SCANDIUM INTERNATIONAL MINING CORP. Overview
Scandium International is a specialty metals company focused on the evaluation and potential development of projects into producing assets. The Company pursues project opportunities from both known geologic resources and existing mine process solutions when it identifies further recovery potential. The Company is an exploration stage company and anticipates incurring significant additional expenditures prior to production at all its properties. The Company was incorporated under the laws of the Province ofBritish Columbia, Canada in 2006. The Company currently trades on theToronto Stock Exchange
under the symbol "SCY." These consolidated financial statements have been prepared on a going concern basis that contemplates the realization of assets and discharge of liabilities at their carrying values in the normal course of business for the foreseeable future. These financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern. The Company currently earns no operating revenues and will require additional capital to advance the Nyngan property. The Company's ability to continue as a going concern is uncertain and is dependent upon the generation of profits from mineral properties, obtaining additional financing and maintaining continued support from its shareholders and creditors. These are material uncertainties that raise substantial doubt about the Company's ability to continue as a going concern. If additional financial support is not received, or operating profits are not generated, the carrying values of the Company's assets may be adversely affected.
InMarch 2020 , theWorld Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company's business or ability to raise funds.
Results for the Year ended
Liquidity and Capital Resources
On
OnDecember 31, 2022 , we had a total of 34,665,000 (2021 - 34,615,000) stock options exercisable betweenC$0.065 andC$0.225 (2021 - betweenC$0.065 andC$0.37 ) which have the potential upon exercise to generate a total ofC$4,753,500 (2021 -C$5,962,625 ) in cash over the next four and a half years. OnDecember 31, 2022 , we had a total of 37,803,218 (2021 - Nil) warrants exercisable atC$0.1075 which have the potential upon exercise to generate a total ofC$4,063,218 . There is no assurance that these securities will be exercised. 34 Our continued development is contingent upon our ability to raise sufficient financing both in the short and long term. There are no guarantees that additional sources of funding will be available to us; however, management is committed to pursuing all possible sources of financing to execute our business plan. Results of Operations
Quarter ended
The net profit for the quarter increased by$443,482 to$228,371 from a loss of$215,111 in the prior year. Details of the individual items contributing to the decreased loss are as follows: Q4 2022 vs. Q4 2021 - Variance Analysis (US$) Variance Favourable / Item (Unfavourable) Explanation Gain on$364,206 Warrants issued in Q2 2022 are in derivative Canadian funds. As the exchange rate liability with the Canadian dollar fluctuates, a gain or loss on this is recorded in the financial statements. Also, the value of the warrants is recalculated based on Black-Scholes calculation at the end of the year. Since the warrants were issued, a gain has been calculated. This is a non-cash item. Salaries and$73,430 This favorable variance is due to the benefits resignation in Q1 2022 of 3 senior staff that have not been replaced. General and$40,921 With the closing of the Sparks, administrative Nevada office and reduced staffing, a favorable variance was realized when compared to 2021 when there was much more activity and staffing. Consulting$25,500 The resignation of a consultant in Q1 2022 has led to this favorable variance. Exploration$7,081 In Q2 2022, the Company received a refund for the cost of a new mine lease after the original mine lease was objected to. The cost of the second mine lease was refunded as it was determined that the original mine lease was valid. Professional$729 Year over year costs are relatively fees the same. Amortization$419 In Q1 2022, all depreciable assets were disposed of. No further amortization expense was incurred in the year resulting in this favorable variance when compared to 2021. Insurance ($255 ) New insurance policies were entered into in Q4 2022. Premiums have increased resulting in this minor unfavorable variance. Travel ($367 ) Costs have not increased very much. Limited travel has been incurred in both years as the Company conserves its cash. Foreign ($19,572 ) In Q4 funds held in foreign exchange loss currencies decreased against the US dollar resulting in this negative variance when compared to the comparable period in 2021. Also in 2021 there was less exposure to currency fluctuations as much smaller amounts of foreign currency funds were held. Stock based ($48,610 ) In Q4 of 2022 the Company was compensation expensing options granted in Q2 2022 that vested over 18 months. No such vestings were incurred in Q4 2021. 35
Results of Operations for the Year ended
The net profit for the year increased by$2,417,628 to$850,596 from a loss of$1,567,032 in the prior year, Details of the individual items contributing to the decreased net loss are as follows: 2022 vs. 2021 - Variance Analysis (US$) Variance Favourable / Item (Unfavourable) Explanation
Accrual$1,032,044 In the current year, the Company reversal reversed accrued liabilities for certain staff who are no longer with the Company. No such item was incurred in 2021. Gain on$525,259 Warrants issued in Q2 2022 are in derivative Canadian funds. As the exchange rate liability with the Canadian dollar fluctuates, a gain or loss on this is recorded in the financial statements. Also, the value of the warrants is recalculated based on Black-Scholes calculation at the end of the quarter. Since the warrants were issued, a gain has been calculated. This is a non-cash item. Stock-based$412,106 Stock options granted in Q2 2022 will compensation vest and be expensed over an 18-month period while stock options granted in Q2 2021 vested and were expensed immediately. Also, the options granted in Q2 2021 were at a higher price resulting in higher amounts expensed. These are non-cash costs. Salaries and$243,461 This favorable variance is due to the benefits resignation in Q1 2022 of 3 senior staff that have not been replaced. Consulting$112,259 The resignation of a consultant in Q1 2022 has led to this favorable variance. Exploration$71,409 In Q2 2022, the Company received a refund for the cost of a new mine lease after the original mine lease was objected to. The cost of the second mine lease was refunded as it was determined that the original mine lease was valid. General and$61,728 With the closing of the Sparks, administrative Nevada office and reduced staffing, a favorable variance was realized when compared to 2021 when there was much more activity and staffing. Insurance$4,471 Lower fees were negotiated in Q4 2021 resulting in lower costs in the current year when compared to 2021. Travel and ($367 ) Year over year costs have not entertainment increased very much. Limited travel has been incurred in both years as the Company conserves its cash. Amortization ($1,204 ) In 2022, all depreciable assets were disposed of resulting in this negative variance. Foreign ($10,200 ) The US dollar strengthened in the exchange gain year ending December 30, 2022, and because of the large derivative liability being in Canadian dollars, there was a favorable foreign exchange gain. However, excluding the impact of the derivative liability there was a loss on assets carried in foreign currencies. Professional ($33,338 ) Audit fees have increased resulting fees in this unfavorable variance when compared to 2021.
Cash flow discussion for the year ended
The cash outflow from operating activities increased by$573,510 to$947,715 (2021 -$374,205 ) due mainly to due mainly to payment of accrued salaries in 2022.
Cash inflows from financing activities of
36
Summary of quarterly results (US$)
2022 2021
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
Net
Sales - - - - - - - -
Net
Income
(Loss) 228,371 70,701 28,577 522,946 (215,111) (278,704) (761,080) (312,137)
Basic
and
diluted
Net
Income
(Loss)
per
share (0.00) (0.00) (0.00) (0.00) (0.00)
(0.00) (0.00) (0.00)
Financial Position
Cash
Yearend Cash increased by
Prepaid expenses and receivables
Prepaid expenses and receivables have decreased by
Reclamation bond
A reclamation bond of €10,000 (
Property, plant and equipment Property plant and equipment consists of office furniture and computer equipment at theSparks, Nevada office. The decrease of$2,932 to $Nil atDecember 31, 2022 (2021 -$2,932 ) is due to the disposal of that office furniture and computer equipment in the nine-month period. Mineral interests
Mineral interests remained at
Accounts Payable, Accounts payable with related parties, Accrued Liabilities and Derivative liability -warrants.
Accounts payable, accounts payable with related parties, accrued liabilities and Derivative liability - warrants have decreased by$219,990 to$1,507,724 atDecember 31, 2022 (2021 -$1,727,714 ) due to warrant derivative liability being classed as a current liability which was partially offset by the write off
of certain salary deferrals. Capital Stock
Capital stock increased by
37
Additional paid-in capital increased by
Off-balance sheet arrangements
AtDecember 31, 2022 , we had no material off-balance sheet arrangements such as guarantee contracts, contingent interest in assets transferred to an entity, derivative instruments obligations or any obligations that trigger financing, liquidity, market or credit risk to us.
Transactions with related parties
During the year ended
During the year endedDecember 31, 2022 , the Company expensed a consulting fee of$17,000 to one of its directors. During the year endedDecember 31, 2021 , the Company expensed a consulting fee of$102,000 to one of its directors.
As at
During the year ended
Additional Information and Accounting Pronouncements
Outstanding share data
At March XX 2, 2023 we had 355,860,144 issued and outstanding common shares and 28,965,000 outstanding stock options at a weighted average exercise price ofC$0.121 . Also, there were 37,803,218 warrants outstanding atC$10.75 atMarch 7, 2023 . Critical Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting policies requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based on past experience, industry trends and known commitments and events. By their nature, these estimates are subject to measurement uncertainty and the effects on the financial statements of changes in such estimates in future periods could be significant. Actual results will likely differ from those estimates. Stock-based compensation We use the Black-Scholes option pricing model to calculate the fair value of stock options and compensatory warrants granted. This model is subject to various assumptions. The assumptions we make will likely change from time to time. At the time the fair value is determined, the methodology that we use is based on historical information, as well as anticipated future events. The assumptions with the greatest impact on fair value are those for estimated stock volatility and for the expected life of the instrument. 38 Deferred income taxes
We account for tax consequences of the differences in the carrying amounts of assets and liabilities and our tax bases using tax rates expected to apply when these temporary differences are expected to be settled. When the deferred realization of income tax assets does not meet the test of being more likely than not to occur, a valuation allowance in the amount of the potential future benefit is taken and no future income tax asset is recognized. We have taken a valuation allowance against all such potential tax assets.
Mineral properties and exploration and development costs
We capitalise the costs of acquiring mineral rights at the date of acquisition. After acquisition, various factors can affect the recoverability of the capitalized costs. Our recoverability evaluation of our mineral properties and equipment is based on market conditions for minerals, underlying mineral resources associated with the assets and future costs that may be required for ultimate realization through mining operations or by sale. We are in an industry that is exposed to a number of risks and uncertainties, including exploration risk, development risk, commodity price risk, operating risk, ownership and political risk, funding and currency risk, as well as environmental risk. Bearing these risks in mind, we have assumed recent world commodity prices will be achievable. We have considered the mineral resource reports by independent engineers on the Nyngan project in considering the recoverability of the carrying costs of the mineral properties. All of these assumptions are potentially subject to change, out of our control, however such changes are not determinable. Accordingly, there is always the potential for a material adjustment to the value assigned to mineral properties and equipment.
Recent Accounting Pronouncements
Accounting Standards Update 2021-04 - Earnings Per Share (Topic 260), Debt Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging Contracts in Entity's Own Equity (Subtopic 815-40). This update is to provide clarity around earnings per share calculations and is effective for fiscal years beginning afterDecember 15, 2021 , including interim periods within those fiscal years. The Company has reviewed this standard and determined there is no impact on its financial statements.
Financial instruments and other risks
Our financial instruments consist of cash, receivables, accounts payable and accrued liabilities, accounts payable with related parties, and promissory notes payable. It is management's opinion that we are not exposed to significant interest, currency or credit risks arising from our financial instruments. The fair values of these financial instruments approximate their carrying values unless otherwise noted. The Company has its cash primarily in five commercial banks, one inVancouver, British Columbia , Canada, one inHamilton, Ontario, Canada , one inMelbourne, Australia , one inChicago, Illinois and one inLos Angeles, California .
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