) 

Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020 

(Expressed in Canadian Dollars, unless otherwise indicated)

(Unaudited)

 

6.Property, plant, and equipment

 

Cost   Vehicle     Furniture     Building     Machinery     Fixtures     Work-in-
progress		     Pilot
plant		     Right-of-use
assets		     Total  
Balance, December 31, 2020   $ 5,888     $ 41,423     $ 12,220     $ 106,566     $ 204,756     $ -     $ 215,379     $ 293,166     $ 879,398  
Additions     -       10,967       -       10,060       -       -       -       -       21,027  
Transfer (note 3 and 7)     -       -       -       -       -       22,516,500       -       -          
Cumulative translation adjustment     64       1,232       133       1,873       2,221       -       2,131       2,546       10,200  
Balance, June 30, 2021   $ 5,952     $ 53,622     $ 12,353     $ 118,499     $ 206,977     $ 22,516,500     $ 217,510     $ 295,712     $ 910,625  

 

Accumulated amortization   Vehicle     Furniture     Building     Machinery     Fixtures     Work-in-
progress		     Pilot
plant		     Right-of-use
assets		     Total  
Balance, December 31, 2020     1,864       8,940       6,767       38,416       45,290       -       33,220       58,593       193,090  
Depreciation     556       1,973       231       5,456       9,591       -       9,268       9,136       36,211  
Cumulative translation adjustment     60       238       90       806       1,175       -       1,021       -       3,390  
Balance, June 30, 2021   $ 2,480     $ 11,151     $ 7,088     $ 44,678     $ 56,056     $ -     $ 43,509     $ 67,729     $ 232,691  

 

Net book value   Vehicle     Furniture     Building     Machinery     Fixtures     Work-in-
progress		     Pilot
plant		     Right-of-use
assets		     Total  
Balance, December 31, 2020   $ 4,024     $ 32,483     $ 5,453     $ 68,150     $ 159,466     $ 22,516,500     $ 182,159     $ 234,573     $ 686,308  
Balance, June 30, 2021   $ 3,472     $ 42,471     $ 5,265     $ 73,821     $ 150,921     $ 22,516,500     $ 174,001     $ 227,983     $ 23,194,434  

 

- 10 -

 

Sigma Lithium Corporation
(Formerly Sigma Lithium Resources Corporation)
Notes to the Condensed Interim Consolidated Financial Statements
Six Months Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise indicated)
(Unaudited)

 

7.Exploration and evaluation assets

 

The Company has deposits in exploration and evaluation stage with respect to its mineral properties and follows the practice of capitalizing all costs relating to the acquisition and exploration of mineral rights. Such costs include, among others, geological, geophysical studies, exploratory drilling and sampling, feasibility studies and technical reports.

 

A summary of explorations costs is set out below:

 

   June 30,   December 31, 
   2021   2020 
Opening balance  $18,354,148   $19,388,092 
Personnel costs (a)   2,188,601    933,045 
Geological costs   1,396,344    292,701 
Drilling   2,221,364    47,578 
Environmental consulting (b)   273,181    321,710 
Environmental compensation (c)   170,704    204,828 
Development / Engineering services   645,700    3,501 
Other   59,179    62,081 
Cumulative translation adjustment (d)   410,625    (2,899,388)
Transfer to property, plant and equipment (Note 3 and 6)   (22,516,500)   - 
Closing balance  $3,203,346   $18,354,148 

 

(a) The personnel costs include $1,562,063 related to RSUs during the six months ended June 30, 2021 (year ended December 31, 2020 - $470,032).

 

(b) Environmental consulting relates to maintenance, monitoring and licensing services.

 

(c) Environmental compensation relates to conditioning factors required by environmental authorities.

 

(d) Cumulative translation adjustment is the result of the exchange gain arising on the translation of exploration and evaluation assets held at SMSA, whose functional currency is the Brazilian Real, as a result of the appreciation of the Brazilian Real relative to the Canadian dollar during the six month period ended June 30, 2021.

 

8.Revolving credit facility

 

On November 29, 2019, in order to fund its working capital, the Company entered into a US$5,000,000 ($6,300,000) unsecured revolving credit facility (the “A10 Credit Facility”) with A10 Group (a related party – note 12). The A10 Credit Facility bears interest at 11% per annum, calculated in US Dollars from the day funds are drawn. The A10 Credit Facility was subject to a commitment and disbursement fee of 0.65% and a due diligence fee of 0.65% of the committed amount, which were offset against any interest payable on funds drawn. This credit facility had a one-year term, which was to be the repayment date for all funds drawn. Each draw on the A10 Credit Facility was subject to A10 Group approval.

 

On November 28, 2020 and on May 29, 2021 A10 Group agreed to extend the maturity date by six and three months, without any penalties or additional charges.

 

On May 31, 2021, the Company repaid US$1,097,774 ($1,330,579) to A10 Group.

 

On August 30, 2021, the Company repaid $1,425,317 (US$1,126,601) to A10 Group, being the outstanding balance of the A10 Credit Facility.

 

- 11 -

 

Sigma Lithium Corporation
(Formerly Sigma Lithium Resources Corporation)
Notes to the Condensed Interim Consolidated Financial Statements
Six Months Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise indicated)
(Unaudited)

 

8.Revolving credit facility (continued)

 

During the six months ended June 30, 2021, the Company drew $nil (year ended December 31, 2020 - US$1,685,700 ($2,281,983)) under the A10 Credit Facility and the following balances were outstanding as at June 30, 2021 and December 31, 2020:

 

   June 30,   December 31, 
   2021   2020 
Principal (a)  $1,194,319   $2,454,882 
Accrued Interests and fees (b)   184,034    228,998 
Total credit facility liability  $1,378,353   $2,683,880 

 

(a) The amount in contractual currency was US$962,850 (December 31, 2020 - US$1,925,700)

(b) The amount in contractual currency was US$148,366 (December 31, 2020 – US$179,634)

 

9.Deferred revenue

 

On March 26, 2019, the Company entered into a binding head of agreement with Mitsui & Co. Ltd. ("Mitsui") under which Mitsui will prepay the Company US$30,000,000 for battery grade lithium concentrate supply of up to 80,000 tonnes annually (the “Mitsui Pre-Payment”) over six years, extendable for another five years at the option of Mitsui.

 

An initial tranche payment of US$3,000,000 ($4,007,100) was received by the Company on April 4, 2019, while the disbursements of the remaining tranches are subject to certain conditions, including the execution of related definitive offtake agreements with Mitsui and securing loan funding for the remaining amount of the capital expenditures for the construction of the Production Plant.

 

As part of the total Mitsui Pre-Payment amount, for the Company to meet its construction timetable, an amount of up to US$7,000,000 for the deposits required to purchase long lead items for construction of the commercial production plant or other preproduction critical activities, can be made available as per the Company’s request to Mitsui. Such payments are subject to Mitsui’s approval and will be credited towards the overall Mitsui Pre-Payment amount.

 

Other than the initial tranche payment described above, the Company did not request or receive any funds in 2020 and in the six month period ended June 30, 2021.

 

10.Note payable

 

The outstanding balance of the note payable is herein presented at its carrying value of $280,173, including principal of $236,432 plus interest of $43,741 as at June 30, 2021, calculated as follows:

 

  

June 30,

2021

  

December 31,

2020

 
Opening balance  $2,204,045   $3,883,733 
Accretion   29,035    167,477 
Interest   14,247    98,831 
Fair value adjustment   -    (29,052)
Unrealized foreign exchange gain   (91,578)   (890,992)
Repayment of interest   (273,882)   (125,176)
Repayment   (1,601,694)   (900,776)
Closing balance  $280,173   $2,204,045 

 

- 12 -

 

Sigma Lithium Corporation
(Formerly Sigma Lithium Resources Corporation)
Notes to the Condensed Interim Consolidated Financial Statements
Six Months Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise indicated)
(Unaudited)

 

10.Note payable (Continued)

 

The following payments schedules due at June 30, 2021 and December 31, 2020 are outlined below.

 

       Canadian     
       equivalent to   Carrying value 
   Reais   Reais   June 30, 
Due date  (undiscounted)   (undiscounted)   2021 
March 28, 2022   1,000,000    247,930   $280,173 
Total            $280,173 

 

   June 30, 
Carrying value  2021 
Current  $280,173 
   $280,173 

 

       Canadian     
       equivalent to   Carrying value 
   Reais   Reais   December 31, 
Due date  (undiscounted)   (undiscounted)   2020 
January 31, 2021   3,859,309   $946,582   $1,101,470 
March 15, 2021   3,000,000    735,817    839,879 
March 28, 2022   1,000,000    245,272    262,696 
             $2,204,045 

 

   December 31, 
Carrying value  2020 
Current  $1,941,349 
Long-term   262,696 
   $2,204,045 

 

- 13 -

 

Sigma Lithium Corporation
(Formerly Sigma Lithium Resources Corporation)
Notes to the Condensed Interim Consolidated Financial Statements
Six Months Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise indicated)
(Unaudited)

 

11.Lease liability

 

The lease liability is related to land leases of surface properties owned by Miazga Participações S.A., (”Miazga”, a related party, (note 12) and Arqueana, a related party, (note 12) and housing leases owned by third parties. The lease liability was measured at the present value of the lease payments. The lease payments were discounted using a weighted average interest rate of 11.33% (December 31, 2020 – 11.33%), which was determined to be the Company's incremental borrowing rate. The continuity of the lease liability is presented in the table below:

 

Lease liability at January 1, 2020  $313,690 
Additions   20,585 
Interest expense   27,465 
Lease payments   (35,231)
Cumulative translation adjustment   (74,310)
Lease liability at December 31, 2020   252,199 
Interest expense   14,338 
Lease payments   (18,799)
Cumulative translation adjustment   2,737 
Lease liability at June 30, 2021  $250,475 
      
As at June 30, 2021     
Lease obligations  $250,475 
Less current portion   9,713 
Non-current portion  $240,762 
      
Maturity analysis – contractual undiscounted cash flows     
      
As at June 30, 2021     
Less than one year  $9,713 
Year 2   37,597 
Year 3   37,597 
Year 4   37,597 
More than 5 years   406,992 
Total contractual undiscounted cash flows  $529,496 

 

- 14 -

 
Sigma Lithium Corporation
(Formerly Sigma Lithium Resources Corporation)
Notes to the Condensed Interim Consolidated Financial Statements
Six Months Ended June 30, 2021 and 2020
(Expressed in Canadian Dollars, unless otherwise indicated)
(Unaudited)

 

12.Related party transactions

 

The Company’s related parties include:

 

Related PartyNature of relationship

 

A10 GroupA10 Group is composed of A10 Serviços Especializados em Avaliação de Empresas Ltda. and A10 Investimentos Ltda., both companies are owned by two directors of the Company.

MiazgaMiazga Participações S.A (“Miazga”) is a land administration company indirectly controlled by two directors of the Company, one of which also controls part of A10 Group.

ArqueanaArqueana Empreendimentos e Participações S.A. (“Arqueana”) is a land administration company in which two directors of the Company have an indirect economic interest.

Key management personnel Includes the directors of the Company, executive management team and senior management at SMSA.

 

(a) Transactions with related parties

 

Cost sharing agreement (“CSA”): The Company entered in a CSA with A10 Group where A10 Group is reimbursed for secondment staff 100% allocated to the Company, including legal, financial and business development personnel and 50% of shared secretarial administrative personnel.

 

Revolving credit facility: The Company entered in a revolving credit facility agreement with A10 Group which allows the Company to raise short-term financing debt increasing its liquidity (note 8).

 

Leasing Agreements: The Company has land lease agreements with Miazga and Arqueana (note 11). Part of these leases get offset by the prepaid land lease (note 5).

 

Share purchase agreement (“SPA”): The Company owes a note payable related to the SPA with Arqueana (note 10).

 

Commission fees: The Company entered into an agreement with A10 Group for acting as one of the Company’s financial advisors to locate equity investors in non-brokered private placements. The Company paid finders’ fee of up to 6% of the gross proceeds received from these investors (note 13).

 

The related party transactions are recorded at the exchange amount transacted as agreed between the Company and the related party. All of the related party transactions have been reviewed and approved by the independent directors of the Company.

 

- 15 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020

(Expressed in Canadian Dollars, unless otherwise indicated)

(Unaudited)

 

12.Related party transactions (continued)

 

(b)Outstanding balances and expenses with related parties

 

  2021   2020 
  

 

 

June 30,

Prepayments

  

June 30,

Accounts

Payable/

Debt

  

Six Months

Ended June 30,

Expenses/

Payments

  

 

 

December 31,

Prepayments

  

December 31,

Accounts

Payable/

Debt

  

Six

Months

Ended

June 30,

Expenses/

Payments

 

  $   $   $   $   $   $ 
A10 Group                        
CSA   -    -    74,145    -    -    58,106 
Revolving credit facility   -    1,378,353    (1,305,527)   -    2,683,880    16,196 
Commission fees   -    -    2,344,584    -    -    - 
Miazga                              

Lease agreements

   -    82,008    23,762    -    82,514    28,685 
Prepaid land lease offset   121,442    -    5,698    123,153    -    5,198 
Arqueana                              

Lease agreements

   -    168,467    11,881    -    169,685    13,868 
SPA   -    280,173    (1,923,872)   -    2,204,045    (735,477)
Management and Directors                              

Travel expenses reimbursement

   -    -    -    -    72,127    - 

 

- 16 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020

(Expressed in Canadian Dollars, unless otherwise indicated)

(Unaudited)

 

13.Share capital

 

a) Authorized share capital

 

The authorized share capital consisted of an unlimited number of common shares. The common shares do not have a par value. All issued shares are fully paid.

 

b) Common shares issued by the Company    
  

Common

shares (#)

   Amount 
Balance, January 1, 2020 and June 30, 2020    68,878,891   $ 36,190,313 
         
  

Common

shares (#)

   Amount 
Balance, December 31, 2020   77,782,757   $53,910,946 
Private placement (1)   9,545,455    42,000,000 
Cost of private placement (1)   -    (2,619,843)
Agent warrants issued   -    (873,121)
Exercise of RSUs (note 18)   10,000    49,800 
Exercise of warrants (note 15)   30,000    178,537 
Balance, June 30, 2021   87,368,212   $92,646,319 

 

(1)On February 12, 2021, the Company completed a non-brokered private placement of 9,545,455 common shares at a price of $4.40 per share for aggregate gross proceeds of $42 million. In connection with such offering, the Company paid aggregate placement agent fees of $2,619,845 and issued 562,860 Common Share purchase warrants having an exercise price of $4.40 per share and exercisable until February 12, 2022. In connection with this offering, A10 Group, a related party (note 12) who was part of the Company’s financial advisors engaged in such non-brokered private placement, received $2,344,584 of such placement agent fees and 532,860 of such warrants.

 

14.Net loss per common share

 

The calculation of basic and diluted loss per share for the three and six months ended June 30, 2021 was based on the loss attributable to common shareholders of $1,019,116 and $7,394,270, respectively (three and six months ended June 30, 2020 – loss of $141,595 and $290,601, respectively) and the weighted average number of common shares outstanding of 87,368,212 and 85,062,054, respectively (three and six months ended June 30, 2020 of 68,878,891 and 68,878,891, respectively). Diluted loss per share for each of the periods presented did not include the effect of RSU’s, stock options and warrants as they are anti-dilutive.

 

- 17 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020

(Expressed in Canadian Dollars, unless otherwise indicated)

(Unaudited)

 

15.Warrants

 

   Number of
Warrants		  

Grant date

 fair value

 
Balance, January 1, 2020   248,352   $217,929 
Expired   (248,352)   (217,929)
Balance, June 30, 2020   -   $- 

Balance, December 31, 2020

   -   $- 
Issued (1)   562,860    873,121 
Exercised (note 13)   (30,000)   (46,537)
Balance, June 30, 2021   532,860   $826,584 

 

(1)The fair value of the 562,860 Common Share purchase warrants of $873,121 was estimated using a relative fair value method at the date of the grant. For this calculation the Company used the Black-Scholes option pricing model calculation with the following inputs: the market price on valuation date of $4.40; expected dividend yield of 0%; expected volatility of 66.61% using the historical price history of the Company; risk-free interest rate of 0.17%; and an expected average life of one year (note 13).

 

16.Financial risk management

 

The Company’s activities expose it to a variety of financial risks: credit risk, liquidity risk and market risk (including interest rate risk, foreign currency risk and price risk).

 

The fair values of cash, accounts receivable, accounts payable, note payable and accrued liabilities approximate their carrying values due to the short term to maturity of these financial instruments.

 

17.General and administrative expenditures

 

  

Three Months Ended

June 30,

  

Six Months Ended

June 30,

 
   2021   2020   2021   2020 
Stock-based compensation  $60,136   $87,079   $5,511,152   $211,349 
Salaries and benefits   263,295    51,386    356,238    167,323 
Legal   46,240    -    114,192    20,000 
Travel   10,761    6,636    21,796    44,413 
Professional fees   34,293    11,857    60,839    21,201 
A10 Group – CSA (note 12(a))   38,638    33,820    70,461    58,106 
Business development and investor relations   194,992    92,602    289,656    156,094 
Accounting   19,837    26,475    43,674    46,271 
Auditing   77,226    99,953    273,795    48,620 
Interest and tax   3,545    -    33,202    - 
Donations(a)   46,073    -    46,073    - 
Other general and administration   60,148    35,818    126,349    97,290 
Total general and administrative expenditures  $855,184   $445,626   $6,947,427   $870,667 

 

(a)Related to COVID-19 initiatives.

 

- 18 -

 

Sigma Lithium Corporation

(Formerly Sigma Lithium Resources Corporation)

Notes to the Condensed Interim Consolidated Financial Statements

Six Months Ended June 30, 2021 and 2020

(Expressed in Canadian Dollars, unless otherwise indicated)

(Unaudited)

 

18.Restricted share units

 

The Company’s Board of Directors has adopted the Equity Incentive Plan (the “Equity Incentive Plan”). The Equity Incentive Plan received shareholder approval in accordance with the policies of the TSXV at the annual and special meeting of the Company’s shareholders held on June 28, 2019. The Equity Incentive Plan is available to (i) the directors of the Company, (ii) the officers and employees of the Company and its subsidiaries and (iii) designated service providers who spend a significant amount of time and attention on the affairs and business of the Company or a subsidiary thereof (each, a “Participant”), all as selected by the Company’s Board of Directors or a committee appointed by the Company’s Board of Directors to administer the Equity Incentive Plan.

 

On June 29, 2021, following the approval by the shareholders the Company amended the Equity Incentive Plan to remove the restriction on granting awards under the Equity Incentive Plan to those eligible persons that are also quotaholders of A10 Investimentos Fundo de Investimento de Ações – Investimento no Exterior.

 

   Number of RSUs 
Balance, January 1, 2020  2,146,000 
Cancelled  (840,000)
Balance, June 30, 2020  1,306,000 

 

   Number of RSUs 
Balance, January 1, 2021  687,334 
Granted (1)  1,381,333 
Exercised  (10,000)
Balance, June 30, 2021  2,058,667 

 

(1) On March 4, 2021, the Board approved the grant of 1,381,333 RSUs to key employees, directors and designated service providers of the Company.

 

19.Stock options

 

Movements in stock options are summarized below:

 

  

Number of

stock options

  

Weighted average

exercise price

 
Balance, January 1, 2020 and June 30, 2020   200,000   $2.10 

 

    

Number of

stock options

    

Weighted average

exercise price

 

Balance, December 31, 2020 and June 30, 2021

   50,000   $2.23 

 

The following table reflects the stock options issued and outstanding as of June 30, 2021:

 

Expiry date 

Exercise

price ($)

  

Weighted average

remaining

exercisable

life (years)

  

Number of

options
outstanding

  

Number of

options

vested
(exercisable)

  

Grant date

(exercisable)

fair value

 
August 28, 2028   2.23    7.17    50,000    20,000   $100,200 

 

These options vest in 5 tranches, being 20% on each anniversary of the grant date.

 

- 19 -