ELECTRA BATTERY MATERIALS CORPORATION ELECTRA BATTERY MATERIALS CORPORATION
(FORMERLY FIRST COBALT CORP.)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(EXPRESSED IN THOUSANDS OF CANADIAN DOLLARS)
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(expressed in thousands of Canadian dollars)
Report of Management's Accountability
The accompanying audited consolidated financial statements of Electra Battery Materials Corporation were prepared by management in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. Management acknowledges responsibility for significant accounting judgements and estimates and for the choice of accounting principles and methods that are appropriate to the Company's circumstances.
Management has identified material weaknesses in the internal controls over financial reporting and disclosure controls and procedures related to the year ending December 31, 2023. As a consequence, the Company had ineffective controls activities related to the design of process level and financial statement close controls.
Management has implemented appropriate processes to support management representations that it has exercised reasonable diligence that the consolidated financial statements fairly present, in all material respects, the financial condition, financial performance and cash flows of the Company, as of the date of and for the periods presented in the consolidated financial statements.
The Board of Directors is responsible for reviewing and approving the audited consolidated financial statements to ensure the Company fulfills its financial reporting responsibilities. The Board of Directors carries out this responsibility principally through its Audit Committee.
The Audit Committee is appointed by the Board of Directors and all of its members are non-management Directors. The Audit Committee reviews the consolidated financial statements, management's discussion and analysis and the external auditors' report; examines the fees and expenses for audit services; and considers the engagement or reappointment of the external auditors. The Audit Committee reports its findings to the Board of Directors for its consideration when approving the consolidated financial statements for issuance. MNP LLP, the external auditors, have full and free access to the Audit Committee.
"Trent Mell" | "David Allen" |
President and Chief Executive Officer | Chief Financial Officer |
May 10, 2024 |
Page 2 of 47
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Electra Battery Materials Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statement of financial position of Electra Battery Materials Corporation (the "Company") as at December 31, 2023, and the related consolidated statements of income (loss) and other comprehensive income (loss), shareholders' equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as 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 its financial performance and its cash flows for the year ended December 31, 2023, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
We have also audited the effects of the adjustments to retrospectively apply the change in segment composition as described in Note 24 to the 2022 consolidated financial statements. In our opinion, such adjustments are appropriate and have been properly applied. We were not engaged to audit, review, or apply any procedures to the 2022 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2022 consolidated financial statements taken as a whole.
Material Uncertainty Related to Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has recurring net losses from operations and negative cash flows from operations, and as at December 31, 2023, the Company had an accumulated deficit that raises substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
MNP LLP
1 Adelaide Street East, Suite 1900, Toronto ON, M5C 2V9 | 1.877.251.2922 T: 416.596.1711 F: 416.596.7894 |
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 provide a reasonable basis for our opinion.
Chartered Professional Accountants
Licensed Public Accountants
May 10, 2024
Toronto, Canada
We have served as the Company's auditor since 2023
1 Adelaide Street East, Suite 1900, Toronto, Ontario, M5C 2V9
1.877.251.2922 T: 416.596.1711 F: 416.596.7894 MNP.ca
KPMG LLP
Bay Adelaide Centre
Suite 4600
333 Bay Street
Toronto ON M5H 2S5
Tel 416-777-8500
Fax 416-777-8818
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of Electra Battery Materials Corporation
Opinion on the Consolidated Financial Statements
We have audited, before the effects of the adjustments to retrospectively apply the change in segment composition as described in Note 24, the consolidated statement of financial position of Electra Battery Materials Corporation (the Company) as of December 31, 2022, the related consolidated statements of income (loss) and other comprehensive income (loss), cash flows and shareholders' equity for the year then ended, and the related notes (collectively, the consolidated financial statements). The 2022 consolidated financial statements before the effects of the adjustments described in Note 24 are not presented herein. In our opinion, the consolidated financial statements, before the effects of the adjustments to retrospectively apply the change in segment composition described in Note 24, present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and its financial performance 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 were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively apply the change in segment composition described in Note 24 and, accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.
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 Public Company Accounting Oversight Board (United States) (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
- 2024 KPMG LLP, an Ontario limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
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.
Yours truly,
/s/ KPMG LLP
Chartered Professional Accountants, Licensed Public Accountants
We served as the Company's auditor from 2020 to 2023
Toronto, Canada
April 4, 2023
2
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AS AT DECEMBER 31, 2023 AND 2022
(expressed in thousands of Canadian dollars)
December 31, 2023 | December 31, 2022 | |||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | 7,560 | $ | 7,952 | ||||
Restricted cash | 888 | - | ||||||
Marketable securities (Note 7) | 595 | 433 | ||||||
Prepaid expenses and deposits | 468 | 716 | ||||||
Receivables (Note 9) | 1,081 | 3,079 | ||||||
Assets held for sale (Note 8) | - | 1,338 | ||||||
10,592 | 13,518 | |||||||
Non-Current Assets | ||||||||
Exploration and evaluation assets (Note 6) | 85,634 | 87,693 | ||||||
Property, plant and equipment (Note 5) | 51,258 | 82,288 | ||||||
Capital long-term prepayments (note 5) | - | 3,087 | ||||||
Long-term restricted cash | 1,208 | 938 | ||||||
Total Assets | $ | 148,692 | $ | 187,524 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities (Note 10) | $ | 8,828 | $ | 18,864 | ||||
Accrued interest (Note 26 (d)) | 5,730 | 1,300 | ||||||
Convertible notes payable (Note 13) | - | 25,662 | ||||||
Financial derivative liability - Convertible notes (Note 13) | - | 6,674 | ||||||
Warrants (Note 13) | 1,421 | - | ||||||
US warrants (Note 16 (c)) | 7 | 1,271 | ||||||
Liabilities held for sale (Note 8) | - | 338 | ||||||
15,986 | 54,109 | |||||||
Non-Current Liabilities | ||||||||
Government loan payable (Note 12) | 4,299 | 3,777 | ||||||
Government grants (Note 12) | 849 | 1,121 | ||||||
Convertible notes payable (Note 13) | 40,101 | - | ||||||
Royalty (Note 13) | 858 | - | ||||||
Lease liability (Note 14) | 175 | 218 | ||||||
Asset retirement obligations (Note 11) | 3,126 | 1,790 | ||||||
Total Liabilities | $ | 65,394 | $ | 61,015 | ||||
Shareholders' Equity | ||||||||
Common shares (Note 15) | 304,721 | 288,871 | ||||||
Reserve (Note 15) | 25,579 | 17,892 | ||||||
Accumulated other comprehensive income | (1,557) | 525 | ||||||
Deficit | (245,445) | (180,779) | ||||||
Total Shareholders' Equity | $ | 83,298 | $ | 126,509 | ||||
Total Liabilities and Shareholders' Equity | $ | 148,692 | $ | 187,524 | ||||
Commitments and Contingencies (Note 23) | ||||||||
Subsequent events (Note 26) | ||||||||
Approved on behalf of the Board of Directors and | ||||||||
authorized for issue on May 10, 2024 | ||||||||
Susan Uthayakumar, Director | Trent Mell, Director |
See accompanying notes to consolidated financial statement
Page 7 of 47
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(expressed in thousands of Canadian dollars)
December 31, | December 31, | ||||
2023 | 2022 | ||||
Operating expenses | |||||
General and administrative | $ | 2,395 | $ | 1,925 | |
Consulting and professional fees | 4,659 | 2,729 | |||
Exploration and evaluation expenditures | 700 | 3,428 | |||
Investor relations and marketing | 633 | 1,000 | |||
Refinery, engineering and metallurgical studies | - | 2,349 | |||
Refinery, permitting and environmental expenses | - | 128 | |||
Salaries and benefits | 3,775 | 3,913 | |||
Share-based payments | 1,821 | 1,282 | |||
Operating loss before noted items below: | 13,983 | 16,754 | |||
Other | |||||
Unrealized loss on marketable securities (Note 7) | (253) | (589) | |||
Gain on financial derivative liability - Convertible Notes (Note 13) | 6,683 | 27,686 | |||
Changes in fair value of US Warrant (Note 16 (c)) | 1,243 | 1,531 | |||
Other non-operating income (loss) (Note 18) | (6,472) | 677 | |||
Impairment (Note 5) | (51,884) | - | |||
Net Income (loss) | $ | (64,666) | $ | 12,551 | |
Other comprehensive income: | |||||
Foreign currency translation gain | (2,082) | - | |||
Net income (loss)and other comprehensive loss | $ | (66,748) | $ | 12,551 | |
Basic income (loss) per share (Note 19) | $ | (1.49) | $ | 0.38 | |
Diluted loss per share (Note 19) | $ | (1.49) | $ | (0.37) | |
Weighted average number of common shares outstanding - Basic (Note 19) | 43,430,951 | 32,646,906 | |||
Weighted average number of common shares outstanding - Diluted (Note 19) | 43,430,951 | 40,763,386 |
Page 8 of 47
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(expressed in thousands of Canadian dollars)
Common | ||||||||||||||
Shares | Accumulated | |||||||||||||
Number of | Amount | Reserves | Other | Deficit | Total | |||||||||
shares | Comprehensive | |||||||||||||
Income | ||||||||||||||
Balance - January 1, 2023 | 35,185,977 | $ | 288,871 | $ | 17,892 | $ | 525 | $ | (180,779) | $ | 126,509 | |||
Other comprehensive loss for the year, net of taxes | - | - | - | (2,082) | - | (2,082) | ||||||||
Net loss for the year | - | - | - | (64,666) | (64,666) | |||||||||
Share-based payment expense | - | - | 1,226 | - | - | 1,226 | ||||||||
Directors' fees paid in deferred share units | - | - | 595 | - | - | 595 | ||||||||
Shares and units issued for: | 17 | - | -- | -- | ||||||||||
Exercise of restricted share units (Note 15) | 3,053 | (17) | - | |||||||||||
Proceeds from issuance of share, net of transaction costs | 19,545,454 | 14,077 | 5,883 | - | - | 19,960 | ||||||||
Settlement of transaction costs on 2028 Notes (Notes 15 (b) and Note 16 (c)) | 77,500 | 240 | - | - | - | 240 | ||||||||
Convertible Notes Conversion (Notes 13 and 15) | 368,543 | 998 | - | - | - | 998 | ||||||||
Settlement of interest on 2028 Notes (Note 15) | 660,800 | 795 | - | - | - | 795 | ||||||||
2022 Private Placement transaction costs | - | (284) | - | - | - | (284) | ||||||||
Settlement of easement | 10,000 | 7 | - | - | - | 7 | ||||||||
Balance - December 31, 2023 | 55,851,327 | $ | 304,721 | $ | 25,579 | $ | (1,557) | $ | (245,445) | $ | 83,298 | |||
Balance - January 1, 2022 | 30,974,853 | $ | 276,215 | $ | 16,554 | $ | 525 | $ | (193,330) | $ | 99,964 | |||
Net income for the year | - | - | - | - | 12,551 | 12,551 | ||||||||
Share-based payment expense | - | - | 1,282 | - | - | 1,282 | ||||||||
Directors' fees paid in deferred share units | - | - | 115 | - | - | 115 | ||||||||
Shares and units issued for: | ||||||||||||||
Exercise of warrants, options, deferred share units, performance share units and | ||||||||||||||
restricted share units (Note 15) | 356,156 | 1,439 | (492) | - | - | 947 | ||||||||
ATM Program sales (Note 15) | 720,865 | 3,701 | - | - | - | 3,701 | ||||||||
Cash, net of transaction costs and fair value derivative (Note 15) | 2,345,000 | 2,681 | 433 | - | - | 3,114 | ||||||||
Convertible Notes Conversion (Notes 13 and 15) | 789,103 | 4,835 | - | - | - | 4,835 | ||||||||
Balance - December 31, 2022 | 35,185,977 | $ | 288,871 | $ | 17,892 | $ | 525 | $ | (180,779) | $ | 126,509 |
Page 9 of 47
ELECTRA BATTERY MATERIALS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(expressed in thousands of Canadian dollars)
Year ended | ||||
Year ended | December | |||
December 31, 2023 | 31. 2022 | |||
Operating activities | $ | |||
Net income (loss) | (64,666) | $ | 12,551 | |
Adjustments for items not affecting cash: | ||||
Share-based payments | 1,226 | 1,282 | ||
Unrealized loss on marketable securities | 253 | 589 | ||
Realized loss on marketable securities | (90) | 220 | ||
Depreciation | 56 | 48 | ||
Interest expense on Convertible Notes | 4,805 | - | ||
Changes in fair value of convertible 2026 Notes | 5,076 | (27,686) | ||
Loss on extinguishment of 2026 Notes and recognition of 2028 Notes (Note 13) | 18,727 | - | ||
Fair value gain on convertible notes and warrants 2028 Notes (Note 13) | (30,758) | - | ||
Settlement of transaction costs on 2028 Notes (Note 13) | (240) | - | ||
Changes in fair value of warrants | (1,531) | |||
Impairment charge (reversal) | 51,884 | (1,338) | ||
Directors' fees paid in DSUs | 595 | 115 | ||
Changes in warrants (US Warrant) | (1,243) | - | ||
Withholding tax liability | - | 14 | ||
Unrealized loss on foreign exchange | 696 | 1,019 | ||
Other | 15 | - | ||
Changes in working capital: | ||||
Decrease (increase) in receivables | 1,848 | (2,122) | ||
Decrease (increase) in prepaid expenses and other assets | 247 | 1,125 | ||
(Decrease) increase in accounts payable and accrual liabilities | (11,477) | (131) | ||
Cash used in operation activities | (23,046) | (15,845) | ||
Investing activities | ||||
Transfer to restricted cash | (1,158) | - | ||
Acquisition of exploration and evaluation assets, net of cash | - | (31) | ||
Capital long-term prepayments | - | 3,544 | ||
Proceeds from sale of marketable securities | 816 | 525 | ||
Additions to property, plant and equipment | (13,705) | (47,591) | ||
Cash used in investing activities | (14,047) | (43,553) | ||
Financing activities | ||||
Proceeds from issuance of common shares, net transaction costs of $1,582 (2022 - Nil) (Note 15) | 19,960 | 3,121 | ||
Proceeds from at-the-market equity program ("ATM Program"), net of transaction costs of Nil (2022 - $82) | - | 3,701 | ||
Transaction costs private placement 2022 | (284) | |||
Proceeds from exercise of warrants | - | 807 | ||
Proceeds from exercise of options | - | 140 | ||
Proceeds from government loan | 250 | 3,733 | ||
Payment of lease liability, net of interest | (43) | 165 | ||
Proceeds from 2028 Notes (Note 13) | 68,049 | - | ||
Repayment of 2026 Notes (Note 13) | (48,036) | - | ||
Settlement of transaction costs on 2028 Notes (Note 13) | (2,100) | - | ||
Exercise of convertible Notes | 397 | - | ||
Interest settlement of 2026 Notes (Note 13) | (1,656) | (3,183) | ||
Cash provided by financing activities | 36,537 | 8,484 | ||
Change in cash during the year | (556) | (50,914) | ||
Effect of exchange rates on cash | 164 | 240 | ||
Cash, beginning of year | 7,952 | 58,626 | ||
Cash, end of year | $ | 7,560 | $ | 7,952 |
Page 10 of 47
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Electra Battery Materials Corp. published this content on 11 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 22 May 2024 14:10:03 UTC.
