Exhibit
4.12 


 


 



     


     


    

 


 





 


	TABLE OF CONTENTS	 
	 	 
	Consolidated
    statements of financial position	1
	 	 
	Consolidated
    statements of loss and comprehensive loss	2
	 	 
	Consolidated
    statements of changes in equity	3
	 	 
	Consolidated
    statements of cash flows	4
	 	 
	Notes
    to consolidated financial statements	5-31




 






     


     


    

 


 





 








Independent
auditor’s report


 


To
the Shareholders of Nouveau Monde Graphite Inc.


 


 






Our
opinion


 


In
our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position
of Nouveau Monde Graphite Inc. and its subsidiaries (together, the Company) as at December 31, 2020 and 2019 and January 1, 2019,
and its financial performance and its cash flows for the years ended December 31, 2020 and 2019 in accordance with International
Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).


 


What
we have audited





The
Company’s consolidated financial statements comprise:


 


	•	the consolidated statements of financial position as
at December 31, 2020 and 2019 and January 1, 2019;




 


	•	the consolidated statements of loss and comprehensive
loss for the years ended December 31, 2020 and 2019;




 


	•	the consolidated statements of changes in equity for
the years ended December 31, 2020 and 2019;




 


	•	the consolidated statements of cash flows for the years
ended December 31, 2020 and 2019; and




 


	•	the notes to consolidated financial statements, which
include significant accounting policies and other explanatory information.




 


 






Basis
for opinion


 


We
conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards
are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section
of our report.


 


We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.


 


Independence





We
are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.


 


PricewaterhouseCoopers
LLP/s.r.l./s.e.n.c.r.l.





1250
René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1


T: +1 514 205 5000, F: +1 514
876 1502


 





“PwC”
refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.


 






     


     


    

 


 


 





 






Other
information


 


Management
is responsible for the other information. The other information comprises the Management’s Discussion and Analysis.


 


Our
opinion on the consolidated financial statements does not cover the other information, and we do not express any form of assurance
conclusion thereon.


 


In
connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit, or otherwise appears to be materially misstated.


 


If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required
to report that fact. We have nothing to report in this regard.


 


 






Responsibilities
of management and those charged with governance for the consolidated financial statements


 


Management
is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and
for such internal control as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.


 


In
preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.


 


Those
charged with governance are responsible for overseeing the Company’s financial reporting process.


 


 






Auditor’s
responsibilities for the audit of the consolidated financial statements


 


Our
objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing
standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.


 






     


     


    

 


 





 


As
part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:


 


	•	Identify and assess the risks of material misstatement
of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.




 


	•	Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company’s internal control.




 


	•	Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates and related disclosures made by management.




 


	•	Conclude on the appropriateness of management’s
use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related
disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Company to cease to continue as a going concern.




 


	•	Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent
the underlying transactions and events in a manner that achieves fair presentation.




 


	•	Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities within the Company to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.




 






     


     


    

 


 





 


We
communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.


 


We
also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence,
and where applicable, related safeguards.


 


The
engagement partner on the audit resulting in this independent auditor’s report is Marc-Stéphane Pennee.


 


/s/PricewaterhouseCoopers
LLP


 


Montréal,
Quebec


April 6, 2021


 




















     


     


    

 


 


 


NOUVEAU
MONDE GRAPHITE INC.


Consolidated
statements of financial position


(Amount
expressed in thousands of Canadian dollars) 


 


Consolidated
statements of financial position


 


	 	 	Notes	 	 	December 31, 2020	 	 	December
31, 2019


 (Adjusted note 27)
 
	 	 	January
1, 2019


 (Adjusted note 27)
 
	 
	ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CURRENT	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash	 	 	 	 	 	 	4,520	 	 	 	4,077	 	 	 	3,794	 
	Grants and other receivables	 	 	11	 	 	 	829	 	 	 	233	 	 	 	236	 
	Restricted cash	 	 	 	 	 	 	158	 	 	 	158	 	 	 	-	 
	Investment	 	 	 	 	 	 	-	 	 	 	22	 	 	 	20	 
	Sales taxes receivable	 	 	 	 	 	 	736	 	 	 	668	 	 	 	979	 
	Tax credits receivable	 	 	 	 	 	 	3,958	 	 	 	4,151	 	 	 	1,339	 
	Prepaid expenses	 	 	 	 	 	 	215	 	 	 	300	 	 	 	53	 
	Total current assets	 	 	 	 	 	 	10,416	 	 	 	9,609	 	 	 	6,421	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NON-CURRENT	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Tax credits receivable	 	 	 	 	 	 	3,802	 	 	 	2,203	 	 	 	2,812	 
	Property and equipment assets	 	 	7	 	 	 	4,207	 	 	 	2,872	 	 	 	1,289	 
	Intangible assets	 	 	8	 	 	 	920	 	 	 	1,526	 	 	 	2,127	 
	Right-of-use assets	 	 	9	 	 	 	1,067	 	 	 	563	 	 	 	-	 
	Restricted cash and deposits	 	 	 	 	 	 	744	 	 	 	621	 	 	 	779	 
	Total non-current assets	 	 	 	 	 	 	10,740	 	 	 	7,785	 	 	 	7,007	 
	Total assets	 	 	 	 	 	 	21,156	 	 	 	17,394	 	 	 	13,428	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	CURRENT	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts payables and accrued liabilities	 	 	10	 	 	 	6,988	 	 	 	4,908	 	 	 	5,786	 
	Deferred grants	 	 	11	 	 	 	1,511	 	 	 	-	 	 	 	-	 
	Current portion of lease liabilities	 	 	12	 	 	 	295	 	 	 	459	 	 	 	-	 
	Borrowings	 	 	13	 	 	 	1,793	 	 	 	4,502	 	 	 	931	 
	Total current liabilities	 	 	 	 	 	 	10,587	 	 	 	9,869	 	 	 	6,717	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	NON-CURRENT	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Asset retirement obligation	 	 	 	 	 	 	621	 	 	 	621	 	 	 	621	 
	Borrowings	 	 	 	 	 	 	-	 	 	 	-	 	 	 	2,377	 
	Lease liabilities	 	 	12	 	 	 	781	 	 	 	150	 	 	 	-	 
	Convertible bond	 	 	14	 	 	 	14,505	 	 	 	-	 	 	 	-	 
	Other Liabilities	 	 	 	 	 	 	-	 	 	 	-	 	 	 	448	 
	Total non-current liabilities	 	 	 	 	 	 	15,907	 	 	 	771	 	 	 	3,446	 
	Total liabilities	 	 	 	 	 	 	26,494	 	 	 	10,640	 	 	 	10,163	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	EQUITY (DEFICIENCY)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Share capital	 	 	15.1	 	 	 	60,537	 	 	 	56,184	 	 	 	36,243	 
	Warrants	 	 	15.3	 	 	 	867	 	 	 	2,224	 	 	 	4,780	 
	Contributed surplus	 	 	 	 	 	 	9,894	 	 	 	7,368	 	 	 	4,219	 
	Equity component of convertible bond	 	 	14	 	 	 	364	 	 	 	-	 	 	 	 	 
	Deficit	 	 	 	 	 	 	(77,000	)	 	 	(59,022	)	 	 	(41,977	)
	Total equity (deficiency)	 	 	 	 	 	 	(5,338	)	 	 	6,754	 	 	 	3,265	 
	Total liabilities and equity (deficiency)	 	 	 	 	 	 	21,156	 	 	 	17,394	 	 	 	13,428	 
	Commitments	 	 	25	 	 	 	 	 	 	 	 	 	 	 	 	 
	Subsequent Events	 	 	26-27	 	 	 	 	 	 	 	 	 	 	 	 	 




 


APPROVED
BY THE BOARD OF DIRECTORS





(s)
Eric Desaulniers – “Director”





(s)
Daniel Buron – “Director”





The
accompanying notes are an integral part of the consolidated financial statements. 






    1


     


    







 


NOUVEAU
MONDE GRAPHITE INC.


Consolidated statements of loss and comprehensive loss


(Amount expressed in thousands of Canadian
dollars, except per share amount) 


 


Consolidated
statements of loss and comprehensive loss


 


	 	 	 	 	 	For the years ended	 
	 	 	Notes	 	 	December 31, 2020
$	 	 	December 31, 2019
(Adjusted, note 27)$	 
	EXPENSES	 	 	 	 	 	 	 	 	 
	Exploration and evaluation expenses	 	 	16	 	 	 	10,340	 	 	 	9,832	 
	Value added products expenses	 	 	17	 	 	 	2,911	 	 	 	1,605	 
	General and administrative expenses	 	 	18	 	 	 	7,770	 	 	 	5,804	 
	Net smelter royalty	 	 	13	 	 	 	(4,306	)	 	 	-	 
	Operating loss (income)	 	 	 	 	 	 	16,715	 	 	 	17,241	 
	Net financial costs	 	 	19	 	 	 	1,263	 	 	 	252	 
	Loss before tax	 	 	 	 	 	 	17,978	 	 	 	17,493	 
	Deferred tax recovery	 	 	20	 	 	 	-	 	 	 	(448	)
	Net loss and comprehensive loss	 	 	 	 	 	 	17,978	 	 	 	17,045	 
	Basic and diluted loss per share	 	 	15.2-26	 	 	 	(0.684	)	 	 	(0.750	)
	Weighted average number of shares outstanding	 	 	26	 	 	 	26,287,106	 	 	 	22,723,974	 




 


The
accompanying notes are an integral part of the consolidated financial statements. 






    2


     


    

 





 


NOUVEAU
MONDE GRAPHITE INC.


Consolidated
statements of changes in equity


(Amount
expressed in thousands of Canadian dollars, except per share amount)


 


Consolidated
statements of changes in equity


 


	 	 	Notes	 	 	Number	 	 	Share
                                         capital





$


	 
 
	 	Warrants





$


	 
 
	 	Contributed 


surplus





$


	 
 
	 	Equity
                                         component of convertible





bond





$


	 
 
	 	Deficit





$


	 
 
	 	Total
                                         equity (deficiency)





$


	 
 

	Balance as at January 1, 2020 – as previously reported	 	 	 	 	 	 	261,782,814	 	 	 	56,184	 	 	 	2,224	 	 	 	7,368	 	 	 	-	 	 	 	(28,417	)	 	 	37,359	 
	Cumulative effect - change in accounting policy	 	 	27	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(30,605	)	 	 	(30,605	)
	Balance adjusted as at January 1, 2020	 	 	 	 	 	 	261,782,814	 	 	 	56,184	 	 	 	2,224	 	 	 	7,368	 	 	 	-	 	 	 	(59,022	)	 	 	6,754	 
	Warrants expired	 	 	15.3	 	 	 	-	 	 	 	-	 	 	 	(836	)	 	 	836	 	 	 	-	 	 	 	-	 	 	 	-	 
	Warrants exercised	 	 	15.3	 	 	 	8,722,914	 	 	 	3,574	 	 	 	(521	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	3,053	 
	Options exercised	 	 	15.6	 	 	 	1,450,000	 	 	 	572	 	 	 	-	 	 	 	(132	)	 	 	-	 	 	 	-	 	 	 	440	 
	Share-based payment	 	 	15.6	 	 	 	1,037,587	 	 	 	208	 	 	 	-	 	 	 	1,822	 	 	 	-	 	 	 	-	 	 	 	2,030	 
	Share issue costs	 	 	 	 	 	 	-	 	 	 	(1	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(1	)
	Convertible bond	 	 	14	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	364	 	 	 	-	 	 	 	364	 
	Net loss and comprehensive loss	 	 	 	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(17,978	)	 	 	(17,978	)
	Balance as at December 31, 2020	 	 	 	 	 	 	272,993,315	 	 	 	60,537	 	 	 	867	 	 	 	9,894	 	 	 	364	 	 	 	(77,000	)	 	 	(5,338	)



 


	 	 	Notes	 	 	Number	 	 	Share
                                         capital





$


	 
 
	 	Warrants





$


	 
 
	 	Contributed
                                         surplus





$


	 
 
	 	Deficit
                                         (Adjusted, note 27)





$


	 
 
	 	Total
                                         equity





$


	 
 

	Balance as at January 1, 2019 – as previously reported	 	 	 	 	 	 	175,311,126	 	 	 	36,243	 	 	 	4,780	 	 	 	4,219	 	 	 	(21,586	)	 	 	3,264	 
	Cumulative effect - change in accounting policy	 	 	27	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(20,391	)	 	 	(20,391	)
	Balance adjusted as at January 1, 2019	 	 	 	 	 	 	175,311,126	 	 	 	36,243	 	 	 	4,780	 	 	 	4,219	 	 	 	(41,977	)	 	 	3,264	 
	Shares issued from private placement	 	 	15.1	 	 	 	86,170,213	 	 	 	20,250	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	20,250	 
	Warrants expired	 	 	15.3	 	 	 	-	 	 	 	-	 	 	 	(2,573	)	 	 	2,573	 	 	 	-	 	 	 	-	 
	Options exercised	 	 	15.6	 	 	 	250,000	 	 	 	79	 	 	 	-	 	 	 	(29	)	 	 	-	 	 	 	50	 
	Shares issued for consulting fees	 	 	15.1	 	 	 	51,475	 	 	 	14	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	14	 
	Share-based payment	 	 	15.6	 	 	 	-	 	 	 	-	 	 	 	17	 	 	 	605	 	 	 	-	 	 	 	622	 
	Share issue costs	 	 	15.1	 	 	 	-	 	 	 	(401	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(401	)
	Net loss and comprehensive loss	 	 	 	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(17,045	)	 	 	(17,045	)
	Balance as at December 31, 2019	 	 	 	 	 	 	261,782,814	 	 	 	56,184	 	 	 	2,224	 	 	 	7,368	 	 	 	(59,022	)	 	 	6,754	 




 


The
accompanying notes are an integral part of the consolidated financial statements. 






    3


     


    

 





 


NOUVEAU
MONDE GRAPHITE INC.


Consolidated statements of cash flows


(Amount expressed in thousands of Canadian dollars) 


 


Consolidated
statements of cash flows


 


	 	 	 	 	For the years ended
	 	 	Notes	 	 	December
                                         31, 2020





$ 


	 
	 	December
                                         31, 2019





(Adjusted
note 27)$


	 
 

	OPERATING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 
	Net loss	 	 	 	 	 	 	(17,978	)	 	 	(17,045	)
	Depreciation and amortization	 	 	7-9	 	 	 	1,202	 	 	 	1,082	 
	Loss (gain) on disposal of investment	 	 	 	 	 	 	22	 	 	 	(3	)
	Loss on asset disposal	 	 	7	 	 	 	2	 	 	 	-	 
	Deferred income tax expenses	 	 	 	 	 	 	-	 	 	 	(448	)
	Share-based compensation	 	 	15.6	 	 	 	2,030	 	 	 	637	 
	Financial costs	 	 	 	 	 	 	1,114	 	 	 	137	 
	Net smelter royalty	 	 	13	 	 	 	(4,306	)	 	 	-	 
	Net change in working capital	 	 	21	 	 	 	(135	)	 	 	(3,014	)
	Cash flows used in operating activities	 	 	 	 	 	 	(18,049	)	 	 	(18,654	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	INVESTING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 
	Additions to property, plant, and equipment assets	 	 	7	 	 	 	(1,269	)	 	 	(1,673	)
	Restricted cash and deposits	 	 	 	 	 	 	(123	)	 	 	-	 
	Tax credits and grants received	 	 	7	 	 	 	731	 	 	 	-	 
	Cash flows used in investing activities	 	 	 	 	 	 	(661	)	 	 	(1,673	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	FINANCING ACTIVITIES	 	 	 	 	 	 	 	 	 	 	 	 
	Proceeds from the issuance of private placement	 	 	15.1	 	 	 	-	 	 	 	20,250	 
	Proceeds from convertible bond, net of issue costs	 	 	13	 	 	 	14,786	 	 	 	-	 
	Proceeds from debt, net of issue costs	 	 	13	 	 	 	3,781	 	 	 	2,000	 
	Repayment of borrowings and lease liabilities	 	 	12, 13	 	 	 	(2,906	)	 	 	(1,289	)
	Proceeds from the exercise of warrants	 	 	15.3	 	 	 	3,053	 	 	 	-	 
	Proceeds from the exercise of stock options	 	 	15.6	 	 	 	440	 	 	 	50	 
	Share issue costs	 	 	 	 	 	 	(1	)	 	 	(401	)
	Cash flows from financing activities	 	 	 	 	 	 	19,153	 	 	 	20,610	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net change in cash	 	 	 	 	 	 	443	 	 	 	283	 
	Cash at the beginning of the year	 	 	 	 	 	 	4,077	 	 	 	3,794	 
	Cash at the end of the year	 	 	 	 	 	 	4,520	 	 	 	4,077	 
	Additional information	 	 	21	 	 	 	 	 	 	 	 	 



 


The
accompanying notes are an integral part of the consolidated financial statements. 






    4


     


    




		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)


 


Notes
to consolidated financial statements


 


		1.	NATURE
                                         OF OPERATIONS AND LIQUIDITY RISK



 


Nouveau
Monde Graphite Inc. (the “Company”) was established on December 31, 2012, under the Canada Business Corporations
Act. The Company specializes in exploration, evaluation and development of mineral properties located in Québec and
is developing a natural graphite-based anode material that would qualify as battery-grade material to supply the lithium-ion industry.


 


The
Company’s shares are listed under the symbol NOU on the TSX Venture Exchange, NMGRF on the OTCQX Market and NM9 on the Frankfurt
Stock Exchange. The Company’s registered office is located at 331 Brassard Street, Saint-Michel-des-Saints, Québec,
Canada, J0K 3B0.


 


As
at December 31, 2020, the Company had a negative working capital of $171, had an accumulated deficit of $77,000, and had incurred
a loss of $17,978 for the year then ended. Working capital included current tax credits receivable of $3,958 and cash of


$4,520.


 


With
the financing completed in January 2021 (described in note 26) management believes that the Company has sufficient funds to meet
its obligations and planned expenditures for the ensuing twelve months as they fall due. In assessing whether the going concern
assumption is appropriate, management considers all available information about the future, which is at least, but not limited
to, twelve months from the end of the reporting period. The Company’s ability to continue future operations and fund its
exploration, evaluation and development activities is dependent on management’s ability to secure additional financing in
the future, which may be completed in several ways including, but not limited to, a combination of strategic partnership, project
debt finance, offtake financing, royalty financing and other capital markets alternatives. Management will pursue such additional
sources of financing when required, and while management has been successful in securing financing in the past, there can be no
assurance it will be able to do so in the future or that these sources of funding or initiatives will be available for the Company
or that they will be available on terms which are acceptable to the Company.


 


		2.	BASIS
                                         OF PREPARATION AND STATEMENT OF COMPLIANCE



 


The
Company’s consolidated financial statements have been prepared in accordance with the International Financial Reporting
Standards (“IFRS”), as published by the International Accounting Standards Board (“IASB”).


 


The
accounting policies set out in note 4 were consistently applied to all years presented in these consolidated financial statements.
Refer to note 27 for the voluntary change in accounting policy that occurred during 2020.


 


The
consolidated financial statements for the year ended December 31, 2020 (including comparative statements) were approved and authorized
for publication by the Board of Directors on April 6, 2021.


 


		3.	NEW
                                         ACCOUNTING STANDARDS



 


Amendments
to IAS 1 Presentation of Financial Statements


 


The
IASB has made amendments to IAS 1 Presentation of Financial Statements which use a consistent definition of materiality
throughout IFRS and the Conceptual Framework for Financial Reporting, clarify when information is material and incorporate
some of the guidance in IAS 1 about immaterial information. In particular, the amendments clarify that information is material
if omitting, misstating, or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose
financial statements make based on those financial statements. Materiality depends on the nature or magnitude of information,
or both. An entity assesses whether information, either individually or in combination with other information, is material in
the context of its financial statements taken as a whole. The Company adopted IAS 1 on January 1, 2020, which did not have a significant
impact on the consolidated financial statements disclosures.


 




    5


     


    

 


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)


 


		4.	SIGNIFICANT
                                         ACCOUNTING POLICIES



 


		4.1	BASIS
                                         OF CONSOLIDATION



 


The
Company’s consolidated financial statements consolidate those of the parent company and its subsidiary. The parent controls
a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary, and could affect those
returns through its power over the subsidiary.


 


All
transactions and balances between group companies are eliminated upon consolidation, including unrealized gains and losses on
transactions between group companies. Amounts reported in the financial statements of the subsidiary have been adjusted where
necessary to ensure consistency with the accounting policies adopted by the Company.


 


Profit
and loss and other comprehensive income of subsidiaries acquired or sold during the period are recognized from the effective date
of the acquisition, or up to the effective date of disposal, as applicable.


 


Subsidiary


 


Information
on the Company’s subsidiaries as at December 31, 2020, all of which are wholly-owned, is as follows:


 


	NAME
    OF SUBSIDIARY	 	PRINCIPAL
    ACTIVITY	 	COUNTRY
                                         OF
 INCORPORATION
	 	YEAR
                                         OF 

                                         INCORPORATION
	 
	Quartier
    Nouveau Monde Inc.	 	Real
    estate company	 	Canada	 	2017	 
	Nouveau
    Monde Europe LTD	 	Trading
    company	 	England
    and Wales	 	2020	 



 


		4.2	FUNCTIONAL
                                         AND REPORTING CURRENCY



 


The
Group’s consolidated financial statements are presented in Canadian dollars, which is also the functional currency of the
parent company and its subsidiaries and the presentation currency.


 


Transactions
in foreign currencies are initially recorded at their respective functional currency spot rates at the date the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the
reporting date. All differences are taken to the statement of loss and comprehensive loss.


 


Non-monetary
items that are measured at historical cost in a foreign currency are translated using the exchange rates at the dates of the initial
transaction. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined.


 


		4.3	TAX
                                         CREDITS RECEIVABLE



 


The
Company is entitled to a refundable tax credit on qualified exploration expenditures incurred, refundable credit on duties for
losses under the Mining Tax Act (Quebec) and research and development tax credits. The tax credits are recognized as a
reduction of the costs incurred based on estimates made by management. The Company records these tax credits when there is reasonable
assurance that the credits will be received and that the Company will continue to comply with the conditions associated to them.


 


		4.4	GRANTS
                                         RECEIVABLE



 


The
Company receives periodically grants from different incentive programs. These grants are recognized initially when there is a
reasonable assurance that they will be received and when the Company has intentions to comply with the conditions associated with
the grant. The financial aid received for expenditures incurred is recognized against these expenditures on a systematic basis
and in the same accounting period in which the expenditures are incurred.


 






    6


     


    




 


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)



 


		4.5	RESEARCH
                                         AND DEVELOPMENT COST



 


Research
costs are expensed during the year in which the expenses are incurred. Development costs are capitalized when they meet the criteria
for capitalization in accordance with IAS 38 Intangible Assets.


The
costs incurred for activities associated with the development of the processes associated with the value-added products are considered
as research and development costs.


 


		4.6	PROPERTY
                                         AND EQUIPMENT



 


Property
and equipment are recognized at cost less accumulated depreciation and accumulated impairment losses. The assets are capitalized
and amortized on a straight-line basis in the consolidated statement of loss and comprehensive loss. Generally, the depreciation
rates are as follows:


 


	Buildings	25
    years
	Equipment	5-15
    years
	Furnitures	3-7
    years
	Computers	3
    years
	Rolling
    Stock	5
    years


 


The
residual value, depreciation method and the useful life of each asset are reviewed at least at each financial year-end. Gains
or losses arising on the disposal of property and equipment are determined as the difference between the disposal proceeds and
the carrying amount of the assets and are recognized in the statement of loss and comprehensive loss.


 


		4.7	INTANGIBLE
                                         ASSETS



 


The
intangible assets include software and licenses with a definite useful life. The assets are capitalized and amortized on a straight-line
basis in the consolidated statement of comprehensive loss. The intangible assets are assessed for impairment whenever there is
an indication that the intangible assets may be impaired.


Generally,
the depreciation rates are as follows:


 


	Software	2
    years
	Licences	2-10
    years


 


		4.8	EXPLORATION
                                         AND EVALUATION EXPENDITURES



 


Exploration
and evaluation expenditures are costs incurred during the initial search for mineral resources before the technical feasibility
and commercial viability of extracting a mineral resource are demonstrable.


 


All
expenditures relating to exploration and evaluation are expensed as incurred until the property reaches the development stage.
Costs related to exploration and evaluation include topographical, geological, geochemical and geophysical studies, exploration
drilling, trenching, sampling, research and development costs specific to a mining project and other costs related to the evaluation
of the technical feasibility and commercial viability of extracting a mineral resource. The various costs are expensed on a property-by-
property basis pending determination of the technical feasibility and commercial viability of extracting a mineral resource.


 


When
the technical feasibility and commercial viability of extracting a mineral resource are demonstrable, exploration and evaluation
expenses related to the mining property will be recorded to property and equipment in Mining assets under construction and or
to intangible assets depending on the nature of the expenditures.


 




    7


     


    

 


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)



 


		4.9	IMPAIRMENT
                                         OF NON-FINANCIAL ASSETS



 


For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows
(cash-generating units). As a result, some assets are tested individually for impairment and some are tested at a cash-generating
unit level.


 


Whenever
events or changes in circumstances indicate that the carrying amount may not be recoverable, an asset or cash-generating unit
is reviewed for impairment.


 


An
impairment loss is recognized in profit or loss for the amount by which the assets or cash-generating unit’s carrying amount
exceeds its recoverable amount. The recoverable amount of an asset or a cash- generating unit is the higher of its fair value
less cost to sell and its value in use.


 


An
impairment charge is reversed if the assets or cash-generating unit’s recoverable amount exceeds its carrying amount.


 


		4.10	INCOME
                                         TAXES



 


Income
tax is recognized in the statements of loss and comprehensive loss except to the extent that it relates to items recognized directly
in equity, in which case it is recognized in equity.


 


		–	Current
                                         taxes



 


Current
tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at
year-end, adjusted for amendments to income tax payable regarding previous years.


 


		–	Deferred
                                         taxes



 


Deferred
tax is provided using the liability method, providing for temporary differences between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. The temporary difference is not provided for if it arises
from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or loss. The amount of deferred
tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using
tax rates enacted or substantively enacted at the financial position reporting date and whose implementation is expected over
the period in which the deferred tax is realized or recovered. A deferred tax asset is recognized only to the extent that it is
probable that future taxable profits will be available against which the asset can be used.


 


Assets
and liabilities are offset where the entity has a legally enforceable right to offset current tax assets and liabilities or deferred
tax assets and liabilities, and the respective assets and liabilities relate to income taxes levied by the same taxation authority.


 


		4.11	EQUITY



 


		–	Share
capital



 


Share
capital represents the amount received on the issue of shares, less issuance costs, net of any underlying tax benefit from these
issuance costs. In addition, if shares were issued as consideration for the acquisition of a mineral property or some other form
of non-monetary assets, they are measured at their fair value according to the quoted price on the day of the conclusion of the
agreement.


 


		–	Unit
offerings



 


Proceeds
from unit offerings are allocated between shares and warrants using their relative fair value. Black-Scholes model is used to
determine the fair value of the warrants and the market price at the time of issuance is used for shares.


 




    8


     


    

 


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)



 


		–	Contributed
surplus and warrants



 


Contributed
surplus includes charges related to share options not exercised and amounts attributable to expired warrants.


 


Warrants
include amounts attributable to outstanding warrants.


 


		4.12	BASIC
                                         AND DILUTED LOSS PER SHARE



 


Basic
loss per share is calculated by dividing the loss attributable to common equity holders of the Company by the weighted average
number of common shares outstanding during the period. Diluted earnings per share is calculated by adjusting loss attributable
to common equity holders of the Company, and the weighted average number of common shares outstanding, for the effects of all
dilutive potential common shares which include convertible debt, options, broker’s options, and warrants. Dilutive potential
common shares arising from option type instruments shall be deemed to have been exercised at the beginning of the period or, if
later, at the date of issue of the potential common shares and the proceeds from their exercise used to repurchase common shares
at the average market price. The if-converted method is used for convertible debentures.


 


		4.13	PROVISION
                                         AND CONTINGENT LIABILITIES



 


Provisions
are recognized when present legal or constructive obligations as a result of a past event will probably lead to an outflow of
economic resources from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and uncertainties associated with the present obligation. Provisions are
discounted when the time value of money is significant.


 


The
Company’s operations are governed by government environment protection legislation. Environmental consequences are difficult
to identify in terms of amounts, timetable and impact. As of the reporting date, management believes that the Company’s
operations are in compliance with current laws and regulations. An asset retirement provision is recognized when there is constructive
commitment that has resulted from past events, it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and the amount of the obligation can be measured with sufficient reliability.


 


In
those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote,
no liability is recognized. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote.


 


All
provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.


 


		4.14	SHARE-BASED
                                         PAYMENTS



 


The
Company operates an equity-settled share-based payment plan for its eligible directors, officers, employees and consultants. The
Company’s plan does not feature any option for a cash settlement.


 


All
goods and services received in exchange for the grant of any share-based payments are measured at their fair values unless that
fair value cannot be estimated reliably. If the Company cannot estimate reliably the fair value of the goods or services received,
the Company shall measure their value indirectly by reference to the fair value of the equity instruments granted. For the transactions
with employees and others providing similar services, the Company measured the fair value of the services rendered by reference
to the fair value of the equity instruments granted.


 


All
equity-settled share-based payments (except broker’s options) are ultimately recognized as an expense in profit or loss
with a corresponding credit to Contributed surplus, in equity. Equity-settled share-based payments to brokers, in respect of an
equity financing are recognized as issuance costs of the equity instruments with a corresponding credit to Contributed surplus,
in equity.


 




    9


     


    

 


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)



 


The
expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to
vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs
from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made
to any expense recognized in a prior period if some vested share options are not ultimately exercised.


 


		4.15	FINANCIAL
                                         INSTRUMENTS



 


Financial
assets and financial liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument
and are measured initially at fair value adjusted for transaction costs, except for those carried at fair value through profit
or loss (“FVTPL”), which are measured initially at fair value. The subsequent measurement of financial assets and
financial liabilities is described below (and Note 18).


 


Financial
assets are derecognized when the rights to receive cash flows from the assets have expired or have been transferred and the Company
has transferred substantially all risks and rewards of ownership. A financial liability is derecognized when it is extinguished,
discharged, cancelled or expires.


 


Financial
assets and financial liabilities are offset, and the net amount is reported in the statements of financial position when there
is an unconditional and legally enforceable right to offset the recognized amounts and there is an intention to settle on a net
basis or realize the asset and settle the liability simultaneously.


 


		–	Financial
assets



 


Financial
assets are initially measured at fair value. If the financial asset is not subsequently accounted for at FVTPL, then the initial
measurement includes transaction costs that are directly attributable to the asset’s acquisition or origination. On initial
recognition, the Company classifies its financial assets in the following measurement categories:


		–	measured
subsequently at amortized cost; or



		–	measured
subsequently at fair value (either through other comprehensive loss, or through net loss).



 


		i)	Financial
                                         assets measured at amortized cost



 


A
financial asset is subsequently measured at amortized cost, using the effective interest method and net of any impairment loss,
if:





		–	the
                                         financial asset is held within a business model whose objective is to hold financial
                                         assets in order to collect contractual cash flows; and






		–	the
                                         contractual terms of the financial asset give rise on specified dates to cash flows that
                                         are solely payments of principal and interest on the principal amount outstanding.



 


		ii)	Financial
                                         assets measured at fair value



 


A
financial asset shall be measured at fair value through net loss unless it is measured at amortized cost or at fair value through
other comprehensive loss.


 


A
financial asset shall be measured at fair value through other comprehensive loss if both of the following conditions are met:





		–	the
                                         financial asset is held within a business model whose objective is achieved by both collecting
                                         contractual cash flows and selling financial assets; and






		–	the
                                         contractual terms of the financial asset give rise on specified dates to cash flows that
                                         are solely payments of principal and interest on the principal amount outstanding.



 


For
investments in debt instruments, this will thus depend on the business model in which the investment is held. For investments
in equity instruments that are not held for trading, this will depend on whether the Company has made an irrevocable election
at the time of initial recognition to account for the equity investment at fair value through other comprehensive loss, in which
case, gains and losses will never be reclassified to net loss, and no impairment may be recognized in net loss. Dividends earned
from such investments are recognized in net loss, unless the dividend clearly represents a repayment of part of the cost of the
investment.


 



    10


     


    

 


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)






 


		–	Financial
liabilities



 


Financial
liabilities are subsequently measured at amortized cost using the effective interest method, except for financial liabilities
at fair value through profit or loss. Such liabilities, including derivatives that are liabilities, shall be subsequently measured
at fair value.


 


Financial
instruments – Fair value


 


The
fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm’s-length transaction.


 


Fair
values of financial instruments traded in active markets are determined based on quoted market prices, where available. For financial
instruments not traded in an active market, fair values are determined based on appropriate valuation techniques. Such techniques
may include discounted cash flow analysis, using recent arm’s-length market transactions, reference to the current fair
value of another instrument that is substantially the same, and other valuation models. The Company applies a hierarchy to classify
valuation methods used to measure financial instruments carried at fair value. Levels 1 to 3 are defined based on the degree to
which fair value inputs are observable and have a significant effect on the recorded fair value, as follows:


		–	Level
1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;



		–	Level
2: Valuation techniques use significant observable inputs, directly or indirectly, or valuations are based on quoted prices for
similar instruments; and



		–	Level
3: Valuation techniques use significant inputs that are not based on observable market data (unobservable inputs).



 


		–	Compound
instruments



 





The
convertible bond issued by the Company is a compound financial instrument which the principal amount, together with all accrued
and unpaid or uncapitalized interest can be converted into a fixed number of common shares of the Company at the option of the
holder.


The
liability component of the compound instrument was established by discounting the contractual cash flow, the remaining balance,
net of the issuance cost, was allocated to the equity component of the financial instrument.


 


		–	Impairment
of financial assets



 


The
Company assesses on a forward-looking basis the expected credit loss associated with its debt instruments carried at amortised
cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.


 


The
Company assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the
financial instrument is determined to have low credit risk at the reporting date. An external rating of investment grade is considered
to indicate that a financial instrument that may be considered as having low credit risk.


 


The
Company applies the simplified approach permitted by IFRS 9 for trade receivables and contract assets, which requires lifetime
expected credit losses to be recognized from initial recognition of the receivables.


 


The
Company’s financial instruments consist of the following:


 


	 	FINANCIAL
    ASSETS	CLASSIFICATION
	 	Cash	Amortized
    cost
	 	Amounts
    receivable	Amortized
    cost
	 	Grant
    and other receivables	Amortized
    cost
	 	Investment	Fair
    value through profit or loss



 






    11


     


    

 


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)



 


	 	FINANCIAL
    LIABILITIES	CLASSIFICATION
	 	Accounts
    payable and accrued liabilities	Amortized
    cost
	 	Long-term
        debt

        
	Amortized
        cost

        

	 	Convertible
    bond (liability component)	Amortized
    cost


 


		4.16	LEASES



 


Leases
are recognized as a right-of-use asset and a corresponding liability in lease liabilities at the date at which the leased asset
is available for use by the Company.


 


The
lease liability is initially measured at the present value of the future lease payment, including variable lease payment that
depends on an index or a rate. The lease liability is discounted using the interest rate implicit in the contract if this rate
can be easily determined, otherwise, the lessee must use his marginal borrowing rate.


 


The
monthly lease payments are segregated between the principal repayment and the finance cost. The present value of the lease liability
is increased to reflect the accretion of interest and decreased by the principal repayment. The accretion of interest is charged
to the profit and loss over the lease period.


 


If
a change to the lease were to happen, the lease liability would be remeasured to reflect those changes (e.g., changes in the lease
term or changes in the lease payment).


 


The
right-of-use assets are initially measured at cost, which includes the amount of the initial measurement of the lease liability
and any lease payments made at or before the commencement date. The right-of-use assets are amortized on a straight-line basis
over the duration of the lease.


 


		4.17	SEGMENT
                                         DISCLOSURE



 


The
Company currently operates in two segments: the acquisition, exploration, and evaluation of mining properties and the transformation
of value-added graphite products. The measure of profit or loss for each segment corresponds to the amounts reported for Exploration
and evaluation expenses and Value- added products expenses, respectively, in the consolidated statement of loss and comprehensive
loss. All the Company’s activities are conducted in Quebec, Canada.


 






    12


     


    

 


NOUVEAU
MONDE GRAPHITE INC. 


Notes
to consolidated financial statements

(Amount expressed in thousands of Canadian dollars)


 


		5.	ACCOUNTING
                                         STANDARDS ISSUED BUT NOT YET EFFECTIVE 



 


The
Company has not yet adopted certain standards, interpretations to existing standards and amendments which have been issued but
have an effective date of later than December 31, 2020. Many of these updates are not expected to have any significant impact
on the Company and are therefore not discussed herein.


 


Amendments
to IAS 16 Property, plant and equipment 


 


The
IASB has made amendments to IAS 16 Property, plant and equipment, which will be effective for financial years beginning
on or after January 1, 2022. Proceeds from selling items before the related item of Property, plant and equipment is available
for use should be recognized in profit or loss, together with the costs of producing those items. The Company will therefore need
to distinguish between the costs associated with producing and selling items before the item of Property, plant and equipment
(pre- production revenue) is available for use and the costs associated with making the item of Property, plant and equipment
available for its intended use. For the sale of items that are not part of a company’s ordinary activities, the amendments
will require the Company to disclose separately the sales proceeds and related production cost recognized in profit or loss and
specify the line items in which such proceeds and costs are included in the statement of comprehensive income (loss). These amendments
will have an impact on the Company’s consolidated financial statements.


 


		6.	ESTIMATES,
                                         JUDGEMENTS AND ASSUMPTIONS 



 


In
preparing its consolidated financial statements, management makes several judgements, estimates and assumptions about the recognition
and measurement of assets, liabilities, revenues, and expenses.


 


Information about the significant estimates and assumptions that
have the greatest impact on the recognition and measurement of assets, liabilities, revenues, and expenses is presented below.
Actual results may differ significantly.


 


Technical
Feasibility and Commercial Viability 


 


The
establishment of technical feasibility and commercial viability of a mineral property is assessed based on a combination of factors.
By its nature, this assessment requires significant judgment.


 


As at December 31, 2020, management determined that the technical
feasibility and commercial viability had not yet been established for the Matawinie Project and as such the project is still considered
to be at the exploration and evaluation stage.


 


Going
concern 


 


The
assessment of the Company’s ability to execute its strategy by funding future working capital requirements involves judgement.
Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.


 


COVID-19
impact 


 


The
duration and full financial effect of the COVID-19 pandemic is unknown at this time, as are the measures taken by governments,
companies, and others to attempt to reduce the spread of COVID-19. Any estimate of the length and severity of these developments
is therefore subject to significant uncertainty, and accordingly estimates of the extent to which the COVID- 19 may materially
and adversely affect the Company’s operations, financial results and condition in future periods are also subject to significant
uncertainty. As at December 31, 2020, the demonstration plant in Saint-Michel-des-Saints was producing graphite flakes similarly
to pre-COVID-19 levels, activities related to the detail engineering of the mine and concentrator continues to advance, and the
construction of the demonstration plant for value added products in Bécancour continues to make significant progress. However,
in the current environment, the assumptions and judgements made by the Company are subject to greater variability than normal,
which could, in the future, significantly affect judgments, estimates and assumptions made by management as they relate to potential
impact of the COVID-19.


 


Provision
for asset retirement obligation 


 


The
Company’s exploration activities are subject to several environmental protection laws and regulations. The Company accounts for
management’s best estimate of asset retirement obligations in the period in which the obligations arise. Costs actually incurred
in future periods could be significantly different from these estimates. In addition, future changes in laws and regulations,
timing of estimated cash flows and discount rates may impact the carrying amount of this provision.




    13


     


    










 


 



NOUVEAU
MONDE GRAPHITE INC. 


Notes
to consolidated financial statements

(Amount expressed in thousands of Canadian dollars)


 








Tax
credits 


 


Tax
credits for the current and prior periods are measured at the amount that the Company expects to recover, based on its best estimate
and judgment at the reporting date. However, uncertainties as to the interpretation of the tax regulations, regarding refundable
mining rights credits for loss and refundable tax credits on eligible exploration expenses, as well as regarding amount and timing
of recovery of these tax credits.


 


To
determine whether the expenses it incurs are eligible for exploration tax credits, the Company must use judgment and resort to
complex techniques. As a result, there may be a significant difference between the amount recognized in respect of tax credits
and the actual amount of tax credits received because of the tax administrations’ review of matters that were subject to interpretation.
In the event of such a difference, an adjustment will be made to the tax credits for mineral prospecting expenses in future periods.


 


It
can take a long time for the tax administration to report its decisions on tax issues, thereby extending the tax credit recovery
period. Mineral exploration tax credits that the Company expects to recover in more than one year are classified as non-current
assets. The amounts recognized in the consolidated financial statements are based on the best estimates of the Company and in
its best possible judgment, as noted above. However, given the uncertainty inherent in obtaining the approval of the tax authority
concerned, the amount of tax credits that will be recovered and the timing of such recovery may differ materially from accounting
estimates and would affect the financial position and cash flow of the Company.





    14


     


    




NOUVEAU
MONDE GRAPHITE INC.


Notes
to consolidated financial statements

(Amount expressed in thousands of Canadian dollars)





 


		7.	PROPERTY
                                         AND EQUIPMENT



 


	 	 	Land
 $	 	 	Buildings
 $	 	 	Equipment
 $	 	 	Computers
 $	 	 	Furniture
 $	 	 	Rolling stock
 $	 	 	Assets under
 construction
 $	 	 	Total
 $	 
	COST	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance as at January 1, 2020	 	 	467	 	 	 	2,430	 	 	 	63	 	 	 	47	 	 	 	70	 	 	 	9	 	 	 	-	 	 	 	3,086	 
	Acquisition	 	 	40	 	 	 	212	 	 	 	-	 	 	 	9	 	 	 	-	 	 	 	15	 	 	 	1,206	 	 	 	1,482	 
	Write-Off/Disposals	 	 	-	 	 	 	-	 	 	 	(63	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(63	)
	Balance as at December 31, 2020	 	 	507	 	 	 	2,642	 	 	 	-	 	 	 	56	 	 	 	70	 	 	 	24	 	 	 	1,206	 	 	 	4,505	 
	ACCUMULATED DEPRECIATION	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance as at January 1, 2020	 	 	-	 	 	 	118	 	 	 	59	 	 	 	14	 	 	 	19	 	 	 	4	 	 	 	-	 	 	 	214	 
	Depreciation	 	 	-	 	 	 	101	 	 	 	2	 	 	 	25	 	 	 	13	 	 	 	4	 	 	 	-	 	 	 	145	 
	Write-Off/Disposals	 	 	-	 	 	 	-	 	 	 	(61	)	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(61	)
	Balance as at December 31, 2020	 	 	-	 	 	 	219	 	 	 	-	 	 	 	39	 	 	 	32	 	 	 	8	 	 	 	-	 	 	 	298	 
	Net book value as at December 31, 2020	 	 	507	 	 	 	2,423	 	 	 	-	 	 	 	17	 	 	 	38	 	 	 	16	 	 	 	1,206	 	 	 	4,207	 





 

	 	 	Land
 $	 	 	Buildings
 $	 	 	Equipment
 $	 	 	Computers
 $	 	 	Furniture
 $	 	 	Rolling stock
 $	 	 	Total
 $	 
	COST	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance as at January 1, 2019	 	 	227	 	 	 	1,037	 	 	 	63	 	 	 	32	 	 	 	49	 	 	 	9	 	 	 	1,417	 
	Acquisition	 	 	240	 	 	 	1,393	 	 	 	-	 	 	 	15	 	 	 	21	 	 	 	-	 	 	 	1,669	 
	Balance as at December 31, 2019	 	 	467	 	 	 	2,430	 	 	 	63	 	 	 	47	 	 	 	70	 	 	 	9	 	 	 	3,086	 
	ACCUMULATED DEPRECIATION	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Balance as at January 1, 2019	 	 	-	 	 	 	47	 	 	 	58	 	 	 	6	 	 	 	15	 	 	 	2	 	 	 	128	 
	Depreciation	 	 	-	 	 	 	71	 	 	 	1	 	 	 	8	 	 	 	4	 	 	 	2	 	 	 	86	 
	Balance as at December 31, 2019	 	 	-	 	 	 	118	 	 	 	59	 	 	 	14	 	 	 	19	 	 	 	4	 	 	 	214	 
	Net book value as at December 31, 2019	 	 	467	 	 	 	2,312	 	 	 	4	 	 	 	33	 	 	 	51	 	 	 	5	 	 	 	2,872	 




 


The
construction in progress is comprised of deposits on equipment and is presented net of grants ($731 in 2020).




    15


     


    

 


NOUVEAU
MONDE GRAPHITE INC.


Notes
to consolidated financial statements

(Amount expressed in thousands of Canadian dollars)


 





 


		8.	INTANGIBLE
                                         ASSETS 



 


In
prior years, the Company and Hydro-Quebec (“HQ”) signed a licence agreement by which the Company is allowing us to
use HQ’s patented technologies for the micronization, spheronization, purification and natural graphite coating to serve
the lithium-ion battery market. The Company paid US $2 million ($2,562) for the use of the patents which have different expiry
dates between October 24, 2021, to June 7, 2028. The licence was capitalized as an intangible asset and will be amortized over
the life of the underlying patents.


 


	 	 	Software
 $	 	 	Licenses
 $	 	 	Total
 $	 
	COST	 	 	 	 	 	 	 	 	 	 	 	 
	Balance as at January 1, 2020	 	 	16	 	 	 	2,562	 	 	 	2,578	 
	Balance as at December 31, 2020	 	 	16	 	 	 	2,562	 	 	 	2,578	 
	ACCUMULATED DEPRECIATION	 	 	 	 	 	 	 	 	 	 	 	 
	Balance as at January 1, 2020	 	 	7	 	 	 	1,045	 	 	 	1,052	 
	Amortization	 	 	9	 	 	 	597	 	 	 	606	 
	Balance as at December 31, 2020	 	 	16	 	 	 	1,642	 	 	 	1,658	 
	Net book value as at December 31, 2020	 	 	-	 	 	 	920	 	 	 	920	 



 


	 	 	Software
 $	 	 	Licenses
 $	 	 	Total
 $	 
	COST	 	 	 	 	 	 	 	 	 	 	 	 
	Balance as at January 1, 2019	 	 	16	 	 	 	2,562	 	 	 	2,578	 
	Balance as at December 31, 2019	 	 	16	 	 	 	2,562	 	 	 	2,578	 
	ACCUMULATED DEPRECIATION	 	 	 	 	 	 	 	 	 	 	 	 
	Balance as at January 1, 2019	 	 	3	 	 	 	448	 	 	 	451	 
	Amortization	 	 	4	 	 	 	597	 	 	 	601	 
	Balance as at December 31, 2019	 	 	7	 	 	 	1,045	 	 	 	1,052	 
	Net book value as at December 31, 2019	 	 	9	 	 	 	1,517	 	 	 	1,526	 



 


		9.	RIGHT-OF-USE
                                         ASSETS 



 


The
Company has lease contracts for various items of mining equipment, motor vehicles and buildings used in its operations. Leases
of mining equipment and rolling stock generally have lease terms between two and three years, while buildings generally have lease
terms between two and five years.


 


Set
below are the carrying amount of Right-of-use assets and the movement during the period.


 


	 	 	Buildings
 $	 	 	Equipment
 $	 	 	Rolling stocks
 $	 	 	Total
 $	 
	COST	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	As at January 1, 2020	 	 	457	 	 	 	339	 	 	 	158	 	 	 	954	 
	New leases	 	 	840	 	 	 	-	 	 	 	-	 	 	 	840	 
	Remeasurement of lease	 	 	-	 	 	 	-	 	 	 	115	 	 	 	115	 
	As at December 31, 2020	 	 	1,297	 	 	 	339	 	 	 	273	 	 	 	1,909	 
	ACCUMULATED DEPRECIATION	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	As at January 1, 2020	 	 	157	 	 	 	167	 	 	 	67	 	 	 	391	 
	Depreciation	 	 	229	 	 	 	154	 	 	 	68	 	 	 	451	 
	As at December 31, 2020	 	 	386	 	 	 	321	 	 	 	135	 	 	 	842	 
	Net book value as at December 31, 2020	 	 	911	 	 	 	18	 	 	 	138	 	 	 	1,067	 







    16


     


    

 


NOUVEAU
MONDE GRAPHITE INC.


Notes
to consolidated financial statements

(Amount expressed in thousands of Canadian dollars)


 


	 	 	Buildings
 $	 	 	Equipment
 $	 	 	Rolling stocks
 $	 	 	Total
 $	 
	COST	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	As at January 1, 2019	 	 	252	 	 	 	321	 	 	 	109	 	 	 	682	 
	New leases	 	 	205	 	 	 	18	 	 	 	49	 	 	 	272	 
	As at December 31, 2019	 	 	457	 	 	 	339	 	 	 	158	 	 	 	954	 
	ACCUMULATED DEPRECIATION	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	As at January 1, 2019	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	Depreciation	 	 	157	 	 	 	167	 	 	 	67	 	 	 	391	 
	As at December 31, 2019	 	 	157	 	 	 	167	 	 	 	67	 	 	 	391	 
	Net book value as at December 31, 2019	 	 	300	 	 	 	172	 	 	 	91	 	 	 	563	 



 


Included
in the depreciation of Right-of-use assets for the period is $321 ($355 in 2019) that have been included under the Evaluation
and exploration expenses and $27 (nil in 2019) under the Value-added products expenses line in the consolidated statements of
loss and comprehensive loss.


 


10.
ACCOUNTS PAYABLES AND ACCRUED LIABILITIES


 








	 	 	December 31, 2020
 $	 	 	December 31, 2019
 $	 
	Trade payables and accrued liabilities	 	 	4,285	 	 	 	4,335	 
	Wages and benefits liabilities	 	 	1,767	 	 	 	573	 
	Other payables	 	 	139	 	 	 	-	 
	Interest payable on convertible bond	 	 	797	 	 	 	-	 
	Accounts payables and accrued liabilities	 	 	6,988	 	 	 	4,908	 





 


11.
GRANTS


 








The
Company benefits from various government grants. The deferred grant is composed of the two following grants:


 


In
August 2019, the Company completed the closing of a federally funded grant with Sustainable Development Technology Canada (“SDTC”)
for a total of $4.25 million. This grant will help the Company build a value-added graphite purification processing facility in
Bécancour, Quebec. In February 2020, the Company received the first milestone payment of $2 million. SDTC also increased
its initial commitment of $4.25 million to the Company by 5%, representing an additional $213 in grant, because of the COVID-19
impact on Canadian companies. The additional $213 amount was received at the end of March 2020.


 


In
addition to the SDTC program, the Company finalized another grant agreement in April 2020 with Transition énergétique
Québec (“TEQ”), a Quebec government funded program, in relation to the same project of building a value-added
graphite purification processing facility. The additional grant of $3 million was secured via TEQ’s Technoclimat program.
During the year 2020, the Company received the payments totaling $1.5 million.


 


As
at December 31, 2020, $1.5 million of the grant proceeds received during the year remains to be applied against related expenditures
and therefore was recorded as a deferred grant at year-end.


 


The
grant receivables as at December 31, 2020 of $785 is composed of various smaller grants as there is reasonable assurance that
they will be received and when the Company has reasonable assurance that it will continue to comply with the conditions associated
with the grants.






    17


     


    


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)



 


		12.	LEASE LIABILITIES



 


	 	 	December
                                         31, 2020
 $
	 	 	December
                                         31, 2019
 $
	 
	Opening balance	 	 	609	 	 	 	682	 
	New liabilities and modifications of leases	 	 	955	 	 	 	272	 
	Principal repayment	 	 	(488	)	 	 	(345	)
	Ending balance	 	 	1,076	 	 	 	609	 
	Current portion	 	 	295	 	 	 	459	 
	Non-current portion	 	 	781	 	 	 	150	 



 


The Company also has certain
leases of assets with lease terms of 12 months or less. The Company applies the short-term lease assets recognition exemptions
for these leases. The expenses related to short term leases were $572 for the year ended December 31, 2020 (December 31, 2019:
$144).


 


		13.	BORROWINGS



 


	 	 	December 31, 2020
 $
	 	 	December 31, 2019
 $
	 
	Opening balance	 	 	4,502	 	 	 	3,308	 
	Proceeds	 	 	3,803	 	 	 	2,000	 
	Repayment	 	 	(2,419	)	 	 	(943	)
	Issue costs	 	 	(21	)	 	 	-	 
	Accretion of issue costs	 	 	25	 	 	 	40	 
	Interest capitalized	 	 	209	 	 	 	97	 
	Debts settled in exchange of Royalty	 	 	(4,306	)	 	 	-	 
	Ending balance	 	 	1,793	 	 	 	4,502	 
	Current portion	 	 	1,793	 	 	 	4,502	 
	Non-current portion	 	 	-	 	 	 	-	 



 


On December 21, 2018, the
Company closed a financing with Investissement Quebec for an aggregate amount of $4,665 through four loan offers of which only
$3,362 had been received as at December 31, 2019. The loans had an annual interest rate charge between 6.25% and 6.38% depending
on the offer.


 


During the year ended December
31, 2019, the Company repaid $943 of its debt. The remaining $2,419 has been repaid during the year ended December 31, 2020.


 


During the second quarter
ended June 30, 2019, the Company concluded a financing agreement with a significant shareholder, Pallinghurst Graphite Limited
(“Pallinghurst”), for a total of $2,000 and required a full reimbursement of the capital plus interest accrued at the
latest on December 31, 2020. The unsecured borrowing bore interest at 9% annually and all accrued interests had to be paid at the
end of the maturity date of the agreement.


 


On March 16, 2020, the
Company concluded a new financing agreement with Pallinghurst, for a total of $2,000. This agreement required the reimbursement
of the capital plus all accrued interests at the latest on December 31, 2020. The agreement bears interest at 9% annually.


 


On April 29, 2020, the Company
closed a financing agreement with Investissement Québec for an aggregate amount received of $1,802 through two loan
offers. The conditions also included a 1% issue cost fee calculated on the total aggregate amount. The interest rate on the
loan offer totalling $611 is the current prime rate of 2.45% plus 0.07%, while the interest rate on the loan offer totalling
$1,192 is the current prime rate of 2.45%. The capital shall be repaid by no later than June 30, 2021. To secure its
obligations set out in the loan offers, the Company granted two first-ranking mortgages for a total of the loan amount
received covering the universality of its present and future receivables, including the universality of its tax credits.


 


On August 28, 2020, the Company
closed a financing transaction with Pallinghurst where the Company issued a 3.0% royalty over the Matawinie graphite property
to Pallinghurst for an aggregate purchase price of $4,306. The purchase price for the royalty was satisfied by setting-off
all principal and accrued interest owed by the Company to Pallinghurst under the promissory note dated June 27, 2019 in the
principal amount of $2 million, the promissory note dated March 16, 2020 in the principal amount of $2 million, and the
accrued interests totaling $306. As the carrying amount of the underlying properties is nil, an amount corresponding to the purchase
price has been reported as net smelter royalty in the consolidated statement of loss and comprehensive loss.


 



    18


     


    

		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)


 


During the year ended December
31, 2020, the Company paid out a total of $123 ($191 for the year ended December 31, 2019) of interest to its lenders.


 


		14.	CONVERTIBLE BOND



 


	 	 	December 31, 2020
 $
	 	 	December 31, 2019
 $
	 
	Opening balance	 	 	-	 	 	 	-	 
	Proceeds	 	 	15,000	 	 	 	-	 
	Equity component of convertible bond	 	 	(364	)	 	 	-	 
	Issue costs	 	 	(214	)	 	 	-	 
	Accretion expense	 	 	83	 	 	 	 	 
	Ending balance	 	 	14,505	 	 	 	-	 
	Current portion	 	 	-	 	 	 	-	 
	Non-current portion	 	 	14,505	 	 	 	-	 



 


During the third quarter
ended September 30, 2020, the Company closed a secured three-year convertible bond with Pallinghurst with a principal of $15 million.
The bond bears interest at 15% annually. Pallinghurst has the right to convert all or a portion of any accrued and unpaid or uncapitalized
interest under the bond into common shares of the Company at the market price of the common shares at the future time of conversion
subject to TSXV approval. The principal amount, together with all accrued and unpaid or uncapitalized interest under the bond,
will become payable on the date that is 36 months following the issuance of the bond. At any time, Pallinghurst has the right to
convert all or a portion of the bond into such number of common shares of the Company equal to the principal amount being converted,
divided by the conversion price of $0.20 per common share. Concurrently with the issuance of the bond, the Company issued to Pallinghurst
common share purchase warrants entitling Pallinghurst to purchase up to 75,000,000 common shares of the Company, at a price of
$0.22 per common share for a period of 36 months from the issuance date of the warrants.


 


When
initially recorded, the proceeds received amounted to $15 million for the convertible bond. Of this amount, the debt, the issue
costs, and the equity component represent respectively $14,422, $214, and $364. The debt component was evaluated first using an
effective rate of 17% corresponding to a rate that the Company would have obtained for a similar financing without the conversion
option. The residual value was attributed to the equity component and is presented in the shareholders’ equity. The net proceeds
allocated to the warrants have been evaluated at nil.


 


		15.	EQUITY



 


		15.1	SHARE CAPITAL



 


Authorized share capital


 


Unlimited number of common shares
voting and participating, with no par value.


 


On April 25, 2019, the
Company completed a non-brokered private placement with Pallinghurst of 43,825,000 common shares in the capital of the Company
at a price of $0.235 per share for aggregate gross proceeds of $10,299 pursuant to a subscription agreement dated April 2, 2019.


 


On June 28, 2019, the Company
also completed a private placement of 42,345,213 common shares in the capital of the Company at a price of $0.235 per Share for
aggregate gross proceeds of $9,951. Pallinghurst also took part in this second private placement.


 


On September 1, 2020, the
Company issued an aggregate of 1,037,587 common shares of its share capital at a price of $0.20 per common share, for an aggregate
amount of $208 to 31 of its employees in settlement of an unpaid portion of wages resulting from a temporary measure in response
to the COVID-19 pandemic.



    19


     


    


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)



 


		15.2	LOSS PER SHARE



 


Basic loss per share is
calculated by dividing the net loss for the year by the weighted average number of ordinary shares outstanding during the year.


 


The numbers for the average
basic and diluted shares outstanding for all the periods presented in the consolidated statements of loss and comprehensive loss
have been adjusted to reflect the effect of the 1:10 share consolidation that took place on March 24, 2021.


 


The basic and diluted loss per
share is the same as there are no instruments that have a dilutive effect on earnings.


 


		15.3	WARRANTS



 


	 	 	 	 	 	December 31, 2020	 	 	 	 	 	December 31, 2019	 
	 	 	Number	 	 	Weighted average
 exercise price
 $
	 	 	Number	 	 	Weighted average
 exercise price
 $
	 
	Opening balance	 	 	26,766,142	 	 	 	0.38	 	 	 	52,049,727	 	 	 	0.39	 
	Issued	 	 	75,000,000	 	 	 	0.22	 	 	 	-	 	 	 	-	 
	Exercised	 	 	(8,722,914	)	 	 	0.35	 	 	 	-	 	 	 	-	 
	Expired	 	 	(14,508,837	)	 	 	0.40	 	 	 	(25,273,585	)	 	 	0.40	 
	Ending balance	 	 	78,534,391	 	 	 	0.23	 	 	 	26,766,142	 	 	 	0.38	 



 


The number of warrants outstanding
exercisable in exchange for an equivalent number of shares is as follows:


 


	 	 	 	 	 	December 31, 2020	 
	Expiration date	 	Number	 	 	Exercise price
 $
	 
	February 7, 2021	 	 	3,534,391	 	 	 	0.35	 
	August 28, 2023	 	 	75,000,000	 	 	 	0.22	 
	Ending balance	 	 	78,534,391	 	 	 	0.23	 



 


At the issuance date of the financial statement, all the outstanding warrants have either been exercised or have expired.


 


		15.4	BROKER’S WARRANTS



 


	 	 	 	 	 	December 31, 2020	 	 	 	 	 	December 31, 2019	 
	 	 	Number	 	 	Weighted average
 exercise price
 $
	 	 	Number	 	 	Weighted average
 exercise price
 $
	 
	Opening balance	 	 	331,994	 	 	 	0.34	 	 	 	1,474,525	 	 	 	0.31	 
	Expired	 	 	(331,994	)	 	 	0.34	 	 	 	(1,142,531	)	 	 	0.30	 
	Ending balance	 	 	-	 	 	 	-	 	 	 	331,994	 	 	 	0.34	 



 


		15.5	ADVISORY WARRANTS



 


	 	 	 	 	 	December 31, 2020	 	 	 	 	 	December 31, 2019	 
	 	 	Number	 	 	Weighted average
 exercise price
 $
	 	 	Number	 	 	Weighted average
 exercise price
 $
	 
	Opening balance	 	 	621,665	 	 	 	0.30	 	 	 	1,771,665	 	 	 	0.36	 
	Expired	 	 	(621,665	)	 	 	0.30	 	 	 	(1,150,000	)	 	 	0.39	 
	Ending balance	 	 	-	 	 	 	-	 	 	 	621,665	 	 	 	0.30	 



 


		15.6	SHARE-BASED PAYMENTS



 


The Board of Directors
determines the price per common share and the number of common shares which may be allocated to each director, officer, employee
and consultant and all other terms and conditions of the option, subject to the rules of the TSXV.




    20


     


    

 


		NOUVEAU
    MONDE GRAPHITE INC.
	 	Notes to consolidated
    financial statements
	 	(Amount expressed
    in thousands of Canadian dollars)




 


The plan has a policy that
caps the maximum of total options that can be granted to 10% of the total outstanding shares of the Company.


 


All share-based payments
will be settled in equity. The Company has no legal or contractual obligation to repurchase or settle the options in cash.


 


The Company’s share options
are as follows for the year ended December 31, 2020 and 2019:


 


	 	 	 	 	 	December 31, 2020	 	 	 	 	 	December 31, 2019	 
	 	 	Number	 	 	Weighted average
 exercise price
 $
	 	 	Number	 	 	Weighted average
 exercise price
 $
	 
	Opening balance	 	 	15,825,000	 	 	 	0.28	 	 	 	11,450,000	 	 	 	0.29	 
	Granted	 	 	11,925,000	 	 	 	0.36	 	 	 	5,775,000	 	 	 	0.23	 
	Exercised	 	 	(1,450,000	)	 	 	0.30	 	 	 	(250,000	)	 	 	0.20	 
	Expired	 	 	(2,300,000	)	 	 	0.27	 	 	 	(1,018,750	)	 	 	0.30	 
	Forfeited	 	 	-	 	 	 	-	 	 	 	(131,250	)	 	 	0.31	 
	Ending balance	 	 	24,000,000	 	 	 	0.32	 	 	 	15,825,000	 	 	 	0.28	 
	Options that can be exercised	 	 	20,000,000	 	 	 	0.34	 	 	 	13,800,000	 	 	 	0.28	 



 


The weighted average price at
the time of exercise for 2020 is $0.62 ($0.24 in 2019).


 


For the year ended December
31, 2020, the Company granted 5,050,000 options to officers, 2,075,000 to directors, 2,850,000 to employees, and 1,950,000 to consultants.
Options granted have different vesting periods. Each option entitles the holder to subscribe to one common share of the Company,
at an average price of $0.36 per common share, for an average period of 4.8 years.


 


For the year ended December
31, 2019, the Company granted 1,375,000 options to officers, 1,250,000 to directors, 2,150,000 to employees, and 1,000,000 to consultants.
Options granted have different vesting periods. Each option entitles the holder to subscribe to one common share of the Company,
at an average price of $0.23 per common share, for an average period of 4.2 years.


 


The
weighted average fair value of the share options granted were estimated using the Black-Scholes option pricing model based on the
following average assumptions:


 


	 	 	2020	 	 	2019	 
	Share price at date of grant	 	$	0.36	 	 	$	0.24	 
	Expected life	 	 	4.75 years	 	 	 	4.2 years	 
	Risk-free interest rate	 	 	0.39	%	 	 	1.46	%
	Expected volatility	 	 	54.68	%	 	 	63.53	%
	Expected dividend	 	 	Nil	 	 	 	Nil	 
	Exercise price at date of grant	 	$	0.36	 	 	$	0.23	 



 


The expected annualized
volatility was based on historical data for the Company. The fair value of the share options is amortized over the vesting period,
considering expected forfeitures. Share options issued are exercisable at the closing market price of the common shares on the
day prior to their grant.


 


	 	 	 	 	 	 	 	 	December 31, 2020	 
	Expiration date	 	Total number	 	 	Total exercisable	 	 	Weighted average
 exercise price
 $
	 
	Year 2021	 	 	1,475,000	 	 	 	1,475,000	 	 	 	0,23	 
	Year 2022	 	 	3,775,000	 	 	 	3,775,000	 	 	 	0,31	 
	Year 2023	 	 	3,900,000	 	 	 	2,900,000	 	 	 	0,34	 
	Year 2024	 	 	4,425,000	 	 	 	4,425,000	 	 	 	0,23	 
	Year 2025	 	 	10,425,000	 	 	 	7,425,000	 	 	 	0,36	 
	Ending balance	 	 	24,000,000	 	 	 	20,000,000	 	 	 	0,32	 




    21


     


    

	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)








 


		16.	EXPLORATION
                                         AND EVALUATION EXPENSES



 


	 	 	December 31, 2020
 $
	 	 	December 31, 2019 

(Adjusted note 27)$	 
	Wages and benefits	 	 	2,294	 	 	 	2,040	 
	Share-based compensation	 	 	594	 	 	 	192	 
	Engineering	 	 	3,964	 	 	 	721	 
	Professional fees	 	 	506	 	 	 	1,349	 
	Materials, consumables, and supplies	 	 	1,767	 	 	 	2,279	 
	Subcontracting	 	 	1,706	 	 	 	2,594	 
	Geology and drilling	 	 	389	 	 	 	2,298	 
	Utilities	 	 	388	 	 	 	218	 
	Other	 	 	265	 	 	 	673	 
	Grants	 	 	(164	)	 	 	(329	)
	Tax credits	 	 	(1,369	)	 	 	(2,203	)
	Exploration and evaluation expenses	 	 	10,340	 	 	 	9,832	 



 


The
exploration and evaluation expenses related to the Matawinie Property in Quebec. The wages and benefits are net of the grant received
as part of the Canada Emergency Wage Subsidy program of $892 in 2020 (nil in 2019).


 


		17.	VALUE
                                         ADDED PRODUCTS EXPENSES



 


	 	 	December
31, 2020
 $
	 	 	December
31, 2019
 (Adjusted
note 27)$
	 
	Wages and benefits	 	 	768	 	 	 	467	 
	Share-based compensation	 	 	112	 	 	 	-	 
	Engineering	 	 	2,399	 	 	 	710	 
	Professional fees	 	 	866	 	 	 	772	 
	Materials, consumables, and supplies	 	 	157	 	 	 	37	 
	Subcontracting	 	 	475	 	 	 	20	 
	Other	 	 	43	 	 	 	40	 
	Grants	 	 	(1,678	)	 	 	(441	)
	Tax credits	 	 	(231	)	 	 	-	 
	Value added products expenses	 	 	2,911	 	 	 	1,605	 



 


The
value-added products expenses relate to the costs incurred to develop an advanced materials plant in Bécancour, Québec.
The wages and benefits are net of the grant received as part of the Canada Emergency Wage Subsidy program of $189 in 2020 (nil
in 2019).


 


		18.	GENERAL
                                         AND ADMINISTRATIVE EXPENSES



 


	 	 	December
31, 2020
 $
	 	 	December
31, 2019
 (Adjusted,
note 27)$
	 
	Wages and benefits	 	 	2,920	 	 	 	2,080	 
	Share-based compensation	 	 	1,323	 	 	 	505	 
	Professional fees	 	 	1,168	 	 	 	949	 
	Consulting fees	 	 	220	 	 	 	415	 
	Travelling, representation and convention	 	 	397	 	 	 	493	 
	Office and administration	 	 	727	 	 	 	501	 
	Stock exchange, authorities, and communication	 	 	111	 	 	 	127	 
	Depreciation and amortization	 	 	854	 	 	 	723	 
	Loss/(gain) on asset disposal	 	 	2	 	 	 	-	 
	Other financial fees	 	 	48	 	 	 	11	 
	General and administrative expenses	 	 	7,770	 	 	 	5,804	 





    22


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)



 


		19.	NET
                                         FINANCIAL COSTS



 


	 	 	December
31, 2020
 $
	 	 	December
31, 2019
 $
	 
	Foreign exchange loss	 	 	15	 	 	 	15	 
	Interest income	 	 	(40	)	 	 	(126	)
	Interest expense on lease liabilities	 	 	28	 	 	 	39	 
	Accretion and interest on borrowings and bond	 	 	1,213	 	 	 	327	 
	Accretion of issue costs	 	 	25	 	 	 	-	 
	Loss /(gain) of fair value on investment	 	 	22	 	 	 	(3	)
	Net financial costs	 	 	1,263	 	 	 	252	 



 


		20.	INCOME
                                         TAXES



 


The
income tax expense attributable to earnings differs from the amounts computed by applying the combined federal and provincial
statutory income tax rate of 26.5% (26.6% in 2019) to loss before income taxes as a result of the following:


 


	 	 	December
31, 2020
 $
	 	 	December
31, 2019
 $
	 
	Loss before income taxes	 	 	(17,978	)	 	 	(17,492	)
	Tax recovery computed at applicable statutory tax rate	 	 	26.50	%	 	 	26.60	%
	Tax expense at combined statutory rate	 	 	(4,617	)	 	 	(4,653	)
	Increase (decrease) in income taxes resulting from:	 	 	 	 	 	 	 	 
	Temporary difference not recorded	 	 	4,268	 	 	 	4,209	 
	Share-based payments	 	 	538	 	 	 	165	 
	Tax effect of renounced flow-through expenditures	 	 	-	 	 	 	578	 
	Recovery of flow-through share liabilities	 	 	-	 	 	 	(448	)
	Effect of change in provincial tax rate	 	 	-	 	 	 	-	 
	Rate change	 	 	-	 	 	 	5	 
	Non-taxable mining duties	 	 	(217	)	 	 	(319	)
	Other	 	 	28	 	 	 	14	 
	 	 	 	-	 	 	 	(448	)
	Composition of deferred income taxes in the income statement:	 	 	 	 	 	 	 	 
	Recovery of a flow-through share liabilities	 	 	-	 	 	 	(448	)
	Deferred tax expense	 	 	-	 	 	 	(448	)





    23


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)



 


As
at December 31, 2020 and 2019, temporary differences and unused tax losses for which the Company has not recognized deferred tax
assets are as follows:


 


	 	 	December
31, 2020
 $
	 	 	December
31, 2019
 $
	 
	FEDERAL	 	 	 	 	 	 
	Exploration and evaluation expenses	 	 	24,034	 	 	 	26,200	 
	Property and equipment	 	 	3,898	 	 	 	1,234	 
	Equity investment	 	 	646	 	 	 	624	 
	Asset retirement obligation	 	 	621	 	 	 	621	 
	Share issue expenses	 	 	629	 	 	 	1,034	 
	Research and development expenses	 	 	12,946	 	 	 	8,971	 
	Non-capital losses	 	 	30,747	 	 	 	53	 
	Other	 	 	16	 	 	 	16,772	 
	 	 	 	73,537	 	 	 	55,509	 
	PROVINCIAL	 	 	 	 	 	 	 	 
	Exploration and evaluation expenses	 	 	22,296	 	 	 	25,237	 
	Property and equipment	 	 	3,881	 	 	 	1,233	 
	Equity investment	 	 	646	 	 	 	624	 
	Asset retirement obligation	 	 	621	 	 	 	621	 
	Share issue expenses	 	 	629	 	 	 	1,020	 
	Research and development expenses	 	 	14,427	 	 	 	9,823	 
	Non-capital losses	 	 	30,791	 	 	 	53	 
	Other	 	 	16	 	 	 	16,707	 
	 	 	 	73,308	 	 	 	55,320	 



 


The
ability to realize the tax benefits is dependent upon several factors, including the future profitability of operations. Deferred
tax assets are recognized only to the extent that it is probable that sufficient taxable profits will be available to allow the
asset to be recovered.


 


As
at December 31, 2020, the Company’s accumulated non-capital losses for tax purposes which can be used to reduce taxable
income in future years as follows:


 


	Year incurred	 	 	Expiration date	 	 	Federal	 	 	Provincial	 
	2020	 	 	 	2040	 	 	 	14,148	 	 	 	14,122	 
	2019	 	 	 	2039	 	 	 	5,381	 	 	 	5,457	 
	2018	 	 	 	2038	 	 	 	4,138	 	 	 	4,044	 
	2017	 	 	 	2037	 	 	 	2,526	 	 	 	2,764	 
	2016	 	 	 	2036	 	 	 	1,447	 	 	 	1,361	 
	2015	 	 	 	2035	 	 	 	873	 	 	 	844	 
	2014	 	 	 	2034	 	 	 	662	 	 	 	644	 
	2013	 	 	 	2033	 	 	 	747	 	 	 	738	 
	2012	 	 	 	2032	 	 	 	765	 	 	 	757	 
	2011	 	 	 	2031	 	 	 	61	 	 	 	59	 



 


The
Company has investment tax credit carryovers of $1,264 ($1,264 in 2019) that expire between 2036 and 2039, which are available
to reduce income taxes payables in future years.






    24


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)



 


		21.	ADDITIONAL
                                         CASH FLOW INFORMATION



 


	 	 	 	 	 	December
31, 2020 
 $
	 	 	December 31, 2019 

(Adjusted, note 27)$	 
	Grants receivable	 	 	9	 	 	 	(596	)	 	 	3	 
	Deferred grants	 	 	9	 	 	 	1,511	 	 	 	-	 
	Mining tax credits	 	 	 	 	 	 	(1,406	)	 	 	(2,203	)
	Sales taxes receivable	 	 	 	 	 	 	(68	)	 	 	311	 
	Prepaid expenses	 	 	 	 	 	 	85	 	 	 	(247	)
	Accounts payable and accrued liabilities	 	 	10	 	 	 	339	 	 	 	(878	)
	Total net change in working capital	 	 	 	 	 	 	(135	)	 	 	(3,014	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Items not affecting cash	 	 	 	 	 	 	 	 	 	 	 	 
	Accounts payable and accrued liabilities included in property and equipment assets	 	 	 	 	 	 	944	 	 	 	-	 



 


		22.	RELATED
                                         PARTY TRANSACTIONS



 


	 	 	December
31, 2020
 $
	 	 	December
31, 2019
 $
	 
	Key management personnel of the Company	 	 	 	 	 	 	 	 
	Employee benefit expenses	 	 	1,238	 	 	 	990	 
	Share-based payments	 	 	398	 	 	 	184	 
	 	 	 	 	 	 	 	 	 
	Directors of the Company	 	 	 	 	 	 	 	 
	Board fees	 	 	91	 	 	 	95	 
	Share-based payments	 	 	305	 	 	 	159	 



 


In
addition to transactions with Pallinghurst disclosed elsewhere in the financial statements and in accordance with IAS 24 Related
Party Disclosures, key management personnel have authority and responsibility for planning, directing and controlling the
activities of the Company directly or indirectly, including any directors (executive and non-executive) of the Company.


 


For
the year ended December 31, 2020, the Company’s interest expense totalled $1,006 (December 31, 2019 - $97) in regards of
its debt and convertible bond agreements signed with Pallinghurst. As at December 31, 2020, Pallinghurst owns 19.18% of the Company’s
issued and outstanding common shares and has significant influence over the Company (2019 – 19.99%).


 


Severance


 


The
Company has commitments under certain management contracts with key executives. Minimum commitments under these contracts are
approximately $881. These contracts require additional minimum payments of approximately $2,003 to be made upon the occurrence
of certain events, such as a change of control. As a triggering event has not taken place, the contingent payments have not been
reflected in these consolidated financial statements.


 


		23.	INFORMATION
                                         DISCLOSURE ABOUT CAPITAL MANAGEMENT



 


The
Company monitors capital based on the carrying amount of equity and loans and totals $12,036 as at December 31, 2020 ($11,864
as at December 31, 2019).


 


The
objective of the Company’s capital management is to preserve its ability to continue its operations and its program of acquisition,
exploration, evaluation and development of mineral properties. It manages its capital structure and adjusts based on economic
conditions and risk characteristics of underlying assets.


 


The
Company is not subject to externally imposed capital requirements. Changes in capital are described in the consolidated statements
of changes in equity and notes 13 and 14.


 


The
properties in which the Company currently has an interest are in the exploration, evaluation, and development stage; as such,
the Company is dependent on external financing to fund its activities. To carry out the planned exploration, evaluation and development
and pay for administrative costs, the Company will spend its existing working capital and raise additional amounts as needed.






    25


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)






 


		24.	Financial
                                         instruments and risk management



 


CLASSIFICATION
AND CARRYING AMOUNT OF FINANCIAL INSTRUMENTS


 


The
Company’s financial instruments as at December 31, 2020 and 2019 consist of the following:


 


	 	 	As at December 31, 2020	 
	 	 	At
fair value through
 profit
or loss
 $
	 	 	

                                               Amortized cost
 $
	 	 	
 Total
 $
	 
	FINANCIAL ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash	 	 	 	 	 	 	-	 	 	 	4,520	 	 	 	4,520	 
	Grants and other receivables	 	 	11	 	 	 	-	 	 	 	829	 	 	 	829	 
	Total financial assets	 	 	 	 	 	 	-	 	 	 	5,349	 	 	 	5,349	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	FINANCIAL LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Account payables and accrued liabilities	 	 	10	 	 	 	-	 	 	 	6,988	 	 	 	6,988	 
	Borrowings	 	 	13	 	 	 	-	 	 	 	1,793	 	 	 	1,793	 
	Convertible bond	 	 	14	 	 	 	-	 	 	 	14,505	 	 	 	14,505	 
	Total financial liabilities	 	 	 	 	 	 	-	 	 	 	23,286	 	 	 	23,286	 



 


	 	 	As at December 31, 2019	 
	 	 	At
                                                                               fair value through
 profit
or loss
 $
	 	 	Amortized
cost
 $
	 	 	Total
 $
	 
	FINANCIAL ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Cash	 	 	 	 	 	 	-	 	 	 	4,077	 	 	 	4,077	 
	Grants and other receivables	 	 	11	 	 	 	-	 	 	 	233	 	 	 	233	 
	Investment	 	 	 	 	 	 	22	 	 	 	-	 	 	 	22	 
	Total financial assets	 	 	 	 	 	 	22	 	 	 	4,310	 	 	 	4,333	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	FINANCIAL LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Account payables and accrued liabilities	 	 	10	 	 	 	-	 	 	 	4,908	 	 	 	4,908	 
	Borrowings	 	 	13	 	 	 	-	 	 	 	4,502	 	 	 	4,502	 
	Total financial liabilities	 	 	 	 	 	 	-	 	 	 	9,410	 	 	 	9,410	 



 


Fair
value


 


Certain
of the Company’s accounting policies and disclosures require the determination of fair value. Fair value represents the
amount at which a financial instrument could be exchanged between willing parties, based on current markets for instruments with
the same risk, principal and remaining maturity. Fair value estimates are based on quoted market values and other valuation methods.
Fair values have been determined for measurement and/or disclosure purposes based on the fair value hierarchy contained in the
Company’s financial instrument accounting policy. When applicable, further information about the assumptions made in determining
fair values is disclosed in the notes specific to that asset or liability.


 


Investments
in shares measured at fair value in the statement of financial position as at December 31, 2019, were classified in Level 1. For
all other financial assets and liabilities, their net carrying amount is a reasonable approximation of fair value given their
relatively short maturities.






    26


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)



 


FINANCIAL
RISKS


 


The
Company is exposed to various financial risks resulting from its operations. The Company does not enter into derivative financial
instruments for speculative purposes.


 


The
main financial risks to which the Company is exposed as well as its policies for managing such risk are detailed below:


 


Liquidity
risk


 


Liquidity
risk is the risk that the Company encounters difficulty in meeting obligations associated with financial liabilities that are
settled by delivering cash or another financial asset.


 


The
Company manages its liquidity risk by using budgets that enable it to determine the amounts required to fund its exploration,
evaluation, and development expenditure programs. The Company’s liquidity and operating results may be adversely affected
if the Company’s access to the capital markets or other alternative forms of financing is hindered, whether because of a
downturn in stock market conditions generally or related to matters specific to the Company. The Company has historically generated
cash flow primarily from its financing activities.


 


As
at December 31, 2020, all of the Company’s short-term liabilities totalled $10,587 ($9,869 as at December 31, 2019), have
contractual maturities of less than one year and are subject to normal trade terms. The Company regularly evaluates its cash position
to ensure preservation and security of capital as well as maintenance of liquidity.


 


With
the financing completed in the first quarter of 2021 (described in note 26), management believes that the Company has sufficient
funds to meet its obligation and planned expenditures for the ensuing twelve months as they fall due (see note 1).


 


	 	 	As at December 31, 2020	 
	 	 	Carrying
 amount
	 	 	Contractual
 cash
flow
	 	 	0
to 12
 months
	 	 	12
to 24
 months
	 	 	more
than 24
 months
	 
	Account payables and accrued liabilities	 	 	6,988	 	 	 	6,988	 	 	 	6,988	 	 	 	-	 	 	 	-	 
	Lease liabilities	 	 	1,076	 	 	 	1,140	 	 	 	321	 	 	 	440	 	 	 	379	 
	Borrowings	 	 	1,793	 	 	 	1,824	 	 	 	1,824	 	 	 	-	 	 	 	-	 
	Convertible bond	 	 	14,505	 	 	 	21,408	 	 	 	2,427	 	 	 	2,427	 	 	 	16,554	 



 


Credit
risk


 


Credit
risk results from the possibility that a loss may occur from the failure of another party to perform according to the terms of
the contract. The Company’s credit risk is primarily related to receivables and cash. The receivables consist mainly of
the refund of the goods and services tax receivable from the governments of Canada and Quebec, as well as tax credits receivable
from the Government of Quebec. The Company mitigates credit risk by maintaining cash with Canadian chartered banks.


 


Currency
risk


 


Given
that most of the Company’s expenditures are in Canadian dollars, the currency risk exposure is limited by maintaining its
cash in Canadian dollars. The Company periodically carries a portion of its accounts payable and accrued liabilities in US dollars
and Euros and is subject to currency risk on these balances. However, the Company considers this risk to be minimal.


 


		25.	Commitments



 


Royalty


 


The
Company issued a 3% net smelter royalty over the Matawinie graphite property to Pallinghurst for an aggregate purchase price of
$4,306. For a period of three years following issuance thereof, the royalty is subject to a 1% buy back right in favour of the
Company for a buy-back price of $1,306 plus an amount equal to interest accrual at a rate of 9% per annum from and after the closing
of the royalty transaction up to the buyback date.


 


Matawinie
Property


 


A
large part of the property is subject to a 2% NSR. Each tranche of 1% can be purchased by the Company for $1,000.






    27


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)



 


Demonstration
plant in Bécancour


 


As
at December 31, 2020, the Company has commitments of $4,956 related to the construction of the graphite purification demonstration
plant in Bécancour.


 


Collaboration
and sharing of benefits.


 


On
January 23, 2020, the Company signed a benefit-sharing agreement with the municipality of Saint-Michel-des-Saints as part of the
Matawinie mining project. Through this new agreement and throughout the mine’s commercial operating life, the Company will
contribute up to 2% of its net future positive cash flow after taxes to the municipality.


 


		26.	Subsequent
                                         events



 


Subsequently
to year end and up to April 6, 2021, the total cash proceeds from issuance of shares sums to $41,5M:


		-	On
                                         January 20, 2021, the Company closed an equity financing in the amount of $17,3M where
                                         the Company issued a total of 11,896,750 common shares at a price of $1.45 per common
                                         share. Of this amount, Pallinghurst, purchased 2,379,316 common shares.






		-	On
                                         February 1, 2021, the Company secured $17,6M from the exercise of previously issued warrants.






		-	On
                                         February 12, 2021, the Company closed an equity financing in the amount of $5,8M where
                                         the Company issued a total of 3,965,516 common shares at a price of $1.45 per common
                                         share. Of this amount, Investissement Québec, acting as mandatory for the government
                                         of Québec, subscribed for 3,172,413 common shares, and Pallinghurst subscribed
                                         for the remainder of the common shares.






		-	2,720,000
                                         options have been exercised for proceeds totaling $759.



 


During
March 2021, the Company received $1.35M as part of a repayable contribution agreement with Canada Economic Development for Quebec
Regions. This contribution agreement bears no interest and will be repayable in 60 equal monthly installments starting September
2023.


 


On
March 24, 2021, the Company performed a ten-to-one share consolidation of the Company’s issued equity instruments including
common shares, warrants and options. Any quantity relating to these instruments for 2020 and up to March 24, 2021 or any per unit
price such as exercise prices disclosed throughout the consolidated financial statements have not been retrospectively adjusted
for the share consolidation except for the weighted average number of shares outstanding used in the calculation of basic and
diluted EPS which have been retroactively adjusted to give effect to the share consolidation as required by IAS 33.


 


		27.	CHANGE
                                         IN ACCOUNTING POLICY



 


The
Company has historically capitalized all expenses related to Exploration and Evaluation (E&E) activities under IFRS 6 Exploration
for and Evaluation of Mineral Resources.


 


During
the year ended December 31, 2020, the Company voluntarily changed its accounting policy regarding E&E expenses. The new accounting
policy indicates that all E&E expenses will be recorded on the statement of loss (income) and comprehensive loss (income).


 


This
change has been implemented for all E&E activities on the Matawinie property. The Company has determined that this voluntary
change in accounting policy will provide more relevant financial information and meaningful disclosure while bringing the Company
in line with its peers with a similar accounting approach.


 


Under
IAS 8 Accounting Policies, changes in Accounting Estimates and Errors, the change in accounting policy was made retroactively
and the comparative information was adjusted for all the periods presented, as if the policy had always been in place. See the
table below for impacts on the consolidated financial statements:






    28


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)



 


		A)	ADJUSTMENT
                                         OF CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



 


	 	 	As
previously reported
 $
	 	 	Impact
 $
	 	 	Adjusted
 $
	 
	 	 	As at January 1, 2019	 
	ASSETS	 	 	 	 	 	 	 	 	 
	Exploration and evaluation assets	 	 	24,252	 	 	 	(24,252	)	 	 	-	 
	Total assets	 	 	37,679	 	 	 	(24,252	)	 	 	13,427	 
	LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred tax liability	 	 	3,861	 	 	 	(3,861	)	 	 	-	 
	Total liabilities	 	 	14,024	 	 	 	(3,861	)	 	 	10,163	 
	EQUITY	 	 	 	 	 	 	 	 	 	 	 	 
	Deficit	 	 	(21,586	)	 	 	(20,391	)	 	 	(41,977	)
	Total equity (deficiency)	 	 	23,655	 	 	 	(20,391	)	 	 	3,264	 
	Total liabilities and equity (deficiency)	 	 	37,679	 	 	 	(24,252	)	 	 	13,427	 



 


	 	 	As at December 31, 2019	 
	ASSETS	 	 	 	 	 	 	 	 	 	 	 	 
	Exploration and evaluation assets	 	 	35,689	 	 	 	(35,689	)	 	 	-	 
	Total assets	 	 	53,083	 	 	 	(35,689	)	 	 	17,394	 
	LIABILITIES	 	 	-	 	 	 	-	 	 	 	-	 
	Deferred tax liability	 	 	5,084	 	 	 	(5,084	)	 	 	-	 
	Total liabilities	 	 	15,724	 	 	 	(5,084	)	 	 	10,640	 
	EQUITY	 	 	-	 	 	 	-	 	 	 	-	 
	Deficit	 	 	(28,417	)	 	 	(30,605	)	 	 	(59,022	)
	Total equity (deficiency)	 	 	37,359	 	 	 	(30,605	)	 	 	6,754	 
	Total liabilities and equity (deficiency)	 	 	53,083	 	 	 	(35,689	)	 	 	17,394	 



 


		B)	ADJUSTMENT
                                         OF CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS



 


	 	 	As
previously reported
 $ 
	 	 	Impact
 $
	 	 	Adjusted
 $
	 
	 	 	For the year ended December 31, 2019	 
	EXPENSES	 	 	 	 	 	 	 	 	 
	Exploration and evaluation expenses	 	 	-	 	 	 	9,832	 	 	 	9,832	 
	Value added products expenditures	 	 	-	 	 	 	1,605	 	 	 	1,605	 
	Deferred tax expense	 	 	775	 	 	 	(1,223	)	 	 	(448	)
	Net loss and comprehensive loss	 	 	6,831	 	 	 	10,214	 	 	 	17,045	 
	Basic and diluted loss per share (note 15.2)	 	 	0.30	 	 	 	0.45	 	 	 	0.75	 



 


		C)	ADJUSTMENT
                                         OF CONSOLIDATED STATEMENTS OF CASH FLOWS



 


	 	 	As
previously reported
 $
	 	 	Impact
 $
	 	 	Adjusted
 $
	 
	 	 	For the year ended December 31, 2019	 
	Cash flows used in operating activities	 	 	(5,140	)	 	 	(13,513	)	 	 	(18,653	)
	Cash flows used in investing activities	 	 	(15,186	)	 	 	13,513	 	 	 	(1,673	)





    29


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)






 


		28.	CHANGE
                                         IN ACCOUNTING POLICIES - QUARTERLY ADJUSTMENTS (UNAUDITED- SUPPLEMENTARY INFORMATION)



 


		A)	ADJUSTMENT
                                         OF CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



 


	 	 	As
previously reported
 $
	 	 	Impact
 $
	 	 	Adjusted
 $
	 
	 	 	As at March 31, 2020	 
	ASSETS	 	 	 	 	 	 	 	 	 	 	 	 
	Exploration and evaluation assets	 	 	39,467	 	 	 	(39,467	)	 	 	-	 
	Property and equipment assets	 	 	2,859	 	 	 	130	 	 	 	2,989	 
	Total assets	 	 	55,591	 	 	 	(39,337	)	 	 	16,254	 
	LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred tax liability	 	 	5,518	 	 	 	(5,518	)	 	 	-	 
	Total liabilities	 	 	20,196	 	 	 	(5,518	)	 	 	14,678	 
	EQUITY	 	 	 	 	 	 	 	 	 	 	 	 
	Deficit	 	 	(30,442	)	 	 	(33,819	)	 	 	(64,261	)
	Total equity (deficiency)	 	 	35,395	 	 	 	(33,819	)	 	 	1,576	 
	Total liabilities and equity (deficiency)	 	 	55,591	 	 	 	(39,337	)	 	 	16,254	 





 


	 	 	As at June 30, 2020	 
	ASSETS	 	 	 	 	 	 	 	 	 	 	 	 
	Exploration and evaluation assets	 	 	42,312	 	 	 	(42,312	)	 	 	-	 
	Property and equipment assets	 	 	3,084	 	 	 	249	 	 	 	3,333	 
	Total assets	 	 	57,006	 	 	 	(42,063	)	 	 	14,933	 
	LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred tax liability	 	 	6,258	 	 	 	(6,258	)	 	 	-	 
	Total liabilities	 	 	23,540	 	 	 	(6,258	)	 	 	17,282	 
	EQUITY	 	 	 	 	 	 	 	 	 	 	 	 
	Deficit	 	 	(32,463	)	 	 	(35,805	)	 	 	(68,268	)
	Total equity (deficiency)	 	 	33,466	 	 	 	(35,805	)	 	 	(2,339	)
	Total liabilities and equity (deficiency)	 	 	57,006	 	 	 	(42,063	)	 	 	14,943	 



 


	 	 	As at September 30, 2020	 
	ASSETS	 	 	 	 	 	 	 	 	 	 	 	 
	Exploration and evaluation assets	 	 	40,841	 	 	 	(40,841	)	 	 	-	 
	Property and equipment assets	 	 	3,051	 	 	 	407	 	 	 	3,458	 
	Total assets	 	 	62,218	 	 	 	(40,434	)	 	 	21,784	 
	LIABILITIES	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred tax liability	 	 	6,808	 	 	 	(6,808	)	 	 	-	 
	Total liabilities	 	 	30,560	 	 	 	(6,808	)	 	 	23,752	 
	EQUITY	 	 	 	 	 	 	 	 	 	 	 	 
	Deficit	 	 	(35,145	)	 	 	(33,626	)	 	 	(68,771	)
	Total equity (deficiency)	 	 	31,658	 	 	 	(33,626	)	 	 	(1,968	)
	Total liabilities and equity (deficiency)	 	 	62,218	 	 	 	(40,434	)	 	 	21,784	 





    30


     


    
	 	NOUVEAU
                                            MONDE GRAPHITE INC.

        Notes
to consolidated financial statements

        (Amount
expressed in thousands of Canadian dollars)



 


		B)	ADJUSTMENT
                                         OF CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS



 


	 	 	As
previously reported
 $
	 	 	Impact
 $
	 	 	Adjusted
 $
	 
	 	 	For the three-month period ended March 31, 2020	 
	EXPENSES	 	 	 	 	 	 	 	 	 
	Exploration and evaluation expenses	 	 	-	 	 	 	3,097	 	 	 	3,097	 
	Value added products expenditures	 	 	-	 	 	 	552	 	 	 	552	 
	Deferred tax expense	 	 	433	 	 	 	(433	)	 	 	-	 
	Net loss and comprehensive loss	 	 	2,025	 	 	 	3,216	 	 	 	5,240	 
	Basic and diluted loss per share (note 15.2)	 	 	0.077	 	 	 	0.123	 	 	 	0.200	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	For the six-month period ended June 30, 2020	 
	EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 
	Exploration and evaluation expenses	 	 	-	 	 	 	5,130	 	 	 	5,130	 
	Value added products expenditures	 	 	-	 	 	 	1,244	 	 	 	1,244	 
	Deferred tax expense	 	 	1,173	 	 	 	(1,173	)	 	 	-	 
	Net loss and comprehensive loss	 	 	4,047	 	 	 	5,201	 	 	 	9,248	 
	Basic and diluted loss per share (note 15.2)	 	 	0.155	 	 	 	0.199	 	 	 	0.354	 



 


	 	 	For the nine-month period ended September 30, 2020	 
	EXPENSES	 	 	 	 	 	 	 	 	 	 	 	 
	Exploration and evaluation expenses	 	 	-	 	 	 	2,689	 	 	 	2,689	 
	Value added products expenditures	 	 	-	 	 	 	2,056	 	 	 	2,056	 
	Deferred tax expense	 	 	1,723	 	 	 	(1,723	)	 	 	-	 
	Net loss and comprehensive loss	 	 	6,728	 	 	 	3,021	 	 	 	9,749	 
	Basic and diluted loss per share (note 15.2)	 	 	0.257	 	 	 	0.115	 	 	 	0.372	 



 


		C)	ADJUSTMENT
                                         OF CONSOLIDATED STATEMENTS OF CASH FLOWS



 


	 	 	As
previously reported
 $
	 	 	Impact
 $
	 	 	Adjusted
 $
	 
	 	 	For the three-month period ended March 31,
    2020	 
	Cash flows used in operating activities	 	 	(1,629	)	 	 	(1,265	)	 	 	(2,894	)
	Cash flows used in investing activities	 	 	(1,556	)	 	 	1,265	 	 	 	(291	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	For the six-month period ended June 30, 2020	 
	Cash flows used in operating activities	 	 	(2,135	)	 	 	(3,610	)	 	 	(5,745	)
	Cash flows used in investing activities	 	 	(4,227	)	 	 	3,610	 	 	 	(617	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	For the nine-month period ended September 30, 2020	 
	Cash flows used in operating activities	 	 	(4,065	)	 	 	(7,979	)	 	 	(12,044	)
	Cash flows used in investing activities	 	 	(8,759	)	 	 	7,979	 	 	 	(780	)








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