Comstock Inc.: Form 10-Q for the period ended Jun 30, 2024

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 innovates and commercializes technologies that enable systemic decarbonization, primarily by enabling the extraction and conversion of under-utilized natural resources into renewable energy products that integrate into existing global supply chains to extract and convert under-utilized natural resources into renewable energy and related 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 primarily in renewable fuels, electrification metals, and artificial intelligence enabled mineral and materials development. 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 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 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.

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 for the continued development and commercialization of advanced applications of RenFuel’s and Comstock’s complimentary 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 fats, oils and greases (‘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 high-yielding 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 Gasoline Gallon Equivalent Basis (“GGE”) basis, with Carbon Intensity (“CI”) scores of 15 or less for Cellulosic Ethanol and our proprietary hydro-deoxygenated Bioleum oil (“HBO”). HBO is used by biofuel refineries to blend with, diversify, and extend conventional hydroprocessed FOG feedstocks to enhance production of renewable fuels.

We are evaluating our first demonstration scale commercial facility and several, related joint development solutions and systems based on our technologies, as well as feedstock and offtake agreements, licenses, engineering services, and direct investments into Comstock Fuels Corporation, primarily from technologically sophisticated and well capitalized partners.

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 in the form of our first demonstration scale commercial facility, primarily with operationally experienced and technologically sophisticated 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 that could create more than 20 years of recurring revenues from the production of lignocellulosic biointermediaries and fuels.

Metals Segment

Our Metals Segment recently secured its first industry-scale facility lease, the related county permit for storage, and sufficient supplier commitments and all of the necessary permits for operating its previously commissioned demonstration scale commercial photovoltaic recycling facility and commenced receiving revenue in the form of tipping fees during the second quarter of 2024, and to a lesser extent, will begin receiving recycled metal sales from processed end-of-life photovoltaic materials in later 2024.

During the first half of 2024, we expanded our metals recycling team, commissioned our first production site, secured all permitting for our first demonstration scale commercial facility, and secured long term supply agreements from our first customers and commenced production commissioning activities while we continued expanding existing revenue generating supply commitments. We have also completed the site selection and secured for our first “industry-scale” production facility and commenced the design and the permitting thereto, having already received our first county-level permit for industry-scale storage and processing. Submitting all prerequisite permits, finalizing the industry-scale engineering and ordering all of the industry-scale equipment are the key 2024 Metals objectives.

Mining Segment

Our Mining Segment is generating income in the form of leases, licenses, and related fees during 2024, and is administered by our wholly owned subsidiaries, Comstock Mining LLC, Comstock Processing and various other local 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”).

Completing the preliminary economic assessment for the Dayton resource and progressing toward full economic feasibility for the southern part of the district and the ultimate development of full mine and reclamation plans are key objectives for 2024.

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 fund up to $3,000,000 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 to develop and test GenMat’s technologies by combining Comstock’s existing geologic data with newly collected information across a broader electromagnetic spectrum from 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 late 2024, or early 2025.

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 half of 2024, the Company invested $530,000 in SSOF at $1.80 per share increasing our equity ownership to 17.50%.

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 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. The Company recorded a corresponding payable for future cash payments to account for the 40% ownership interest in the Developer. At June 30, 2024, the future remaining payments, net implied interest, totaled $1,150,424 (see Note 6, Accrued Expenses and Other Liabilities). For the three and six-months ended June 30, 2024, the Company recorded $48,400 in equity loss from affiliates for our investment in the Developer. During the three and six-months ended June 30, 2024, Comstock paid $60,000 and $180,000, respectively, to the Developer in accordance with the funding commitments under the Developer Securities Purchase Agreement.

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 has begun marketing these assets for sale as both industrial and commercial development as interest in Silver Springs, NV continuously increased during 2024, and accordingly has classified these assets as held for sale in the condensed consolidated balance sheet.

COMPARATIVE FINANCIAL INFORMATION

Three-Months Ended June 30, 2024 Compared to Three-Months Ended June 30, 2023

Net loss for the three-months ended June 30, 2024 increased by $3,147,683 to $8,652,272 from a loss of $5,504,589 for the comparable 2023 period. The increase in net loss primarily resulted from a change in estimated fair value of the derivative assets of $1,642,113 with a $77,496 loss recorded in 2024 as compared to a $1,564,617 gain in 2023, change in loss on conversion of debt of $1,311,344, loss on debt extinguishment of $521,622, higher research and development expenses of $785,163, and higher interest expense of $406,279. The increase is partially offset by lower selling, general and administration expenses of $706,030, lower other expense by $361,082 primarily due to other income from SSOF deposits, and higher revenues of $399,499.

Below we set forth a summary of comparative financial information for the three-months ended June 30, 2024 and 2023:

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RESULTS OF OPERATIONS

Three-Months Ended June 30, 2024 Compared to Three-Months Ended June 30, 2023

Revenues for the three-months ended June 30, 2024 increased by $399,499 to $434,824 from $35,325 for the comparable 2023 period, primarily due to higher revenues from the Mackay mineral lease of $390,626 and initial revenues from Comstock Metals of $7,599.

Revenue, costs of sales and gross profit in future periods will vary significantly depending on a number of factors, including the amount of solar panels that we recycle and the amount of renewable energy technology solutions that we license and sell, lease revenues on our properties, 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 June 30, 2024 decreased by $706,030 to $2,792,822 from $3,498,852 in the comparable 2023 period, primarily as a result of lower employee costs of $506,683 attributed to lower executive incentive compensation and lower marketing expense of $296,722; partially offset by higher consulting expense of $176,837.

Research and development expenses for the three-months ended June 30, 2024 increased by $785,163 to $2,548,467 from $1,763,304 in the comparable 2023 period. The increase is primarily related to higher rent expense of $1,306,272 attributed to the AST research and development rent of $1,208,180 paid in April 2024 (see Note 7, Leases); offset partially by lower employee costs of $604,392 for salaries and executive incentive compensation.

Depreciation and amortization for the three-months ended June 30, 2024 was $656,717 and comparable to 2023 amount of $704,881.

Interest expense for the three-months ended June 30, 2024 increased by $406,279 to $782,440 from $376,161 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 June 30, 2024 of $65,081 was comparable to 2023 of $61,018.

Change in the fair value of our derivative instruments for the three-months ended June 30, 2024 decreased by $1,642,113 to a loss of $77,496 from a gain of $1,564,617 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 losses of $359,104 for the LINICO investment, $209,872 for the GenMat investment and $48,000 for the Haywood investment, partially offset by a gain of $539,480 on the derivative liability for Kips Bay Note. The gain from the three-months ended June 30, 2023 was attributed to $1,365,000 for the LINICO investment, $1,030,871 for the GenMat investment and $585,000 for the Haywood investment, partially offset by a loss $1,416,254 on the derivative liability for Ionic Note.

Loss of $1,278,544 on the conversion of debt to equity for the three-months ended June 30, 2024 is attributed to the Kips Bay Note debt conversions associated with 12,244,556 of the Company's common shares used for the conversion of the debt during the three-months ended June 30, 2024. Gain of $32,800 on the conversion of debt to equity for the three-months ended June 30, 2023 was attributed to the Ionic Note debt conversions associated with 1,951,248 of the Company's common shares used for the conversion during the three-months ended June 30, 2023.

Loss on debt extinguishment of $521,622 resulted from the debt modifications for the Amended GHF 2021 Note and Amended Alvin Fund 2023 Note.

Other income (expenses), net for the three-months ended June 30, 2024 were $494,069, primarily consisting of losses from our equity method investments of $649,281 primarily from GenMat of $606,935, partially offset by other income recognized on SSOF deposits of $400,000.

Other income (expenses), net for the three-months ended June 30, 2023 were $855,151, primarily consisting of losses from our equity method investments of $341,099 primarily from GenMat of $345,586, and losses from our investment in ABTC common shares of $765,000.

COMPARATIVE FINANCIAL INFORMATION

Six-Months Ended June 30, 2024 Compared to Six-Months Ended June 30, 2023

Net loss for the six-months ended June 30, 2024 increased by $4,384,261 to $15,570,592 from a loss of $11,186,331 for the comparable 2023 period. The increase in net loss primarily resulted from a change in estimated fair value of the derivative assets of $3,096,826 with a $833,614 loss recorded in 2024 as compared to a gain of $2,263,212 in 2023, change in loss on conversion of debt of $1,234,411, higher interest expense of $609,763, loss on debt extinguishment of $521,622, higher research development expenses of $408,797, and lower gain on sale of Facility of $178,193. The increased loss is partially offset by higher revenues of $794,700, lower selling, general and administration expenses of $565,478 and lower other expense of $249,248 primarily due to other income from SSOF deposits.

Below we set forth a summary of comparative financial information for the six-months ended June 30, 2024 and 2023:

RESULTS OF OPERATIONS

Six-Months Ended June 30, 2024 Compared to Six-Months Ended June 30, 2023

Revenues and gross profit for the six-months ended June 30, 2024, increased $794,700 to $860,775 from $66,075 for the comparable 2023 period, primarily due to higher revenues from the Mackay mineral lease of $781,251 and initial revenues from Comstock Metals of $7,599.

Revenue, costs of sales and gross profit in future periods will vary significantly depending on a number of factors, including the amount of solar panels that we recycle and the amount of renewable energy technology solutions that we license and sell, lease revenues on our properties, 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 six-months ended June 30, 2024 decreased by $565,478 to $6,320,346 from $6,885,824 in the comparable 2023 period, primarily as a result of lower insurance expense of $323,610, lower property taxes and licenses of $264,684 and lower marketing expense of $221,730; partially offset by higher consulting fees of $153,617.

Research and development expenses for the six-months ended June 30, 2024 increased by $408,797 to $3,440,480 from $3,031,683 in the comparable 2023 period. The increase is primarily related to higher rent expense of $1,414,289 attributed to the AST research and development rent of $1,208,180 paid in April 2024 (see Note 7, Leases); offset partially by lower employee costs of $1,067,895 for salaries and executive incentive compensation.

Depreciation and amortization during the six-months ended June 30, 2024 was $1,312,695 and comparable to 2023 amount of $1,335,922.

In 2023, we recognized a gain on the sale of the Facility of $178,193, with no comparable amount in 2024.

Interest expense for the six-months ended June 30, 2024, increased by $609,763 to $1,601,102 from $991,339 for 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 six-months ended June 30, 2024, increased by $32,698 to $139,573 from $106,875 in the comparable 2023 period, primarily due to higher interest income related to our cash sweep account.

Change in fair value of our derivative instruments for the six-months ended June 30, 2024, decreased by $3,096,826 to a loss of $833,614 in 2024 compared to a gain in 2023 of $2,263,212 resulting from 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 losses of $869,267 for the LINICO investment, $687,428 for the GenMat investment and $333,000 for the Haywood investment, partially offset by a gain of $1,056,081 on the derivative liability for Kips Bay Note. The 2023 gain was attributed $1,575,000 for the LINICO investment, $1,189,466 for the GenMat investment and $675,000 for the Haywood investment, offset by a loss $1,176,254 on the derivative liability for Ionic Note.

Loss of $1,472,067 on conversion of debt for the six-months ended June 30, 2024 are attributed to the Kips Bay Note debt conversions associated with 14,521,500 of the Company's common shares used for the conversion during the six-months ended June 30, 2024. Loss of $237,656 on conversion of debt for the six-months ended June 30, 2023 are attributed to the Ionic Note conversions of 6,490,661 shares.

Loss on debt extinguishment of $521,622 attributed to the debt modifications for the Amended GHF 2021 Note and Amended Alvin Fund 2023 Note.

Other income (expenses), net, for the six-months ended June 30, 2024 were $1,069,014, primarily consisting of losses from our equity method investments of $1,225,185 primarily from GenMat of $1,173,139, partially offset by other income recognized on SSOF deposits of $400,000.

Other income (expenses), net, for the six-months ended June 30, 2023 were $1,318,262, primarily consisting of losses from our equity method investments of $806,265 primarily from GenMat of $789,209 and loss from our investment in ABTC common shares of $765,000.

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 and capitalization 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 engaged in the panning and deployment of our first commercial demonstration facility and pursuing joint development and licensing agreements representing strategic capital and future revenue sources from technical and engineering services, 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. The facility is being commissioned on one shift and is currently expanding to three shifts over the next two to three months. 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 for the next two facilities.

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 the second half of 2024 include:

• Closing on a $200 million investment, primarily to deploy the first commercial demonstration facility;
• Execute multiple, revenue generating commercial agreements for industry-scale joint developments;
• 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.

Our first commercial demonstration facility is designed to be profitable and to confirm the scale of multiple industry-scale facilities. Each joint development project could result in millions of dollars of technical services and engineering revenues and ultimately, license agreements for additional production facilities that would generate 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.

The Company’s objectives for the second half of 2024 include:

• Closing on a $22 million investment, primarily to deploy the first two commercial demonstration facilities;
• Commissioning the photovoltaic material recycling;
• Commencing full, three-shift production of the demonstration scale production facility;
• Confirming the ability to fully and cleanly reprocess and reuse all residual materials;
• Advancing the technology readiness for broader material recycling, prioritizing photovoltaics, to TRL 7;
• Expanding our existing revenue generating supply and offtake commitments; and
• Finalizing the site selection for our first three “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 occurring now with ongoing production immediately thereafter. Comstock Metals has also secured the initial county level permits for industry-scale operations and storage and is actively engaged in expanded revenue generating supply and now, also, residual material offtake commitments.

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 the second half of 2024 include:

• Closing on a $50 million investment, in part, to finalize the resource, design and mine plan for Dayton;
• 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, develop and validate the AI predictions; and
• Complete the mine plans that enables the economic development of the southern district claims.

The Company’s 2024 efforts 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 and the development of post productive land and community development plans.

Strategic Investments

Investment in GenMat

Investment in physics-based AI is a meaningful 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. Comstock has a minority investment interest in GenMat.

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 the second half of 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 clients for advanced materials and satellite enabling solutions.

GenMat has recently announced revenue generating agreements as GenMat's technologies, including its space-based satellite systems, are maturing much faster than anticipated, with multiple commercial agreements now 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”), having now deployed its first commercial battery remanufacturing facility from fully recycled battery materials deployed. The Company intends to sell the remaining 35,662 Green Li-ion preferred shares in late 2024 or early 2025.

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

The Company has announced an indicative agreement selling its non-mining real estate and water rights for $50 million in gross (approximately $47 million in net proceeds) during the fourth quarter of 2024.

LIQUIDITY AND CAPITAL RESOURCES

Our financial position and liquidity are 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 June 30, 2024 and December 31, 2023 were $114,304 and $3,785,577, respectively. The Company had current assets of $28,372,047 and current liabilities of $13,257,114, representing working capital excess of $15,114,933 at June 30, 2024.

The current liabilities include derivative liabilities of $4,400,579 for the contingent make-whole liabilities and $3,131,158 of accrued expenses and other liabilities, including $1,237,500 for incentive compensation and $888,788 for accrued payroll and related expenses.

Our primary source of liquidity during the first six-months of 2024 was cash from financing activities. During the six-months ended June 30, 2024, we generated $6,823,459 in cash from our financing activities and we used $5,830,794 and $4,663,938, respectively, in cash in our operating and investing activities.

During the six-months ended June 30, 2024, the Company issued 3,318,014 shares of common stock to Tysadco, for an aggregate sales price of $1,213,710 at an average price per share of $0.37.

On July 19, 2024, the Company entered into a securities purchase agreement (the “Leviston Securities Agreement”) with Leviston Resources LLC (“Leviston”), relating to the issuance of an 8.0% convertible promissory note due October 31, 2025 (the “Leviston Convertible Note”). The Convertible Note was issued with an original aggregate principal amount of $2,717,500 (the “Principal Amount”) and an 8% original issue discount and the Company received cash of $2.5 million. The Convertible Note accrues interest at a per annum interest rate of 8% and is redeemable for 30-days following closing at 125% of the Principal Amount, plus accrued interest. The Company agreed to, and on August 6, 2024, issued Leviston (i) 337,787 restricted shares of the Company’s common stock representing 2% of the Principal Amount, based on a price per share equal to the 20-day VWAP for the period beginning on the 10th trading day prior to the closing of the Convertible Note and ending on the 10th trading day after the closing of the Convertible Note (the “VWAP Period”), and (ii) 506,681 registered shares of the Company’s common stock representing 3% of the Principal Amount of the Convertible Note (the “Registered Commitment Shares”), based on a price per share equal to the 20-day VWAP for the VWAP Period, in each case, for no additional consideration.

On July 24, 2024, pursuant to the Leviston Convertible Note, the Company issued 5,974,124 registered shares to convert $717,500 of the Convertible Note plus $2,382 of accrued interest at conversion price of $0.12 leaving the remaining principal balance of the Convertible Note at $2,000,000.

From July 1, through July 19, 2024, pursuant to the Kips Bay Note, the Company issued 2,967,160 shares to Kips Bay at a conversion price of $400,000 at an average conversion price of $0.135. The Company also issued an additional 786,521 shares to Kips Bay in compliance with a most favored nation (“MFN”) clause associated with past conversions.

On July 19, 2024, the Company redeemed $500,000 of principal on the Kips Bay Note at a 10% redemption premium, for $550,000.

From July 1, through July 17, 2024, pursuant to the 2024 ClearThink Agreement, the Company issued 6,704,146 registered shares of common stock of the Company to ClearThink for an aggregate sales price of $1,000,000 at an average price per share of $0.15. On July 18, 2024, the Company elected to terminate all future offers and sales pursuant an Equity Purchase Agreement (the “Sales Agreement”) with ClearThink Capital Partners LLC (“ClearThink”) and the Company filed a prospectus supplement to reflect the reduction in the aggregate offering dollar amount of securities to be offered and sold from $5,000,000 to $4,250,000, and accordingly, the 2024 ClearThink Agreement has no remaining capacity (see Note 10, Equity).

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 restricted and registered shares of common stock of the Company at an aggregate offering price of up to $5,000,000 from time to time, at our option, on terms we deem favorable. On March 26, 2024, the Company filed a prospectus supplement to the registration statement on Form S-3, dated March 28, 2022, that registered for resale these shares issued pursuant to the 2024 ClearThink Agreement. As of June 30, 2024, the Company issued 14,083,627 registered shares of common stock to ClearThink for an aggregate sales price of $3,250,000 at an average price per share of $0.23. As of June 30, 2024, the 2024 ClearThink Agreement had remaining capacity of $1,750,000.

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, 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 additional $2.0 million in principal amount of the Kips Bay Note, or $92,105, also at $0.511 per share. During six-month period ended June 30, 2024, the Company delivered 14,521,500 shares of common stock with a fair value of $4,301,634 at an average conversion price per share of $0.30 upon the conversion of a principal balance of $3,363,152 and accrued interest of $166,707.

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 was due on February 12, 2025. Interest was payable monthly at a rate of 8% annually. On April 22, 2024, the Company and Alvin Fund amended the Alvin Fund 2023 Note to extend the maturity from February 12, 2025 to April 15, 2026 and increase the interest rate from 8% to 12% per annum (see Note 8, Debt Obligations). 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 June 30, 2024, the 2023 Leviston Sales Agreement had no remaining capacity and no sales under this agreement were made in 2024.

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. On April 22, 2024, the Company and Alvin Fund amended the Alvin Fund 2022 Note to extend the maturity from January 31, 2026 to April 15, 2026 (see Note 8, Debt Obligations). 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 was due on December 15, 2024. Interest was payable monthly at a rate of 6% annually. On April 22, 2024, the Company and GHF amended the GHF 2021 Note to extend the maturity from December 15, 2024 to April 15, 2026 and increase the interest rate from 6% to 12% per annum (see Note 8, Debt Obligations). 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 planned sales of non-strategic assets and other investments, issuance of equity under our existing shelf registration statement and private placements, planned licensing and related engineering services, sales and deferred revenue from our solar panel recycling business and existing cash and cash equivalents. 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 six-months ended June 30, 2024 decreased by $847,236 to $5,830,794 from $6,678,030 in the comparable 2023 period, due primarily to decreases in operating expenses discussed in Financial Condition and Results of Operating Information.

Net cash used in investing activities for the six-months ended June 30, 2024 was $4,663,938, compared to net cash provided by investing activities of $3,701,641 in the comparable 2023 period, resulting in a $8,365,579 change, primarily due to proceeds received in 2023 from sale of AQMS lease and related assets of $21.0 million offset by purchase of the facility of $12.0 million. Decrease attributed to funding of RenFuel note of $1,030,000, advances to GenMat of $235,636 and investment in SSOF of $530,000; partially offset by lower make-whole payments for our investments of $1,215,636 and lower purchase of mineral rights and property, plant and equipment of $350,133.

Net cash provided in financing activities for the six-months ended June 30, 2024 increased $4,783,129 to $6,823,459 from $2,040,330 for the comparable 2023 period, primarily as a result of an increase in proceeds from issuance of common stock of $2,563,710 and 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 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 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 June 30, 2024, 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 June 30, 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 June 30, 2024.