Comstock Inc 10-Q for FY2020 Q2

Comstock Inc. (LODE)

10-Q 2020-08-14 For: 2020-06-30

Added on April 10, 2026

About this 10-Q

Comstock Inc filed this 10-Q on August 14, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $48.38K; up 9.5% from $44.18K a year earlier
Net income: $1.28M; compared with a net loss of $2.08M a year earlier
Diluted EPS: $0.05; compared with -$0.13 a year earlier

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Nevada	1040	65-0955118
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)



Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐



PART I – FINANCIAL INFORMATION
Item 1. Financial Statements.	4
CONDENSED CONSOLIDATED BALANCE SHEETS	5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS	7
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY	8
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	32
Item 3. Quantitative and Qualitative Disclosures About Market Risk	51
Item 4. Controls and Procedures.	51
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.	53
Item 1A. Risk Factors.	54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	54
Item 3. Defaults Upon Senior Securities.	55
Item 4. Mine Safety Disclosures.	55
Item 5. Other Information.	56
Item 6. Exhibits.	57
Signatures	59



	June 30, 2020			December 31, 2019
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	968,211		$	1,015,857
Assets held for sale, net (Note 2)	10,512,066			10,512,066
Prepaid expenses and other current assets (Note 3)	2,467,258			1,821,627
Total current assets	13,947,535			13,349,550

Mineral rights and properties, net (Note 4)	5,690,885			5,690,885
Properties, plant and equipment, net (Note 5)	7,651,495			7,935,021
Reclamation bond deposit	2,695,573			2,688,962
Retirement obligation asset (Note 6)	86,945			115,926
Investment in Tonogold shares (Note 19)	10,396,656			9,080,000
Investment in Pelen	602,500			—
Investment in Sierra Springs common shares	335,000			335,000
Contingent forward asset (Note 15)	2,646,334			—
Other assets	348,125			374,548

TOTAL ASSETS	$	44,401,048		$	39,569,892

LIABILITIES AND EQUITY

CURRENT LIABILITIES:
Accounts payable	$	1,088,889		$	922,553
Accrued expenses and other liabilities (Note 7)	1,134,963			1,855,431
Deposits (Note 8)	1,762,790			318,384
Liabilities held for sale, net (Note 2)	1,019,705			1,019,705
Long-term debt– current portion (Note 9)	5,032,252			328,068
Total current liabilities	10,038,599			4,444,141

LONG-TERM LIABILITIES:
Long-term debt (Note 9)	186,421			5,084,006
Long-term reclamation liability (Note 10)	6,044,563			6,034,208
Other liabilities	496,692			514,977
Total long-term liabilities	6,727,676			11,633,191

Total liabilities	16,766,275			16,077,332

COMMITMENTS AND CONTINGENCIES (Note 12)

EQUITY:
Preferred Stock, $.000666 par value, 50,000,000 shares authorized, no shares issued	—			—
Common stock, $.000666 par value, 158,000,000 shares authorized, 28,815,000 and 27,236,489 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	19,190			18,139
Additional paid-in capital	262,198,924			259,095,152
Accumulated deficit	(234,877,498		)	(235,890,272		)

Total Comstock Mining Inc. stockholders' equity	27,340,616			23,223,019
Noncontrolling interest	294,157			269,541
Total equity	27,634,773			23,492,560

TOTAL LIABILITIES AND EQUITY	$	44,401,048		$	39,569,892



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
REVENUES
Revenue - mining	$	—		$	—		$	—		$	—
Revenue - real estate	48,375			44,184			96,800			81,782
Total revenues	48,375			44,184			96,800			81,782

COSTS AND EXPENSES
Costs applicable to mining revenue	47,332			505,393			173,225			1,010,785
Real estate operating costs	15,320			12,288			28,916			22,711
Exploration and mine development	151,666			241,538			288,387			466,379
Mine claims and costs	122,069			136,901			244,139			287,855
Environmental and reclamation	30,972			(362,826		)	57,770			(308,349		)
General and administrative	891,953			964,268			1,737,181			1,624,634
Total costs and expenses	1,259,312			1,497,562			2,529,618			3,104,015

LOSS FROM OPERATIONS	(1,210,937		)	(1,453,378		)	(2,432,818		)	(3,022,233		)

OTHER INCOME (EXPENSE) (Note 17)
Change in estimated fair value of contingent forward asset	351,091			—			1,413,382			—
Interest expense	(91,656		)	(181,907		)	(142,244		)	(643,045		)
Other income (expense)	2,227,488			(442,459		)	2,174,454			(247,531		)
Total other income (expense), net	2,486,923			(624,366		)	3,445,592			(890,576		)

NET INCOME (LOSS)	1,275,986			(2,077,744		)	1,012,774			(3,912,809		)

Less: net income (loss) attributable to noncontrolling interest	—			—			—			—

NET INCOME (LOSS) ATTRIBUTABLE TO COMSTOCK MINING INC.	$	1,275,986		$	(2,077,744	)	$	1,012,774		$	(3,912,809	)

Basic income per common share:
Net income (loss) per share	$	0.05		$	(0.13	)	$	0.04		$	(0.24	)
Weighted average common shares outstanding	28,253,242			16,594,983			27,758,899			16,199,927

Diluted income per common share:
Net income (loss) per share	$	0.05		$	(0.13	)	$	0.04		$	(0.24	)
Weighted average common shares outstanding	28,264,472			16,594,983			27,764,514			16,199,927



	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Preferred Stock				Common Stock			Additional Paid-in Capital			Accumulated Deficit			Noncontrolling interest in Subsidiary
	Shares	Amount			Shares	Amount		Amount			Amount			Amount		Total
BALANCE - January 1, 2019	—	$	—		15,067,655	$	50,175	$	241,419,897		$	(232,085,170	)	$	—	$	9,384,902

Issuance of common stock	—	—			1,090,400	3,631		809,930			—			—		813,561
Common stock issuance costs	—	—			—	—		(85,093		)	—			—		(85,093		)
Net Loss	—	—		—	—	—		—			(1,835,065		)	—		(1,835,065		)
BALANCE - March 31, 2019	0	$	—		16,158,055	$	53,806	$	242,144,734		$	(233,920,235	)	$	—	$	8,278,305

Issuance of common stock	—	—			941,945	3,137		921,621			—			—		924,758
Common stock issuance costs	—	—			—	—		(374,885		)	—			—		(374,885		)
Issuance of convertible preferred stock	1,274	1			—	—		1,514,999			—			—		1,515,000
Net Loss	—	—			—	—		—			(2,077,744		)	—		(2,077,744		)
BALANCE - June 30, 2019	1,274	$	1		17,100,000	$	56,943	$	244,206,469		$	(235,997,979	)	$	—	$	8,265,434

	Preferred Stock				Common Stock			Additional Paid-in Capital			Accumulated Deficit			Noncontrolling interest in Subsidiary
	Shares	Amount			Shares	Amount		Amount			Amount			Amount		Total
BALANCE - January 1, 2020	—	$	—		27,236,489	$	18,139	$	259,095,152		$	(235,890,272	)	$	269,541	$	23,492,560

Issuance of common stock	—	—			638,511	425		242,196			—			—		242,621
Common stock issuance costs	—	—			—	—		(50,070		)	—			—		(50,070		)
Initial value of contingent forward	—	—			—	—		1,232,952			—			—		1,232,952
Sale of membership interests in Comstock Mining, LLC	—	—			—	—		100,000			—			—		100,000
Net (Loss)	—	—			—	—		—			(263,212		)	—		(263,212		)
BALANCE - March 31, 2020	—	$	—		27,875,000	$	18,564	$	260,620,230		$	(236,153,484	)	$	269,541	$	24,754,851

Investment in Mercury Clean Up LLC	—	—			625,000	416		314,271			—			—		314,687
Director compensation	—	—			315,000	210		176,190			—			—		176,400
Investment in Pelen LLC	—	—			—	—		585,000			—			—		585,000
Employee share-based compensation	—	—			—	—		27,849			—			—		27,849
Sale of membership interests in Comstock Mining, LLC	—	—			—	—		475,384			—			24,616		500,000
Net Income	—	—			—	—		—			1,275,986			—		1,275,986
BALANCE - June 30, 2020	—	$	—		28,815,000	$	19,190	$	262,198,924		$	(234,877,498	)	$	294,157	$	27,634,773



	June 30, 2020		December 31, 2019
DTSS (Land)	$	3,589,876	$	3,589,876
Industrial Park (Land and water rights)	2,738,462		2,738,462
Daney Ranch (Land and buildings)	2,146,575		2,146,575
Lucerne Mine (Mineral rights and properties) (Note 19)	1,539,197		1,539,197
Lucerne Properties (Reclamation asset, net)	19,590		19,590
Gold Hill Hotel (Land and buildings)	478,366		478,366
Total assets held for sale	$	10,512,066	$	10,512,066



	June 30, 2020		December 31, 2019
Lucerne Properties (Reclamation liabilities)	$	1,019,705	$	1,019,705
Total liabilities held for sale	$	1,019,705	$	1,019,705



	June 30, 2020		December 31, 2019
Land and property deposits	$	10,100	$	10,100
Deposit for Mercury Clean Up	1,751,050		1,501,050
Surety bond and insurance	169,043		110,558
Advance to Sierra Springs Opportunity Fund	140,000		—
Permit bond	100,000		—
Investor relations subscription	39,694		—
Other	257,371		199,919
Total prepaid expenses and other current assets	$	2,467,258	$	1,821,627



	June 30, 2020		December 31, 2019
Dayton resource area	$	2,932,226	$	2,932,226
Occidental area	1,002,172		1,002,172
Spring Valley area	810,000		810,000
Oest area	260,707		260,707
Northern extension	157,205		157,205
Northern targets	121,170		121,170
Other mineral properties	317,405		317,405
Water rights	90,000		90,000
Total mineral rights and properties	$	5,690,885	$	5,690,885



	June 30, 2020			December 31, 2019
Land and building	$	9,140,805		$	9,140,805
Vehicle and equipment	2,267,916			2,267,916
Processing and laboratory	21,113,177			21,113,177
Furniture and fixtures	549,860			549,860
	33,071,758			33,071,758
Less accumulated depreciation	(25,420,263		)	(25,136,737		)
Total properties, plant and equipment	$	7,651,495		$	7,935,021



	Six Months Ended			Twelve Months Ended
	June 30, 2020			December 31, 2019
Retirement obligation asset — beginning of period	$	115,926		$	203,274
Additional obligations incurred	—			—
Amounts reclassified to assets held for sale	—			(19,590		)
Amortization of retirement obligation asset	(28,981		)	(67,758		)
Retirement obligation asset — end of period	$	86,945		$	115,926



	June 30, 2020		December 31, 2019
Accrued make-whole for Mercury Clean Up LLC (Note 18)	$	—	$	452,740
Accrued interest expense	252,059		264,268
Accrued insurance liabilities	41,288		—
Accrued Northern Comstock Joint Venture	407,083		180,833
Accrued payroll costs	144,450		165,543
Accrued make-whole for Pelen LLC (Note 18)	—		222,602
Accrued Board of Directors fees	90,000		120,000
Accrued vendor liabilities	140,604		309,515
Other accrued expenses	59,479		139,930
Total accrued expenses and other liabilities	$	1,134,963	$	1,855,431



Note Description	June 30, 2020			December 31, 2019
Senior Secured Debenture (GF Comstock 2) - 11% interest, due Dec 2020.	$	4,756,901		$	4,929,277
Note Payable (Caterpillar Financial Services) - 5.75% interest.	541,116			645,891
Total debt	5,298,017			5,575,168
Less: long-term debt discounts and issuance costs	(79,344		)	(163,094		)
Total debt, net of discounts and issuance costs	5,218,673			5,412,074
Less: current maturities	(5,032,252		)	(328,068		)
Long-term debt, net of discounts and issuance costs	$	186,421		$	5,084,006



Cash paid for amounts included in the measurement of lease liabilities	$	4,500
Right-of-use assets obtained in exchange for operating lease obligations	$	1,978



Remainder of 2020	$	4,550
2021	9,350
2022	9,650
2023	9,950
2024	10,250
Thereafter	42,050
Total operating lease payments	85,800
Less: Imputed interest	30,799
Present value of lease liabilities	$	55,001



Exhibit Number		Exhibit

10.1		Amended and Restated Membership Interest Purchase Agreement, dated March 20, 2020 between Comstock Mining Inc, and Tonogold Resources, Inc. (previously filed with the Securities and Exchange Commission on March 25, 2020 as exhibit 10.1 to the Company's Form 8-K (file number 001-35200/film number 20743365) and incorporated herein by reference)

31*		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities Exchange Act of 1934, as amended.

32*		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

95*		Mine Safety Disclosures.

101*		Interactive Data File (Quarterly Report on Form 10-Q, for the periods ended June 30, 2020, furnished in XBRL (extensible Business Reporting Language)).

		Attached as Exhibit 101 to this report are the following documents formatted in XBRL: (i) the Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019, (ii) the Condensed Consolidated Statements of Operations for the three months ended June 30, 2020 and 2019, (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 and (iv) the Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.



	June 30, 2020		December 31, 2019
Deposits toward sale of non-mining assets	$	410,100	$	310,100
Prepaid Tonogold expense reimbursements	1,071,732		—
Prepayment of placement proceeds	205,000		—
Paycheck Protection Program grant	67,624		—
Lease income	8,334		8,284
Total deposits	$	1,762,790	$	318,384



Lease Assets and Liabilities	Classification	June 30, 2020
Operating lease right-of-use asset	Other assets	$	53,353

Operating lease liability - current	Accrued expenses and other liabilities	$	3,310
Operating lease liability - long-term	Other liabilities	51,691
Total operating lease liabilities		$	55,001



			Fair Value Measurements at
			June 30, 2020
	Total		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Convertible preferred shares of Tonogold (Note 19)	$	7,935,000	$	—	$	—	$	7,935,000
Common shares of Tonogold (Note 19)	2,461,656		2,461,656		—		—
Contingent forward asset	2,646,334		—		—		2,646,334
Total Assets	$	13,042,990	$	2,461,656	$	—	$	10,581,334



	Three Months Ended June 30,					Six Months Ended June 30,
	2020			2019		2020			2019
Beginning balance	$	11,090,243		$	—	$	9,080,000		$	—
Total gains or losses recognized in earnings	591,091			—		1,368,382			—
Additions				4,995,000		1,232,952			4,995,000
Transfers to Level 1	(1,100,000		)	—		(1,100,000		)	—
Ending balance	$	10,581,334		$	4,995,000	$	10,581,334		$	4,995,000



	As of June 30,		As of December 31,
	2020		2019
Assets
Mining	$	34,902,878	$	30,106,865
Real estate	9,498,170		9,463,027
Total assets	$	44,401,048	$	39,569,892



	June 30, 2020			June 30, 2019			Change
Revenue - mining	$	—		$	—		$	—
Revenue - real estate	48,375			44,184			4,191

Costs applicable to mining revenue	47,332			505,393			(458,061		)
Real estate operating costs	15,320			12,288			3,032
Exploration and mine development	151,666			241,538			(89,872		)
Mine claims and costs	122,069			136,901			(14,832		)
Environmental and reclamation	30,972			(362,826		)	393,798
General and administrative	891,953			964,268			(72,315		)
Total costs and expenses	1,259,312			1,497,562			(238,250		)

Loss from operations	(1,210,937		)	(1,453,378		)	242,441
OTHER INCOME (EXPENSE)
Change in estimated fair value of contingent forward	351,091			—			351,091
Interest expense	(91,656		)	(181,907		)	90,251
Other income (expense)	2,227,488			(442,459		)	2,669,947
Other income (expense), net	2,486,923			(624,366		)	3,111,289
NET INCOME (LOSS)	$	1,275,986		$	(2,077,744	)	$	3,353,730



Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (Unaudited)	5

Condensed Consolidated Statements of Operations for the three and six month periods ended June 30, 2020 and 2019 (Unaudited)	7

Condensed Consolidated Statements of Changes in Equity for the three and six month periods ended June 30, 2020 and 2019 (Unaudited)	8

Condensed Consolidated Statements of Cash Flows for the six month periods ended June 30, 2020 and 2019 (Unaudited)	9

Notes to Condensed Consolidated Financial Statements (Unaudited)	12



		COMSTOCK MINING INC.
		(Registrant)

Date:	August 13, 2020	By:	/s/ Corrado De Gasperis
			Name: Corrado De Gasperis
			Title: Executive Chairman and Chief Executive Officer (Principal Executive, Financial, and Accounting Officer)



/s/ Corrado De Gasperis
Corrado De Gasperis
Executive Chairman and Chief Executive Officer (Principal Executive, Financial, and Accounting Officer)



Mining Operating Name MSHA Identification Number	Section 104S&S Citations	Section 104(b) Orders	Section 104(d) Citations and Orders	Section 110(b)(2) Violations	Section 107(a) Orders	Total Dollar Value of MSHA Assessments Proposed		Total Number Of Mining Related Fatalities	Received Notice of Pattern of Violations Under 104(3)	Received Notice of Potential to Have Pattern of Violations Under Sections 104(3)	Legal Actions Pending as of Last Day of Period	Legal Actions Initiated During Period	Legal Actions Resolved During Period
26-01871	—	—	—	—	—	$	—	—	No	No	No	—	—
26-02771	—	—	—	—	—	$	—	—	No	No	No	—	—