| 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$0.37 until April 1,
2025.
In
July 2022, the Company issued 1,975,482 common shares in connection with its election to satisfy interest payments under the outstanding
convertible debentures for the three months ended June 30, 2022.
Bunker
Hill Mining Corp.
Notes
to the Condensed Interim Consolidated Financial Statements (Unaudited)
Three
and Nine Months Ended September 30, 2022
(Expressed
in United States Dollars)
For
each financing, the Company has accounted for the warrants in accordance with ASC Topic 815. The warrants are considered derivative instruments
as they were issued in a currency other than the Company’s functional currency of the U.S. dollar. The estimated fair value of
warrants accounted for as liabilities was determined on the date of issue and marks to market at each financial reporting period. The
change in fair value of the warrant is recorded in the unaudited condensed interim consolidated statements of income and comprehensive
income as a gain or loss and is estimated using the Binomial model.
The
warrant liabilities as a result of the June 2019, August 2019, August 2020, February 2021, April 2022 special warrants, April 2022 non-brokered,
May 2022 Teck purchase, and June 2022 contractor private placements were revalued as at September 30, 2022, issuance date in 2022, and
December 31, 2021 using the Binomial model and the following assumptions:
Schedule of Estimated Using the Binomial Model to Determine the Fair Value of Warrant Liabilities
| April 2022 special warrants issuance | |
September 30,
2022 | | |
April 1,
2022 | |
| Expected life | |
| 914 days | | |
| 1,096 days | |
| Volatility | |
| 120 | % | |
| 120 | % |
| Risk free interest rate | |
| 3.72 | % | |
| 2.35 | % |
| Dividend yield | |
| 0 | % | |
| 0 | % |
| Share price (C$) | |
$ | 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$0.59 per common share and extended the expiry date to December
31, 2025 for 17,920,000 warrants. The terms of the remaining 2,752,900 warrants remain unchanged. |
Warrants
Schedule of Warrant Activity
| | |
| | |
Weighted | | |
Weighted | |
| | |
| | |
average | | |
average | |
| | |
Number of | | |
exercise price | | |
grant date | |
| | |
warrants | | |
(C$) | | |
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:
Schedule of Warrants Outstanding Exercise Price
| | |
| | |
| | |
Number of | |
| | |
Exercise | | |
Number of | | |
warrants | |
| Expiry date | |
price (C$) | | |
warrants | | |
exercisable | |
| | |
| | |
| | |
| |
| August 31, 2023 | |
| 0.50 | | |
| 58,284,148 | | |
| 58,284,148 | |
| December 31, 2025 | |
| 0.59 | | |
| 32,895,200 | | |
| 32,895,200 | |
| February 9, 2026 | |
| 0.60 | | |
| 17,112,500 | | |
| 17,112,500 | |
| February 16, 2026 | |
| 0.60 | | |
| 2,881,580 | | |
| 2,881,580 | |
| April 1, 2025 | |
| 0.37 | | |
| 40,358,969 | | |
| 40,358,969 | |
| May 13, 2025 | |
| 0.37 | | |
| 10,416,667 | | |
| 10,416,667 | |
| | |
| | | |
| 162,129,064 | | |
| 162,129,064 | |
Compensation
options
At
September 30, 2022, the following compensation options were outstanding:
Schedule
of Compensation Options
| | |
| | |
Weighted | |
| | |
Number of | | |
average | |
| | |
compensation | | |
exercise price | |
| | |
options | | |
(C$) | |
| | |
| | |
| |
| 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:
Schedule of Estimated Using Black-Scholes Valuation Model for Fair Value of Broker Options
| 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$0.30 |
|
|
|
2
years |
|
Schedule of Broker Exercise Prices
| | |
Exercise | | |
Number of | | |
Fair value | |
| Expiry date | |
price (C$) | | |
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:
Schedule of Stock Options
| | |
| | |
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:
Schedule of Estimated Using Black-Scholes Valuation Model for Fair value of Stock Options
| | | |
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$0.15 | | |
| 5 years | |
The
following table reflects the actual stock options issued and outstanding as of September 30, 2022:
Schedule
of Actual Stock Options Issued and Outstanding
| | | |
| | |
| | |
Number of | | |
| |
| | | |
remaining | | |
Number of | | |
options | | |
| |
| Exercise | | |
contractual | | |
options | | |
vested | | |
Grant date | |
| price (C$) | | |
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 | |
|