Capital Stock, Warrants and Stock Options

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Capital Stock, Warrants and Stock Options

9. Capital Stock, Warrants and Stock Options

Authorized

The total authorized capital is as follows:

● An increase to 1,500,000,000 common shares, as approved in the July 29, 2022 annual meeting of shareholders, with a par value of $0.000001 per common share; and

● 10,000,000 preferred shares with a par value of $0.000001 per preferred share

Issued and outstanding

In February 2021, the Company closed a non-brokered private placement of units of the Company (the “February 2021 Offering”), issuing 19,576,360 units of the Company (“February 2021 Units”) at C$0.40 per February 2021 Unit for gross proceeds of $6,168,069 (C$7,830,544). Each February 2021 Unit consisted of one common share of the Company and one common share purchase warrant of the Company (each, “February 2021 Warrant”), which entitles the holder to acquire a common share of the Company at C$0.60 per common share for a period of five years. In connection with the February 2021 Offering, the Company incurred share issuance costs of $154,630 and issued 351,000 compensation options (the “February 2021 Compensation Options”). Each February 2021 Compensation Option is exercisable into one February 2021 Unit at an exercise price of C$0.40 for a period of three years.

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended September 30, 2022

(Expressed in United States Dollars)

The Company also issued 417,720 February 2021 Units to settle $132,000 of accrued liabilities at a deemed price of $0.45 based on the fair value of the units issued. As a result, the Company recorded a loss on debt settlement of $56,146.

In April 2022, the Company closed a private placement of 37,849,325 Special Warrants and a non-brokered private placement of 1,471,664 units of the Company for aggregate gross proceeds of approximately $9,384,622 (C$11,796,297). Related parties, including management, directors, and consultants, participated in the Special Warrant private placement for a total of 4,809,160 shares (included in the total above).

The Special Warrants were issued at a price of C$0.30 per special warrant. Each Special Warrant shall be automatically exercisable (without payment of any further consideration and subject to customary anti-dilution adjustments) into one unit of the Company (a “Brokered Unit”) on the date that is the earlier of: (i) the date that is three (3) business days following the date on which the Company has obtained both (A) a receipt from the Canadian security commission in each of the each of the provinces of Canada which the purchasers and Agents (as defined herein) are residents where the Special Warrants are sold (the “Qualifying Jurisdictions”) for a (final) short-form prospectus qualifying the distribution of the common stock of the Company (“Common Shares”) and common stock purchase warrants of the Company (the “Warrants”) issuable upon exercise of the Special Warrants (the “Qualification Prospectus”); and (B) notification that the registration statement, under U.S. securities laws, of the Company filed with the United States Securities and Exchange Commission (the “SEC”) has been declared effective by the SEC (the “Registration Statement”); and (ii) the date that is six months following April 1, 2022 (the “Closing ‎Date”). Each unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one common share for C$0.37 until April 1, 2025. The warrants shall also be exercisable on a cashless basis in the event the Registration Statement has not been made effective by the SEC prior to the date of exercise.

On May 31, 2022, the Company announced that it had received a receipt from the Ontario Securities Commission for its final short-form Canadian prospectus qualifying the distribution of the common stock of the Company and common stock purchase warrants of the Company issuable upon exercise of the special warrants of the Company that were issued on April 1, 2022. The Company also announced that it received notice from the United States Securities and Exchange Commission that its Form S-1 has been declared effective as of May 27, 2022. As a result of obtaining the receipt for the Canadian prospectus and the declaration of effectiveness for the Form S-1, each unexercised Special Warrant was automatically exercised into one Common Share and one Warrant without further action on the part of the holders.

The non-brokered 1,471,664 units were issued at a price of C$0.30 per unit. Each unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$0.37 until April 1, 2025.

In connection with the special warrants offering, the agents earned a cash commission in the amount of C$563,968 and compensation options exercisable to acquire an aggregate of 1,879,892 units of the Company at C$0.30 a unit until April 1, 2024. Each compensation unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$0.37 until April 1, 2024.

In April 2022, the Company issued 1,315,856 common shares in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ended March 31, 2022.

In May 2022, the Company issued 10,416,667 units to Teck Resources Limited in consideration towards the purchase of the Pend Oreille Processing Plant at C$0.245 per unit. Each unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$0.37 until May 13, 2025.

In June 2022, the Company issued 1,218,000 units to contractors for bonuses accrued during the three months ended March 31, 2022. Each unit consists of one common share and one warrant. Each warrant entitles the holder to acquire one warrant share for C$0.37 until April 1, 2025.

In July 2022, the Company issued 1,975,482 common shares in connection with its election to satisfy interest payments under the outstanding convertible debentures for the three months ended June 30, 2022.

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended September 30, 2022

(Expressed in United States Dollars)

For each financing, the Company has accounted for the warrants in accordance with ASC Topic 815. The warrants are considered derivative instruments as they were issued in a currency other than the Company’s functional currency of the U.S. dollar. The estimated fair value of warrants accounted for as liabilities was determined on the date of issue and marks to market at each financial reporting period. The change in fair value of the warrant is recorded in the unaudited condensed interim consolidated statements of income and comprehensive income as a gain or loss and is estimated using the Binomial model.

The warrant liabilities as a result of the June 2019, August 2019, August 2020, February 2021, April 2022 special warrants, April 2022 non-brokered, May 2022 Teck purchase, and June 2022 contractor private placements were revalued as at September 30, 2022, issuance date in 2022, and December 31, 2021 using the Binomial model and the following assumptions:

April 2022 special warrants issuance	September 30, 2022			April 1, 2022
Expected life		914 days			1,096 days
Volatility		120	%		120	%
Risk free interest rate		3.72	%		2.35	%
Dividend yield		0	%		0	%
Share price (C$)	$	0.115		$	0.29
Fair value	$	1,488,348		$	5,947,232
Change in derivative liability	$	(4,458,884	)	$	-

April 2022 non-brokered issuance	September 30, 2022			April 1, 2022
Expected life		914 days			1,096 days
Volatility		120	%		120	%
Risk free interest rate		3.72	%		2.35	%
Dividend yield		0	%		0	%
Share price (C$)	$	0.115		$	0.29
Fair value	$	57,869		$	186,190
Change in derivative liability	$	(128,321	)	$	-

May 2022 Teck issuance	September 30, 2022			May 13, 2022
Expected life		956 days			1,096 days
Volatility		120	%		120	%
Risk free interest rate		3.72	%		2.68	%
Dividend yield		0	%		0	%
Share price (C$)	$	0.115		$	0.25
Fair value	$	424,053		$	1,273,032
Change in derivative liability	$	(848,979	)	$	-

June 2022 issuance	September 30, 2022			June 30, 2022
Expected life		914 days			1,006 days
Volatility		120	%		120	%
Risk free interest rate		3.72	%		3.14	%
Dividend yield		0	%		0	%
Share price (C$)	$	0.115		$	0.20
Fair value	$	47,895		$	113,425
Change in derivative liability	$	(65,530	)	$	-

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended September 30, 2022

(Expressed in United States Dollars)

February 2021 issuance	September 30, 2022			December 31, 2021
Expected life		1,228 days			1,501 days
Volatility		120	%		100	%
Risk free interest rate		3.72	%		1.25	%
Dividend yield		0	%		0	%
Share price (C$)	$	0.115		$	0.37
Fair value	$	829,987		$	3,483,745
Change in derivative liability	$	(2,653,758	)	$	(329,358	)

August 2020 issuance	September 30, 2022			December 31, 2021
Expected life		335 days			608 days
Volatility		120	%		100	%
Risk free interest rate		3.79	%		0.95	%
Dividend yield		0	%		0	%
Share price (C$)	$	0.115		$	0.37
Fair value	$	484,745		$	6,790,163
Change in derivative liability	$	(6,305,419	)	$	(7,703,052)

June 2019 issuance (i)	September 30, 2022			December 31, 2021
Expected life	1,188 days			1,461 days
Volatility		120	%		100	%
Risk free interest rate		3.72	%		1.02	%
Dividend yield		0	%		0	%
Share price (C$)	$	0.115		$	0.37
Fair value	$	460,207		$	2,067,493
Change in derivative liability	$	(1,607,286	)	$	(1,371,346)

(i) During the six months ended December 31, 2020, the Company amended the exercise price to C$0.59 per common share and extended the expiry date to December 31, 2025 for 11,660,000 warrants.

August 2019 issuance (ii)	September 30, 2022			December 31, 2021
Expected life		1,188 days			1,461 days
Volatility		120	%		100	%
Risk free interest rate		3.72	%		1.02	%
Dividend yield		0	%		0	%
Share price (C$)	$	0.115		$	0.37
Fair value	$	707,282		$	3,177,485
Change in derivative liability	$	(2,470,203	)	$	(2,744,785)

(ii) During the six months ended December 31, 2020, the Company amended the exercise price to C$0.59 per common share and extended the expiry date to December 31, 2025 for 17,920,000 warrants. The terms of the remaining 2,752,900 warrants remain unchanged.

Warrants

				Weighted		Weighted
				average		average
	Number of			exercise price		grant date
	warrants			(C$)		value ($)
Balance, December 31, 2020		95,777,806		$	0.54	$	0.08
Issued		19,994,080			0.60		0.19
Expired		(2,913,308	)		0.48		0.14
Balance, September 30, 2021		112,858,578		$	0.55	$	0.19
Balance, December 31, 2021		111,412,712		$	0.54	$	0.18
Issued		50,955,636			0.37		0.15
Expired		(239,284	)		0.70		0.21
Balance, September 30, 2022		162,129,064		$	0.49	$	0.17

During the nine months ended September 30, 2022, 239,284 February 2020 broker warrants expired.

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended September 30, 2022

(Expressed in United States Dollars)

At September 30, 2022, the following warrants were outstanding:

					Number of
	Exercise		Number of		warrants
Expiry date	price (C$)		warrants		exercisable
August 31, 2023		0.50		58,284,148		58,284,148
December 31, 2025		0.59		32,895,200		32,895,200
February 9, 2026		0.60		17,112,500		17,112,500
February 16, 2026		0.60		2,881,580		2,881,580
April 1, 2025		0.37		40,358,969		40,358,969
May 13, 2025		0.37		10,416,667		10,416,667
				162,129,064		162,129,064

Compensation options

At September 30, 2022, the following compensation options were outstanding:

			Weighted
	Number of		average
	compensation		exercise price
	options		(C$)
Issued - August 2020 Compensation Options		3,239,907	$	0.35
Balance, December 31, 2020		3,239,907		0.35
Issued – February 2021 Compensation Options		351,000		0.35
Balance, December 31, 2021		3,590,907		0.35
Issued – April 2022 Compensation Options		1,879,892		0.30
Balance, September 30, 2022		5,470,799	$	0.34

The grant date fair value of the August 2020 and February 2021, and April 2022 Compensation Options were estimated at $521,993, $68,078 and $264,435 respectively, using the Black-Scholes valuation model with the following underlying assumptions:

Grant Date	Risk free interest rate			Dividend yield			Volatility			Stock price		Weighted average life
August 2020		0.31	%		0	%		100	%		C$0.35		3 years
February 2021		0.26	%		0	%		100	%		C$0.40		3 years
April 2022		2.34	%		0	%		100	%		C$0.30		2 years

	Exercise		Number of		Fair value
Expiry date	price (C$)		broker options		($)
August 31, 2023 (i)	$	0.35		3,239,907	$	521,993
February 16, 2024 (ii)	$	0.40		351,000	$	68,078
April 1, 2024 (iii)	$	0.30		1,879,892	$	264,435
				5,470,799	$	854,506

(i) Exercisable into one August 2020 Unit

(ii) Exercisable into one February 2021 Unit

(iii) Exercisable into one April 2022 Unit

Bunker Hill Mining Corp.

Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)

Three and Nine Months Ended September 30, 2022

(Expressed in United States Dollars)

Stock options

The following table summarizes the stock option activity during the nine months ended September 30, 2022:

				Weighted
				average
	Number of			exercise price
	stock options			(C$)
Balance, December 31, 2020		8,015,159		$	0.62
Granted (i)		1,037,977			0.34
Balance, December 31, 2021		9,053,136		$	0.58
Granted (ii)		300,000			0.15
Expired May 01, 2022		(47,500	)
Balance, September 30, 2022		9,305,636		$	0.52

(i)

On February 19, 2021, 1,037,977 stock options were issued to an officer of the Company, of which 273,271 stock options vested immediately and the balance of 764,706 stock options vested on December 31, 2021. These options have a 5-year life and are exercisable at C$0.335 per common share. The grant date fair value of the options was estimated at $204,213. The vesting of these options resulted in stock-based compensation of $nil for the three and nine months ended September 30, 2022, compared to $43,941 and $160,750 for the three and nine months ended September 30, 2021, respectively, which is included in operation and administration expenses on the consolidated statements of income (loss) and comprehensive income (loss).

(ii)

On August 24, 2022, 300,000 stock options were issued to an employee of the Company, of which 150,000 vested immediately and the remaining balance of outstanding options to vest equally over the next two anniversaries of the grant date. These options have a 5-year life and are exercisable at C$0.15 per common share. The grant fair value of the options was estimated at $28,930. The vesting of these options resulted in stock-based compensation of $14,465 for the three and nine months ended September 30, 2022, which is included in the operation and administration expense of the consolidated statements of income (loss) and comprehensive income (loss).

The fair value of these stock options was determined on the date of grant using the Black-Scholes valuation model, and using the following underlying assumptions:

	Risk free interest rate			Dividend yield			Volatility			Stock price		Weighted average life
(i)		0.64	%		0	%		100	%		C$0.34		5 years

(ii) On August 24, 2022, 300,000 stock options were issued to an employee of the Company, of which 150,000 stock options vested immediately and the balance of 150,000 stock options will vest equally over two years on the anniversary date of issuance. These options have a 5-year life and are exercisable at C$0.15 per common share. The grant date fair value of the options was estimated at $28,930. The vesting of these options resulted in stock-based compensation of $14,465 for the period ended September 30, 2022, which is included in operation and administration expenses on the consolidated statements of income (loss) and comprehensive income (loss).

The fair value of these stock options was determined on the date of grant using the Black-Scholes valuation model, and using the following underlying assumptions:

	Risk free interest rate			Dividend yield			Volatility			Stock price		Weighted average life
(ii)		3.27	%		0	%		120	%		C$0.15		5 years

The following table reflects the actual stock options issued and outstanding as of September 30, 2022:

						Number of
		remaining		Number of		options
Exercise		contractual		options		vested		Grant date
price (C$)		life (years)		outstanding		(exercisable)		fair value ($)
	0.50		0.5		235,000		235,000		46,277
	0.60		1.25		200,000		200,000		52,909
	0.60		2.35		1,575,000		1,575,000		435,069
	0.55		2.81		5,957,659		1,489,415		1,536,764
	0.335		3.64		1,037,977		1,037,977		204,213
	0.15		4.90		300,000		150,000		28,930
					9,305,636		4,687,392	$	2,304,162