Capital Stock, Warrants and Stock Options | 10. 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 On May 23, 2019, the Company affected a consolidation of its issued and outstanding share capital on the basis of one (1) post-consolidation share for each ten (10) pre-consolidation common shares, which has been retrospectively applied in these consolidated financial statements. On July 19, 2019, the Company amended its articles of incorporation to change the total authorized capital and the par values, which have been retrospectively applied in these consolidated financial statements. Issued and outstanding On June 27, 2019, the Company closed the first tranche (the “First Tranche”) of a non-brokered private placement, issuing 11,660,000 units (“June 2019 Unit”) at a price of C$0.05 per June 2019 Unit for gross proceeds of C$583,000 ($436,608) and incurring financing costs of $19,640. Each June 2019 Unit consists of one common share of the Company and one common share purchase warrant (“June 2019 Warrant”). Each whole June 2019 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. As a part of the First Tranche, Hummingbird has acquired 2,660,000 June 2019 Units for C$133,000 ($100,000) which was applied to reduction of the principal amount owing under the convertible loan facility (see note 7). On August 1, 2019, the Company closed the second and final tranche of the non-brokered private placement, issuing 6,042,954 units (the “August 2019 Units”) at C$0.05 per August 2019 Unit for gross proceeds of C$302,148 ($228,202) and incurring financing costs of $36,468. Each August 2019 Unit consists of one common share of the Company and one common share purchase warrant, which entitles the holder to acquire one common share at a price of C$0.25 per common share for a period of two years. The Company also issued 16,962,846 August 2019 Units to settle $640,556 of debt at a deemed price of C$0.09 based on the fair value of the shares issued. As a result, the Company recorded resulting in loss on debt settlement of $858,495. On August 23, 2019, the Company closed the first tranche of a non-brokered private placement, issuing 27,966,002 common shares of the Company at C$0.05 per common share for gross proceeds of C$1,398,300 ($1,049,974) and incurring financing costs of $28,847. The Company also issued 2,033,998 common shares to settle $77,117 of debt at a deemed price of C$0.18 based on the fair value of the shares issued. As a result, the Company recorded a loss on debt settlement of $197,800. On August 30, 2019, the Company closed the second and final tranche of the non-brokered private placement, issuing 1,000,000 common shares at C$0.05 per common share for gross proceeds of C$50,000 ($37,550). 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 7). 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). During the year ended June 30, 2020, the Company issued 1,403,200 June 2019 Units and 1,912,000 August 2019 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. 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, an “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. 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 in the consolidated statements of loss 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. 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 consolidated statement of operations and comprehensive loss as a gain or loss and is estimated using the Binomial model. 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 December 31, 2020: August 2020 issuance August 14, 2020 December 31, 2020 Expected life 1112 days 973 days Volatility 100 % 100 % Risk free interest rate 1.53 % 1.31 % Dividend yield 0 % 0 % Share price $ 0.42 $ 0.41 Fair value $ 15,746,380 $ 14,493,215 Change in derivative liability $ 1,253,165 The warrant liabilities as a result of the December 2017, August 2018, November 2018, June 2019 and August 2019 private placements were revalued as at December 31, 2020 and June 30, 2020 using the Binomial model and the following assumptions: December 2017 issuance June 30, 2020 December 31, 2020 Expected life 166 days Expired Volatility 100 % Risk free interest rate 0.69 % Dividend yield 0 % Share price $ 0.73 Fair value $ 0 $ 0 Change in derivative liability $ 0 August 2018 issuance June 30, 2020 December 31, 2020 Expected life 405 days 221 days Volatility 100 % 100 % Risk free interest rate 1.20 % 1.23 % Dividend yield 0 % 0 % Share price $ 0.73 $ 0.41 Fair value $ 6,132 $ 0 Change in derivative liability $ 6,132 November 2018 issuance June 30, 2020 December 31, 2020 Expected life 516 days 332 days Volatility 100 % 100 % Risk free interest rate 1.34 % 1.09 % Dividend yield 0 % 0 % Share price $ 0.73 $ 0.41 Fair value $ 206,253 $ 52,540 Change in derivative liability $ 153,713 June 2019 issuance (i) June 30, 2020 December 31, 2020 Expected life 363 days 1826 days Volatility 100 % 100 % Risk free interest rate 1.15 % 0.85 % Dividend yield 0 % 0 % Share price $ 0.73 $ 0.41 Fair value $ 6,582,920 $ 3,438,839 Change in derivative liability $ 3,144,081 (i) During the six months ended December 31, 2020, the Company amended the exercise price to C$0.59 per common share and extended the expiry date to December 31, 2025 for 11,660,000 warrants. August 2019 issuance (ii) June 30, 2020 December 31, 2020 Expected life 397 days 213-1826 days Volatility 100 % 100 % Risk free interest rate 1.11 % 0.81 % Dividend yield 0 % 0 % Share price $ 0.73 $ 0.41 Fair value $ 11,631,921 $ 5,922,270 Change in derivative liability $ 5,709,651 (ii) During the six months ended December 31, 2020, the Company amended the exercise price to C$0.59 per common share and extended the expiry date to December 31, 2025 for 17,920,000 warrants. The terms of the remaining 2,752,900 warrants remain unchanged. Warrants Weighted Weighted average average Number of exercise price grant date warrants (C$) value ($) Balance, June 30, 2019 13,046,484 $ 0.88 $ 0.27 Issued 27,360,284 0.27 0.03 Expired (229,464 ) 8.50 3.54 Exercised (i) (2,332,900 ) 0.25 0.02 Balance, June 30, 2020 37,844,404 $ 0.43 $ 0.09 Issued 58,284,148 0.50 0.11 Expired (350,746 ) 14.84 5.63 Balance, December 31, 2020 95,777,806 $ 0.54 $ 0.08 (i) During the year ended June 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. (ii) During the six months ended December 31, 2020, the Company amended the exercise price to C$0.59 per share and extended the expiry date to December 31, 2025 for 3,315,200 finder’s warrants. As a result, the Company recognized stock-based compensation of $210,839, which is included in operation and administration expenses on the consolidated statements of loss and comprehensive loss. Number of Exercise Number of warrants Expiry date price (C$) warrants exercisable August 1, 2021 0.25 2,752,900 2,752,900 August 9, 2021 4.50 160,408 160,408 November 28, 2021 1.00 645,866 645,866 November 13, 2021 0.80 400,000 400,000 November 13, 2021 0.50 400,000 400,000 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 95,777,806 95,777,806 Broker options Weighted Number of average broker exercise price options (C$) Balance, June 30, 2019 and June 30, 2020 - $ - Issued - August 2020 Compensation Options 3,239,907 0.35 Balance, December 31, 2020 3,239,907 $ 0.35 (i) The grant date fair value of the August 2020 Compensation Options were estimated at $521,993 using the Black-Scholes valuation model with the following underlying assumptions: Risk free interest rate Dividend yield Volatility Stock price Weighted average life 0.31 % 0 % 100 % C$0.35 3 years Exercise Number of Expiry date price (C$) broker options Fair value ($) August 31, 2023 (i) 0.35 3,239,907 521,993 (i) Exercisable into one August 2020 Unit Stock options The following table summarizes the stock option activity during the years ended December 31, 2020: Weighted average Number of exercise price stock options (C$) Balance, June 30, 2019 287,100 $ 7.50 Granted (i)(ii) 7,532,659 0.56 Forfeited (239,600 ) 9.78 Balance, June 30, 2020 7,580,159 $ 0.62 Granted (iii)(iv) 435,000 0.55 Balance, December 31, 2020 8,015,159 $ 0.62 (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 $74,949 for the six months ended December 31, 2020 (years ended June 30, 2020 and 2019 - $309,211 and $nil, respectively), which is included in operation and administration expenses on the consolidated statements of loss and comprehensive 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 $403,456 (years ended June 30, 2020 and 2019 - $162,855 and $nil, respectively), which is included in operation and administration expenses on the consolidated statements of loss and comprehensive 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 $20,259 for the six months ended December 31, 2020 (years ended June 30, 2020 and 2019 - $nil), which is included in operation and administration expenses on the consolidated statements of loss and comprehensive loss. (iv) On October 30, 2020, 235,000 stock options were issued to a former director. Each stock option entitles the holder to acquire one common share of the Company at an exercise price of C$0.50. The stock options vested immediately and expire on December 31, 2022. The grant date fair value of the options was estimated at $46,277. The vesting of these options resulted in stock based compensation of $46,277 for the six months ended December 31, 2020 (years ended June 30, 2020 and 2019 $nil), which is included in operation and administration expenses on the consolidated statements of loss and comprehensive loss. The fair value of these stock options was determined on the date of grant using the Black-Scholes valuation model, and using the following underlying assumptions: Risk free interest rate Dividend yield Volatility Stock price Weighted average life (i) 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) 0.26 % 0 % 100 % C$0.49 2.2 years The following table reflects the actual stock options issued and outstanding as of December 31, 2020: Weighted average Number of remaining Number of options Exercise contractual options vested Grant date price (C$) life (years) outstanding (exercisable) fair value ($) 10.00 1.33 47,500 47,500 258,013 0.50 2.00 235,000 235,000 46,277 0.60 2.75 200,000 - 52,909 0.60 3.82 1,575,000 975,000 435,069 0.55 4.30 5,957,659 - 1,536,764 8,015,159 1,257,500 2,329,032 |