# Comstock Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [Comstock Inc.](/companies/lode.md) (CIK 1120970)
- Form: 10-Q
- Filed: 2023-05-03
- Accepted by EDGAR: May 2, 2023, 18:13 ET
- Period: 2023-03-31
- Accession: 0001120970-23-000033
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1120970/000112097023000033/lode-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1120970/000112097023000033/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $30.8k | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-01-01 to 2023-03-31 | $1.3m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $3.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | −$5.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $615.2k | us-gaap:InterestExpense |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$5.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.06 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | −$0.06 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 94,715,215 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | −$3.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $788.1k | us-gaap:PaymentsToAcquireProductiveAssets |
| Cash and equivalents | at 2023-03-31 | $8.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $35.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $105.0m | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $40.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $50.7m | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $3.6m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-03-31 | $3.4m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-03-31 | $51.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 29,666 characters.

### RESULTS OF OPERATIONS

*The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our condensed consolidated financial condition and results of operations. This discussion should be read in conjunction with the Condensed Consolidated Financial Statements included herewith, the footnotes thereto and the risk factors herein.*

OVERVIEW

Comstock innovates and commercializes technologies that enable systemic decarbonization, primarily by enabling the extraction and conversion of under-utilized natural resources into renewable energy products. Our strategic plan is based on innovating, enabling and commercializing material science solutions that use our technologies to reduce reliance on long cycle fossil fuels, to shift to and maximize throughput of short cycle fuels, and to lead and support the adoption and growth of a profitable, balanced short cycle ecosystem that continuously offsets, recycles, and/or neutralizes carbon emissions.

We achieve our goal by accelerating the commercialization of our technology portfolios and investments, primarily in renewable fuels, electrification metals, and artificial intelligence enabled mineral discovery and materials development.

*Comstock Fuels –* Most renewable fuels draw from the same feedstock pool, but the total supply can only meet a small fraction of the demand. Our technologies unblock that constraint by converting abundant but underutilized lignocellulosic biomass into biointermediates for refining into renewable fuels. Our team recently demonstrated commercial readiness with unprecedented yields approaching 100 gallons of fuel per dry ton of feedstock on a gasoline gallon equivalent basis. Execution of one or more license agreements with operationally experienced, technologically sophisticated, and well capitalized customers is a top 2023 objective. Each license could create more than 20 years of recurring royalty revenue with material upfront engineering fees.

*Comstock Metals –* The world is focused on the production of energy generation and storage technologies to reduce reliance on fossil fuels, including lithium-ion batteries (“LIBs”), photovoltaics, and fuel cells. Each of those technologies relies on scarce critical metals, increasing global demand for primary metal mining and recycling. During 2022, we deployed a pilot system to validate technologies for use in efficiently crushing, conditioning, extracting, and recycling high purity metal concentrates from LIBs and other electronic devices. We also expanded our leadership team in metals recycling, permitted a universal waste storage facility and opportunistically entered into an agreement to sell an existing facility for net cash proceeds of over $14 million. Securing revenue generating supply commitments in our expanded metals recycling business is a key objective for 2023.

*Comstock Mining –* We own or control twelve square miles of patented mining claims, unpatented mining claims, and surface parcels, covering six and a half miles of continuous mineral strike length. We enhanced the value of a small portion of our properties in the past year with two SK-1300 technical reports confirming Measured and Indicated resources of 605,000 ounces of gold and 5,880,000 ounces of silver, plus Inferred resources of 297,000 ounces of gold and 2,572,000 ounces of silver. We believe that our mining properties collectively contain billions of dollars of recoverable metals. Our plan to demonstrate that value combines our amassed historical and current data repository with hyperspectral orbital imaging and generative artificial intelligence (“AI”) solutions to provide prospecting analytics and enable mineral discovery for fraction of the cost of conventional exploration. Our 2023 efforts should enhance our resources and advance us toward full economic feasibility.

*Artificial Intelligence –* Quantum Generative Materials LLC ("GenMat"), our 48% owned subsidiary, has developed and launched a new generative AI to simulate critical properties of known materials during calibration testing late last year. Remarkably, GenMat also used its AI to simulate new material characteristics. GenMat’s generative AI models can be employed today for commercial use on GenMat’s existing high-performance computing platform, well before quantum computers become mainstream. In 2023, GenMat will, among other things, elevate new material simulation to commercial readiness by synthesizing and directly testing new AI simulated materials in high value applications. Our investment in GenMat is also a crucial component of our ongoing innovation strategy.

The Company’s strategic investment in the further demonstrate our commitment to sustainable innovation. SSOF and its subsidiaries support responsible, sustainable economic growth in Silver Springs, NV and our northern Nevada communities.

COMPARATIVE FINANCIAL INFORMATION

Net loss for the three months ended March 31, 2023 decreased by $865,281 to $5,681,742 from a loss of $6,547,023 for the comparable 2022 period. The decrease in net loss primarily resulted from a $4,476,889 decrease in losses from impairment of intangible assets, notes receivable from MCU-P and investments in MCU recorded in the first quarter of 2022 and lower depreciation and amortization expense of $213,488. Variance offset primarily due to lower change in estimated fair value of the derivative assets of $2,366,405, higher selling, general and administration expenses of $984,206, loss on conversion of debt $270,456, lower gain on investments of $351,624, lower interest income 311,004 and higher interest expense $290,454.

Below we set forth a summary of comparative financial information for the three months ended March 31, 2023 and 2022:

|  | March 31, 2023 | March 31, 2022 | Change |
| --- | ---: | ---: | ---: |
| Revenue | $30,750 | $54,625 | $(23,875) |
| Operating expenses: |  |  |  |
| Selling, general and administrative expenses | 3,386,972 | 2,402,766 | 984,206 |
| Research and development | 1,268,379 | 1,195,418 | 72,961 |
| Depreciation & amortization | 631,041 | 844,529 | (213,488) |
| Gain on sale of property | (178,193) | — | (178,193) |
| Total operating expenses | 5,108,199 | 4,442,713 | 665,486 |
| Loss from operations | (5,077,449) | (4,388,088) | (689,361) |
| Other Income (Expense) |  |  |  |
| Gain (loss) on investments | — | 351,624 | (351,624) |
| Interest expense | (615,178) | (324,724) | (290,454) |
| Interest income | 45,857 | 356,861 | (311,004) |
| Change in fair value of derivative instruments | 698,595 | 3,065,000 | (2,366,405) |
| Loss on conversion of debt | (270,456) | — | (270,456) |
| Impairment of intangible assets | — | (1,966,969) | 1,966,969 |
| Impairment of investments, net recovery | — | (2,509,920) | 2,509,920 |
| Other income (expense) | (463,111) | (1,130,807) | 667,696 |
| Total other income (expense), net | (604,293) | (2,158,935) | 1,554,642 |
| Net loss | $(5,681,742) | $(6,547,023) | $865,281 |
| Net loss attributable to noncontrolling interest | $(12,805) | $(168,468) | $155,663 |
| Net loss attributable to Comstock Inc. | $(5,668,937) | $(6,378,555) | $709,618 |

RESULTS OF OPERATIONS

#### Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Revenues for the three months ended March 31, 2023 decreased by $23,875 to $30,750 from $54,625 for the comparable 2022 period, as a result of lower revenues from operating leases on our land and building leased to others.

Revenue, costs of sales and gross profit in future periods will vary significantly depending on a number of factors, including the amount of renewable energy products that we produce and sell, the market prices for those products, the extent to which we secure and collect reasonable royalties, the degree to which we can provide event-driven engineering services, and the costs associated with each component of the aforementioned revenues.

Selling, general and administrative expense for the three months ended March 31, 2023 increased by $984,206 to $3,386,972 from $2,402,766 in the comparable 2022 period, primarily as a result of higher employee costs of $579,525 attributed to higher salaries and executive incentive compensation and payroll administration costs and higher other costs of $416,211 including mining related costs associated with no relative reimbursements from Tonogold.

Research and development expenses for the three months ended March 31, 2023 increased by $72,961 to $1,268,379 from $1,195,418 in the comparable 2022 period. The increase primarily related to higher employee-related costs of $337,386 partially offset by lower engineering services related to LINICO operations in the first quarter of 2023.

Depreciation and amortization for the three months ended March 31, 2023 decreased by $213,488 to $631,041 from $844,529 in the comparable 2022 period, primarily from ceasing amortization on assets held for sale in the first quarter of 2023.

Gain on investments for the three months ended March 31, 2023 decreased by $351,624 due to no gain on investments for the first three months of 2023 compared to a gain of $351,624 for the comparable 2022 period. The 2022 gain was primarily due to an increase in fair value of Tonogold common shares held for $415,205, partially offset by a realized loss of $55,769 in Tonogold common shares sold, offset in part by a decrease in the market value of other securities.

Interest expense for the three months ended March 31, 2023 increased by $290,454 to $615,178 from $324,724 in the comparable 2022 period, primarily due to interest and related amortization of the original issue discount ("OID") on the GHF promissory note, the Alvin note and the Ionic Ventures note that originated during the fourth quarter of 2022.

Interest income for the three months ended March 31, 2023 decreased by $311,004 to $45,857 from $356,861 in the comparable 2022 period, as a result of the extinguishment of the Tonogold note receivable and the extinguishment of the MCU-P note receivable that was exchanged for the MCU assets, both of which are no longer accruing interest income for the three months ended March 31, 2023.

Change in the fair value of our derivative instruments for the three months ended March 31, 2023 decreased by $2,366,405 to a gain of $698,595 from a gain of $3,065,000 in the comparable 2022 period, as a result of a lower increase in the Company's share price in connection with potential make-whole obligations for minimum value commitments on the Company's common shares and change in the fair value of the Ionic derivative. The 2023 gain was attributed to $240,000 gain on derivative liability for Ionic Note, $210,000 LINICO investment, $158,595 for GenMat investment and $90,000 Haywood investment. The gain from the three months ended March 31, 2022 was attributed to $1,330,000 from the additional LINICO investment made on December 30, 2021, $1,140,000 for GenMat and $595,000 for LP Biosciences LLC ("LPB").

Impairment losses for the three months ended March 31, 2023 decreased by $4,476,889, due substantially to the 2022 impairment losses of $4,084,268 as a result of investments in MCU and MCU-P and note receivable in MCU-P, which were deemed unrecoverable as of March 31, 2022 from a significant decline in forecasted cash flows from the MCU-P operations and $338,034 related to the FPC intangible assets as a result of historical and continuing losses and an inability to recover the investment through the use of their technology, and $54,587 related to the LPB investment prior to settlement in exchange for 3,500,000 of the Company's shares in 2022. As of March 31, 2023, no impairment losses were recorded.

Other income (expenses), net for the three months ended March 31, 2023 were $463,111, primarily consisting of losses from our equity method investments of $465,165 including a GenMat loss of $443,622.

Other income (expenses), net for the three months ended March 31, 2022 were $1,130,807, which primarily consisted of gains from the change in fair value of the Tonogold note receivable of $605,000 and Tono Note amendment fee income of $262,500, and other expenses of $8,509, primarily from losses on equity method investments.

OUTLOOK

The primary focus for 2023 is commercialization. The Company’s biorefining technologies are commercially ready and offer unprecedented performance for the Company’s prospective customers. The Company is actively pursuing revenue producing licensing opportunities with globally recognized renewable fuel producers. The Company’s metals and GenMat’s generative AI solutions have made significant technological advancements in the past two years with the 2023 goal of commercial readiness first followed by commercialization with early adopting customers.

### Commercialization

Comstock’s team has decades of diverse technology development and commercialization experience. The Company uses a disciplined approach to devising, qualifying, and elevating innovations from conception through increasing degrees of commercial readiness. The Company has adopted a widely used Technology Readiness Level (“TRL”) measurement system for objectively assessing Comstock’s progress, risks, investment qualifications, and commercial maturity.

There are nine readiness levels on the TRL scale, starting with TRL 1. Progression up the scale requires achievement of “SMART” milestones that are Specific, Measurable, Achievable, Relevant, and Timely. Proof of concept occurs at TRL 3. TRL 4 and 5 involve increasing degrees of process validation. TRL 6 is the first true demonstration of commercial readiness. TRL 7 and 8 involve various functional prototypes and pilots with increasing fidelity and sophistication. A TRL 9 technology is commercially mature and fully deployed. Depending on the technology and other applicable factors, revenue can commence at TRL 6 for early adopting and generally sophisticated commercial clients with continued development to TRL 7, 8, and 9.

The following chart summarizes the change in TRL status over the past year, and the objectives for 2023:

| Line of Business | Technology | 12/2021 | 12/2022 | 12/2023 Goal |
| --- | --- | --- | --- | --- |
| Cellulosic Fuels | Conversion of under-utilized woody biomass into renewable fuels at high yield | TRL 4 | TRL 6 | TRL 7 |
| Artificial Intelligence | Generative AI that simulates new materials at exponentially increased speed | TRL 3 | TRL 4 | TRL 6 |
| Metals | Scalable extraction of purified black mass concentrate from lithium-ion batteries | TRL 2 | TRL 5 | TRL 6 |
| Mining Technology | Dramatically reduced exploration costs with hyperspectral imaging and AI-based analytics | TRL 0 | TRL 2 | TRL 3 |

Comstock’s SMART milestones and commercialization process involve meticulous planning that is informed by many factors, including the total addressable markets, their growth rates and the speed that the Company can initiate and increase revenue.

### Cellulosic Fuels

Most current forms of renewable fuel draw from the same pool of conventional feedstocks, including corn and vegetable oils in the U.S., but the entire available supply of those feedstocks could only meet a small fraction of the demand for renewable fuels. Comstock's patented and patent-pending biorefining technologies unblock that constraint by converting abundant but underutilized lignocellulosic or "woody" biomass into biointermediates for refining drop-in and other renewable fuels.

The Company’s objectives for 2023 include:

- Executing one or more early adopter license agreements and commencing development on commercial scale projects for operationally experienced, technologically sophisticated and well capitalized customers.
- Completion of full technical documentation and engineering submittal packages.
- Completion of an independent lifecycle carbon analysis to prove the carbon emissions reduction benefits of the fuels produced with Comstock’s known processes.
- Continuous operation of the integrated bio-intermediate production process at the Company’s demonstration plant for sufficient time to achieve and broadly demonstrate TRL 7.

Each license agreement for a commercial production facility will create 15 to 20 years of recurring royalty revenue for the Company in addition to upfront fees for design and engineering.

### Artificial Intelligence

Investment in artificial intelligence (“AI”) is a crucial component of Comstock’s technology innovation strategy. Quantum Generative Materials LLC ("GenMat"), develops and commercializes cutting-edge generative artificial intelligence models for the discovery and manipulation of matter. GenMat is a company in which Comstock has a 48.19% investment interest. This includes generative AI models that can be employed today, for commercial use on GenMat’s existing, high-performance computing platforms, well before quantum computers become mainstream.

GenMat's AI operates similarly to the large language models widely discussed in the media today, but instead of words and language, it uses atoms and molecules to generate physical systems and harness math and science to discover new materials in an exponentially shorter time than traditional methods allow. To put this into perspective, new material discovery typically takes many years and many millions of dollars. GenMat's AI will simulate thousands of unique new materials in seconds.

GenMat’s objectives for 2023 include:

- Elevate new material simulation to TRL 6 by synthesizing and directly testing the AI’s simulated materials to confirm the precision and accuracy of those simulations.
- Commercialize an enterprise-oriented API and other generative AI solutions to early adopter enterprise clients for advanced materials simulation and synthesis.
- Launch and make operational a space-based hyperspectral imaging sensor for mineral discovery applications.

While the Company can’t be precise about exactly when GenMat will initiate revenue, GenMat’s technologies are maturing much faster than anticipated when the Company invested in GenMat in 2021.

### Mining and Minerals

The Company has amassed the single largest known repository of historical and current geological data on the Comstock mineral district, including extensive geophysical surveys, geological mapping, sampling and drilling data and published updated SK-1300 technical reports on the Lucerne and Dayton resource areas.

The Company’s objectives for 2023 include:

- Publish preliminary economic assessments for both the Lucerne and Dayton resource areas.
- Develop, in collaboration with GenMat, a next-generation geostatistical digital twin model of the Dayton resource area using the Company’s existing geologic and geophysical data.

The Company’s 2023 efforts will enhance Comstock’s gold and silver resources progressing toward full economic feasibility.

### Metal Recycling

Resource scarcity and supply are generally the main drivers presented when discussing battery recycling. From a market perspective what is often missed is that electric vehicle batteries are only one of many metals-based products that can cause a massive amount of pollution if simply landfilled at the end of life with no recovery of the underlying metal values.

Comstock Metals objectives for 2023 include:

- Physically reposition and broaden the addressable market for commercialization of our metals recycling.
- Advancing the technology readiness for broader material recycling, including photovoltaics and more.

The Company will provide additional, specific objectives for Comstock Metals during the second quarter of 2023.

The Company has also made meaningful progress and expect to complete the monetization of up to $30 million in sales of our non-strategic assets during 2023, while funding our business developments and limiting our focus to the objectives above.

LIQUIDITY AND CAPITAL RESOURCES

Our financial position and liquidity is based on our net sources of capital from financing as generally compared to our net uses of capital from investing activities and ultimately, our ability to generate cash flows from our operations. Our cash balances at March 31, 2023 and December 31, 2022 were $8,105,256 and $2,521,772, respectively. The Company had current assets of $35,511,746 and current liabilities of 40,944,085, representing working capital deficit of $5,432,339 at March 31, 2023.

Our primary source of liquidity during the first three months of 2023 was cash from asset sales and to a lesser extent, financing activities. During the three months ended March 31, 2023, we generated $7,867,494 and 1,565,396 in cash from our investing activities and our financing activities, respectively, and we used $3,849,406 in cash in our operating activities.

During the three months ended March 31, 2023, we issued 3,839,122 common shares through equity issuances to Leviston at an average price per share of $0.30 corresponding to proceeds of $1,150,000, including commitment and due diligence fees of 963,445 shares with a fair value of $350,000 to Leviston.

During the three months ended March 31, 2023, we issued 4,539,413 common shares with a fair value of $1,662,723, including interest of $19,310 at an average alternate conversion price per share of $0.37 corresponding to $1,300,000 in Convertible Note conversions. On April 6, 2023, Ionic Ventures, LLC returned to the Company 327,549 excess shares from equity conversions in the first quarter 2023 resulting in total outstanding shares of 102,707,603.

During the three months ended March 31, 2023, we issued 3,214,599 shares of common stock to Tysadco, for an aggregate sales price of $1,350,000 at an average price per share of $0.42.

On February 13, 2023, we entered into an equity purchase agreement (“2023 Leviston Sales Agreement”) with Leviston Resources LLC (“Leviston”) to offer and sell registered shares of common stock at an aggregate offering price of up to $10 million from time to time, at our option, on terms we deem favorable. As of March 31, 2023, the Company issued 2,875,677 registered shares of common stock to Leviston pursuant to the Company’s Form S-3 filed with the U.S. Securities and Exchange Commission, for an aggregate sales price of $800,000 at an average price per share of $0.28, and an additional 963,445 common shares at a fair value of $350,000 in commitment and due diligence fees. As of March 31, 2023, the 2023 Leviston Sales Agreement has $4,200,000 of remaining capacity.

On December 16, 2022, the Company entered into a securities purchase agreement for an unsecured convertible promissory note ("Ionic 2022 Convertible Note") with Ionic Ventures, LLC. with a principal amount of $3,150,000, of which $2,975,000 was funded and $175,000 was an original issue discount ("OID") and issued with a 5% OID. The full principal is due on March 16, 2024. Interest is payable monthly at a rate of 8% annually. The Convertible Note contains conversion terms that are based on percentages of trading price and volumes over defined measurement periods. The terms require the conversion option to be bifurcated as a derivative. As of March 31, 2023 and December 31, 2022, the Company bifurcated the conversion feature and recorded a derivative liability of $24,000 and $420,000, respectively, reflected in our consolidated balance sheet.

On October 25, 2022, we entered into a short-term promissory note ("Alvin Fund 2022 Note") with Alvin Fund LLC with a principal amount of $2,000,000. In consideration of the lender providing the financing, the Company issued $250,000 in shares to the lender. The full principal is due on October 25, 2023. Interest is payable monthly at a rate of 9% annually. Prepayment is allowed in full or in part at any time without premium or penalty. The loan is secured by all the property commonly referred to as the Dayton properties.

On June 21, 2022, The Company entered into an agreement with Tysadco for the purchase of up to $10,000,000 worth of shares of the Company’s common stock from time to time, at the Company’s option. Any shares offered and sold to Tysadco will be registered for resale pursuant to a registration statement on Form S-1 filed with U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933 (the “Securities Act”). The Company paid a commission of 428,571 additional shares of common stock with a fair value of $300,000 to Tysadco in connection with such sale. Sales of common stock, if any, under the Purchase Agreement are made at a 10% discount to the volume weighted average sales price of the common stock on the date that Tysadco receives such a capital call from the Company.

On April 12, 2022, the Company entered into an equity purchase agreement (the “Leviston Agreement”) with Leviston Resources LLC (“Leviston”) for the purchase of up to $10,000,000 worth of shares of the Company’s common stock from time to time, at the Company’s option, on terms deemed favorable to the Company. Any shares offered and sold are issued pursuant to the Company’s shelf registration statement on Form S-3 and the related prospectus (File No. 333-263930) filed by the Company with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933 (the “Securities Act”). Sales of common stock, if any, under the Purchase Agreement may be made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act, at a discount of 10% to the volume weighted average sales price of the common stock on the date that Leviston receives a capital call from the Company. For consideration to enter into the Leviston Agreement, the Company agreed to deliver additional shares of common stock to Leviston, for no additional consideration, on the first settlement date with respect to a put notice delivered by the Company. As of December 31, 2022, the 2022 Leviston Agreement has no remaining capacity, and the facility was closed.

We intend to fund our operations over the next twelve months from existing cash and cash equivalents, planned sales of non-strategic assets and other investments, planned licensing, sales and profits from our cellulosic and battery metal recycling technology and related engineering services, and previously funded capital into our LINICO subsidiary and Quantum investment. Based on these expected funding sources, management believes we will have sufficient funds to sustain our operations and meet our commitments under our investment agreements during the 12 months following the date of issuance of the condensed consolidated financial statements included herein. While we have been successful in the past in obtaining the necessary capital to support our operations, including registered equity financings from our existing shelf registration statement, non-registered equity placements, borrowings and various other means. There is no assurance we will be able to obtain additional equity capital or other financing, if needed.

Net cash used in operating activities for the three months ended March 31, 2023 decreased by $11,832 to $3,849,406 from $3,861,238 in the comparable 2022 period, due primarily to changes in operating expenses discussed in Financial Condition and Results of Operating Information.

Net cash provided by investing activities for the three months ended March 31, 2023 was $7,867,494, compared to net cash used in investing activities of $226,275 in the comparable 2022 period, resulting in a $8,093,769 change, primarily due proceeds from the proceeds from sale of AQMS lease and related assets of $11.0 million offset by cash primarily used in the purchase of water rights totaling $730,595 and an increase of advances to SSOF of $550,000 and proceeds from Tonogold option agreement of $750,000 received in 2022.

Net cash provided in financing activities for the three months ended March 31, 2023 increased $1,141,064 to $1,565,396 from $424,332 for the comparable 2022 period, primarily as a result of net proceeds from the issuance of common stock of $2,150,000, partially offset by reduced contributions of $500,000 from AQMS for additional shares in LINICO in 2022.

Risks to our liquidity could result from future operating expenditures above management’s expectations, including but not limited to research and development, pre-development, exploration, selling, general and administrative, and investment related expenditures in excess of repayments of the advances to SSOF, and sale proceeds our non-strategic assets and other investments, amounts to be raised from the issuance of equity under our existing shelf registration statement, declines in the market value of properties planned for sale, or declines in the share price of our common stock that would adversely affect our results of operations, financial condition and cash flows. If we were unable to obtain any necessary additional funds, this could have an immediate material adverse effect on liquidity and raise substantial doubt about our ability to continue as a going concern. In such case, we could be required to limit or discontinue certain business plans, activities or operations, reduce or delay certain capital expenditures or investments, or sell certain assets or businesses. There can be no assurance that we would be able to take any such actions on favorable terms, in a timely manner, or at all.

CRITICAL ACCOUNTING ESTIMATES

There have been no significant changes to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K.

## Market risk

As filed, 755 characters.

#### Market Prices

Changes in the market price of commodities, including precious metals, critical metals and oil and gas may significantly affect our future profitability and cash flow. Metal prices fluctuate widely due to factors such as: demand, global mine production levels, supply chain constraints, investor sentiment, central bank reserves, global conflicts and the value of the U.S. dollar.

#### Interest Rate Risk

The interest rates on our existing long-term debt borrowings are fixed, and as a result, interest due on borrowings are not impacted by changes in market-based interest rates.

There have been no material changes in the market risks discussed in Item 7A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

## Controls and procedures

As filed, 1,872 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 and Financial and Accounting 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 Securities Exchange Act of 1934 ("Exchange Act") was conducted. Our disclosure controls and procedures are designed to ensure 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 rules, and such information is accumulated and communicated to our management, including our Principal Executive and 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. Based on that evaluation, our CEO concluded that our disclosure controls and procedures, including controls and procedures designed to ensure that information required to be disclosed by us is accumulated and communicated to our management (including our CEO), were effective as of March 31, 2023, in assuring them in a timely manner that material information required to be disclosed in this report has been properly recorded, processed, summarized and reported.

#### Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2023, there was no change in our internal control over financial reporting that materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

## Risk factors

As filed, 247 characters.

No new risk factors have been identified in addition to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022 and our Quarterly Report on Form 10-Q for the interim period ended March 31, 2023.

Filed May 3, 2023.
Source: SEC EDGAR, the filing index for accession 0001120970-23-000033. Last ingested by Listed: Nov 4, 2026, 17:20 ET. No prices; not investment advice.