Bunker Hill Mining Corp. 10-Q

Item 1. Financial Statements The Condensed interim consolidated financial statements of Bunker Hill Mining Corp., (“Bunker Hill”, the “Company”, or the “Registrant”) a. Nevada corporation, included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.”) were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2021, and all amendments thereto. 3 Bunker Hill Mining Corp. Condensed Interim Consolidated Balance Sheets (Expressed in United States Dollars) Unaudited March 31, December 31, 2022 2021 ASSETS Current assets Cash $ 3,010,080 $ 486,063 Accounts receivable 169,207 112,630 Prepaid expenses 246,270 300,813 Short-term deposit (notes 3 and 14) 500,000 68,939 Prepaid mine deposit and acquisition costs (note 5) - 2,260,463 Prepaid finance costs 190,649 393,640 Total current assets 4,116,206 3,622,548 Non-current assets Equipment (note 3) 496,229 396,894 Right-of-use assets (note 4) 27,911 52,353 Bunker Hill Mine and mining interests (note 5) 14,449,211 1 Total assets $ 19,089,557 $ 4,071,796 EQUITY AND LIABILITIES Current liabilities Accounts payable (note 13) $ 900,984 $ 1,312,062 Accrued liabilities (note 12) 2,415,382 869,581 EPA/IDEQ water treatment payable (note 6) 5,185,706 5,110,706 Interest payable (note 6) 506,735 409,242 DSU liability (note 11) 1,331,488 1,531,409 Promissory notes payable (note 7) 2,500,000 2,500,000 EPA cost recovery payable - short-term (note 6) 12,000,000 11,000,000 Current portion of lease liability (note 8) 31,889 62,277 Total current liabilities 24,872,184 22,795,277 Non-current liabilities Convertible debentures (note 7) 12,553,070 - Derivatives of convertible debenture (note 7) 1,260,850 - EPA cost recovery liability - long-term, net of discount (note 6) 3,540,852 - Derivative warrant liability (notes 8 and 9) 12,064,879 15,518,887 Total liabilities 54,291,835 38,314,164 Shareholders’ Deficiency Preferred shares, $ 0.000001 par value, 10,000,000 preferred shares authorized; Nil preferred shares issued and outstanding (note 9) - - Common shares, $ 0.000001 par value, 750,000,000 common shares authorized; 164,435,442 and 143,117,068 common shares issued and outstanding, respectively (note 9) 164 164 Subscriptions received (note 14) 1,775,790 - Additional paid-in-capital (note 9) 38,393,804 38,248,618 Deficit accumulated during the exploration stage ( 75,372,036 ) ( 72,491,150 ) Total shareholders’ deficiency ( 35,202,278 ) ( 34,242,368 ) Total shareholders’ deficiency and liabilities $ 19,089,557 $ 4,071,796 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. 4 Bunker Hill Mining Corp. Condensed Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) (Expressed in United States Dollars) (Unaudited) 1 2 Three Months Ended March 31, 2022 2021 Operating expenses Operation and administration $ 259,712 $ 837,945 Exploration - 3,088,302 Mine preparation 2,507,079 - Legal and accounting 362,736 219,108 Consulting 2,357,147 478,619 Loss from operations ( 5,486,674 ) ( 4,623,974 ) Other income or gain (expense or loss) Change in derivative liability 3,454,008 10,475,376 Gain on foreign exchange 27,920 42,553 Loss on FV of debenture derivative ( 73,469 ) - Interest expense ( 735,237 ) - Debenture finance costs (note 7) ( 67,434 ) - Loss on debt settlement - ( 56,146 ) Net (loss) income and comprehensive (loss) income for the period ( 2,880,886 ) 5,837,809 Net (loss) income per common share – basic $ ( 0.02 ) $ 0.04 Net (loss) income per common share – fully diluted $ ( 0.02 ) $ 0.04 Weighted average common shares – basic 164,435,442 154,102,811 Weighted average common shares – fully diluted 165,076,880 155,192,827 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. 5 Bunker Hill Mining Corp. Condensed Interim Consolidated Statements of Cash Flows (Expressed in United States Dollars) Unaudited 1 2 Three Months Three Months Ended Ended March 31, March 31, 2022 2021 Operating activities Net income (loss) for the period $ ( 2,880,886 ) $ 5,837,809 Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation (note 10) ( 54,735 ) 534,528 Depreciation expense 78,457 56,425 Change in fair value of warrant liability ( 3,454,008 ) ( 10,475,376 ) Imputed interest expense on lease liability (note 8) 1,317 4,210 Foreign exchange loss (gain) ( 27,920 ) ( 42,553 ) Foreign exchange loss (gain) on re-translation of lease (Note 8) 718 2,015 Loss on debt settlement - 56,146 Amortization of EPA discount 138,427 - Loss on fair value of convertible debt derivatives 73,469 - Imputed interest expense on convertible debentures 468,116 - Changes in operating assets and liabilities: Accounts receivable ( 56,577 ) ( 23,184 ) Prepaid finance costs ( 524,674 ) - Prepaid expenses 63,482 1,278 Accounts payable ( 383,159 ) ( 533,471 ) Accrued liabilities 1,545,801 550,235 Accrued EPA/IDEQ water treatment 75,000 - EPA cost recovery payable ( 2,000,000 ) - Interest payable 97,493 - Net cash used in operating activities ( 6,839,679 ) ( 4,031,935 ) Investing activities Deposit on plant ( 500,000 ) - Land purchase ( 202,000 ) - Bunker Hill mine purchase ( 5,524,322 ) - Purchase of machinery and equipment ( 153,350 ) - Net cash used in investing activities ( 6,379,672 ) - Financing activities Proceeds from convertible debentures 14,000,000 - Proceeds from issuance of shares, net of issue costs - 6,008,672 Proceeds from subscriptions received 1,775,790 - Lease payments ( 32,422 ) ( 32,000 ) Net cash provided by financing activities 15,743,368 5,976,672 Net change in cash 2,524,017 1,944,737 Cash, beginning of period 486,063 3,568,661 Cash, end of period $ 3,010,080 $ 5,513,398 Supplemental disclosures Non-cash activities Units issued to settle accrued liabilities $ - $ 188,607 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. 6 Bunker Hill Mining Corp. Condensed Interim Consolidated Statements of Changes in Shareholders’ Deficiency (Expressed in United States Dollars) Unaudited 1 2 5 3 4 Stock Deficit subscriptions accumulated Additional received for during the Common stock paid-in- Units to be exploration Shares Amount capital issued stage Total Balance, December 31, 2021 164,435,442 $ 164 $ 38,248,618 $ - $ ( 72,491,150 ) $ ( 34,242,368 ) Stock-based compensation - - 145,186 - - 145,186 Stock subscription received for Units - - - 1,775,790 - 1,775,790 Net loss for the period - - - - ( 2,880,886 ) ( 2,880,886 ) Balance, March 31, 2022 164,435,442 $ 164 $ 38,393,804 $ 1,775,790 $ ( 75,372,036 ) $ ( 35,202,278 ) Balance, December 31, 2020 143,117,068 $ 143 $ 34,551,133 $ 34,551,133 $ ( 66,088,873 ) $ ( 31,537,597 ) Beginning Balance 143,117,068 $ 143 $ 34,551,133 $ 34,551,133 $ ( 66,088,873 ) $ ( 31,537,597 ) Stock-based compensation 620,063 620,063 - 620,063 Shares issued at $ 0.32 per share (1) 19,576,360 20 6,168,049 6,168,049 - 6,168,069 Shares issued for debt settlement at $ 0.45 per share (2) 417,720 - 188,145 188,145 - 188,145 Shares issued for RSUs vested 437,332 - - - - - Issue costs - - ( 159,397 ) ( 159,397 ) - ( 159,397 ) Warrant valuation - - ( 3,813,103 ) ( 3,813,103 ) - ( 3,813,103 ) Net loss for the period - - - - 5,837,809 5,837,809 Balance, March 31, 2021 163,548,480 $ 163 $ 37,554,890 $ 37,554,890 $ ( 60,251,064 ) $ ( 22,696,011 ) Ending Balance 163,548,480 $ 163 $ 37,554,890 $ 37,554,890 $ ( 60,251,064 ) $ ( 22,696,011 ) (i) Units issued at C$ 0.40 , converted to US at $ 0.32 (note 11) (ii) Units issued at C$ 0.57 , converted to US at $ 0.45 (note 11) The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements. 7 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) 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 Kellogg, 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. Going Concern: 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 $ 75,372,036 and further losses are anticipated in the development of its business. Additionally, the Company owes a total of $ 17,497,236 to the Environmental Protection Agency (“EPA”) (see Note 6) that is classified as current liability unless the Company can consummate financial assurances that would reclassify $ 12,000,000 of this liability to long-term debt. The Company owes a total of $ 3,540,852 , net of discount, to the EPA that is classified as long-term debt. The Company does not have sufficient cash to fund normal operations and meet debt obligations for the next 12 months without deferring payment on certain current liabilities and/or raising additional funds. 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 and debt financing. These 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 in existence. The ability of the Company to emerge from the exploration stage is dependent upon, among other things, obtain additional financing to continue operations, explore and develop the mineral properties and the discovery, development, and sale of reserves. COVID-19: 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 (“COVID-19”). The Company cannot accurately predict the impact COVID-19 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. The Russia/Ukraine Crisis: The Company’s operations could be adversely affected by the effects of the escalating Russia/Ukraine crisis and the effects of sanctions imposed against Russia or that country’s retributions against those sanctions, embargos or further-reaching impacts upon energy prices, food prices and market disruptions. The Company cannot accurately predict the impact the crisis will have on its operations and the ability of contractors to meet their obligations with the Company, including uncertainties relating the severity of its effects, the duration of the conflict, and the length and magnitude of energy bans, embargos and restrictions imposed by governments. In addition, the crisis could adversely affect the economies and financial markets of the United States in general, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations. Additionally, the Company cannot predict changes in precious metals pricing or changes in commodities pricing which may alternately affect the Company either positively or negatively. 2. Basis of Presentation The accompanying unaudited condensed interim consolidated financial statements of the Company 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, which contains the annual audited consolidated financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended December 31, 2021. The interim results for the period ended March 31, 2022, are not necessarily indicative of the results for the full fiscal year. The unaudited interim condensed consolidated financial statements are presented in United States dollars, which is the Company’s functional currency. 8 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) 3. Equipment Equipment consists of the following: Schedule of Equipment March 31, December 31, 2022 2021 Equipment $ 757,322 $ 603,972 Equipment, gross 757,322 603,972 Less accumulated depreciation ( 261,093 ) ( 207,078 ) Equipment, net $ 496,229 $ 396,894 The total depreciation expense during the three months ended March 31, 2022 and March 31, 2021 was $ 54,015 and $ 29,830 , respectively. Pend Oreille Process Plant On January 25, 2022, the Company entered into a non-binding Memorandum of Understanding (“MOU”) with Teck Resources Limited (“Teck”) for the purchase of a comprehensive package of equipment and parts inventory from its Pend Oreille site (the “Pend Oreille Mill”). The package comprises substantially all processing equipment of value located at the site, including complete crushing, grinding and flotation circuits suitable for a planned ~1,500 ton-per-day operation at Bunker Hill, and total inventory of nearly 10,000 components and parts for mill, assay lab, conveyer, field instruments, and electrical spares. The MOU outlined a purchase price under two scenarios, at Teck’s option: an all-cash $ 2,750,000 purchase price, or a $ 3,000,000 purchase price comprised of cash and Bunker Hill shares. Each option includes a $ 500,000 non-refundable deposit, which was paid by the Company in January 2022. On March 31, 2022, the Company reached an agreement with a subsidiary of Teck to satisfy the remaining purchase price for the Pend Oreille Mill by way of an equity issuance of the Company. Teck will receive 10,416,667 units of the Company (the “Teck Units”) at a deemed issue price of C$ 0.30 per unit. Each Teck Unit consists of one common share of the Company and one common share purchase warrant (the “Teck Warrants”). Each whole Teck Warrant entitles the holder to acquire one common share at a price of C$ 0.37 per common share for a period of three years. The equity issuance occurred on May 13, 2022. 4. Right-of-Use Asset Right-of-use asset consists of the following: Schedule of Right-of-use Asset March 31, December 31, 2022 2021 Office lease $ 319,133 319,133 Less accumulated depreciation ( 291,222 ) ( 266,780 ) Right-of-use asset, net $ 27,911 $ 52,353 The total depreciation expense during the three months ended March 31, 2022 and March 31, 2021 was $ 24,442 and $ 26,595 , respectively. 5. Mining Interests Bunker Hill Mine Complex The Company purchased the Bunker Hill Mine (the “Mine”) in January 2022, as described below. Prior to purchasing the Mine, the Company had entered into a series of agreements with Placer Mining Corporation (“Placer Mining”), the prior owner, for the lease and option to purchase the Mine. The first of these agreements was announced on August 28, 2017, with subsequent amendments and/or extensions announced on November 1, 2019, July 7, 2020, and November 20, 2020. Under the terms of the November 20, 2020 amended agreement (the “Amended Agreement”), a purchase price of $ 7,700,000 was agreed, with $ 5,700,000 payable in cash (with an aggregate of $ 300,000 to be credited toward the purchase price of the Mine as having been previously paid by the Company) and $ 2,000,000 in Common Shares of the Company. The Company agreed to make an advance payment of $ 2,000,000 , credited towards the purchase price of the Mine, which had the effect of decreasing the remaining amount payable to purchase the Mine to an aggregate of $ 3,400,000 payable in cash and $ 2,000,000 in Common Shares of the Company. 9 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) The Amended Agreement also required payments pursuant to an agreement with the EPA whereby for so long as the Company leases, owns and/or occupies the Mine, the Company would make payments to the EPA on behalf of Placer Mining in satisfaction of the EPA’s claim for historical water treatment cost recovery in accordance with the Settlement Agreement reached with the EPA in 2018. Immediately prior to the purchase of the Mine, the Company’s liability to EPA in this regard totaled $ 11,000,000 . The Company completed the purchase of the Mine on January 7, 2022. The terms of the purchase price were modified to $ 5,400,000 in cash, from $ 3,400,000 of cash and $ 2,000,000 of Common Shares. Concurrent with the purchase of the Mine, the Company assumed incremental liabilities of $ 8,000,000 to the EPA, consistent with the terms of the amended Settlement Agreement with the EPA that was executed in December 2021 (see “EPA Settlement Agreement” section below). The $ 5,400,000 contract cash paid at purchase was the $ 7,700,000 less the $ 2,000,000 deposit and $ 300,000 credit given by the seller for prior years’ maintenance payments. The carrying cost of the Mine is comprised of the following: Schedule of Mining Interests January 7, 2022 Contract purchase price $ 7,700,000 Less: Credit by seller for prior maintenance payments ( 300,000 ) Net present value of water treatment cost recovery liability assumed 6,402,425 Closing costs capitalized 2,638 Mine acquisition costs - legal 442,147 Total carrying cost of mine $ 14,247,210 Management has determined the purchase to be an acquisition of a single asset. 10 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) Land Purchase On March 3, 2022, the Company purchased a 225-acre surface land parcel for $ 202,000 which includes the surface rights to portions of 24 patented mining claims, for which the Company already owns the mineral rights. 6. Environmental Protection Agency Agreement As a part of the lease of the Mine, the Company was required to make payments pursuant to an agreement with the EPA whereby for so long as the Company leases, owns and/or occupies the Mine, the Company will make payments to the EPA on behalf of Placer Mining in satisfaction of the EPA’s claim for cost recovery. These payments, if all are made, will total $ 20,000,000 . The agreement called for payments starting with $ 1,000,000 30 days after a fully ratified agreement was signed (which payment was made) followed by $2,000,000 on November 1, 2018, and $3,000,000 on each of the next five anniversaries with a final $2,000,000 payment on November 1, 2024. The November 1, 2018, December 1, 2018, June 1, 2019, November 1, 2019, November 1, 2020, and November 1, 2021, payments were not made, and the Company engaged in discussions with the EPA in an effort to reschedule these payments in ways that enable the sustainable operation of the Mine as a viable long-term business . The EPA liability schedule in effect at March 31, 2022 was: Schedule Of Environmental Protection Agency Agreement Liability Date Amount November 1, 2021 $ 11,000,000 (aggregate amounts from 2018, 2019, 2020 and 2021) November 1, 2022 $ 3,000,000 November 1, 2023 $ 3,000,000 November 1, 2024 $ 2,000,000 plus accrued interest Interest is accrued at EPA superfund interest rates, which was 0.10 % and 2.22 % for the quarters ended March 31, 2022 and 2021, respectively. Interest expense for those periods was $ 5,028 and $ 47,982 , respectively. At March 31, 2022 interest of $ 311,530 is included in interest payable on the condensed consolidated balance sheet. Effective December 19, 2021, the Company entered into an amended Settlement Agreement between the Company, Idaho Department of Environmental Quality, US Department of Justice, and the EPA (the “Amended Settlement”). Upon the effectivity of the Amended Settlement, the Company would become fully compliant with its payment obligations to these parties. The Amended Settlement modified the payment schedule and payment terms for recovery of historical environmental response costs at Mine by the EPA. Pursuant to the terms of the Amended Settlement, the Company paid $ 2,000,000 to the EPA on January 7, 2022. Pursuant to the terms of the Amended Settlement, an additional $ 17,000,000 will be paid by the Company to the EPA on the following dates: Schedule Of Amended Settlement Environmental Protection Agency Agreement Date Amount November 1, 2024 $ 3,000,000 November 1, 2025 $ 3,000,000 November 1, 2026 $ 3,000,000 November 1, 2027 $ 3,000,000 November 1, 2028 $ 3,000,000 November 1, 2029 $ 2,000,000 plus accrued interest The Amended Settlement included additional payment for outstanding water treatment costs (described below) that have been incurred over the period from 2018 through 2020. This $ 2,900,000 payment was to be made within 90 days of execution of the Amended Settlement. In addition to the changes in payment terms and schedule, the Amended Settlement included a commitment by the Company to secure $ 17,000,000 of financial assurance in the form of performance bonds or letters of credit deemed acceptable to the EPA. The financial assurance can be drawn on by the EPA in the event of non-performance by the Company of its payment obligations under the Amended Settlement (the “Financial Assurance”). The amount of the bonds will decrease over time as individual payments are made. If the Company does not post the Financial Assurance within 90 days of execution of the Amended Settlement, it must issue an irrevocable letter of credit for $ 9,000,000 . The EPA may draw on this letter of credit after an additional 90 days if the Company is unable to either put the Financial Assurance in place or make payment for the full $ 17,000,000 of remaining historical cost recovery sums. In the event neither occurs, the terms of the initial Settlement Agreement will be reinstated. On March 22, 2022, the Company reported that in consultation with the EPA, it has committed to meet the $ 2,900,000 payment and Financial Assurance obligations by 180 days from the effective date of the Amended Settlement Agreement. At March 31, 2022, the terms of the initial Settlement Agreement were still in place. The Company completed the purchase of the Mine on January 7, 2022 (see note 5). The terms of the purchase price were modified to $5,400,000 in cash, from $3,400,000 of cash and $2,000,000 of Common Shares. The purchase price of the mine totaled $7,342,638 was capitalized, after taking into effect the deposits previously made, the credits given and closing costs. Additionally, a total of $442,147 of legal costs were capitalized . Concurrent with the purchase of the Mine, the Company assumed the balance of the EPA liability totaling $17,000,000 (after the payment of the $2,000,000 on January 7, 2022), an increase of $8,000,000 of which $3,000,000 is current liability and $5,000,000 is long-term in nature. The long-term portion was discounted at an interest rate of 16.5% to arrive at a net present value of $3,402,425 after discount. During the quarter ended March 31, 2022, $138,427 of the discount was amortized to interest expense. At Marc h 31, 2022, the total EPA cost recovery liability was $ 17,000,000 , less $ 1,457,147 discount on the long-term portion, or $ 15,540,853 . The current portion of the EPA cost recovery liability at March 31, 2022 was $ 12,000,000 as detailed below: Schedule Of Environmental Cost Recover Liability Amount EPA cost recovery payable at December 31, 2021 $ 11,000,000 Payment as part of mine purchase on January 7, 2022 ( 2,000,000 ) Assumed with mine purchase – current portion 3,000,000 EPA cost recovery at March 31, 2022 $ 12,000,000 The balance of the NPV of the long-term portion of the EPA cost recovery payable at March 31, 2022 was $ 3,540,853 detailed below: Schedule Of Net Present Vale of Environmental Protection Agency Agreement Amount Long-term portion of NPV of EPA cost recovery payable at purchase of mine on January 7, 2022 $ 3,402,425 Accretion of NPV discount during the quarter 138,427 Long-term portion of NPV of EPA cost recovery payable at March 31, 2022 $ 3,540,853 In addition to these payments, the Company makes a monthly accrual of $ 165,000 to cover the Idaho Department of Environmental Quality (“IDEQ”) (formerly performed and invoiced by the EPA) estimated costs of treating water at the water treatment facility. The Company also pays an agreed-upon monthly amount of $ 140,000 , with a true-up to be recorded and paid by the Company once the actual annual costs are determined each year. The balance of EPA/IDEQ water treatment liability at March 31, 2022 was $ 5,185,706 as detailed below: Schedule Of EPA/IDEQ Water Treatment Liability Amount EPA/IDEQ water treatment liability at December 31, 2021 $ 5,110,706 Payments during the quarter ( 420,000 ) Accruals during the quarter 495,000 EPA/IDEQ water treatment liability at March 31, 2022 $ 5,185,706 11 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) 7. Promissory Note Payable and Convertible Debentures 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 matured on March 15, 2022 ; however, the note holder agreed to accept $ 500,000 payment, which the Company paid, by April 15, 2022, and the remaining principal and interest was deferred to June 20, 2022. Interest expense for the three months ended March 31, 2022 and 2021 was $ 92,466 and $ nil , respectively. At March 31, 2022 interest of $ 195,205 is included in interest payable on the condensed consolidated balance sheet. $50,000,000 Project Finance Package On December 20, 2021, the Company executed a non-binding term sheet outlining a $ 50,000,000 project finance package with Sprott Private Resource Streaming and Royalty Corp. (“SRSR”). The non-binding term sheet with SRSR outlined a $ 50,000,000 project financing package that the Company expects to fulfill the majority of its funding requirements to restart the Mine. The financing package consisted of an $ 8,000,000 royalty convertible debenture (the “RCD”), a $ 5,000,000 convertible debenture (the “CD”), and a multi-metals stream of up to $ 37,000,000 (the “Stream”, together with the RCD and the CD, the “Project Financing Package”). Total finance costs for legal fees associated with the two convertible debentures was $ 795,100 , of which $ 67,435 associated with the derivative portions of the financing was recognized as a period expense and $ 727,665 was allocated to the CD and RCD pro-ratably based on their fair value on the issuance date, with $ 300,579 and $ 427,086 allocated, respectively. $8,000,000 Royalty Convertible Debenture The Company closed the $ 8,000,000 RCD on January 7, 2022. The RCD bears interest at an annual rate of 9.0 % , payable in cash or Common Shares at the Company’s option, until such time that SRSR elects to convert a royalty, with such conversion option expiring at the earlier of advancement of the Stream or 18 months. In the event of conversion, the RCD will cease to exist and the Company will grant a royalty for 1.85 % of life-of-mine gross revenue from mining claims considered to be historically worked, contiguous to current accessible underground development, and covered by the Company’s 2021 ground geophysical survey (the “SRSR Royalty”). A 1.35% rate will apply to claims outside of these areas. The RCD is secured by a share pledge of the Company’s operating subsidiary, Silver Valley, until a full security package was put in place concurrent with the consummation of the CD. In the event of non-conversion, the principal of the RCD will be repayable in cash. $6,000,000 Convertible Debenture The Company closed the $ 6,000,000 CD on January 28, 2022, which was increased from the previously-announced $ 5,000,000 . The Convertible Debenture bears interest at an annual rate of 7.5 % , payable in cash or shares at the Company’s option, and matures on July 7, 2023 . The CD is secured by a pledge of the Company’s properties and assets. Until the closing of the Stream, the CD is convertible into Common Shares at a price of C$ 0.30 per Common Share, subject to stock exchange approval. Alternatively, SRSR may elect to retire the CD with the cash proceeds from the Stream. The Company may elect to repay the CD early; if SRSR elects not to exercise its conversion option at such time, a minimum of 12 months of interest would apply. 12 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) The Company determined that the conversion features in both the RCD and CD were not closely related to their respective debt components, and should be considered as derivatives under ASC 815. As such, these derivative components were bifurcated, accounted for and valued separately under the framework prescribed by ASC 820. The fair value of the derivative components in the RCD included the utilization of payable metal production estimates from the Company’s Preliminary Economic Assessment published in November 2022, and a Monte Carlo Simulation approach that included simulating the future prices of metals, and application of an appropriate project discount rate, as well as key inputs included in the table below. The value of the conversion feature in the CD was determined with the binomial model which involves the modelling of stock prices over the applicable term to evaluate the payouts under ‘hold’, ‘convert’, and ‘prepay’ decisions and select the decision that would maximize the fair value from a market participant’s perspective. The derivative components will be fair valued at each reporting period, with changes in fair value recorded as a gain or loss in the statement of profit or loss. The debt components of the RCD and CD were initially measured by first valuing the derivative components as described above, and are accounted for separately as financial liabilities that will be subsequently measured at amortized cost. Consistent with the approach above, the following table summarizes the key valuation inputs: Schedule of Key Valuation Inputs Reference (2)(4) (5) Valuation date Maturity date Contractual Interest rate Stock price (US$) Expected equity volatility Credit spread Risk-free rate Risk-adjusted rate CD note (1)(3) 01-28-22 07-07-23 7.50 % 0.230 120 % 8.70 % 0.92 % 16.18 % RCD note (stream not advanced scenario) 01-07-22 07-07-23 9.00 % 0.242 130 % 9.21 % 0.65 % 16.39 % RCD note (stream advanced) scenario 01-07-22 06-30-22 9.00 % 0.242 130 % 9.16 % 0.23 % 15.96 % CD note (1)(3) 03-31-22 07-07-23 7.50 % 0.235 120 % 8.85 % 1.80 % 17.12 % RCD note (stream not advanced scenario) 03-31-22 07-07-23 9.00 % 0.235 120 % 8.85 % 1.80 % 17.12 % RCD note (stream advanced) scenario 03-31-22 06-30-22 9.00 % 0.235 120 % 8.78 % 0.52 % 15.88 % (1) The CD carries a Discount for Lack of Marketability (“DLOM”) of 5.0 %. (2) All instruments carry an instrument-specific spread of 7.23 % (3) The conversion price of the CD is $ 0.235 (4) A project risk rate of 13.0 % was used for all scenarios of the RCD fair value computations (5) The probabilities for the stream being advanced and the stream not being advanced is 55 % and 45 %, respectively. The resulting fair values of the CD and RCD at the issuance dates, and as of March 31, 2022 were as follows: Schedule of Fair Value Derivative Liability Instrument Description Valuation Date Value of the Debt Component, Net of Finance Costs Value of the Embedded Derivatives Total Value CD January 28, 2022 4,991,976 1,028,252 6,020,228 RCD January 7,2022 7,092,978 159,129 7,252,107 Total 12,084,954 1,187,381 13,272,335 Instrument Description Valuation Date Value of the Debt Component Including Interest at Effective Rates(1) Value of the Embedded Derivatives Total Value CD March 31, 2022 5,173,075 997,614 6,170,689 RCD March 31,2022 7,379,995 263,236 7,643,231 Total 12,553,070 1,260,850 13,813,920 (1) The effect rates for the CD and RCD are 21.357 % and 17.795 %, respectively. Accretion of $181,099 and $287,017 was recognized as interest expense for the CD and RCD, respectively. The Company performs quarterly testing of the covenants in the RCD and CD. The RCD and CD contain a covenant that the Company must maintain positive working capital at each quarterly filing date, as determined by the financial statements filed on such date. As the Company would not have been in compliance with this covenant as of May 16, 2022 with respect to its working capital position as of March 31, 2022, it has obtained a waiver of this covenant from the holders of the RCD and CD until the next filing date, which is August 15, 2022. The Company intends to ensure compliance with this covenant for future filing dates through the advance of the Stream or other long-term financing. The Stream A minimum of $ 27,000,000 and a maximum of $ 37,000,000 (the “Stream Amount”) will be made available under the Stream, at the Company’s option, once the conditions of availability of the Stream have been satisfied. If the Company draws the maximum funding of $ 37,000,000 , the Stream would apply to 10% of payable metals sold until a minimum quantity of metal is delivered consisting of, individually, 55 million pounds of zinc, 35 million pounds of lead, and 1 million ounces of silver. Thereafter, the Stream would apply to 2% of payable metals sold. If the Company elects to draw less than $37,000,000 under the Stream, the percentage and quantities of payable metals streamed will adjust pro-rata. The delivery price of streamed metals will be 20% of the applicable spot price. The Company may buy back 50% of the Stream Amount at a 1.40x multiple of the Stream Amount between the second and third anniversary of the date of funding, and at a 1.65x multiple of the Stream Amount between the third and fourth anniversary of the date of funding. The Company will be permitted to incur additional indebtedness of $ 15,000,000 and a cost over-run facility of $ 13,000,000 from other financing counterparties. 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 March 31, 2022: Schedule of Operating Lease Liability Office lease Balance, December 31, 2020 $ 176,607 Addition - Interest expense 12,696 Lease payments ( 129,191 ) Foreign exchange loss 2,165 Balance, December 31, 2021 62,277 Addition - Interest expense 1,317 Lease payments ( 32,422 ) Foreign exchange loss 717 Balance, March 31, 2022 $ 31,889 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 $ 40,512 $ - $ - $ 40,512 Additional rent 37,515 - - 37,515 $ 78,027 $ - $ - $ 78,027 The monthly rental expenses are offset by rental income obtained through a series of short-term subleases held by the Company. 13 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) 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 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. 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. The warrant liabilities issued with private placements in June 2019, August 2019, August 2020, and February 2021 were revalued as at March 31, 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 February 2021 issuance March 31, 2022 December 31, 2021 Expected life 1,411 days 1,501 days Volatility 100 % 100 % Risk free interest rate 2.28 % 1.25 % Dividend yield 0 % 0 % Share price $ 0.285 $ 0.37 Fair value $ 2,563,262 $ 3,483,745 Change in derivative liability $ ( 920,484 ) $ ( 329,358 ) August 2020 issuance March 31, 2022 December 31, 2021 Expected life 518 days 608 days Volatility 120 % 100 % Risk free interest rate 2.27 % 0.95 % Dividend yield 0 % 0 % Share price $ 0.285 $ 0.37 Fair value $ 5,681,025 $ 6,790,163 Change in derivative liability $ ( 1,109,138 ) $ ( 7,703,052 ) June 2019 issuance March 31, 2022 December 31, 2021 Expected life 1,371 days 1,461 days Volatility 100 % 100 % Risk free interest rate 2.28 % 1.02 % Dividend yield 0 % 0 % Share price $ 0.285 $ 0.37 Fair value $ 1,506,021 $ 2,067,493 Change in derivative liability $ ( 561,472 ) $ ( 1,371,346 ) 14 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) August 2019 issuance (ii) December 31, 2020 December 31, 2021 Expected life 1,371 days 1,461 days Volatility 100 % 100 % Risk free interest rate 2.28 % 1.02 % Dividend yield 0 % 0 % Share price $ 0.285 $ 0.37 Fair value $ 2,314,571 $ 3,177,485 Change in derivative liability $ ( 862,914 ) $ ( 2,744,785 ) Outstanding warrants at March 31, 2021 and March 31, 2022 were as follows: 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 Balance, March 31, 2021 115,771,886 $ 0.55 $ 0.10 Balance, December 31, 2021 111,412,712 $ 0.54 $ 0.18 Expired ( 239,284 ) 0.70 0.21 Balance, March 31, 2022 111,173,428 $ 0.52 $ 0.18 During the three months ended March 31, 2022, 239,284 February 2020 broker warrants expired. At March 31, 2022, the following warrants were outstanding: Schedule of Warrants Outstanding Exercise Price Number of Exercise Number of warrants Expiry date price (C$) warrants exercisable August 31, 2023 0.50 58,284,148 58,284,148 December 31, 2025 0.59 32,895,200 32,895,200 February 9, 2026 0.60 17,112,500 117,112,500 February 16, 2026 0.60 2,881,580 2,881,580 111,173,428 111,173,428 15 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) Broker options At March 31, 2022, the following broker options were outstanding: Schedule of Broker Options Weighted Number of average broker exercise price options (C$) Balance, December 31, 2020 3,239,907 $ 0.35 Issued – February 2021 Compensation Options 351,000 0.40 Balance, December 31, 2021 3,590,907 0.35 Balance, March 31, 2022 3,590,907 0.35 (i) The grant date fair value of the February 2021 Compensation Options were estimated at $ 68,078 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 February 2021 0.26 % 0 % 100 % C$ 0.40 3 years Schedule of Warrants Outstanding Broker Option Exercise Prices Exercise Number of Expiry date price (C$) broker options Fair value ($) 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 Stock options The following table summarizes the stock option activity during the three months ended March 31, 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 Balance, March 31, 2022 9,053,136 $ 0.58 (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 $ 54,735 for the quarter ended March 31, 2022 and $ 204,213 for the year ended December 31, 2021, which are included in operation and administration expenses on the consolidated statements of income (loss) and comprehensive income (loss). 16 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) 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 The following table reflects the actual stock options issued and outstanding as of March 31, 2022: Schedule of Stock Option Issued and Outstanding Weighted average Number of remaining Number of options Exercise contractual options vested Grant date price (C$) life (years) outstanding (exercisable) fair value ($) $ 10.00 0.00 47,500 47,500 $ 258,013 0.50 0.02 235,000 235,000 46,277 0.60 0.03 200,000 200,000 52,909 0.60 0.45 1,575,000 1,575,000 435,069 0.55 2.01 5,957,659 1,489,415 1,536,764 0.335 0.45 1,037,977 1,037,977 204,213 9,053,136 4,584,892 $ 2,533,245 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 three months ended March 31, 2022: Schedule of Restricted Share Units Weighted average grant date fair value Number of per share shares (C$) Unvested as at December 31, 2020 988,990 $ 0.39 Granted 1,348,434 0.38 Vested ( 1,516,299 ) 0.41 Forfeited ( 245,125 ) 0.52 Unvested as at December 31, 2021 576,000 $ 0.62 Granted 500,000 0.31 Vested ( 500,000 ) 0.31 Unvested as at March 31, 2022 576,000 $ 0.62 (i) On April 14, 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 resulted in stock-based compensation of $ 14,023 and $ 26,968 for the three months ended March 31, 2022 and 2021, respectively, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss). 17 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) (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 resulted in stock-based compensation of $ 4,757 and $ 9,148 for the three months ended March 31, 2022 and 2021, 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 resulted in stock-based compensation of $ 4,158 and $ 7,996 for the three months ended March 31, 2022 and 2021, respectively, 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 resulted in stock-based compensation of $nil and $ 49,112 for the three months ended March 31, 2022 and 2021, respectively, 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. 245,128 RSUs vested immediately with the remaining RSUs vesting in one twelfth increments per month. During the year ended 2021, a total of 490,258 RSUs vested, and in July 2021, the consultant forfeited the remaining 245,125 unvested RSUs, resulting in a reversal of share-based compensation of $ 64,870 . The vesting of these RSUs resulted in stock-based compensation of $ nil and $ 212,878 for the three months ended March 31, 2022 and 2021, respectively. (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 $ nil for the three months ended March 31, 2022 and 2021, respectively. (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 $ nil for the three months ended March 31, 2022 and 2021, respectively. (vii) On January 10, 2022, the Company granted 500,000 RSUs to a consultant of the Company, vesting immediately. The vesting of these RSUs resulted in stock-based compensation of $ 122,249 for the three months ended March 31, 2022, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss). 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. 18 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) The following table summarizes the DSU activity during the three months ended March 31, 2022 and 2021: Schedule of Deferred Share Units Weighted average grant date fair value Number of per share shares (C$) Unvested as at December 31, 2020 and March 31, 2021 (i) 7,500,000 $ 1.03 - Unvested as at December 31, 2021 5,625,000 $ 1.03 Vested (ii) ( 625,000 ) 1.03 Unvested as at March 31, 2022 5,000,000 $ 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 months ended March 31, 2022, and 2021 the Company recognized $ 199,921 and $ 85,535 , respectively, recovery of stock-based compensation related to the DSUs, which is included in operation and administration expenses on the condensed interim consolidated statements of income (loss) and comprehensive income (loss). The fair value at March 31, 2022 was $ 1,331,488 . (ii) On March 31, 2022, the Board approved the early vesting of 625,000 DSUs for one of the Company’s Directors 12. Commitments and Contingencies As stipulated in the agreement with the EPA and as described in Note 6, the Company is required to make two types of payments to the EPA and IDEQ, one for historical water treatment cost-recovery to the EPA, and the other for ongoing water treatment. Water treatment costs incurred through December 2021 are payable to the EPA, and water treatment costs incurred thereafter are payable to the IDEQ. The IDEQ (formerly the EPA) invoices the Company on an annual basis for the actual water treatment costs, which may exceed the recognized estimated costs significantly. When the Company receives the water treatment invoices, it records any liability for actual costs over and above any estimates made and adjusts future estimates as required based on these actual invoices received. The Company is required to pay for the actual costs regardless of the periodic required estimated accruals and payments made each year. As at March 31, 2022 and December 31, 2021, $ 5,185,709 and $ 5,110,706 , respectively, is payable to the EPA and IDEQ, which has been included in accounts payable and accrued liabilities. The majority of these amounts relate to the EPA, given that they primarily relate to costs incurred through December 2021. The Company pays a lease under a lease agreement which expires in May 2022 . Monthly rental expenses are approximately C$ 26,000 and are offset by rental income obtained through short-term subleases held by the Company. See note 8. 19 Bunker Hill Mining Corp. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) Three Months Ended March 31, 2022 (Expressed in United States Dollars) 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. On September 20, 2021, the Company filed a motion to dismiss Crescent’s claims against it, contending that such claims are facially deficient.  On March 2, 2022, Chief US District Court Judge, David C. Nye granted in part and denied in part the Company’s motion to dismiss. The court granted the Company’s motion to dismiss Crescent’s Cost Recovery claim under CERCLA Section 107(a), Declaratory Judgment, Tortious Interference, Trespass, Nuisance and Negligence claims. These claims were dismissed without prejudice. The court denied the motion to dismiss filed by Placer Mining Corp. for Crescent’s trespass, nuisance and negligence claims. Crescent later filed it amended complaint on April 1, 2022. Placer Mining Corp. and Bunker Hill Mining Corp are named as co-defendants. Bunker Hill and Placer have until May 20, 2022 to respond to the amended filing. The Company believes Crescent Mining LLC’s lawsuit against Placer Mining Corp. is without merit and intends to defend Placer Mining Corp. vigorously pursuant to the Company’s indemnification of Placer Mining Corp in the Sale and Purchase agreement executed between the companies for Bunker Hill Mine on December 15, 2021. On October 26, 2021, the Company asserted claims against Crescent in a separate lawsuit. Bunker Hill Mining Corporation v. Venzee Technologies Inc. et al, Case No. 2:21-cv-209-REP, filed in the same court on May 14, 2021. The Company has subsequently executed a tolling agreement with Venzee in exchange for dropping its lawsuit. The Company originally filed this lawsuit on May 14, 2021 against other parties but has since filed an amended complaint to include its claims against Crescent. 13. Related party transactions 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 March 31, 2022 Three Months Ended March 31, 2021 Consulting Fees and Salaries $ 1,097,610 $ 324,619 At March 31, 2022 and March 31, 2021, $ 825,776 and $ 171,223 , respectively is owed to key management personnel with all amounts included in accounts payable and accrued liabilities. 14. Subsequent Events On April 1, 2022, the Company announced that it had closed the private placement of 37,849,325 Special Warrants, and concurrent non-brokered private placement of 1,471,644 units of the Company (the “Non-Brokered Units”) for aggregate gross proceeds of approximately $ 11,796,297 (the “Offering”). Of this amount, $ 1,775,790 was received prior to the end of the quarter and is included in Subscriptions received in the equity section of the balance sheet. Pursuant to the Offering, the Company issued 37,849,325 Special Warrants at a price of $ 0.30 per Special Warrant. Each Special Warrant is 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 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 in which the purchasers of the Special Warrants were sold 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 “Final Qualification Prospectus”); and (B) notification that the registration statement, of which this Prospectus is a part, has been declared effective by the SEC (the “Registration Statement”); and (ii) October 1, 2022. Each Brokered Unit consists of one Common Share and one Warrant. Each whole Warrant will entitle the holder to acquire one Common Share (a “Warrant 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. In addition, pursuant to the Offering, the Company issued 1,471,644 Non-Brokered Units at a price of $ 0.30 per Non-Brokered Units. Each Non-Brokered Unit consists of one Common Share and one Warrant. Each whole Warrant will entitle the holder to acquire one Warrant Share for C$ 0.37 until April 1, 2025. Related parties, including management, directors and officers purchased 4,537,160 of Non-Brokered Units for a total of $ 1,361,148 of gross cash proceeds to the Company. On May 13, 2022, the Company issued 10,416,667 units of the Company to Teck Resources Limited at an issue price of C$ 0.30 per unit, or C$ 3,125,000 (US$ 2,500,000 ), which together with the $ 500,000 cash payment made in January 2022, satisfies the purchase price of $ 3,000,000 and applicable sales tax for the Pend Oreille Mill. Each unit consists of one common share and one common share purchase warrant. Each whole warrant entitles the holder to acquire one common share at a price of C$ 0.37 for a period of three years. 20