Comstock Inc.: Form 10-Q for the period ended Mar 31, 2024

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, footnotes and the risk factors included herewith and herein.

OVERVIEW

Comstock enables systemic decarbonization by innovating and commercializing technologies and materials that integrate into existing global supply chains to extract and convert under-utilized natural resources into renewable energy products that reduce reliance on fossil fuels and contribute to net zero mobility.

Our goal is to Accelerate the Commercialization of Hard Technologies for the Energy Transition. We are pushing the boundaries in technology development and sustainability by leveraging our teams’ unique skills, our diverse technology portfolio, and our frontier research networks toward achieving breakthrough innovations that deliver meaningful positive impact across industries, economies, and communities. The primary 2024 focus is the continued development and commercialization of our businesses.

Our approach integrates frontier scientific discovery with our systemic management practices into One System aligned and capable to meet the demand for commercial-ready energy transition solutions. Our operations primarily involve the innovation, development, and commercialization of our intellectual properties and related assets, with integrated teams focused on each core function in dedicated lines of business organized to address high impact decarbonization targets. We innovate and develop technologies to achieve significant growth on industry-wide scales by creating financial and other incentives for rapid integration into and across entire industries. Our commercialization plans are designed to facilitate that result, such as by selling process solutions, engineering services and technology licenses that enable clients to use their capital, infrastructure, and other resources to maximize the rate and scale of adoption, thereby simultaneously maximizing the rate we build shareholder wealth.

We are currently commercializing pioneering intellectual properties for refining lignocellulosic (woody) biomass into renewable replacements for fossil crude at remarkably high yields, recycling increasingly scarce electrification metals from end-of-life photovoltaics and other electronic devices, and advanced physics based artificial intelligence for precision mining and materials discovery. We make, own and manage investments in related assets to support our businesses, including multiple, existing minority equity positions in strategic technology developers, a renewable fuels demonstration facility in Wisconsin, a metals recycling demonstration facility in Nevada, and direct investments in northern Nevada real estate comprised of strategic water rights and about twelve square miles of mining claims and surface parcels with measured and indicated mineral resources containing 605,000 ounces of gold and 5,880,000 ounces of silver, and inferred mineral resources containing an additional 297,000 ounces of gold and 2,572,000 ounces of silver. We also announced the execution of agreements with RenFuel to acquire a development stage biorefinery project to refine byproducts of paper production into biointermediates for refining into renewable fuels, and to make an up to $3,000,000 strategic investment over the next three years in RenFuel for the continued development and commercialization of advanced applications of RenFuel’s and Comstock’s complimentary renewable fuels technologies.

Lines of Business

Fuels Segment

Our Fuels Segment develops and commercializes technologies that extract and convert wasted and unused lignocellulosic biomass into intermediates for refining into advanced renewable fuels. Most renewable fuels draw from the same pool of conventional FOG feedstocks, but the total existing FOG supply can only meet a small fraction of the global mobility demand. Our technologies unblock that constraint by converting abundant, lignocellulosic biomass into biointermediates for refining into renewable fuels.

While innovation and development are ongoing and we expect additional advancements, our existing commercially available technologies have proven the potential to produce more than 100 gallons per dry tonne of woody biomass as measured on a GGE basis, with CI scores of 15 or less for Cellulosic Ethanol and our proprietary HBO. HBO is used directly by biofuel refineries to blend with, diversify, and extend conventional hydroprocessed FOG feedstocks to enhance production of renewable fuels.

We are currently evaluating several joint development solutions and systems based on our technologies, as well as feedstock and offtake agreements, licenses, engineering services, and direct investments.

Execution of additional commercial agreements, including but not limited to, joint development agreements, offtake agreements, feedstock agreements, licensing agreements and direct investments supporting the deployment and enablement of our solutions, primarily with operationally experienced, technologically sophisticated, and well capitalized customers represents an ongoing objective and the primary focus for 2024. The joint development agreements represent up to five phases of development and represent material upfront engineering and professional service fees, ultimately enabling licenses and royalties could create more than 20 years of recurring revenues from the production and sale of lignocellulosic biointermediaries and related co-products.

Metals Segment

Our Metals Segment recently secured sufficient supplier commitments and all of the necessary permits and began commissioning our first photovoltaic recycling facility, and will commence receiving revenue in the form of tipping fees and to a lesser extent recycled metal sales for the processing of end-of-life photovoltaic materials during the second quarter of 2024.

During 2023 and early 2024, we expanded our leadership team in metals recycling, selected our first production site, secured all permitting for our first demonstration scale commercial facility, and secured long term supply agreements from our first customers. In early 2024, we commenced production commissioning activities and continued expanding our existing revenue generating supply commitments while commencing the design and site selection for our first “industry-scale” production facility and the permitting thereto in our metals recycling business are the key objectives for 2024.

Mining Segment

Our Mining Segment is expected to generate income in the form of leases, licenses, and related fees throughout 2024. Our Mining Segment is administered by our wholly owned subsidiary, Comstock Mining LLC, and various other subsidiaries that collectively own or control twelve square miles of properties of patented mining claims, unpatented mining claims and surface parcels in northern Nevada, including six and a half miles of continuous mineralized strike length (the “Comstock Mineral Estate”).

Strategic Investments Segment

We own and manage several investments and projects that are strategic to our plans and ability to produce and maximize throughput in our Fuels, Metals and Mining Segments, that are held for the purpose of complimenting or enhancing our mission of enabling systemic decarbonization and creating value but that are not a component of such other segments or otherwise have distinct operating activities. Our Strategic Investments Segment includes minority equity investments in GenMat (physics-based artificial intelligence), Green Li-ion Pte Limited (lithium-ion battery component recycler and remanufacturing), Sierra Springs Opportunity Fund (strategic direct investment in northern Nevada real estate), and other equity or equity-linked investments.

We also recently announced the execution of agreements with RenFuel to acquire a development stage biorefinery project to refine byproducts of paper production into biointermediates for refining into renewable fuels, and to make an up to $3,000,000 strategic investment over the next three years in RenFuel for the continued development and commercialization of advanced applications of RenFuel’s and Comstock’s complimentary renewable fuels technologies.

Investment in GenMat – We invested our minority interest of GenMat as an enhancement and an integral component of our innovation strategy. GenMat has developed and launched a new generative AI that we believe is capable of simulating critical properties of known materials with high accuracy. GenMat also plans on using its AI to simulate new material characteristics for new and existing applications. We believe these generative AI models can be employed today, on GenMat’s existing high-performance computing platform, well before quantum computers become mainstream.

During 2023, GenMat began elevating material simulation capabilities to commercial readiness by synthesizing and directly testing new AI simulated materials in high value applications and potentially engage early adopter enterprise clients for this use. GenMat also initiated new mineral exploration capabilities with the successful launch of GENMAT-1, GenMat’s own Hyperspectral Remote Sensing Imaging (“HRSI”) system for optimizing future mineral exploration using their proprietary physics-based artificial intelligence (AI) and newly developing hyperspectral sensing technology. GenMat and Comstock Mining are collaborating other a pioneering development and testing of GenMat’s technologies by combining Comstock’s existing geologic data with newly collected information across a broader electromagnetic spectrum form the new GENMAT-1 HRSI system and importantly, applying probabilistic algorithms powered with GenMat’s physics-based AI.

Investment in Green Li-ion – Our wholly owned LINICO subsidiary has owned 37,162 preferred shares of Green Li-ion since 2021. On September 12, 2023, LINICO received gross proceeds of $795,510 from the sale of 1,500 Green Li-ion preferred shares (representing approximately 4% of the 37,162 of the shares then owned by LINICO). In 2023, the Company adjusted our investment's carrying value to fair value by increasing that value by $14,577,627 for the remaining 35,662 Green Li-ion preferred shares representing 13.34% of Green Li-ion. The Company intends to sell its remaining shares during 2024.

Investment in SSOF – During 2019, the Company invested $335,000 for 6,700,000 shares. From 2020 through November of 2023, the Company advanced $6,985,000 to SSOF and its subsidiary, for the purpose of purchasing land, payments for deposits on land and payments for an option on land and water rights purchases. On December 29, 2023, the Company and SSOF agreed to convert the full amount of the outstanding advances for an additional 3,880,556 common shares of SSOF stock (at a dollar value of $1.80 per share) that also resulted in an unrealized gain recognized of $11,725,000 on the original 6,700,000 shares. In the first quarter of 2024, the Company invested $480,000 in SSOF at $1.80 per share increasing our equity ownership to 17.46%.

At March 31, 2024, the Company’s total investment in SSOF was valued at $19,525,000, representing 10,847,222 common shares of SSOF, or 17.46% of the total SSOF outstanding common shares on a fully diluted, if converted basis.

SSOF is a qualified opportunity zone fund, that owns 100% of SSE, a qualified opportunity zone business. SSE and its subsidiaries own or controls approximately 2,500 acres of land, a manufacturing facility, significant senior, junior and effluent water rights, sewer rights and also owns and operates the Silver Springs Regional Airport LLC. The substantial majority of these properties are contiguous and strategically located within immediate proximity of Highway 50, State Route 492, the Northern Nevada Industrial Center and the Tahoe Reno Industrial Center where companies like Tesla, Switch, Google, Microsoft, and Redwood Materials, and over one hundred more companies that are currently located, expanding or locating in this industrializing region.

Other Investment - On March 1, 2024, the Company entered into Securities Purchase Agreement (the “Developer Securities Purchase Agreement”) with an unaffiliated research and development company (“Developer”) under which the Company agreed to purchase 4,000,000 shares of common stock of the Developer, corresponding to 40% of Developer's fully-diluted issued and outstanding capital stock, for $1,500,000. Concurrently and in connection with the entity into the Developer Securities Purchase Agreement, the Company and Developer entered into Development Services Agreement (“DSA”) for purposes of conducting certain research and development work. The purchase price payable by the Company pursuant to the Developer Securities Purchase Agreement will be paid on the following schedule:

Phase 1

• $100,000 on March 1, 2024;
• $20,000 per month from March 1, 2024 to completion of the first project under the DSA; and
• $205,000 on completion of the first project under the DSA.

After completion of Phase 1

• $30,000 per month until fully paid; and
• $205,000 on completion of the first six projects under the DSA.

Since the payments are not interest bearing, the Company calculated the implied interest of $214,039 on the future cash payments using an interest rate of 9.76% which was recorded as a discount on initial investment of $1.5 million and will be recognized over the payment term. As of March 31, 2024, the Company recorded an investment in the Developer of $1,285,961 in our condensed consolidated balance sheets.

Other

Investments in Properties – The Company directly owns three types of properties in Silver Springs, NV, including 98 acres of industrial land, 160 acres of commercial land, both centrally located in Silver Springs, just south of the Silver Springs Regional Airport and a portfolio of water rights. The Company will begin marketing these assets for sale as both industrial and commercial development as interest in Silver Springs, NV continuously increased during 2023.

COMPARATIVE FINANCIAL INFORMATION

Net loss for the three months ended March 31, 2024 increased by $1,236,578 to $6,918,320 from a loss of $5,681,742 for the comparable 2023 period. The increase in net loss primarily resulted from the change in estimated fair value of the derivative investments of $1,454,713 with a loss of $756,118 recorded in 2024 as compared to a gain of $698,595 recorded in 2023, higher interest expense of $203,483, lower gain on sale of Facility of $178,193 due to prior year gain recorded for the sale of the Facility, higher selling, general and administration expenses of $140,552 and higher other income (expense) of $111,835 primarily due to losses from our equity method investments. Variance offset primarily due to higher revenues of $395,201, lower research and development cost of $376,366 and lower loss on conversion of debt $76,933.

Below we set forth a summary of comparative financial information for the three months ended March 31, 2024 and 2023:

RESULTS OF OPERATIONS

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

Revenues for the three months ended March 31, 2024 increased by $395,201 to $425,951 from $30,750 for the comparable 2023 period, primarily due to higher revenues from the Mackay mineral lease of $390,625.

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 technology solutions that we license and sell, the market prices for those services, 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, 2024 increased by $140,552 to $3,527,524 from $3,386,972 in the comparable 2023 period, primarily as a result of higher employee costs of $641,792 attributed to higher salaries and executive incentive compensation and payroll administration costs, partially offset by lower insurance expense of $211,159, lower legal fees of $209,129 and lower rent expense of $117,519.

Research and development expenses for the three months ended March 31, 2024 decreased by $376,366 to $892,013 from $1,268,379 in the comparable 2023 period. The decrease is primarily related to lower employee-related costs of $463,502 partially offset by higher rent expense of $108,018.

Depreciation and amortization for the three months ended March 31, 2024 of $655,977 was comparable to 2023 of $631,041.

In 2023, we recognized a gain on the sale of the Facility of $178,193.

Interest expense for the three months ended March 31, 2024 increased by $203,483 to $818,661 from $615,178 in the comparable 2023 period, primarily due to interest and related amortization of the original issue discount ("OID") on the Kips Bay Note and 2023 Alvin Fund Note originating in the fourth quarter of 2023.

Interest income for the three months ended March 31, 2024 increased by $28,634 to $74,491 from $45,857 in the comparable 2023 period, primarily due to higher interest income related to our cash sweep account.

Change in the fair value of our derivative instruments for the three months ended March 31, 2024 decreased by $1,454,713 to a loss of $756,118 from a gain of $698,595 in the comparable 2023 period, as a result of a decrease in the Company's share price in connection with potential make-whole obligations for minimum value commitments on the Company's common shares. The 2024 loss was attributed to $516,601 gain on derivative liability for Kips Bay Note offset by loss of $510,163 LINICO investment, $477,556 GenMat investment and $285,000 Haywood investment. The gain from the three months ended March 31, 2023 was attributed to $240,000 gain on derivative liability for Ionic Note, $210,000 LINICO investment, $158,595 for GenMat and $90,000 for Haywood investment.

Loss of $193,523 on conversion of debt for the three months ended March 31, 2024 are attributed to the Kips Bay Note debt conversions associated with 2,276,944 of the Company's common shares used for the conversion during the three months ended March 31, 2024. Loss of $270,456 on conversion of debt for the three months ended March 31, 2023 was attributed to the Ionic Note debt conversions associated with 4,539,413 of the Company's common shares used for the conversion during the three months ended March 31, 2023.

Other income (expenses), net for the three months ended March 31, 2024 were $574,946, primarily consisting of losses from our equity method investments of $575,904 primarily from GenMat losses of $566,204.

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 primarily from GenMat losses of $443,622.

OUTLOOK

Our goal is to Accelerate the Commercialization of Hard Technologies for the Energy Transition. We are pushing the boundaries of what is possible in technology and sustainability by leveraging our teams’ unique skills, our diverse technology portfolio and our frontier research and development networks toward achieving breakthrough innovations that deliver meaningful positive impact across industries, economies and communities. The primary focus for 2024 is the commercialization of our businesses and the continuous innovation, development and engineering of technologies and solutions.

Technology Readiness

The Company’s biorefining technologies are commercially ready and offer growth-enabling performance for the Company’s prospective customers. Comstock Fuels is actively pursuing joint development and licensing agreements representing future revenues from technical and engineering services, designed to identify, define and enable renewable fuel hub projects, including securing associated supply chain participants, performing preliminary and final engineering, facilitating commissioning, construction and operations with globally recognized current and developing renewable fuel producers.

Comstock Metals is also commercially ready and has deployed and is currently commissioning its first commercial demonstration facility during March and April of 2024. The facility is being commissioned on one shift and will expand to three shifts over the next two quarters. Site selection, design and permitting is currently underway for the next “Industry Scale” photovoltaic recycling facility and related storage capacity. Industry Scale facilities are anticipated to scale up to 10-15 times the capacity of the operating demonstration facility (that is, from approximately 7,000 tons per annum of capacity for the demonstration facility up to 70,000 – 100,000 tons per annum of capacity for Industry Scale). Regional site assessment and selection activities are ongoing.

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.

Each of our lines of developing businesses have achieved sufficiency for certain aspects of their technology readiness enabling early adoption and commercialization efforts.

The following summarizes the recent change in TRL status, and the 2024 objectives:

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.

Commercialization – Lines of Business

Comstock 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 rapidly growing demand for renewable fuels. Comstock's patented and patent-pending biorefining technologies unblock that constraint by converting underutilized lignocellulosic or "woody" biomass into biointermediates for refining drop-in and other renewable fuels.

The Company’s objectives for 2024 include:

• Execute multiple, revenue generating commercial agreements for industry-scale joint development projects, including prefeasibility, feasibility, engineering, commissioning, construction, operations, committed offtake, supply of feedstocks etc., with operationally experienced, technologically sophisticated and well capitalized customers;
• Advancing and expanding our innovation network for even higher yields and lower costs; and
• Expand our integrated bio-intermediate production system, including cellulosic ethanol and HBO.

Each joint development project could result in millions of dollars of technical services and engineering revenues and ultimately, license agreements for commercial production facilities that could each create 15 to 20 years of royalty revenues.

Comstock Metals

End of life solar panels are one of the primary metals-based products that can cause a massive amount of pollution if simply allowed to be landfilled at the end of life with no recovery of any of the underlying metal values.

Comstock Metals objectives for 2024 include:

• Advancing the technology readiness for broader material recycling, prioritizing photovoltaics, to TRL 7;
• Commissioning the photovoltaic material recycling;
• Commencing production of the demonstration scale production facility;
• Expanding our existing revenue generating supply commitments; and
• Finalizing the design and site selection for our first few “industry-scale” facilities and commence permitting.

Comstock Metals has secured all permits for operating its demonstration scale production facility in Silver Springs, NV, with commissioning of operations commencing now, and once commissioned, begin ongoing production immediately thereafter.

Comstock Mining

The Company has amassed the single largest known repository of historical and current geological data within the Comstock mineral district, including extensive geophysical surveys, geological mapping, and drilling data, including the Dayton resource.

On June 30, 2023, the Company signed a Mineral Exploration and Mining Lease Agreement (the “Mining Lease”) with Mackay. The Mining Lease provides a twenty-year term granting Mackay the rights to conduct exploration on certain of the Company’s mineral properties in Storey County, Nevada. Mackay paid a lease initiation fee of $1,250,000 and made their first two quarterly lease payments totaling $875,000, with quarterly lease payments of $375,000 due for the next three and a half years, and then quarterly lease payments of $250,000 thereafter. Mackay also committed to expenditures of $1,000,000 per year on a cumulative basis, and increasingly detailed technical reports after the first five, ten, and fifteen years. Mackay will reimburse carrying costs and pay a 1.5% NSR royalty from any future mine production.

The Company’s objectives for 2024 include:

• Receive cash proceeds of more than $2 million from mineral leases leveraging the northern district claims;
• Commercialize mineral development agreements that enable resource expansion of the central district claims;
• Develop with GenMat, AI-based exploration tools, using Comstock's extensive geologic data along with GENMAT-1’s hyperspectral imaging solution to condition and develop the AI and ground-truth its predictions, and
• Complete the development and mine plans that enables the economic development of the southern district claims.

The Company’s 2024 efforts will apply economic analysis to Comstock’s existing gold and silver resources progressing toward full economic feasibility for the southern part of the district and the ultimate development of full mine and reclamation plans.

Strategic Investments

Investment in GenMat

Investment in generative physics-based AI is a crucial component of Comstock’s technology innovation strategy. GenMat develops and commercializes proprietary generative artificial intelligence models for the discovery and manipulation of matter. This includes AI models that can be employed today, for commercial use on GenMat’s existing, high-performance computing platforms. GenMat is a company in which Comstock has a minority investment interest.

GenMat's AI 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. New material discovery typically takes many years and many millions of dollars. GenMat's AI can simulate thousands of unique new materials in seconds.

GenMat’s objectives for 2024 include:

• Elevate new material simulation to TRL 7 by synthesizing and directly testing the AI’s ability to predict material properties to confirm the precision and accuracy of those simulations;
• Commercialize its space-based hyperspectral imaging sensor for mineral discovery applications; and
• Commercialize physics-based AI solutions to enterprise clients for advanced materials simulation and synthesis.

While the Company can’t be precise about exactly when GenMat will initiate revenue, GenMat’s technologies are maturing much faster than anticipated and at least one commercial agreement is likely in 2024.

Investment in Green Li-ion

Green Li-ion continues making meaningful progress in the development and deployment of its system that remanufactures critical precursor cathode active materials (“PCAM”). In 2023, LINICO received gross proceeds of approximately $0.8 million from the sale of 1,500 Green Li-ion preferred shares (representing approximately 4% of the 37,162 Green Li-ion preferred shares owned by LINICO). The Company intends to sell the remaining 35,662 Green Li-ion preferred shares for potentially up to $19 million more in 2024 proceeds, resulting in a total of almost $20 million from its original $2.0 million investment.

Investments in others non-mining real estate, water rights and securities

The Company directly owns land and water rights in Silver Springs, NV, we will begin marketing for sale and anticipates selling these assets for over $40 million in net proceeds.

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, 2024 and December 31, 2023 were $466,976 and $3,785,577, respectively. The Company had current assets of $22,099,158 and current liabilities of $14,791,541, representing working capital excess of $7,307,617 at March 31, 2024.

The current liabilities include derivative liabilities of $5.5 million for the contingent make-whole liabilities and $3.3 million of accrued expenses and other liabilities, including $1.6 million for incentive compensation and $0.7 million for accrued payroll and related expenses.

Our primary source of liquidity during the first three months of 2024 was cash from equity financing activities. During the three months ended March 31, 2024, we generated $3,131,934 in cash from our financing activities and we used $3,830,596 and $2,619,939, respectively, in cash in our operating and investing activities.

During the three months ended March 31, 2024, we issued 3,318,014 shares of common stock to Tysadco, for an aggregate sales price of $1,213,711 at an average price per share of $0.37.

On March 25, 2024, the Company entered into an equity purchase agreement (“2024 ClearThink Agreement”) with ClearThink Capital Partners LLC (“ClearThink”) to offer and sell registered shares of common stock at an aggregate offering price of up to $5 million from time to time, at our option, on terms we deem favorable. As of March 31, 2024, the Company issued 784,683 registered shares of common stock to ClearThink for an aggregate sales price of $250,000 at an average price per share of $0.32, and additional 250,000 unregistered restricted common shares at a fair value of $85,000 in commitment fees. As of March 31, 2024, the 2024 ClearThink Agreement had remaining capacity of $4,750,000.

On December 27, 2023, the Company entered into a securities purchase agreement for an unsecured convertible promissory note (the "Kips Bay Note") with Kips Bay Select LP ("Kips Bay") with a principal amount of $5,263,157, of which $263,157 was OID. The full principal is due on March 27, 2025. Interest is payable monthly at a rate of 8% annually. The Company received $3.0 million on December 27, 2023 and received the remaining $2.0 million by January 27, 2024. On January 11, 2024, for consideration to enter into the Kips Bay Note, the Company issued 308,931 restricted shares of its common stock equal to 3% of the principal amount of the Kips Bay Note, or $157,895 at $0.511 per share. On January 16, 2024, the Company issued an additional 180,210 registered shares of its common stock equal in value to 1.75% of the principal amount of the Kips Bay Note, or $92,105, also at $0.511 per share. During three month period ended March 31, 2024, the Company delivered 2,276,944 shares of common stock with a fair value of $894,773 at an average conversion price per share of $0.39 upon the conversion of a principal balance of $663,156 and accrued interest of $104,756.

On November 12, 2023, the Company entered into a short-term promissory note (the “Alvin Fund 2023 Note”) with Alvin Fund with a principal amount of $2.1 million which includes $100,000 OID. The full principal is due on February 12, 2025. Interest is payable monthly at a rate of 8% annually. Prepayment is allowed in full or in part at any time without premium or penalty. The Alvin Fund 2023 Note is secured by the Company's non-mining assets.

On February 13, 2023, the Company 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 $5.0 million. As of December 31, 2023, the Company issued 10,892,604 registered shares of common stock to Leviston pursuant to the Company's S-3 filed with the U.S. Securities and Exchange Commission, for an aggregate sales price of

$5.0 million at an average price per share of $0.46, and additional 552,486 common shares at a fair value of $200,000 in commitment fees. As of March 31, 2024, the 2023 Leviston Sales Agreement had no remaining capacity.

On December 16, 2022, the Company entered into a securities purchase agreement for an unsecured convertible promissory note (the “Ionic Note”) with Ionic with a principal amount of $3,150,000, of which $2,975,000 was funded and $175,000 was an OID. In 2023, the Company delivered 9,636,924 shares of common stock with a fair value of $4,622,502 at an average conversion price per share of $0.48 upon the conversion. In 2023 the Ionic Note was fully converted with no remaining obligation.

On October 25, 2022, the Company entered into a short-term promissory note (the “Alvin Fund 2022 Note”) with Alvin Fund LLC (“Alvin Fund”) with a principal amount of $2,000,000. In consideration for entering into the Alvin Fund 2022 Note, the Company issued to Alvin Fund common shares of the Company at a fair value of $250,000, which was recognized as a discount on the Alvin Fund 2022 Note. The maturity date pursuant to the Alvin Fund 2022 Note was originally October 25, 2023. On September 30, 2023, the Company and Alvin Fund amended the Alvin Fund 2022 Note to extend the maturity date to January 31, 2026, at an interest rate of 16%. Interest was payable monthly at a rate of 9% annually. Prepayment is allowed in full or in part at any time without premium or penalty. The Alvin Fund 2022 Note is secured by all the property commonly referred to as the Dayton properties.

On December 15, 2021, the Company entered into a long-term promissory note (the “GHF 2021 Note”) with GHF, Inc. (“GHF”), with a principal amount of $5,000,000, of which $4,550,000 was funded and $450,000 was an original issue discount (“OID”). The full principal is due on December 15, 2024. Interest is payable monthly at a rate of 6% annually. Prepayment is allowed in full or in part at any time without premium or penalty. The loan is secured by all non-mining related assets of the Company, Silver Springs land and water rights, excluding the Lucerne and Dayton properties. The Company is required to prepay the GHF 2021 Note with any net cash proceeds received in the sale of any collateral.

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, issuance of equity under our existing shelf registration statement and private placements, equity planned licensing, sales and profits from our cellulosic and battery metal recycling technology and related engineering services, and previously funded capital into our GenMat 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. We intend to fund our operations beyond the next twelve months from existing cash and cash equivalents, mining lease revenues, sales from our lignocellulosic and battery metal recycling technology and related engineering services, and planned sales of non-strategic assets and other investments, planned licensing, and borrowings and other various equity financing alternatives from our existing shelf and other registration statements.

Net cash used in operating activities for the three months ended March 31, 2024 increased by $18,810 to $3,830,596 from $3,849,406 in the comparable 2023 period, due primarily to increases in operating expenses discussed in Financial Condition and Results of Operating Information.

Net cash used by investing activities for the three months ended March 31, 2024 was $2,619,939, compared to net cash provided in investing activities of $7,867,494 in the comparable 2023 period, resulting in a $10,487,433 change, primarily due to proceeds received in 2023 from sale of AQMS lease and related assets of $11.0 million. Decrease attributed to lower SSOF advances of $550,000 and lower purchase of mineral rights and property, plant and equipment of $432,120 partially offset by $480,000 investment in SSOF and $250,000 advances to RenFuel in 2024.

Net cash provided in financing activities for the three months ended March 31, 2024 increased $1,566,538 to $3,131,934 from $1,565,396 for the comparable 2023 period, primarily as a result of net proceeds from additional funding from Kips Bay Note of $2,000,000.

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 sale proceeds from 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 2023 Form 10-K.

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, 2023.

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 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 chief executive officer 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 chief executive officer), were effective as of March 31, 2024, in assuring them that material information required to be disclosed timely in this report has been properly recorded, processed, summarized and reported.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2024, 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.

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, 2023 and our Quarterly Report on Form 10-Q for the interim period ended March 31, 2024.