Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
1.
Nature and continuance of operations and going concern
Bunker
Hill Mining Corp. (the “Company”) was incorporated under the laws of the state of Nevada, U.S.A on February 20, 2007 under
the name Lincoln Mining Corp. Pursuant to a Certificate of Amendment dated February 11, 2010, the Company changed its name to Liberty
Silver Corp., and on September 29, 2017 the Company changed its name to Bunker Hill Mining Corp. The Company’s registered office
is located at 1802 N. Carson Street, Suite 212, Carson City Nevada 89701, and its head office is located at 82 Richmond Street East,
Toronto, Ontario, Canada, M5C 1P1. As of the date of this Form 10-Q, the Company had one subsidiary, Silver Valley Metals Corp. (formerly
American Zinc Corp.), an Idaho corporation created to facilitate the work being conducted at the Bunker Hill Mine in Idaho.
The
Company was incorporated for the purpose of engaging in mineral exploration activities. It continues to work at developing its project
with a view towards putting it into production.
These
unaudited condensed interim consolidated financial statements have been prepared on a going concern basis. The Company has incurred losses
since inception resulting in an accumulated deficit of $56,245,378
and further losses are anticipated in the
development of its business. The Company does not have sufficient working capital needed to meet its current fiscal obligations and commitments.
In order to continue to meet its fiscal obligations in the current fiscal year and beyond, the Company must seek additional financing.
This raises substantial doubt about the Company’s ability to continue as a going concern. Its ability to continue as a going concern
is dependent upon the ability of the Company to generate profitable operations in the future and/or to obtain the necessary financing
to meet its obligations and repay its liabilities arising from normal business operations when they come due. The accompanying condensed
interim consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Management
is considering various financing alternatives including, but not limited to, raising capital through the capital markets, debt
financing, and royalty/streaming arrangements. These condensed interim consolidated financial statements do not include any adjustments
relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might
be necessary in the event the Company cannot continue as a going concern.
The
ability of the Company to emerge from the exploration stage is dependent upon, among other things, obtaining additional financing to
continue operations, explore and develop the mineral properties and the discovery, development, and sale of reserves.
The
Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of epidemics, pandemics,
or other health crises, including the recent outbreak of respiratory illness caused by the novel coronavirus (“COVID19”).
The Company cannot accurately predict the impact COVID19 will have on its operations and the ability of others to meet their obligations
with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration
of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant
outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies
and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and
ability to finance its operations.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
2.
Basis of presentation
The
accompanying unaudited condensed interim consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation
of financial position, results of operations, shareholders’ deficiency or cash flows. It is management’s opinion,
however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial
statement presentation. The unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s
Annual Report on Form 10-K/T, which contains the annual audited consolidated financial statements and notes thereto, together with the
Management’s Discussion and Analysis, for the six months ended December 31, 2020. The interim results for the period ended
September 30, 2021 are not necessarily indicative of the results for the full fiscal year. The unaudited interim condensed consolidated
financial statements are presented in USD, which is the functional currency.
3.
Equipment
Equipment
consists of the following:
Schedule of Equipment
|
|
|
September
30,
2021
|
|
|
December
31,
2020
|
|
|
Equipment
|
|
$
|
603,972
|
|
|
$
|
509,279
|
|
|
Less
accumulated depreciation
|
|
|
(172,513
|
)
|
|
|
(73,552
|
)
|
|
Equipment,
net
|
|
$
|
431,459
|
|
|
$
|
435,727
|
|
The
total depreciation expense during the three and nine months ended September 30, 2021 was $34,565
and $98,961,
respectively (three and nine months ended September 30, 2020 - $14,392
and $16,673,
respectively), which is included in operation and administration expenses on the condensed interim consolidated statements of income
(loss) and comprehensive income (loss).
4.
Right-of-use asset
Right-of-use
asset consists of the following:
Schedule of Right-of-use Asset
|
|
|
September
30,
2021
|
|
|
December
31,
2020
|
|
|
Office
lease
|
|
$
|
319,133
|
|
|
$
|
319,133
|
|
|
Less
accumulated depreciation
|
|
|
(240,185
|
)
|
|
|
(160,402
|
)
|
|
Right-of-use
asset, net
|
|
$
|
78,948
|
|
|
$
|
158,731
|
|
The
total depreciation expense during the three and nine months ended September 30, 2021 was $26,594
and $79,783,
respectively (three and nine months ended September 30, 2020 - $20,034
and $73,396,
respectively), which is included in operation and administration expenses on the condensed interim consolidated statements of income
(loss) and comprehensive income (loss).
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
5.
Mining interests
Bunker
Hill Mine Complex
On
November 27, 2016, the Company entered into a non-binding letter of intent with Placer Mining Corp. (“Placer Mining”), which
letter of intent was further amended on March 29, 2017, to acquire the Bunker Hill Mine in Idaho and its associated milling facility
located in Kellogg, Idaho, in the Coeur d’Alene Basin (as amended, the “Letter of Intent”). Pursuant to the terms and
conditions of the Letter of Intent, the acquisition, which was subject to due diligence, would include all mining claims, surface rights,
fee parcels, mineral interests, existing infrastructure, machinery and buildings at the Kellogg Tunnel portal in Milo Gulch, or anywhere
underground at the Bunker Hill Mine Complex. The acquisition would also include all current and historic data relating to the Bunker
Hill Mine Complex, such as drill logs, reports, maps, and similar information located at the mine site or any other location.
During
the year ended June 30, 2017, the Company made payments totaling $300,000 as part of this Letter of Intent. These amounts were initially
capitalized and subsequently written off during fiscal 2018 and were included in exploration expenses.
On
August 28, 2017, the Company announced that it signed a definitive agreement (the “Agreement”) for the lease and option to
purchase the Bunker Hill Mine assets (the “Bunker Assets”).
Under
the terms of the Agreement, the Company was required to make a $1,000,000 bonus payment to Placer Mining no later than October 31, 2017,
which payment was made, along with two additional $500,000 bonus payments in December 2017. The 24month lease commenced November 1, 2017.
During the term of the lease, the Company was to make $100,000 monthly mining lease payments, paid quarterly.
The
Company had an option to purchase the Bunker Assets at any time before the end of the lease and any extension for a purchase price of
$45,000,000 with purchase price payments to be made over a ten year period to Placer Mining. Under the terms of the agreement, there
is a 3% net smelter return royalty (“NSR”) on sales during the lease and a 1.5% NSR on the sales after the purchase option
is exercised, which post-acquisition NSR is capped at $60,000,000.
On
October 2, 2018, the Company announced that it was in default of the Agreement. The default arose as a result of missed lease and operating
cost payments, totaling $400,000, which were due at the end of September and on October 1, 2018. As per the Agreement, the Company had
15 days, from the date notice of default was provided (September 28, 2018), to remediate the default by making the outstanding payment.
While management worked with urgency to resolve this matter, management was ultimately unsuccessful in remedying the default, resulting
in the Agreement being terminated.
On
November 13, 2018, the Company announced that it was successful in renewing the Agreement, effectively with the original Agreement intact,
except that monthly payments were reduced to $60,000
per month for 12 months, with the accumulated
reduction in payments of $140,000
per month (“deferred payments”) being
accrued. These deferred payments would be waived if the Company had chosen to exercise its option.
The accruals for the deferred payment were waived
pursuant to the November 20, 2020 Amended Agreement described below. As a result, as at September 30, 2021, the Company had accrued
a total of $nil (December 31, 202 - $nil).
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
5.
Mining interests (continued)
Bunker
Hill Mine Complex (continued)
On
November 1, 2019, the Agreement was amended (the “Amended Agreement”). The key terms of the Amended Agreement are as follows:
|
●
|
The
lease period was extended for an additional period of nine months to August 1, 2020, with the option to extend for a further six
months based upon payment of a one-time $60,000 extension fee (extended);
|
|
●
|
The
Company will make monthly care and maintenance payments to Placer Mining of $60,000 until exercising the option to purchase; and
|
|
●
|
The
purchase price is set at $11,000,000 for 100% of the Bunker Assets to be paid with $6,200,000 in cash, and$4,800,000 in common shares.
The purchase price also includes the negotiable United States Environmental Protection Agency (“EPA”) costs of $20,000,000.
The Amended Agreement provides for the elimination of all royalty payments that were to be paid to the mine owner. Upon signing the
Amended Agreement, the Company paid a onetime, nonrefundable cash payment of $300,000 to the mine owner. This payment will be applied
to the purchase price upon execution of the purchase option. In the event the Company elects not to exercise the purchase option,
the payment shall be treated as an additional care and maintenance payment.
|
On
July 27, 2020, the Company extended the lease with Placer Mining for a further 18 months for a $150,000 extension fee. This extension
expires on August 1, 2022.
On
November 20, 2020, the Company signed a further amendment to the Amended Agreement. Under the terms of this amendment:
|
●
|
The
Company will continue to make monthly care and maintenance payments to Placer Mining of $60,000 until exercising the option to purchase;
|
|
●
|
The
purchase price was reduced to $7,700,000, with $5,700,000 payable in cash (with an aggregate of $300,000 to be credited toward
the purchase price of the Bunker Assets as having been previously paid by the Company and an aggregate of $5,400,000 payable in cash
outstanding) and $2,000,000 in common shares. The reference price for the payment in common shares will be based on the common share
price of the last equity raise before the option is exercised;
|
|
●
|
The
Company’s contingent obligation to settle $1,787,300 of accrued payments due to Placer Mining has been waived. As a result,
the Company recorded a gain on settlement of accounts payable of $1,787,300 during the six months ended December 31, 2020; and
|
|
●
|
The
Company made an advance payment of $2,000,000
to Placer Mining which shall be credited toward the purchase price if and when the Company elects to exercise its purchase
right. In the event that the Company irrevocably elects not to exercise its purchase right, the advance payment of $2,000,000
will be repaid to the Company within twelve months from
the date of such election. The amount has been recorded as a long term deposit. This payment had the effect of decreasing the remaining
amount payable to purchase the Bunker Assets to an aggregate of $3,400,000
payable in cash and $2,000,000
in Common Shares of the Company.
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
5.
Mining interests (continued)
Bunker
Hill Mine Complex (continued)
In
addition to the payments to Placer Mining, and pursuant to an agreement with the EPA whereby for so long as Bunker leases, owns and/or
occupies the Bunker Hill Mine, the Company will make payments to the EPA on behalf of the current owner in satisfaction of the EPA’s
claim for cost recovery, excluding water treatment charges. These payments, if all are made, will total $20,000,000.
The agreement calls for payments starting with $1,000,000
within
30 days after a fully ratified agreement was signed followed by a payment schedule detailed below:
Schedule of Payments for Mining
|
Date
|
|
Amount
|
|
|
Action
|
|
Within
30 days of the effective date
|
|
$
|
1,000,000
|
|
|
Paid
|
|
November 1, 2018
|
|
$
|
2,000,000
|
|
|
Not
paid
|
|
November 1, 2019
|
|
$
|
3,000,000
|
|
|
Not
paid
|
|
November 1, 2020
|
|
$
|
3,000,000
|
|
|
Not
paid
|
|
November 1, 2021
|
|
$
|
3,000,000
|
|
|
Not
paid
|
|
November 1, 2022
|
|
$
|
3,000,000
|
|
|
|
|
November 1, 2023
|
|
$
|
3,000,000
|
|
|
|
|
November 1, 2024
|
|
$
|
2,000,000
|
|
|
|
In
addition to these cost recovery payments, the Company is to make semi-annual payments of $480,000
on June 1 and December 1 of each year, to cover
the EPA’s costs of operating and maintaining the water treatment facility that treats the water being discharged from the Bunker
Hill Mine. Prior to July 2021, the Company had received invoices from the EPA for water treatment charges for the periods from December
2017 to October 2019, which exceeds the semi-annual payments outlined in the agreement, which would have resulted in annual payment
of $960,000. The Company received the supporting details from the EPA and began the process of reconciling and reviewing these invoices
in September 2020.
In
July 2021, the Company received an invoice from the EPA for water treatment charges for the period from November 2019 to October 2020,
in the amount of approximately $2,500,000,
higher than the invoice received in 2020 for the period of November 2018 to October 2019 of approximately $1,600,000.
Based on preliminary review, the Company believes that this increase in water treatment charges is not consistent with the EPA’s
cost to treat water from the Mine, and a discussion with the EPA has been initiated.
In
August 2021, the Company received an interim invoice from the EPA for water treatment charges for the period from November 2020 to May
2021, and accordingly reversed the previously accrued estimate amount of $1,309,000 and recorded $1,155,000 to exploration expenses based
on the interim invoice for the period from November 2020 to May 2021. Additionally, $660,000 or $165,000 per month has been accrued for
the period from June 1, 2021 to September 30, 2021, reflecting the Company’s best estimate of future water treatment costs, informed
by the August 2021 invoice.
A
total of $4,872,186
for water treatment charges, net of payments
made, was accrued for as at September 30, 2021 (December 31, 2020 - $3,136,055).
The unpaid EPA balance is subject to interest at the rate specified for interest on investments of the EPA Hazardous Substance Superfund.
As at September 30, 2021, the interest accrued on the unpaid EPA balance is $306,136
(December 31, 2020 - $162,540).
The Company has included all unpaid and accrued EPA payments and accrued interest in accounts payable and accrued liabilities amounting
to $13,178,322
(December 31, 2020 - $11,298,594).
The Company initiated a discussion with the EPA regarding the amount and payment schedule.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
6.
Convertible loan payable
On
June 13, 2018, the Company entered into a loan and warrant agreement with Hummingbird Resources PLC (“Hummingbird”),
an arm’s length investor, for an unsecured convertible loan in the aggregate sum of $1,500,000, bearing interest at 10%
per annum, maturing in one year. Contemporaneously, the Company agreed to issue 229,464 share purchase warrants, entitling the lender
to acquire 229,464 common shares of the Company, at a price of C$8.50 per common share, for two years. Under the terms of the loan agreement,
the lender may, at any time prior to maturity, convert any or all of the principal amount of the loan and accrued interest thereon, into
common shares of the Company at a price per share equal to C$8.50. In the event that a notice of conversion would result in the lender
holding 10% or more of the Company’s issued and outstanding shares, then, in the alternative, and under certain circumstances,
the Company would be required to pay cash to the lender in an amount equal to C$8.50 multiplied by the number of shares intended to be
issued upon conversion. Further, in the event that the lender holds more than 5% of the issued and outstanding shares of the Company
subsequent to the exercise of any of its convertible securities held under this placement, it shall have the right to appoint one director
to the board of the Company. Lastly, among other things, the loan agreement further provides that for as long as any amount is outstanding
under the convertible loan, the investor retains a right of first refusal on any Company financing or joint venture/strategic partnership/disposal
of assets.
In
August 2018, the amount of the Hummingbird convertible loan payable was increased to $2,000,000 from its original $1,500,000 loan, net
of $45,824 of debt issue costs. An additional 116,714 warrants with each warrant exercisable at C$4.50 were issued. Under the terms of
the amended and restated loan agreement, Hummingbird may, at any time prior to maturity, convert any or all of the principal amount of
the loan and accrued interest thereon, into common shares of Bunker as follows: (i) $1,500,000, being the original principal amount (the
“Principal Amount”), may be converted at a price per share equal to C$8.50; (ii) 229,464 common shares may be acquired upon
exercise of warrants at a price of C$8.50 per warrant for a period of two years from the date of issuance; (iii) $500,000, being the
additional principal amount (the “Additional Amount”), may be converted at a price per share equal to C$4.50; and (iv) 116,714
common shares may be acquired upon exercise of warrants at a price of C$4.50 per warrant for a period of two years from the date issuance.
In the event that Hummingbird would acquire common shares in excess of 9.999% through the conversion of the Principal Amount or the Additional
Amount, including interest accruing thereon, or on exercise of the warrants as disclosed herein, the Company shall pay to Hummingbird
a cash amount equal to the common shares exercised in excess of 9.999%, multiplied by the conversion price.
During
the year ended June 30, 2019, Hummingbird agreed to extend the scheduled maturity date of the loan to June 30, 2020. This was accounted
for as a loan extinguishment which resulted in the recording of a net loss on loan extinguishment.
In
June 2019, the Company settled $100,000 of the Additional Amount by issuing 2,660,000 common shares, which resulted in the recording
of a net loss on loan extinguishment.
In
February 2020, the Company settled $300,000 of the Additional Amount by issuing 696,428 common shares, which resulted in the recording
of a net loss on loan extinguishment of $9,407.
In
June 2020, Hummingbird agreed to extend the scheduled maturity date of the loan to July 31, 2020.
In
October 2020, the Company settled the full amount of the outstanding loan by issuing 5,572,980
common shares at a deemed price of C$0.49
based on the fair value of the shares issued.
As a result, the Company recorded a gain on debt settlement of $23,376 for the year ended December 31, 2020.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
6.
Convertible loan payable (continued)
The
Company has accounted for the conversion features and warrants in accordance with ASC Topic 815. The conversion features and warrants
are considered derivative financial liabilities as they are convertible into common shares at a conversion price denominated in a currency
other than the Company’s functional currency of the U.S. dollar. The estimated fair value of the conversion features and warrants
was determined on the date of issuance and marked to market at each financial reporting period.
Accretion
expense for the three and nine months ended September 30, 2021 was $nil (three and nine months ended September 30, 2020 - $nil and $75,093,
respectively) based on effective interest rate of 16% after the loan extension.
Interest
expense for the three and nine months ended September 30, 2021 was $nil (three and nine months ended September 30, 2020 - $101,827 and
$185,772, respectively). As at September 30, 2021, the Company has an outstanding interest payable of $nil (December 31, 2020 - $nil).
Schedule of Convertible Loan Outstanding Interest Payable
|
|
|
Amount
|
|
|
Balance,
December 31, 2019
|
|
$
|
1,815,500
|
|
|
Accretion
expense
|
|
|
75,093
|
|
|
Loss
on loan extinguishment
|
|
|
9,407
|
|
|
Partial
extinguishment
|
|
|
(300,000
|
)
|
|
Loan
extinguishment
|
|
|
(1,600,000
|
)
|
|
Balance,
December 31, 2020 and September 30, 2021
|
|
$
|
-
|
|
7.
Promissory notes payable
(i)
On November 13, 2019, the Company issued a promissory note in the amount of $300,000. The note was unsecured, bore interest of 1% monthly,
and is due on demand after 90 days from issuance. In consideration for the loan, the Company issued 400,000 common share purchase warrants
to the lender. Each whole warrant entitles the lender to acquire one common share of the Company at a price of C$0.80 per share for a
period of two years.
On
April 24, 2020, the Company extended the maturity date of the promissory note payable to August 1, 2020. In consideration, the Company
issued 400,000 common share purchase warrants to the lender at an exercise price of C$0.50. The warrants expire on November 13, 2021.
This was accounted for as a loan modification.
During
the six months ended December 31, 2020, the Company repaid $110,658 of the promissory note and settled the remaining balance of $218,281
(C$288,000), which included interest payable of $28,939, in full by issuing 822,857 August 2020 Units (as defined in note 9).
The
Company has accounted for the warrants in accordance with ASC Topic 815. The warrants are considered derivative financial liabilities
as they are convertible into common shares at a conversion price denominated in a currency other than the Company’s functional
currency of the US dollar. The estimated fair value of the warrants was determined on the date of issuance and marks to market at each
financial reporting period.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
7.
Promissory notes payable (continued)
(i)
(continued)
The
fair values of the warrants were estimated using the Binomial model to determine the fair value of the derivative warrant liabilities
using the following assumptions:
Schedule of Fair Value of Derivative Warrant Liability Assumptions
|
November
2019 issuance
|
|
December 31,
2020
|
|
|
September 30,
2021
|
|
|
Expected
life
|
|
|
317
days
|
|
|
|
44
days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk
free interest rate
|
|
|
0.64
|
%
|
|
|
0.30
|
%
|
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.14
|
|
|
Fair value
|
|
$
|
40,999
|
|
|
$
|
nil
|
|
|
Change
in derivative liability
|
|
|
|
|
|
$
|
40,999
|
|
|
April
2020 issuance
|
|
December 31,
2020
|
|
|
September 30,
2021
|
|
|
Expected
life
|
|
|
317
days
|
|
|
|
44
days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk
free interest rate
|
|
|
0.27
|
%
|
|
|
0.30
|
%
|
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.14
|
|
|
Fair value
|
|
$
|
58,373
|
|
|
$
|
nil
|
|
|
Change
in derivative liability
|
|
|
|
|
|
$
|
58,373
|
|
Accretion
expense for the three and nine months ended September 30, 2021 was $nil (three and nine months ended September 30, 2020 - $51,522 and
$170,438, respectively) based on an effective interest rate of 11% after the loan extension.
Interest
expense for the three and nine months ended September 30, 2021 was $nil (three and nine months ended September 30, 2020 - $5,600 and
$24,200, respectively). As at September 30, 2021, the Company has an outstanding interest payable of $nil (December 31, 2020 - $nil).
(ii)
On May 12, 2020, the Company issued a promissory note in the amount of $362,650 (C$500,000), net of $89,190 of debt issue costs. The
note bore no interest and was due on demand after 90 days after the issue date. This promissory note was repaid during the nine months
ended September 30, 2020. Accretion expense for the three and nine months ended September 30, 2021 was $nil (three and nine months ended
September 30, 2020 - $47,737 and $89,190, respectively) based on effective interest rate of 7%.
(iii)
On May 12, 2020, the Company issued a promissory note in the amount of $141,704 (C$200,000), net of $35,676 of debt issue costs. The
note bore no interest and was due on demand after 90 days after the issue date. During the nine months ended September 30, 2020, the
Company settled the promissory note in full by issuing 714,285 common shares. Accretion expense for the three and nine months ended September
30, 2021 was $nil (three and nine months ended September 30, 2020 - $19,129 and $35,676, respectively) based on effective interest rate
of 8%.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
7.
Promissory notes payable (continued)
(iv)
On June 30, 2020, the Company issued a promissory note in the amount of $75,000, net of $15,000 of debt issue costs. The note bore no
interest and was due on demand. This promissory note was repaid in full during the nine months ended September 30, 2020. Financing cost
for the three and nine months ended September 30, 2021 was $nil (three and nine months ended September 30, 2020 - $nil and $15,000, respectively).
(v)
On June 30, 2020, the Company issued a promissory note in the amount of $75,000 to a director of the Company. The note bore no interest
and was due on demand. This promissory note was repaid in full during the nine months ended September 30, 2020. Financing cost for the
three and nine months ended September 30, 2021 was $nil (three and nine months ended September 30, 2020 - $nil and $15,000, respectively).
(vi)
On July 13, 2020, the Company issued a promissory note in the amount of $1,200,000, net of $360,000 debt issue costs. The note bore no
interest and was due on August 31, 2020. This promissory note was repaid in full during the nine months ended September 30, 2020. Financing
cost for the three and nine months ended September 30, 2021 was $nil (three and nine months ended September 30, 2020 - $360,000).
(vii)
On September 22, 2021, the Company issued a non-convertible promissory note in the amount of $2,500,000
bearing interest of 15%
per annum and payable at maturity. The promissory
note is scheduled to mature on the earlier of March
15, 2022, or the date at which the Company raises
more than $10,000,000
in equity financing in aggregate, beginning September
22, 2021. The Company is considering a land parcel purchase of approximately $200,000, which will be used as security for the
promissory note. Interest expense for the three and nine months ended September 30, 2021 was $8,219.
8.
Lease liability
The
Company has an operating lease for office space that expires in 2022. Below is a summary of the Company’s lease liability as of
September 30, 2021:
Schedule of Operating Lease Liability
|
|
|
Office
lease
|
|
|
Balance,
December 31, 2019
|
|
$
|
274,981
|
|
|
Addition
|
|
|
-
|
|
|
Interest
expense
|
|
|
22,156
|
|
|
Lease
payments
|
|
|
(123,098
|
)
|
|
Foreign
exchange loss
|
|
|
2,568
|
|
|
Balance,
December 31, 2020
|
|
|
176,607
|
|
|
Addition
|
|
|
-
|
|
|
Interest
expense
|
|
|
10,632
|
|
|
Lease
payments
|
|
|
(97,138
|
)
|
|
Foreign
exchange loss
|
|
|
1,434
|
|
|
Balance,
September 30, 2021
|
|
|
91,535
|
|
|
Less:
current portion
|
|
|
(91,535
|
)
|
|
Long-term
lease liability
|
|
$
|
-
|
|
In
addition to the minimum monthly lease payments of C$13,504, the Company is required to make additional monthly payments amounting to
C$12,505 for certain variable costs. The schedule below represents the Company’s obligations under the lease agreement in Canadian
dollars.
Schedule of Lease Obligations
|
|
|
Less
than 1 year
|
|
|
1-2
years
|
|
|
2-3
years
|
|
|
Total
|
|
|
Base
rent
|
|
$
|
108,032
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
108,032
|
|
|
Additional
rent
|
|
|
100,040
|
|
|
|
-
|
|
|
|
-
|
|
|
|
100,040
|
|
|
|
|
$
|
208,072
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
208,072
|
|
The
monthly rental expenses are offset by rental income obtained through a series of short-term subleases held by the Company.
Bunker
Hill Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
Three and Nine Months Ended September 30, 2021
(Expressed in United States Dollars)
Unaudited
9.
Capital stock, warrants and stock options
Authorized
The
total authorized capital is as follows:
|
●
|
750,000,000
common shares 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
On
February 26, 2020, the Company closed a non-brokered private placement, issuing 2,991,073 common shares of the Company at C$0.56 per
common share for gross proceeds of C$1,675,000 ($1,256,854) and incurring financing costs of $95,763, and issuing 239,284 broker warrants.
Each broker warrant entitles the holder to acquire one common share at a price of C$0.70 per common share for a period of two years.
The Company also issued 696,428 common shares for $300,000 which was applied to reduce the principal amount owing under the convertible
loan facility (see note 6).
During
the nine months ended September 30, 2020, the Company issued 3,315,200 units at a deemed price of C$0.05 as finder’s fees
with a total value of C$165,760 ($125,180) to a shareholder of the Company. Each unit consisted of one common share of the Company
and one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at a price of C$0.25 per common
share for a period of two years.
On
May 12, 2020, the Company closed a non-brokered private placement, issuing 107,143 common shares of the Company at C$0.56 per common
share for gross proceeds of C$60,000 ($44,671).
On
August 14, 2020, the Company closed the first tranche of a brokered private placement of units of the Company (the “August 2020
Offering”), issuing 35,212,142 units of the Company (“August 2020 Units”) at C$0.35 per August 2020 Unit for gross
proceeds of $9,301,321 (C$12,324,250). Each August 2020 Unit consisted of one common share of the Company and one common share purchase
warrant of the Company (each, a “August 2020 Warrant”), which entitles the holder to acquire a common share of the Company
at C$0.50 per common share until August 31, 2023. In connection with the first tranche of the August 2020 Offering, the Company incurred
share issuance costs of $709,488 (C$849,978) and issued 2,112,729 compensation options (the “August 2020 Compensation Options”).
Each August 2020 Compensation Option is exercisable into one August 2020 Unit at an exercise price of C$0.35 until August 31, 2023.
On
August 25, 2020, the Company closed the second tranche of the August 2020 Offering, issuing 20,866,292 August 2020 Units at C$0.35 per
August 2020 Unit for gross proceeds of $5,510,736 (C$7,303,202). In connection with the second tranche of the August 2020 Offering, the
Company incurred share issuance costs of $237,668 (C$314,512) and issued 1,127,178 August 2020 Compensation Options.
Bunker
Hill Mining Corp.
Notes to Condensed Interim Consolidated Financial Statements
Three and Nine Months Ended September 30, 2021
(Expressed in United States Dollars)
Unaudited
9.
Capital stock, warrants and stock options (continued)
Issued
and outstanding (continued)
In
the August 2020 Offering, the fair value of warrants, which are treated as a liability and fair value accounted for, were greater than
gross proceeds. As a result, a loss of $940,290 has been recognized and $947,156 of total share issue costs were also expensed.
The
Company also issued 2,205,714 August 2020 Units to settle $177,353 of accounts payable, $55,676 of accrued liabilities, $28,300 of interest
payable, and $344,185 of promissory notes payable at a deemed price of $0.67 based on the fair value of the units issued. As a result,
the Company recorded a loss on debt settlement of $899,237.
On
October 9, 2020, the Company issued 5,572,980 common shares at a deemed price of C$0.49 based on the fair value of the common shares
issued to settle $1,600,000 of convertible loan payable and $500,000 of interest payable. As a result, the Company recorded a gain on
debt settlement of $23,376.
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, an “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 $159,397
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.
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.
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 condensed interim consolidated statements of income (loss) and comprehensive income
(loss) as a gain or loss and is estimated using the Binomial model.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
9.
Capital stock, warrants and stock options (continued)
Issued
and outstanding (continued)
The
fair value of the warrant liabilities related to the various tranches of warrants issued during the period were estimated using the Binomial
model to determine the fair value using the following assumptions on the day of issuance and as at September 30, 2021:
Schedule of Estimated Using the Binomial Model to Determine the Fair Value of Warrant Liabilities
|
February
2021 issuance
|
|
February
9 and
16, 2021
|
|
|
September
30,
2021
|
|
|
Expected
life
|
|
|
1826
days
|
|
|
|
1593
days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk
free interest rate
|
|
|
0.49
|
%
|
|
|
0.89
|
%
|
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share
price
|
|
$
|
0.27
and $0.29
|
|
|
$
|
0.14
|
|
|
Fair
value
|
|
$
|
3,813,103
|
|
|
$
|
1,440,591
|
|
|
Change
in derivative liability
|
|
|
|
|
|
$
|
2,372,512
|
|
The
warrant liabilities as a result of the August 2018, November 2018, June 2019, August 2019, and August 2020 private placements were revalued
as at September 30, 2021 and December 31, 2020 using the Binomial model and the following assumptions:
|
August
2018 issuance
|
|
December 31,
2020
|
|
|
September 30,
2021
|
|
|
Expected
life
|
|
|
221
days
|
|
|
|
Expired
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
|
|
|
Risk
free interest rate
|
|
|
1.23
|
%
|
|
|
|
|
|
Dividend
yield
|
|
|
0
|
%
|
|
|
|
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
|
|
|
Fair value
|
|
$
|
nil
|
|
|
$
|
nil
|
|
|
Change
in derivative liability
|
|
|
|
|
|
$
|
nil
|
|
|
November
2018 issuance
|
|
December 31,
2020
|
|
|
September 30,
2021
|
|
|
Expected
life
|
|
|
332
days
|
|
|
|
59
days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk
free interest rate
|
|
|
1.09
|
%
|
|
|
0.92
|
%
|
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.14
|
|
|
Fair value
|
|
$
|
52,540
|
|
|
$
|
nil
|
|
|
Change
in derivative liability
|
|
|
|
|
|
$
|
52,540
|
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
9.
Capital stock, warrants and stock options (continued)
Issued
and outstanding (continued)
|
June
2019 issuance (i)
|
|
December 31,
2020
|
|
|
September 30,
2021
|
|
|
Expected
life
|
|
|
1826
days
|
|
|
|
1553
days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk
free interest rate
|
|
|
0.85
|
%
|
|
|
0.84
|
%
|
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.14
|
|
|
Fair value
|
|
$
|
3,438,839
|
|
|
$
|
837,368
|
|
|
Change
in derivative liability
|
|
|
|
|
|
$
|
2,601,471
|
|
(i)
|
|
In
December 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)
|
|
December
31,
2020
|
|
|
September
30,
2021
|
|
|
Expected
life
|
|
|
213-1826
days
|
|
|
|
1553
days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk
free interest rate
|
|
|
0.81
|
%
|
|
|
0.84
|
%
|
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share
price
|
|
$
|
0.41
|
|
|
$
|
0.14
|
|
|
Fair
value
|
|
$
|
5,922,270
|
|
|
$
|
1,282,713
|
|
|
Change
in derivative liability
|
|
|
|
|
|
$
|
4,639,557
|
|
|
(ii)
|
|
In
December 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.
|
|
August
2020 issuance
|
|
December 31,
2020
|
|
|
September 30,
2021
|
|
|
Expected
life
|
|
|
973
days
|
|
|
|
700
days
|
|
|
Volatility
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Risk
free interest rate
|
|
|
1.31
|
%
|
|
|
0.41
|
%
|
|
Dividend
yield
|
|
|
0
|
%
|
|
|
0
|
%
|
|
Share price
|
|
$
|
0.41
|
|
|
$
|
0.14
|
|
|
Fair value
|
|
$
|
14,493,215
|
|
|
$
|
2,085,987
|
|
|
Change
in derivative liability
|
|
|
|
|
|
$
|
12,407,228
|
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
9.
Capital stock, warrants and stock options (continued)
Warrants
Schedule of Warrant Activity
|
|
|
Number
of
|
|
|
Weighted
average exercise price
|
|
|
Weighted
average grant date
|
|
|
|
|
warrants
|
|
|
(C$)
|
|
|
value
($)
|
|
|
Balance,
December 31, 2019
|
|
|
36,452,284
|
|
|
$
|
0.48
|
|
|
$
|
0.16
|
|
|
Issued
|
|
|
62,238,632
|
|
|
|
0.49
|
|
|
|
0.26
|
|
|
Expired
|
|
|
(346,178
|
)
|
|
|
14.84
|
|
|
|
5.97
|
|
|
Exercised
(i)
|
|
|
(2,332,900
|
)
|
|
|
0.25
|
|
|
|
0.02
|
|
|
Balance,
September 30, 2020
|
|
|
96,011,838
|
|
|
$
|
0.47
|
|
|
$
|
0.20
|
|
|
Balance, December
31, 2020
|
|
|
95,777,806
|
|
|
$
|
0.54
|
|
|
$
|
0.16
|
|
|
Issued
|
|
|
19,994,080
|
|
|
|
0.6
|
|
|
|
0.19
|
|
|
Expired
|
|
|
(2,913,308
|
)
|
|
|
0.48
|
|
|
|
0.14
|
|
|
Balance,
September 30, 2021
|
|
|
112,858,578
|
|
|
$
|
0.55
|
|
|
$
|
0.19
|
|
|
(i)
|
|
During
the nine months ended September 30, 2020, 2,332,900 warrants were exercised at C$0.25 per warrant for gross proceeds of C$583,225
($417,006). In conjunction with the exercise of warrants, the Company recognized a change in derivative liability of $871,710.
|
Schedule
of Warrants Outstanding Exercise Price
|
Expiry
date
|
|
Exercise
price (C$)
|
|
|
Number
of warrants
|
|
|
Number
of warrants exercisable
|
|
|
November
13, 2021
|
|
|
0.80
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
November 13, 2021
|
|
|
0.50
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
November 28, 2021
|
|
|
1.00
|
|
|
|
645,866
|
|
|
|
645,866
|
|
|
February 26, 2022
|
|
|
0.70
|
|
|
|
239,284
|
|
|
|
239,284
|
|
|
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
|
|
|
|
|
|
|
|
|
|
112,858,578
|
|
|
|
112,858,578
|
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
9.
Capital stock, warrants and stock options (continued)
Broker
options
Schedule of Broker Options
|
|
|
Number of
|
|
|
Weighted average
|
|
|
|
|
broker options
|
|
|
exercise price (C$)
|
|
|
Balance, December 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
Issued - August 2020 Compensation Options (i)
|
|
|
3,239,907
|
|
|
|
0.35
|
|
|
Balance, December 31, 2020
|
|
|
3,239,907
|
|
|
|
0.35
|
|
|
Issued - February 2021 Compensation Options
|
|
|
351,000
|
|
|
|
0.40
|
|
|
Balance, September 30, 2021
|
|
|
3,590,907
|
|
|
$
|
0.35
|
|
|
(i)
|
The grant date fair values of the August 2020 Compensation
Options and February 2021 Compensation Options were estimated at $521,993 and $68,078, 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$0.35
|
|
|
|
3
years
|
|
Schedule of Warrants Outstanding Broker Option Exercise Prices
|
Expiry
date
|
|
Exercise
price
(C$)
|
|
|
Number
of
broker
options
|
|
|
Fair
value ($)
|
|
|
August
31, 2023 (i)
|
|
|
0.35
|
|
|
|
3,239,907
|
|
|
|
521,993
|
|
|
February
16, 2024 (ii)
|
|
|
0.40
|
|
|
|
351,000
|
|
|
|
68,078
|
|
|
|
|
|
|
|
|
|
3,590,907
|
|
|
|
590,071
|
|
|
(i)
|
|
Exercisable
into one August 2020 Unit
|
|
(ii)
|
|
Exercisable
into one February 2021 Unit
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
9.
Capital stock, warrants and stock options (continued)
Stock
options
The
following table summarizes the stock option activity during the periods ended September 30, 2021 and 2020:
Schedule of Stock Options
|
|
|
Number
of
stock
options
|
|
|
Weighted
Average
exercise price (C$)
|
|
|
Balance,
December 31, 2019
|
|
|
1,692,500
|
|
|
$
|
1.27
|
|
|
Granted
(i)(ii)
|
|
|
6,157,659
|
|
|
|
0.55
|
|
|
Forfeited
|
|
|
(70,000
|
)
|
|
|
10.38
|
|
|
Balance,
September 30, 2020
|
|
|
7,780,159
|
|
|
$
|
0.62
|
|
|
Balance, December
31, 2020
|
|
|
8,015,159
|
|
|
$
|
0.62
|
|
|
Granted
(iv)
|
|
|
1,037,977
|
|
|
|
0.34
|
|
|
Balance,
September 30, 2021
|
|
|
9,053,136
|
|
|
$
|
0.58
|
|
|
(i)
|
On October 24,
2019, 1,575,000
stock options were issued to directors and officers of the Company. These options have a 5-year life and are exercisable at C$0.60
per share. The grant date fair value of the stock options was estimated at $435,069.
The vesting of these options resulted in stock-based compensation of $10,430
and $48,189,
for the three and nine months ended September 30, 2021 respectively (three and nine months ended September 30, 2020 - $45,173
and $186,614,
respectively), which is included in operation and administration expenses on the condensed interim consolidated statements of income
(loss) and comprehensive income (loss).
|
|
(ii)
|
On April 20, 2020, 5,957,659 stock options were issued to certain
directors of the Company. Each stock option entitles the holder to acquire one common share of the Company at an exercise price of C$0.55.
The stock options vest in one-fourth increments upon each anniversary of the grant date and expire in 5 years. The grant date fair value
of the stock options was estimated at $1,536,764. The vesting of these options results in stock-based compensation of $104,890 and $427,034,
for the three and nine months ended September 30, 2021 respectively (three and nine months ended September 30, 2020 - $201,728 and $357,409, respectively), which is included in operation and
administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).
|
|
(iii)
|
On September 30, 2020, 200,000 stock options were issued to
a consultant. Each stock option entitles the holder to acquire one common share of the Company at an exercise price of C$0.60. The stock
options vest 50% at 6 months and 50% at 12 months from the grant date and expire in 3 years. The grant date fair value of the options
was estimated at $52,909. The vesting of these options resulted in stock-based compensation of $6,596 and $32,652, for the three
and nine months ended September 30, 2021, respectively (three and nine months ended September 30, 2020 - $218 and $218, respectively),
which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive
income (loss).
|
|
(iv)
|
On February 19, 2021, 1,037,977 stock options were issued to
an officer of the Company, of which 273,271 stock options vest immediately and the balance of 764,706 stock options shall vest 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 $43,941 and $160,750, for the
three and nine months ended September 30, 2021, respectively (three and nine months ended September 30, 2020 - $nil), which is
included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive
income (loss).
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
9.
Capital stock, warrants and stock options (continued)
Stock
options (continued)
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)
|
|
|
|
1.54
|
%
|
|
|
0
|
%
|
|
|
100
|
%
|
|
|
C$0.50
|
|
|
|
5
years
|
|
|
|
(ii)
|
|
|
|
0.44
|
%
|
|
|
0
|
%
|
|
|
100
|
%
|
|
|
C$0.50
|
|
|
|
5
years
|
|
|
|
(iii)
|
|
|
|
0.25
|
%
|
|
|
0
|
%
|
|
|
100
|
%
|
|
|
C$0.58
|
|
|
|
3
years
|
|
|
|
(iv)
|
|
|
|
0.64
|
%
|
|
|
0
|
%
|
|
|
100
|
%
|
|
|
C$0.34
|
|
|
|
5
years
|
|
The
following table reflects the actual stock options issued and outstanding as of September 30, 2021:
Schedule of Stock Option Issued and Outstanding
|
Exercise
price
(C$)
|
|
|
Weighted
average remaining
contractual
life (years)
|
|
|
Number
of
options
outstanding
|
|
|
Number
of
options
vested
(exercisable)
|
|
|
Grant
date
fair
value ($)
|
|
|
|
10.00
|
|
|
|
0.59
|
|
|
|
47,500
|
|
|
|
47,500
|
|
|
|
258,013
|
|
|
|
0.50
|
|
|
|
1.25
|
|
|
|
235,000
|
|
|
|
235,000
|
|
|
|
46,277
|
|
|
|
0.60
|
|
|
|
2.00
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
52,909
|
|
|
|
0.60
|
|
|
|
3.07
|
|
|
|
1,575,000
|
|
|
|
1,275,000
|
|
|
|
435,069
|
|
|
|
0.55
|
|
|
|
3.56
|
|
|
|
5,957,659
|
|
|
|
1,489,415
|
|
|
|
1,536,764
|
|
|
|
0.335
|
|
|
|
4.39
|
|
|
|
1,037,977
|
|
|
|
273,271
|
|
|
|
204,213
|
|
|
|
|
|
|
|
|
|
|
|
9,053,136
|
|
|
|
3,520,186
|
|
|
|
2,533,245
|
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
10.
Restricted share units
Effective
March 25, 2020, the Board of Directors approved a Restricted Share Unit (“RSU”) Plan to grant RSUs to its officers, directors,
key employees and consultants.
The
following table summarizes the RSU activity during the periods ended September 30, 2021 and 2020:
Schedule of Restricted Share Units
|
|
|
Number
of
|
|
|
Weighted
average grant date fair value per share
|
|
|
|
|
shares
|
|
|
(C$)
|
|
|
Unvested
as at December 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
Granted
(i)(ii)
|
|
|
600,000
|
|
|
|
0.40
|
|
|
Vested
|
|
|
(1,474,294
|
)
|
|
|
0.31
|
|
|
Forfeited
|
|
|
(245,130
|
)
|
|
|
0.41
|
|
|
Unvested as at September
30, 2020
|
|
|
600,000
|
|
|
$
|
0.40
|
|
|
Unvested as at December
31, 2020
|
|
|
988,990
|
|
|
$
|
0.39
|
|
|
Granted
(v)(vi)(vii)
|
|
|
1,348,434
|
|
|
|
0.30
|
|
|
Vested
|
|
|
(1,474,294
|
)
|
|
|
0.31
|
|
|
Forfeited
|
|
|
(245,130
|
)
|
|
|
0.41
|
|
|
Unvested as at September
30, 2021
|
|
|
618,000
|
|
|
$
|
0.45
|
|
|
(i)
|
On April 20, 2020, the Company granted 400,000 RSUs to a certain
officer of the Company. The RSUs vest in one-fourth increments upon each anniversary of the grant date. The vesting of these RSUs results
in stock-based compensation of $14,334 and $57,494, respectively for the three and nine months ended September 30, 2021 (three
and nine months ended September 30, 2020 $27,568 and $50,641, respectively), which is included in operation and administration expenses
on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).
|
|
(ii)
|
On April 20, 2020, the Company granted 200,000 RSUs to a certain
director of the Company. The RSUs vest in one-fourth increments upon each anniversary of the grant date. The vesting of these RSUs results
in stock-based compensation of $5,785 and $14,933, respectively for the three and nine months ended September 30, 2021 (three
and nine months ended September 30, 2020 $9,352 and $16,569, respectively), which is included in operation and administration expenses
on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).
|
|
(iii)
|
On
November 16, 2020, the Company granted 168,000
RSUs to certain directors
of the Company. The RSUs vest in one-fourth increments upon each anniversary of the grant date. The vesting of these RSUs results in
stock-based compensation of $8,174
and $24,255,
respectively for the three and nine months ended September 30, 2021 (three and nine months ended September 30, 2020 - $nil),
which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive
income (loss).
|
|
(iv)
|
On December 6, 2020, the Company granted 220,990 RSUs to a
consultant of the Company. The RSUs vest in one-sixth increments per month. The vesting of these RSUs results in stock-based compensation
of $nil and $58,740, respectively for the three and nine months ended September 30, 2021 (three and nine months ended September 30, 2020
- $nil), which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss)
and comprehensive income (loss).
|
|
(v)
|
On January 1, 2021, the Company granted 735,383 RSUs to a consultant
of the Company. Of the 735,383 RSUs, 245,128 RSUs vested immediately, and the remaining 490,255 RSUs vested in 1/12 increments per month.
The vesting of these RSUs results in stock-based compensation of $26,263 and $291,364, respectively for the three and nine months
ended September 30, 2021 (three and nine months ended September 30, 2020 - $nil), which is included in operation and administration expenses
on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).
|
|
(vi)
|
On July 1, 2021, the Company granted 17,823 RSUs to a consultant
of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $4,026 for the three and
nine months ended September 30, 2021 (three and nine months ended September 30, 2020 - $nil), which is included in operation and administration
expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss).
|
|
(vii)
|
On August 5, 2021, the Company granted 595,228 RSUs to consultants
of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $100,022 for the three
and nine months ended September 30, 2021 (three and nine months ended September 30, 2020 - $nil), which is included in operation and
administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive.
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
11.
Deferred share units
Effective
April 21, 2020, the Board of Directors approved a Deferred Share Unit (“DSU”) Plan to grant DSUs to its directors. The DSU
Plan permits the eligible directors to defer receipt of all or a portion of their retainer or compensation until termination of their
services and to receive such fees in the form of cash at that time.
Upon
vesting of the DSUs or termination of service as a director, the director will be able to redeem DSUs based upon the then market price
of the Company’s common share on the date of redemption in exchange for cash.
The
following table summarizes the DSU activity during the periods ended September 30, 2021:
Schedule of Deferred Share Units
|
|
|
Number
of
shares
|
|
|
Weighted
Average
grant
date
fair value
per
share
(C$)
|
|
|
Unvested as at December
31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
Granted
(i)
|
|
|
7,500,000
|
|
|
$
|
1.03
|
|
|
Unvested
as at September 30, 2020, December 31, 2020 and September 30, 2021
|
|
|
7,500,000
|
|
|
$
|
1.03
|
|
|
(i)
|
On
April 21, 2020, the Company granted 7,500,000
DSUs. The DSUs vest in
one-fourth increments upon each anniversary of the grant date and expire in 5
years. During the three
and nine months ended September 30, 2021, the Company recognized $291,243
and $430,964,
respectively, recovery of stock-based compensation related to the DSUs (three and nine months ended September 30, 2020 $204,127
and $753,791,
respectively expensed), which is included in operation and administration expenses on the condensed interim consolidated statements
of income (loss) and comprehensive income (loss).
|
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
12.
Income per share
Potentially
dilutive securities include convertible loan payable, warrants, broker options, stock options, RSUs and DSUs. Diluted income per share
reflects the assumed exercise or conversion of all dilutive securities using the treasury stock method.
Schedule of Income per Share
|
|
|
Three
Months
Ended
|
|
|
Three
Months
Ended
|
|
|
Nine
Months
Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) and comprehensive income (loss) for the period
|
|
$
|
3,960,630
|
|
|
$
|
(267,859
|
)
|
|
$
|
9,843,495
|
|
|
$
|
(13,848,837
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
income (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic
|
|
|
164,179,999
|
|
|
|
106,276,928
|
|
|
|
160,690,371
|
|
|
|
86,173,243
|
|
|
Net
income (loss) per share – basic
|
|
$
|
0.02
|
|
|
$
|
0.00
|
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss)
per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares - basic
|
|
|
164,179,999
|
|
|
|
106,276,928
|
|
|
|
160,690,371
|
|
|
|
86,173,243
|
|
|
Diluted
effect:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants,
RSUs, broker options, and stock options
|
|
|
150,000
|
|
|
|
-
|
|
|
|
150,000
|
|
|
|
-
|
|
|
Weighted
average number of common shares - fully diluted
|
|
|
164,329,999
|
|
|
|
106,276,928
|
|
|
|
160,840,371
|
|
|
|
86,173,243
|
|
|
Net
income (loss) per share - fully diluted
|
|
$
|
0.02
|
|
|
$
|
0.00
|
|
|
$
|
0.06
|
|
|
$
|
(0.16
|
)
|
13.
Commitments and contingencies
As
stipulated by the agreements with Placer Mining as described in note 5, the Company is required to make monthly payment of $60,000 for
care and maintenance.
As
stipulated in the agreement with the EPA and as described in note 5, the Company is required to make two payments to the EPA, one for
cost-recovery, and the other for water treatment. As at September 30, 2021, $13,178,322 payable to the EPA has been included in accounts
payable and accrued liabilities. The Company is now engaged with the EPA to discuss an amendment to or deferral of these payments.
The
Company has entered into a lease agreement which expires in May 2022. Monthly rental expenses are approximately C$26,000 and are offset
by rental income obtained through a series of short-term subleases held by the Company. See note 8.
On
or about June 14, 2021, a lawsuit was filed in the US District Court for the District of Idaho brought by a purported personal
representative of the estate of a minority shareholder of Placer Mining. The named defendants include Placer Mining, certain of
Placer Mining’s shareholders, the Company, and certain of the Company’s shareholders. The lawsuit alleges that Placer
Mining entered into a series of transactions, including amendments to the Company’s lease with Placer Mining, in breach of an
agreement dated August 31, 2018, which allegedly restricted the sale of shares in Placer Mining by certain shareholders. On August
13, 2021, the Company filed a motion to dismiss the claim for lack of jurisdiction and standing. On September 3, 2021, the plaintiff
responded to the motion to dismiss and agreed that Placer Mining should be dismissed for lack of jurisdiction. The Company,
as well as other named defendants, filed replies in support of the motions to dismiss and argued that Placer Mining is an
indispensable party and with dismissal of Placer Mining the lawsuit should be dismissed. The US District Court has not ruled on the
motions to dismiss but the Company believes the motion to dismiss will be granted and the lawsuit dismissed.
On
July 28, 2021, a lawsuit was filed in the US District Court for the District of Idaho brought by Crescent Mining, LLC (“Crescent”).
The named defendants include Placer Mining, Robert Hopper Jr., and the Company. The lawsuit alleges that Placer Mining and Robert Hopper
Jr. intentionally flooded the Crescent Mine during the period from 1991 and 1994, and that the Company is jointly and severally liable
with the other defendants for unspecified past and future costs associated with the presence of AMD in the Crescent Mine. The plaintiff
has requested unspecified damages.
The
Company believes the claims in both lawsuits, as they relate to Bunker Hill, are without merit and intends to defend them vigorously.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
14.
Related party transactions
Compensation
of key management personnel
The
Company’s key management personnel have the authority and responsibility for planning, directing and controlling the activities
of the Company and consists of the Company’s executive management team and management directors.
Schedule of Related Party Transactions
|
|
|
Three
Months Ended
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Consulting
fees
|
|
$
|
276,049
|
|
|
$
|
166,806
|
|
|
$
|
846,604
|
|
|
$
|
458,009
|
|
At
September 30, 2021, $102,235 is owed to key management personnel (December 31, 2020 - $45,000) with all amounts included in accounts
payable and accrued liabilities
Share
subscriptions
During
the nine months ended September 30, 2021, the CEO of the Company subscribed for 208,860 units in the February 2021 Offering.
During
the nine months ended September 30, 2021, the Company issued 208,860 February 2021 Units at a deemed price of $0.45 to settle $66,000
of debt owed to the CFO.
During
the nine months ended September 30, 2021, the Company issued 208,860 February 2021 Units at a deemed price of $0.45 to settle $66,000
of debt owed to a consultant that is deemed to be a related party.
Bunker
Hill Mining Corp.
Notes
to Condensed Interim Consolidated Financial Statements
Three
and Nine Months Ended September 30, 2021
(Expressed
in United States Dollars)
Unaudited
15.
Financial instruments
Fair
values
The
carrying amounts reported in the condensed interim consolidated balance sheets for cash and cash equivalents, accounts receivable
excluding HST, accounts payable, accrued liabilities, DSU liability, lease liability and promissory note payable, all
of which are financial instruments, are a reasonable estimate of fair value because of the short period of time between the
origination of such instruments and their expected realization and current market rate of interest. The Company measured its DSU
liability at fair value on recurring basis using level 1 inputs and derivative warrant liabilities at fair value on recurring basis
using level 3 inputs. There were no transfers of financial instruments between levels 1, 2, and 3 during the period ended September
30, 2021 and year ended December 31, 2020.
Foreign
currency risk
Foreign
currency risk is the risk that changes the rates of exchange on foreign currencies will impact the financial position of cash flows of
the Company. The Company is exposed to foreign currency risks in relation to certain activities that are to be settled in Canadian dollars.
Management monitors its foreign currency exposure regularly to minimize the risk of an adverse impact on its cash flows.
Concentration
of credit risk
Concentration
of credit risk is the risk of loss in the event that certain counterparties are unable to fulfill its obligations to the Company. The
Company’s financial instruments that are exposed to concentrations of credit risk primarily consist of its cash and cash equivalents.
The Company places its cash and cash equivalents with financial institutions of high credit worthiness. At times, its cash equivalents
with a particular financial institution may exceed any applicable government insurance limits. The Company’s management also routinely
assesses the financial strength and credit worthiness of any parties to which it extends funds and as such, it believes that any associated
credit risk exposures are limited.
Liquidity
risk
Liquidity
risk is the risk that the Company’s consolidated cash flows from operations will not be sufficient for the Company to continue
operating and discharge its liabilities. The Company is exposed to liquidity risk as its continued operation is dependent upon its ability
to obtain financing, either in the form of debt or equity, or achieving profitable operations in order to satisfy its liabilities as
they come due.
SPECIAL
NOTE OF CAUTION REGARDING FORWARD-LOOKING STATEMENTS
Certain
statements in this report, including statements in the following discussion, are what are known as “forward looking statements”,
which are basically statements about the future. For that reason, these statements involve risk and uncertainty since no one can accurately
predict the future. Words such as “plans,” “intends,” “will,” “hopes,” “seeks,”
“anticipates,” “expects “and the like often identify such forward looking statements, but are not the only indication
that a statement is a FORWARD-LOOKING statement. Such forward looking statements include statements concerning THE COMPANY’S plans
and objectives with respect to the present and future operations of the Company, and statements which express or imply that such present
and future operations will or may produce revenues, income or profits. Numerous factors and future events could cause the Company to
change such plans and objectives or fail to successfully implement such plans or achieve such objectives, or cause such present and future
operations to fail to produce revenues, income or profits. Therefore, the reader is advised that the following discussion should be considered
in light of the discussion of risks and other factors contained in this report and in the Company’s other filings with the UNITED
STATES SECURITIES AND EXCHANGE COMMISSION (“SEC”). NO STATEMENTS CONTAINED IN THE FOLLOWING DISCUSSION SHOULD BE CONSTRUED
AS A GUARANTEE OR ASSURANCE OF FUTURE PERFORMANCE OR FUTURE RESULTS.