# Comstock Inc.: Form 10-Q for the period ended Jun 30, 2020

- Company: [Comstock Inc.](/companies/lode.md) (CIK 1120970)
- Form: 10-Q
- Filed: 2020-08-14
- Accepted by EDGAR: Aug 13, 2020, 17:32 ET
- Period: 2020-06-30
- Accession: 0001120970-20-000032
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1120970/000112097020000032/lode-20200630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1120970/000112097020000032/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-04-01 to 2020-06-30 | $48.4k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2020-01-01 to 2020-06-30 | $96.8k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2020-04-01 to 2020-06-30 | −$1.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2020-01-01 to 2020-06-30 | −$2.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2020-04-01 to 2020-06-30 | $91.7k | us-gaap:InterestExpense |
| Interest expense | 6 months, 2020-01-01 to 2020-06-30 | $142.2k | us-gaap:InterestExpense |
| Net income | 3 months, 2020-04-01 to 2020-06-30 | $1.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2020-01-01 to 2020-06-30 | $1.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-04-01 to 2020-06-30 | $0.05 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2020-01-01 to 2020-06-30 | $0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-04-01 to 2020-06-30 | $0.05 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2020-01-01 to 2020-06-30 | $0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-04-01 to 2020-06-30 | 28,264,472 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2020-01-01 to 2020-06-30 | 27,764,514 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2020-01-01 to 2020-06-30 | −$381.2k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2020-04-01 to 2020-06-30 | $11.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Capital expenditure | 6 months, 2020-01-01 to 2020-06-30 | $11.0k | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2020-06-30 | $968.2k | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2020-06-30 | $13.9m | us-gaap:AssetsCurrent |
| Total assets | at 2020-06-30 | $44.4m | us-gaap:Assets |
| Current liabilities | at 2020-06-30 | $10.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2020-06-30 | $16.8m | us-gaap:Liabilities |
| Long-term debt | at 2020-06-30 | $186.4k | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2020-06-30 | $5.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2020-06-30 | $27.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,955 characters.

The following discussion provides information that we believe is relevant to an assessment and understanding of the consolidated results of operations and financial condition of the Company as of and for the six-month period ended June 30, 2020. It should be read in conjunction with the condensed consolidated financial statements and accompanying notes included in this Form 10-Q and our Annual Report on Form 10-K as of, and for the fiscal year ended December 31, 2019.

### Overview

Unless the context otherwise indicates, the terms “Comstock,” “we,” “us,” “our,” “our Company” or “the Company” mean Comstock Mining Inc. and its consolidated subsidiaries.

The Company is a Nevada-based, gold and silver mining exploration, development and production company with extensive, contiguous property in the historic Comstock and Silver City mining districts (collectively, the “Comstock District”) and is an emerging leader in sustainable, responsible mining and is currently commercializing environment-enhancing, precious-metal-based technologies, products, and processes for precious metals recovery.

The Company began acquiring properties in the Comstock District in 2003. Since then, the Company has consolidated a significant portion of the Comstock District, amassed the single largest known repository of historical and current geological data on the Comstock region, secured permits, built an infrastructure and completed two phases of test production. The Company continues evaluating and acquiring properties inside and outside the district, expanding its footprint and evaluating all our existing and prospective opportunities for further exploration, development and mining. The Company’s goal is to grow per-share value by commercializing environment-enhancing, precious-metal-based products and processes that generate a rate of predictable cash flow (throughput) and increase the long-term enterprise value of our northern Nevada based platform.

The Company and its subsidiaries now own or control approximately 9,224 acres of mining claims and parcels in the broader Comstock District and surrounding area. The acreage includes approximately 2,365 acres of patented claims and surface parcels (private lands) and approximately 6,859 acres of unpatented mining claims (public lands), which the Bureau of Land Management (“BLM”) administers. The Company's headquarters is on American Flat road, immediately north of the Lucerne resource area and just south of Virginia City, Nevada.

Because of the Comstock District’s historical significance, the geology is well known and has been extensively studied by the Company, our advisors and many independent researchers. We have expanded our understanding of the geology through vigorous surface mapping and drill hole logging. The volume of geologic data is immense, particularly in the Lucerne and Dayton resource areas. We have amassed a large library of historical data and detailed surface mapping of Comstock District properties and continue to obtain historical information from public and private sources. We integrate this data with information obtained from our recent mining operations, to target geological prospective exploration areas and plan exploratory drilling programs, including expanded surface and underground drilling.

Our Dayton resource area and the adjacent Spring Valley exploration targets are located in Lyon County, Nevada, approximately six miles south of Virginia City. Access to the properties is by State Routes 341 and 342, both paved roads.

Our Lucerne resource area is located in Storey County, Nevada, approximately three miles south of Virginia City and 30 miles southeast of Reno. The Lucerne resource area was host to the Company’s most-recent test mining operations from 2012 through 2015. The heap processing facility is in American Flat, approximately three quarters of a mile west of the Lucerne mine. Lucerne is the subject of ongoing assessment, exploration and development plans by Tonogold.

The Company achieved initial production and first poured gold and silver on September 29, 2012. The Company ceased mining in 2015 and concluded processing in 2016. From 2012 through 2016, the Company mined and processed approximately 2.6 million tons of mineralized material, and produced 59,515 ounces of gold and 735,252 ounces of silver.

#### Figure 1 - Comstock Mining's Land Position in the Comstock District

During 2019, the Company’s Board of Directors approved a transformational strategy focused on high-value, cash-generating, precious metal-based activities, (the “Strategic Focus”) including, but not limited to, metals exploration, engineering, resource development, economic feasibility assessments, mineral production, metal processing and related ventures of environmentally friendly, and economically enhancing mining technologies.

The Company advanced the Strategic Focus by facilitating the formation of a qualified opportunity zone fund named Sierra Springs Opportunity Fund Inc. and a qualified opportunity zone business named Sierra Springs Enterprises Inc. Sierra Springs Enterprises, Inc. has formally agreed to acquire Comstock’s non-mining assets.

### Comstock Mining's Corporate Realignment

#### Figure 2 - Comstock's Corporate Realignment

### Current Projects

The Company completed the realignment during 2019, such that the new corporate structure is now well aligned with the Strategic Focus. Comstock Mining Inc. remains as the parent company that wholly owns the realigned subsidiaries. Comstock Mining LLC owns or controls the Lucerne properties, including those contained in the Northern Comstock Joint Venture. Comstock Processing LLC owns the American Flat processing facility and additional land for potential expansion. Comstock Northern Exploration LLC owns or controls the remaining Storey County exploration targets, primarily located north of the Lucerne properties, including the Occidental Lode. Comstock Exploration & Development LLC owns or controls the Lyon County mining claims and exploration targets, including the Dayton Resource Area and the Spring Valley target. Comstock Industrial LLC owns the Silver Springs properties and water rights. Comstock Real Estate Inc. owns the Daney Ranch and the Gold Hill Hotel.

#### Exploration and Development

The Company has identified many exploration targets on its land holdings in the Comstock District, but has focused, to date, on the Dayton resource area and, through our collaboration with Tonogold Resources Inc. (“Tonogold”) the Lucerne resource area (including surface and underground exploration). We have also leased the remaining Storey County mineral claims, including the Occidental group and other exploration targets, to Tonogold, who has near-term plans for exploration and ultimately development towards economic feasibility on those assets. We are developing exploration plans for the remaining areas, primarily the Spring Valley group that we view as an extension of the Dayton resource area.

The Company's district-wide exploration and development plans contemplate three specific, geological areas that the Company has organized into wholly-owned subsidiaries called Comstock Exploration and Development LLC, Comstock Northern Exploration LLC, and the 45.43%-owned Comstock Mining LLC. Comstock Exploration and Development LLC includes the Dayton and Spring Valley areas. Comstock Northern Exploration LLC includes the Occidental and Gold Hill exploration targets now leased to Tonogold, and Comstock Mining LLC includes the Lucerne properties that Tonogold has agreed to acquire. These exploration targets represent over 7 miles of mineralized strike length, with current and historical grades of gold and silver, and significant historical mine production. Refer to Figure 3.

The Company retained royalties ranging from 1.5% to 3.0% on the Lucerne, Occidental and other properties.

#### Figure 3 - General Overview of Priority Exploration Targets

### Comstock Processing LLC (100% owner of the American Flat Processing Facility)

The processing facility is in the American Flat area of Gold Hill, NV, less than a mile west of Lucerne, and operated 24 hours per day, seven days per week, for substantially all of 2013 through 2016. During 2019, Comstock formed Comstock Processing LLC ("CPL"), a newly realigned, wholly-owned subsidiary that owns all of the property, plant, equipment and permits for the crushing, agglomerating, leaching, Merrill Crowe processing, mercury retort, refining, and metallurgical operations located at 1200 American Flat, Virginia City, NV. The facilities represent a fully permitted platform, best positioned for implementing our Strategic Focus on high-value, cash-generating, precious metal-based activities, including, but not limited to, metals exploration, engineering, resource development, economic feasibility assessments, mineral production, metal processing and related ventures of environmentally friendly, and economically enhancing mining technologies. To date, Comstock Processing has entered into two agreements that leverage its platform for nearer-term cash generation; first with Tonogold for the Lease-Option Agreement to lease and operate the facilities and second, with Mercury Clean Up LLC (“MCU”) for the commercial pilot of the MCU mercury remediation system.

#### CPL’s Lease Option with Tonogold

On November 18, 2019, the Company entered into a Lease Option Agreement (the "Lease-Option") to lease its permitted American Flat mining property, plant and equipment to Tonogold for crushing, leaching and processing material from the Lucerne mine (the "Lease Option Agreement"). Under the Lease-Option, Tonogold is required to reimburse the Company approximately $1.1 million in expenses to maintain the option. If the option is exercised, Tonogold will then pay the Company a rental fee of $1.0 million per year plus $1 per processed ton, in addition to all the costs of operating and maintaining the facility. After the first $15.0 million in rental fees are paid, the rental fee will step down to $1.0 million per year and $0.50 per processed ton for the next $10.0 million paid to the Company.

#### CPL’s Venture with Mercury Clean Up LLC

The second agreement is with Mercury Clean Up LLC ("MCU"), to pilot test new, cleaner technologies, in collaboration with Oro Industries Inc. (“Oro”), for the manufacture and global deployment of mercury remediation systems with proprietary mechanical, hydro, electro-chemical and oxidation processes to reclaim and remediate mercury from soils, waste and tailings. MCU has the exclusive, world-wide rights to four patentable technologies and equipment that we believe will demonstrate feasible, economic mercury remediation. Comstock provides the platform for testing the mercury remediation system and MCU will conduct the trials that prove scalable feasibility. MCU plans to deploy the solution globally and has secured its first major, international remediation project in the Philippines. Comstock’s award-winning mercury reclamation experience coupled with MCU’s technology and processing know-how positions a new, global growth opportunity consistent with the Company’s Strategic Focus.

Worldwide unregulated activity has released thousands of tons of mercury into the environment. The continued worldwide use of mercury in unregulated activities, primarily outside of the United States, is polluting air, soils, and waters and poisoning marine life and endangering lives. Ongoing, unregulated artisanal mining outside of the U.S. represents more than 40% of the ongoing mercury contamination and represents a tremendous opportunity for cleaning up the environment in a sustainable, profitable manner. Mercury will not go away by itself and must be removed to stop the pollution. Mercury can’t be broken down or destroyed, and MCU, in collaboration with Oro and the Company, is pioneering an effective solution.

Pursuant to the MCU Agreement, the Company committed $2.0 million of capital contributions payable in cash of $1.15 million and stock of $0.85 million, in exchange for 15% of the fully-diluted equity ownership of MCU and 50% of the equity of any future joint ventures formed with MCU. Through June 30, 2020, the Company has invested $0.90 million in cash and over $0.85 million in stock out of the 2.0 million commitment for MCU to demonstrate the feasibility of the Mercury Remediation System on CPL’s permitted platform.

Over the past seven years, Comstock has implemented several approved plans, by the Nevada Division of Environmental Protection (“NDEP”), intended to address NDEP’s and the U.S. Environmental Protection Agency (“EPA”) protocols, guidance and goals for sampling, characterizing, transporting and managing mercury within the Carson River Mercury Superfund Site. These plans and CPL’s existing, permitted infrastructure provide an ideal platform for evaluating the efficacy of the MCU process. MCU and the Company will work closely with NDEP for any additional approvals or permits.

The Company and MCU are evaluating numerous locations containing historical, mercury-contaminated tailings, and developing a detailed schedule for the pilot testing. MCU delivered sampling and testing equipment to the American Flat site in February 2020, and has begun taking samples of tailings at locations in the Carson River Mercury Superfund Site ("CRMSS")

to locate suitable material to commence testing. The remaining equipment began arriving at the Comstock on July 27, 2020, and should be assembled during August 2020 for initial test processing.

Based on successful proof of technical and economic viability, the Company and MCU would create a new, 50-50 venture called Comstock Mercury Remediation LLC for pursuing global business opportunities. The Company has the rights to invest in up to 25% of MCU and separately, 50% of the joint venture and expects to close on these transactions during the third and fourth quarters of 2020.

The Company entered into a second amendment of the MCU Agreement, on April 10, 2020, wherein, MCU and Comstock have identified an opportunity to remediate mercury in the Philippines, particularly in the province of Davao d' Oro (the “Philippine Opportunity”); where Comstock and MCU intend to form a new entity to engage profitably in the Philippine Opportunity. The Company made a cash investment of $0.1 million and committed a total of $3 million in equity and debt investments, and formed a new entity called MCU Philippines Inc. The Company investments, when completed, will result in the full 25% interest in MCU and direct 50% joint venture participations in both the MCU Philippines Inc. and Comstock Mercury Remediation LLC, the first two mercury remediation project opportunities.

#### CPL and Development of Clean Technologies

The ongoing testing of alternative technologies aligns with the Company’s Strategic Focus on responsible development. A breakthrough with cleaner technologies could result in higher, faster recoveries with reduced waste, shorter permitting cycle times and lower reclamation costs.

The Company continues exploring other partners and ventures that can leverage this fully-permitted platform for the development of cash-generating, precious metal-based activities, including, but not limited to, metals exploration, engineering, resource development, economic feasibility assessments, mineral production, metal processing and related ventures of environmentally-friendly, and economically enhancing mining technologies.

### Comstock Exploration & Development (100% owner of the Dayton Resource and Spring Valley Exploration Areas)

Our Dayton resource area and the adjacent Spring Valley exploration targets are located in Lyon County, Nevada, approximately six miles south of Virginia City. Access to the properties is by State Routes 341 and 342, both paved roads. The Dayton includes the historic Dayton, Kossuth and Alhambra patents, and the old Dayton Consolidated mine workings. The historic Dayton mine was the last meaningful underground mining operation in the Comstock District, before being closed after the War Act in October 1942, which closed down all gold mining operations in the United States and its territories.

The Dayton resource area ranks as the Company’s top exploration and development target. In January 2014, the Lyon County Board of Commissioners approved strategic master plan and zoning changes on the Dayton, Kossuth and Alhambra mining patents and other properties located in the Dayton resource area, enabling a more practical, comprehensive feasibility study for mining. Geological studies and development planning are currently underway utilizing data from extensive metallurgical testing and assessment during 2017, an additional 30,818 feet of drilling completed in 2015, geophysical analysis and interpretation completed in 2013, and extensive geological data from pre-2013 drill programs.

The Company’s technical staff is currently compiling a detailed structural interpretation of the Dayton resource area, which will provide the framework for a completely new resource model. The detailed interpretation is leading to a list of highly prospective drill targets to further define and expand the mineral resource.

The Company plans to advance the Dayton to full feasibility, towards a production ready mine plan. The plan includes expanding the current resource at the Dayton and continuing southerly into Spring Valley, with incremental expansion programs that include exploration and definition drilling of targets identified by the prior conventional percussion, RC and diamond core drill programs and magnetic, IP and resistivity geophysical surveys (see Figure 4).

The Spring Valley group of exploration targets lies adjacent to the Dayton resource area, trending south toward the southern-most end of the Comstock District that includes the southern portion of the Kossuth patented claim and the Dondero, Daney and New Daney claims and all of the Company’s placer mining claims in Spring Valley and Gold Canyon. The Spring Valley mineralized structures lie mostly concealed beneath a veneer of sediment gravels and the volcanic host rocks and the structural controls of the mineralization defined for the Dayton resource area are known to continue south into Spring Valley.

On May 21, 2020, the Company enhanced its land position in Spring Valley by exercising its option with New Daney Company, Inc. ("New Daney") to purchase seven unpatented lode mining claims in Spring Valley. These claims have been leased from New Daney since 2010. The claims are being purchased for a total of $100,000, inclusive of a 3% royalty. The Company paid $10,000 upon signing, and $1,000 on June 4, 2020. Additional payments of $1,000 per month will be made, with a final $85,000 at closing, on or before November 26, 2020. Until closing, these payments are shown on the balance sheet as prepaid expenses and other current assets.

#### Figure 4 - Dayton and Spring Valley Magnetic Geophysics with Interpreted Veins and Structures

The Spring Valley exploration program is designed to target areas that have similar magnetic signatures of known economic grade mineralization. The magnetic geophysical survey was further studied and a structural interpretation was developed that illustrated multiple cross cutting structures (colored green) that are oblique to the southerly projected north/south vein trend (colored red), refer to Figure 4. Though rare due to alluvial cover, the outcropping quartz veins and outcropping crosscutting structures had definitive diagnostic magnetic signatures. The interpretation of the vein structures was derived by connecting specific magnetic attributes as identified on each 25-meter spaced survey lines. Similar structures have been identified in the Dayton and were important components for the development of economic grades of mineralization. The exploration of Spring Valley will include phased drilling programs that will continue southerly from SR 341 to the historic Daney mine site (Figure 5), with a potential strike length of approximately 9,600 feet.

In-house Dayton engineering and mine planning have resulted in profiling economic shells with multiple cutoff grade scenarios. Multiple layout plans for the mine and corresponding processing facilities have been conceptually developed and located on lands 100% privately held by the Company, thus simplifying and shortening the critical permitting chain.

The Company is proceeding to publish a separate NI 43-101 compliant, updated technical report for the Dayton resource that supports the subsequent scope of publishing a Preliminary Economic Assessment (“PEA”) for the Dayton project. The new technical report will provide not only a new resource estimate, but also a phased drilling plan for further defining and expanding the resource for sustainable, profitable mining.

*Figure 5 - Dayton and Spring Valley Group Target*s

### Comstock Northern Exploration LLC (Occidental Lode and Other Northern Target Mineral Claims)

Tonogold has commenced further, detailed analysis of our northern targets that correlates historical data with modern geological assessments and reveals a potentially much larger exploration opportunity. Accordingly, the Company signed a new Mineral Exploration and Mining Lease (the "Exploration Lease") with Tonogold for certain mineral properties in Storey County, Nevada. The lease is for an initial term of 5 years, with options to renew for an additional 15 years, so long as specific commitments are met, including spending of at least $1.0 million per year on exploration and progressively validating progress through technical reports.

The lease has a quarterly fee of $10,000 in the first year, escalating 10% per year thereafter. Tonogold is also required to reimburse all claim maintenance costs and other costs associated with owning the properties. The Company retains a 1.5% to 3.0% NSR royalty on future mineral production from the properties.

The Exploration Lease includes the Occidental group and Gold Hill group of exploration targets, which contain many historic mining operations, including the Overman, Con Imperial, and Yellow Jacket mines, as well as the historically under-developed Occidental Lode, parallel to the main Comstock trend. The Company believes this will accelerate the development of these targets and enhance the value of its mineral property and royalty portfolio. Tonogold is currently permitting an exploration drilling program for these areas, and expects to begin drilling in the third quarter of 2020.

### Comstock Mining LLC (100% owner of the Lucerne Resource Area)

Our Lucerne resource area is located in Storey County, Nevada, approximately three miles south of Virginia City and 30 miles southeast of Reno, and has been the primary focus of the Company’s exploration and development efforts since 2003. Lucerne includes the previously mined Billie the Kid, Hartford and Lucerne mining patents, and extends east and northeasterly to the area of the historic Woodville (southern-most of the historic Comstock bonanzas), Succor and Lager Beer patents and north to the historic Justice and Keystone mines. The Lucerne resource area is approximately one mile along strike, with explored widths from 600 to 1,800 feet, representing approximately 845 acres of the land holdings controlled by the Company. The Lucerne is the site of our previous mining activities and ongoing exploration and development by Tonogold, the company that has agreed to acquire Comstock Mining LLC ("CML"). The Company holds the key mining permits required to resume surface or underground mining of this area and processing.

The Company’s prior exploration activities in the Lucerne area included open pit gold and silver test mining from 2004 through 2006, and from late 2012 through 2015. As defined by the Securities Exchange Commission (“SEC”) Industry Guide 7 and by the 2018 amendments to Regulation S-K, the Company has not yet established any proven or probable reserves at the Lucerne mine. From 2012 to 2016, the Company processed approximately 2.6 million tons of mineralized material, producing 59,515 ounces of gold and 735,252 ounces of silver.

In December 2018, the Company received unanimous approval from the Storey County Board of Commissioners to extend its landmark Special Use Permit (“SUP”) for mining and processing for the Lucerne Mine Project for the maximum allowable, 20-year term, extending the original, 10-year permit until September 2, 2034. The permit applies to both surface and underground mining, processing, milling, exploration and development, and other ancillary uses and represents one of the most significant, progressive and collaborative permit approvals in the Company’s history, and its extension strengthens the foundation for the future growth of the Company and its partner in Lucerne’s exploration and development, Tonogold.

In January 2019, the Company and Tonogold entered into a Purchase Agreement, as restated and amended in March 2020, to sell its interests in CML, a wholly-owned subsidiary of Comstock whose sole assets are the Lucerne properties and related permits, to Tonogold for total consideration of $17.6 million. The consideration received to date includes $6.525 million in cash and 6.1 million in Tonogold Convertible Preferred Stock ("CPS"). The remaining $5.475 million of cash consideration is secured by a 12% Note, with interest payable monthly. Tonogold also guaranteed the Company’s remaining financial responsibility for its membership interest in Northern Comstock LLC, which owns and leases certain mineral properties in the Lucerne area, and assumed certain reclamation liabilities, both totaling approximately $7.0 million. The Company also retains a 1.5% NSR royalty on the Lucerne properties.

At closing on November 18, 2019, Tonogold received 50% of the membership interests of CML, representing the ownership contractually granted based on the cash and CPS consideration paid to date. Tonogold paid an additional $0.6 million in the first six months of 2020, increasing their ownership to 54.57%, and will receive the remaining membership interests as it pays the Note in full. The Company retains all management control and authority over CML until that time.

Over the past two years, Tonogold, aided by the independent mining advisory firm of Mine Development Associates (“MDA”), has evaluated and remodeled the Lucerne resource estimate, and plans further exploration, development and economic feasibility assessments.

### Pelen-Sutro Tunnel Company Acquisition

In January 2018, the Company issued 295,082 shares of restricted common stock as initial payment to acquire 25% of the total membership interests of Pelen, LLC ("Pelen"). Pelen is the 100% owner of the historic Sutro Tunnel Company that owns the Town of Sutro, the historic 6-mile Sutro Tunnel, the federal land grants and mining rights spanning 1,000 feet on each side of the 6-mile span, the rights to the tunnel’s water and the patented mining claims and private lands on Gold Hill.

In November 2018, the Company issued 351,637 shares of restricted common stock as additional shares based on the shortfall on the aggregate proceeds for the initial shares. In December 2018, the agreement was amended to have a "Cut-Off" date of December 31, 2019, for closing the transaction and any unsold shares will be returned to the Company, with the Company required to make up any shortfall in cash.

On April 24, 2020, the Company completed the acquisition of 25% of the total membership interests of Pelen. The total purchase price was $0.6 million, paid in stock and cash.

### Non-mining Real Estate

On September 26, 2019, as amended on November 30, 2019, December 26, 2019, March 31, 2020, and June 30, 2020, the Company entered into agreements, with Sierra Springs Enterprises Inc., a qualified opportunity zone business, to sell the industrial land and senior water rights in Silver Springs, NV, (the “98 acres”) for $6.5 million and to sell its rights in the membership interests in Downtown Silver Springs, LLC (“DTSS”) for $3.6 million. The agreements anticipate the transactions to close in the third quarter of 2020. On September 15, 2019, and effective September 25, 2019, the Company terminated prior agreements to sell the 98 acres and DTSS to another third party.

The Gold Hill Hotel is listed for sale for $1.5 million. The Gold Hill Hotel has been consistently profitable and cash positive over the past two years. The Daney Ranch is listed for sale, in two components, for a total of $3.8 million.

### COVID-19

The outbreak of the novel strain of coronavirus, specifically identified as “COVID-19,” has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, including the implementation of social distancing measures, quarantine periods and travel bans, have caused material disruptions to many businesses and negatively impacted economic activities. Global equity markets have experienced significant volatility. Governments and their central banks have reacted with significant fiscal and monetary interventions designed to mitigate the impacts and stabilize economic conditions. The impact and ultimate duration of the COVID-19 outbreak is currently unknown, as is the efficacy of these governmental and central bank interventions. On August 3, 2020, Nevada's governor unveiled a new long-term mitigation strategy for the State of Nevada to help provide predictability and stability moving forward. The plan was developed recognizing the State of Nevada and the nation are still in response mode to the COVID-19 pandemic and will be for the foreseeable future. The Governor's guidance for the mining industry includes limiting gatherings to no more than 10 people, maintaining social distancing protocols where 10 or less are gathered, limiting travel, and working remotely when possible.

The Company is operating in alignment with these guidelines for protecting the health of our employees, partners, and suppliers, and limiting the spread of COVID-19, that have already resulted in delays of MCU’s plans for commencing mercury recovery testing and Tonogold's plans for exploration drilling during the third quarter of 2020. It is not currently possible to reliably estimate the length and severity of these developments and the impact on the Company's financial condition, and that of its subsidiaries and partners, in future periods.

### Outlook

Our annual operating expenditures, including other cash income and expenditures and excluding depreciation, are planned at approximately $5.5 million, with approximately $2.5 million of that amount reimbursed under the Tonogold Purchase Agreement, Lease-Option Agreement, and Mineral Exploration and Mining Lease Agreement, resulting in net operating expenses for 2020, excluding exploration spending, of $3 million. During the first six months of 2020, the Company received approximately $1.25 million in expense reimbursements and $1.0 million in cash for prepaid reimbursements required under the Tonogold agreements and expects to receive another $0.2 million during the fourth quarter of 2020.

As of June 30, 2020, Tonogold has earned 54.57% of the membership interest after making payments of over $6.5 million in cash and $6.1 million in CPS. The Company expects to monetize approximately $0.5 million worth of common shares in the second half of 2020, depending on price and liquidity, under an existing 10b5-1 plan.

Tonogold is currently permitting a drilling program for the Storey County exploration targets, including the leased mineral claims, just north of the Lucerne area, and expects to begin drilling in the third quarter of 2020.

During the third quarter of 2020, the Company expects to close on the sale of certain non-mining assets located in Silver Springs, NV, to Sierra Springs Enterprises Inc., for total proceeds of approximately $10 million. The agreements, as amended, included $0.4 million of non-refundable deposits made and released to the Company from escrow. The Company will use at least 80% of the proceeds to paydown its Promissory Notes of approximately $4.5 million, plus accrued interest of less than $0.1 million.

The Company’s second half 2020 plans also include updating Dayton’s current resource estimate and continuing southerly into Spring Valley with incremental exploration programs that include exploration and definition drilling of targets identified by geophysical surveys, surface mapping, prior drilling and deeper geological interpretations that all lead to publishing a new, SK-1300 compliant, mineral resource estimate.

For 2020, the Company’s plans include advancing the investment in and the commercialization of MCU’s mercury remediation processing technologies. The Company expects to close on the MCU transactions during the fourth quarter of 2020, meaning, at that time, it will own 25% of MCU and 50% of its first joint venture in the Philippines. Oro has completed the manufacture of the 25-ton-per-hour mercury recovery plant and is preparing shipment of the system to the Comstock, including a 200 gallon-per-minute dissolved air flotation water treatment plant.

MCU has delivered the Comstock mercury remediation system and will commence trial operations that will continue throughout the second half of 2020, at the Company's American Flat processing facility, to validate and fine-tune the mercury extraction and remediation process, with the objective of reclaiming and remediating the Company's existing properties within the Carson River Mercury Superfund Site ("CRMSS"), enhancing the values of, and evaluating the potential economic feasibilities for, these properties and creating new global growth opportunities in mercury remediation by demonstrating MCU’s technological and operational effectiveness, efficiency, and feasibility.

MCU-P has agreed to and plans to commence reclamation operations during the third quarter 2020, in the Philippines. MCU-P will operate under a joint venture agreement with Clean Ore Solutions, a Philippine Company, for mercury extraction and remediation of Mount Diwalwal and the Naboc River, one of the most mercury polluted, gold mining regions in the world. This represents the first real international opportunity for large-scale mercury remediation and environmental reclamations, using MCU’s systems, with the objective of establishing MCU a leader in mercury remediation projects, and in particular, contaminations caused by Artisanal and Small-Scale Miners (ASM).

### Equity Raises

For the six months ended June 30, 2020, the Company issued 638,511 common shares through the 2019 Equity Agreement with Leviston Resources. Gross proceeds were approximately $0.24 million at an average share price of $0.38. The Company issued 625,000 shares of restricted common stock to fund the difference between proceeds received and the required investment of $0.85 million. The Company also granted 315,000 common shares to its directors for past and current services.

Following is a reconciliation of the common stock-based transactions as of June 30, 2020 and 2019:

|  | Six Months Ended June 30, 2020 | 2019 |
| --- | ---: | ---: |
| Shares outstanding as of beginning of period | 27,236,489 | 15,067,655 |
| Shares issued for: |  |  |
| Equity issue agreements | 638,511 | 2,032,345 |
| Investment in Mercury Clean Up LLC | 625,000 | — |
| Director compensation | 315,000 | — |
| Shares outstanding as of end of period | 28,815,000 | 17,100,000 |

46

### Comparative Financial Information

The Company had two operating segments as of June 30, 2020 and 2019: mining and real estate. The comparative financial information is reflected in the following table:

#### Three Months Ended:

|  | 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 |

The Company ceased processing material from its leach pad in December 2016, resulting in no mining revenues for the three months ended June 30, 2020, and 2019, respectively.

Real estate revenues for the three months ended June 30, 2020 increased $4,191 as compared to the same period ended June 30, 2019, primarily related to the rentals of our metallurgical labs at the Company's processing site.

Real estate operating costs for the three months ended June 30, 2020, increased $3,032 as compared to the same period ended June 30, 2019, due to higher utilities and depreciation expense, partially offset by lower maintenance expense.

Costs applicable to mining revenue decreased by $0.5 million during the three months ended June 30, 2020, as compared to the same period ended June 30, 2019, as a result of certain assets becoming fully depreciated. These costs consist solely of depreciation expense on temporarily idled mining equipment, processing facilities and heap leach pads.

Exploration and mine development costs decreased by $0.1 million during the three months ended June 30, 2020, as compared to the same period ended June 30, 2019, primarily due to decreases in maintenance and repair expenses and bond and insurance expense.

Mine claims and costs decreased by $14,832 during the three months ended June 30, 2020, as compared to the same period ended June 30, 2019, primarily due to lower amortization of claim fees in the 2020 period.

Environmental and reclamation increased by $0.4 million during the three months ended June 30, 2020, as compared to the same period ended June 30, 2019, primarily due to reduction in reclamation liability for Lucerne in the 2019 period.

General and administrative expenses decreased by $0.1 million during the three months ended June 30, 2020, as compared to the same period ended June 30, 2019, primarily due to lower legal expenses.

Interest expense decreased by $0.1 million during the three months ended June 30, 2020, as compared to the same period ended June 30, 2019, as a result of lower average debt balances from the pay-down on the Senior Secured Debentures in 2019, and interest reimbursements from Tonogold that began accruing on June 1, 2019, somewhat offset by an acceleration of discount and issuance costs recognized as a result of those pay-downs.

Other income, net was $2.5 million for the three months ended June 30, 2020, primarily driven by unrealized gains on Tonogold preferred and common stock of $1.7 million, unrealized gains of $0.4 million for the change in estimated fair value of the contingent forward, $0.2 million of Paycheck Protection Program proceeds used to cover qualifying expenses, $0.2 million of interest income on the Tonogold secured convertible note. Other expense, net was $0.6 million for the three months ended June 30, 2019, primarily resulting from $0.4 million in preferred stock issuance costs.

Net income was $1.3 million for the three months ended June 30, 2020, as compared to a net loss of $2.1 million for the three months ended June 30, 2019. The $3.4 million improvement in net income is primarily driven by $2.7 million from gains resulting from the increase in fair value of Tonogold securities and on the contingent forward, and to a much lesser extent, $0.2 million and $0.1 million of lower operating and interest expenses, respectively.

#### Six Months Ended:

|  | June 30, 2020 | June 30, 2019 | Change |
| --- | ---: | ---: | ---: |
| Revenue - mining | $— | $— | $— |
| Revenue - real estate | 96,800 | 81,782 | 15,018 |
| Costs applicable to mining revenue | 173,225 | 1,010,785 | (837,560) |
| Real estate operating costs | 28,916 | 22,711 | 6,205 |
| Exploration and mine development | 288,387 | 466,379 | (177,992) |
| Mine claims and costs | 244,139 | 287,855 | (43,716) |
| Environmental and reclamation | 57,770 | (308,349) | 366,119 |
| General and administrative | 1,737,181 | 1,624,634 | 112,547 |
| Total costs and expenses | 2,529,618 | 3,104,015 | (574,397) |
| Loss from operations | (2,432,818) | (3,022,233) | 589,415 |
| OTHER INCOME (EXPENSE) |  |  |  |
| Change in estimated fair value of contingent forward asset | 1,413,382 | — | 1,413,382 |
| Interest expense | (142,244) | (643,045) | 500,801 |
| Other income (expense) | 2,174,454 | (247,531) | 2,421,985 |
| Other income (expense), net | 3,445,592 | (890,576) | 4,336,168 |
| NET INCOME (LOSS) | $1,012,774 | $(3,912,809) | $4,925,583 |

The Company ceased processing material from its leach pad in December 2016, resulting in no mining revenues for the six months ended June 30, 2020, and 2019, respectively.

Real estate revenues for the six months ended June 30, 2020 increased $15,018 as compared to the same period ended June 30, 2019, primarily due to the rental of an additional building at our processing site.

Real estate operating costs increased by $6,205 for the six months ended June 30, 2020, as compared to the same period ended June 30, 2019, due to increased utilities and depreciation partially offset by lower maintenance and construction costs.

Costs applicable to mining revenue decreased by $0.8 million during the six months ended June 30, 2020, as compared to the same period ended June 30, 2019 as a result of certain assets becoming fully depreciated. These costs consist solely of depreciation expense on temporarily idled mining equipment, processing facilities and heap leach pads.

Exploration and mine development costs decreased by $0.2 million during the six months ended June 30, 2020, as compared to the same period ended June 30, 2019, primarily due to lower costs for permits, licenses and fees and lower payroll and related expenses.

Mine claim and costs decreased by $43,716 during the six months ended June 30, 2020, as compared to the same period ended June 30, 2019, due to lower amortization of claim fees in the 2020 period.

Interest expense decreased by $0.5 million during the six months ended June 30, 2020, as compared to the same period ended June 30, 2019, primarily due to lower outstanding debt on the Senior Secured Debenture and higher reimbursements of interest expense from Tonogold.

Other income, net was $3.4 million for the six months ended June 30, 2020, primarily from $1.3 million in unrealized gains on Tonogold convertible preferred and common shares, $1.4 million in unrealized gains on the change in estimated fair value of the contingent forward, $0.2 million in interest income on the Tonogold secured convertible note, $0.2 million from Tonogold reimbursements and $0.2 million from recognition of Paycheck Protection Program proceeds used for qualifying expenses.

Other expense, net was $0.9 million for the six months ended June 30, 2019, primarily from $0.6 million of interest expense and $0.4 million of Comstock preferred stock issuance costs.

Net income was $1.0 million for the six months ended June 30, 2020, as compared to a net loss of $3.9 million for the six months ended June 30, 2019. This $4.9 million improvement resulted from decreased operating expenses of $0.6 million, decreased interest expense of $0.5 million and an improvement in other income (expense), net of $2.4 million.

### Liquidity and Capital Resources

The financial statements are prepared on the going concern basis of accounting which assumes the realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company’s current capital resources include cash and cash equivalents and other net working capital resources, planned investment sales of Tonogold securities, and proceeds from the planned sale of Lucerne mineral properties and non-mining assets.

The Company has recurring net losses from operations and an accumulated deficit of $234.9 million as of June 30, 2020. For the six-month period ended June 30, 2020, the Company generated net income of $1.0 million and used $0.4 million of cash in operations. As of June 30, 2020, the Company had cash and cash equivalents of $1.0 million. The Company also has debt of $4.8 million that matures in December 2020, for which it does not currently have the ability to repay. Such condition raises substantial doubt regarding the Company’s ability to continue as a going concern.

The Company intends to finance its operations over the next twelve months through its existing cash, the sale of common stock through its existing equity agreements to issue securities, proceeds from the planned sale of its Lucerne mineral properties, non-mining assets, and Tonogold securities. These plans are outside of the control of management, and therefore, substantial doubt exists about the Company’s ability to continue as a going concern through 12 months from the issuance date of the financial statements.

On February 18, 2019, the Company filed a new shelf registration statement on Form S-3 (the “S-3 Shelf”), for the sale of up to $50.0 million of the Company’s securities, from time to time, and used $4.8 million of that capacity through June 30, 2020, leaving an aggregate unused capacity of $45.2 million as of June 30, 2020. So long as the aggregate market value of the Company’s voting and non-voting common equity held by non-affiliates is less than $75 million, the aggregate market value of securities sold by or on behalf of the Company pursuant to the S-3 Shelf during the period of 12 calendar months immediately prior to, is limited from being no more than one-third of the aggregate market value of the Company’s non-affiliated voting and non-voting common equity. On July 31, 2020, these limitations resulted in approximately $5.3 million of unrestricted, available S-3 Shelf capacity.

On October 1, 2019, and as amended and restated on October 9, 2019, the Company entered into a new equity purchase agreement (the “Leviston Equity Agreement”) with Leviston Resources LLC (“Leviston”) and filed a prospectus supplement to offer and sell shares of common stock at an aggregate offering price of up to $1.25 million, from time to time, to Leviston with aggregate unused capacity of $0.2 million as of June 30, 2020.

On September 26, 2019, as amended November 30, 2019, December 26, 2019, March 31, 2020, and June 30, 2020, the Company entered into agreements with SSE to sell two properties in Silver Springs, NV, including 98 acres of industrial land and senior water rights (the “98 acres”) for $6.5 million and 160 acres of commercial land contained with its rights in the membership interests in Downtown Silver Springs, LLC (“DTSS”) for $3.6 million. As of June 30, 2020, the Company received $0.4 million in escrowed deposits for the purchase of these assets and expects the sales to close during the third quarter of 2020.

On April 30, 2020, the Company received a Paycheck Protection Program (“PPP”) grant of $0.3 million, as part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES”), and the rules promulgated thereunder. The amounts received were all used for payroll costs and the Company expects all of the proceeds received to be forgiven.

On July 9, 2020, the Company entered into a common stock purchase agreement with Triton Funds L.P., (the “Triton”) and filed a prospectus supplement to offer and sell shares of common stock at an aggregate offering price of up to $1.25 million, from time to time, to Triton with aggregate unused capacity of $1.25 million. On July 22, 2020, the Company issued 2,040,483 common shares to Triton for net proceeds of $1.25 million, at a price per share of $0.61 per common share.

On July 13, 2020, the Company entered into a new equity purchase agreement (the “Leviston Equity Agreement”) with Leviston Resources LLC (“Leviston”) and filed a prospectus supplement to offer and sell shares of common stock at an aggregate offering price of up to $2.5 million, from time to time, to Leviston, and paid 5% fee by issuing 173,611 restricted common shares. From July 13, 2020, through July 31, 2020, the Company raised $0.65 million by issuing 1,029,741 common shares at a price of $0.63 per common share. As of July 31, 2020, the Leviston Equity Agreement has aggregate unused capacity of $1.9 million.

Net cash used in operating activities for the six months ended June 30, 2020, was $0.4 million as compared to net cash used in operating activities of $1.6 million for the comparable prior period. The Company's use of cash in the six months ended June 30, 2020, and 2019, was primarily related to general and administrative, exploration, mine claim cost and environmental expenditures. The decrease resulted from a lower net loss due to lower operating expenses and a higher net source of cash from working capital, primarily due to $1.1 million of accelerated reimbursements from Tonogold.

Net cash provided by investing activities for the six months ended June 30, 2020, was $0.4 million, primarily from $0.6 million of proceeds from Tonogold for deposits on the purchase of the membership interest, proceeds from deposits on the sale of non-mining assets to Sierra Springs of $0.1 million, and proceeds from the sale of certain mineral rights of $0.1 million, partially offset by additional deposits made for investment in MCU of $0.3 million and an advance to Sierra Springs of $0.1 million. Net cash provided by investing activities for the six months ended June 30, 2019, was $1.9 million, primarily from $3.1 million in proceeds from Tonogold for deposits on the purchase of the membership interest, offset by $1.1 million in property purchases.

Net cash used in financing activities for the six months ended June 30, 2020, was $0.1 million, primarily from net proceeds from the sale of common stock of $0.2 million, offset by principal payments on long term debt of approximately $0.3 million. Net cash used in financing activities for the six months ended June 30, 2019, was $0.6 million, primarily from net principal payments on long-term debt of $1.9 million, offset by net proceeds from the sale of common stock of $1.3 million.

Future operating expenditures above management’s expectations, including exploration and mine development expenditures, or in excess of amounts to be raised from the issuance of equity or new debt facilities, declines in the market value of properties held for sale, or declines in the share price of the Company's common stock, would adversely affect the Company’s results of operations, financial condition and cash flows. If the Company was unable to obtain any necessary additional funds, the Company could be required to limit or discontinue certain business plans, activities or operations, reduce or delay certain capital expenditures and investments or sell certain assets or businesses. There can be no assurance that the Company would be able to take any such actions on favorable terms, in a timely manner or at all.

### Critical Accounting Policies and Estimates

There have not been any material changes to the critical accounting policies and estimates previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019.

## Controls and procedures

As filed, 6,136 characters.

### A. Disclosure

### Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, with the participation of our Principal Executive Officer and Principal Financial Officer, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act was conducted. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Exchange Act and SEC’s rules, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Our Principal Executive Officer and Principal Financial Officer concluded that, as of June 30, 2020, despite the implementation of additional reviews and additional resources, certain procedures were not effective at the reasonable assurance level due to a material weakness described below.

The Company did not maintain effective monitoring controls over the determination of the valuation of a complex accounting transaction. The Company's control did not sufficiently determine the estimated fair value of a contingent forward contract, including certain default, redemption, and conversion features at March 31, 2020. The Company did extend the valuation and estimation process and more completely valued all features of the contingent forward during the quarter ended June 30, 2020, and fully accounted for the estimated value of the contingent forward at June 30, 2020. The misstatement of the estimated fair value of the contingent forward at March 31, 2020 was not material.

### Changes in Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company in accordance with and as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and the board of directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the company that could have a material effect on its financial statements.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Subsequent to the issuance of the Company’s interim financial statements for the period ended March 31, 2020, the Company determined they had misstatements related to the accounting for an amended arrangement with Tonogold that occurred during the same period. Management determined that they have a material weakness in its internal control over financial reporting regarding the control to determine the valuation of this contract. As a result, the Company has determined that its internal control over financial reporting is not effective due to the material weakness.

### Status of Material Weakness

Since identification of the misstatement described above, management has been actively engaged in the planning for, and implementation of, remediation efforts. During the quarter ended June 30, 2020, the Company implemented a more formalized process for reviewing complex transactions and validating the accuracy of related calculations. Subsequent to the quarter, management and the audit committee have engaged additional, third-party competencies over complex accounting transactions. This process now includes the use of these external resources, when deemed necessary.

Management believes the measures described above will remediate the material weakness that existed as of June 30, 2020, and strengthen its internal control over financial reporting.

Management is committed to continuous improvement of the Company’s internal control processes. Under the direction of the Audit Committee, management will continue to review and make changes it deems necessary to the overall design of the Company’s internal control over financial reporting, including implementing further improvements in policies and procedures and taking additional measures to address any control deficiencies.

Except as described above, there have been no changes during the quarter ended June 30, 2020 in the Company’s internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) and 15d-15(d) that have material affected, or are reasonably likely to materially affect, our internal controls over our financial reporting.

### Officer Certifications

We have attached as exhibits to this Annual Report the certifications of our Principal Executive Officer and Principal Financial Officer, which are required in compliance with the Exchange Act.

## Risk factors

As filed, 2,848 characters.

In addition to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019;

***We are exposed to global health economic and market risks that are beyond our control, which could adversely affect our financial results and capital requirements.***

The outbreak of the novel strain of coronavirus, specifically identified as “COVID-19,” has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, including the implementation of travel bans, quarantine periods and social distancing, have caused material disruptions to global business and an economic downturn. Global equity markets have experienced significant volatility and weakness. Governments and their central banks have reacted with significant fiscal and monetary interventions designed to mitigate the impacts and stabilize economic conditions.

Attempts at containment of COVID-19 have resulted in decreased economic activity which has adversely affected the broader global economy. Many countries around the world as well as the majority of the states in the United States have ordered their citizens to stay home in order to contain the spread of the virus. As part of the “shelter in place” and “stay at home” orders, fewer businesses than normal are open and massive unemployment has resulted from business declines. At this time, the full extent to which COVID-19 will negatively impact the global economy and our business is uncertain, but pandemics or other significant public health events will most likely have a material adverse effect on our business and results of operations.

Uncertainties regarding the global economic and financial environment could lead to an extended national or global economic recession. A slowdown in economic activity caused by a recession would likely reduce demand for assets that we hold for sale and result in lower commodity prices for long periods of time. Costs of exploration, development and production have not yet adjusted to current economic conditions, or in proportion to the significant reduction in product prices.

In the past several years, capital and credit markets have experienced volatility and disruption. Given the levels of market volatility and disruption, the availability of funds from those markets may diminish substantially. Further, arising from concerns about the stability of financial markets generally and the solvency of borrowers specifically, the cost of accessing the credit markets has increased as many lenders have raised interest rates, enacted tighter lending standards, or altogether ceased to provide funding to borrowers. Due to these potential capital and credit market conditions, the Company cannot be certain that funding will be available in amounts or on terms acceptable to the Company.

Filed Aug 14, 2020.
Source: SEC EDGAR, the filing index for accession 0001120970-20-000032. Last ingested by Listed: Nov 4, 2026, 17:20 ET. No prices; not investment advice.