在 2024年3月1日， Comstock與開發者簽訂了DSA，以推進Comstock子公司擁有的技術，這些技術包含開發者擁有的知識產權（「開發者知識產權」）的應用。DSA的範圍涉及研究和開發，以驗證Comstock知識產權和開發者知識產權的集成應用，包括僅涉及開發者知識產權的基礎應用。DSA要求工作分階段完成， 首先 階段（“階段 1”）由 三 項目組成， 九個月期間 months at a cost to Comstock of $116,900 per month, or $1,052,100 in total. Current estimates for the next 三 projects in the 第二， 在滿足12月 Tranche A 支付之後，向 Tranche b 票據的持有者支付一個
等同於並滿足攤銷贖回價格（如 Tranche b 票據中定義）在2025年1月2日到期的總金額（“ phase of work under the DSA (“Phase 2”) 包括 $116,900 每月額外 六 個月，或者 $701,400 總共 $，包括 $321,160 設備和供應品在第 1 階段購買的剩餘付款，將在第 2. 對於 三 和 九個月期間-個月結束 2024年9月30日，公司記錄了$350,700 和 $818,300，分別作爲在簡明合併財務報表中的研發費用。階段 2 在收集和評估階段數據後，估算可能會出現上行變化。 1.否 該估算適用於超出階段的工作。 2 目前，DSA考慮在初始期內繼續進行研究和開發合作。 三每個工作階段都通過詳細的範圍定義，最終形成具體、可衡量、可實現、相關和及時的里程碑和決策點。無階段下的工作。 2 在滿足階段完成的條件後，不能在沒有Comstock發出的書面開始通知的情況下發生。 1 基於所述的里程碑和決策點。階段 2 開始通知還不能發出，直到階段的詳細項目計劃最終確定並得到Comstock和開發者的批准。 2 階段
For the year ended December 31, 2023, the Company recognized share-based compensation of $143,833 associated with the agreement with Dr. Villamagna. During the three and nine-months ended September 30, 2024, the Company recognized share-based compensation of $43,150 and $129,450, respectively. At September 30, 2024, unamortized stock-based compensation for the equity award was $589,717 and will be amortized over the remaining vesting term of 3.50 years.
Treasury Stock
At December 31, 2023, treasury stock included 2,605,322 shares of our common stock with carrying value of $3,360,867. On January 5, 2024, the Company retired and cancelled the treasury stock.
Warrants
Outstanding warrants at September 30, 2024 and December 31, 2023 are as follows:
Number of Warrants
Exercise Price
Expiration Date
GHF, Inc.
200,000
$
0.4555
December 31, 2025
GHF, Inc.
500,000
$
0.4555
December 31, 2025
GHF, Inc.
500,000
$
0.4555
December 31, 2025
Alvin Fund LLC
1,000,000
$
0.4555
December 31, 2025
Total Outstanding warrants
2,200,000
During the nine-months ended September 30, 2024 and 2023, no warrants to purchase common stock were issued, exercised, or expired. During the second quarter 2024, the warrants were modified in connection with amendments to related debt agreements (see Note 8,Debt Obligations).
NOTE 11FAIR VALUE MEASUREMENTS
The following table presents our assets and liabilities measured at fair value on a recurring basis at September 30, 2024:
Fair Value Measurements at
September 30, 2024
Quoted
Significant
Prices
Other
Significant
in Active
Observable
Unobservable
Markets
Inputs
Inputs
Total
(Level 1)
(Level 2)
(Level 3)
Assets:
Haywood derivative
$
428,850
$
—
$
428,850
$
—
Stock held by GenMat advances (see Note 3)
1,188,862
—
1,188,862
—
Total assets measured at fair value
$
1,617,712
$
—
$
1,617,712
$
—
Liabilities:
2023 Kips Bay convertible debt derivative
$
10,000
$
—
$
—
$
10,000
2024 Kips Bay convertible debt derivative
1,240,000
—
—
1,240,000
Total liabilities measured at fair value
$
1,250,000
$
—
$
—
$
1,250,000
The following table presents our liabilities measured at fair value on a recurring basis at
December 31, 2023:
Changes in the assets and liabilities that include level 3 inputs the following:
•
During the three and nine-months ended September 30, 2023, the Company recognized a gain of $76,667 and a loss of $1,099,587, respectively, for the change in fair value of the Ionic conversion option derivative. During the three and nine-months ended September 30, 2023, $523,333 and $1,519,587, respectively, of the derivative liability was converted.
•
During the three and nine-months ended September 30, 2024, the Company recognized a gain of $404,794 and $1,460,875 respectively, for the change in fair value of the 2023 Kips Bay conversion option derivative. On January 27, 2024, the Company recorded an additional $836,000 associated with the additional borrowings under the Kips Bay Note. During three and nine-months ended September 30, 2024, $55,206 and $725,125, respectively, of the derivative liability was converted.
•
During the three and nine-months ended September 30, 2024, the Company recognized a gain of $130,000 for the change in fair value of the Leviston conversion option derivative. On July 19, 2024, the Company recorded $1,210,000 associated with the derivative liability. During three and nine-months ended September 30, 2024, $1,080,000 of the derivative liability was converted. As of September 30, 2024, the Leviston Note was fully converted
•
During the three and nine-months ended September 30, 2024, the Company recognized a loss of $120,000 for the change in fair value of the 2024 Kips Bay conversion option derivative. During three and nine-months ended September 30, 2024, $0 of the derivative liability was converted and on September 19, 2024, the Company recorded an additional $1,120,000 associated with the derivative liability.
VALUATION METHODOLOGIES
Following is a description of the valuation methodologies used for the Company's financial instruments measured at fair value on a recurring basis as well as the general classification of such instruments pursuant to the valuation hierarchy.
Derivatives
The Company has several derivatives associated with its common stock including make-whole commitments and debt conversion options. The following tables presents changes in our derivative liabilities for the three and nine-months ended September 30, 2024 and 2023, at fair value:
For the Three-Months Ended September 30, 2024
As of June 30, 2024
(Additions) Deductions
Change in Fair Value
Payments for Decrease in Contractual Stock Consideration
As of September 30, 2024
2023 Kips Bay convertible debt derivative
$
(470,000
)
$
55,206
$
404,794
$
—
$
(10,000
)
Leviston convertible debt derivative
—
(130,000
)
130,000
—
—
2024 Kips Bay convertible debt derivative
—
(1,120,000
)
(120,000
)
—
(1,240,000
)
LINICO related derivative
(3,252,429
)
3,243,853
8,576
—
—
Haywood derivative
(678,150
)
—
927,000
180,000
428,850
Total derivative assets and liabilities measured at fair value
$
(4,400,579
)
$
2,049,059
$
1,350,370
$
180,000
$
(821,150
)
For the Nine-Months Ended September 30, 2024
As of December 31, 2023
(Additions) Deductions
Change in Fair Value
Payments for Decrease in Contractual Stock Consideration
As of September 30, 2024
2023 Kips Bay convertible debt derivative
$
(1,360,000
)
$
(110,875
)
$
1,460,875
$
—
$
(10,000
)
Leviston convertible debt derivative
—
(130,000
)
130,000
—
—
2024 Kips Bay convertible debt derivative
—
(1,120,000
)
(120,000
)
—
(1,240,000
)
LINICO related derivative
(2,383,162
)
3,243,853
(860,691
)
—
—
Haywood derivative
(875,000
)
409,850
594,000
300,000
428,850
GenMat derivative
(781,966
)
(694,970
)
(687,428
)
2,164,364
—
Total derivative assets and liabilities measured at fair value
$
(5,400,128
)
$
1,597,858
$
516,756
$
2,464,364
$
(821,150
)
For the Three-Months Ended September 30, 2023
As of June 30, 2023
(Additions) Deductions
Change in Fair Value
Payments for Decrease in Contractual Stock Consideration
As of September 30, 2023
Ionic convertible debt derivative
$
(600,000
)
$
523,333
$
76,667
$
—
$
—
LINICO related derivative
(3,278,162
)
—
(1,120,000
)
625,000
(3,773,162
)
Haywood derivative
(605,000
)
—
(480,000
)
—
(1,085,000
)
GenMat derivative
(3,303,172
)
—
(845,843
)
1,500,000
(2,649,015
)
Total derivative liabilities measured at fair value
Payments for Decrease in Contractual Stock Consideration
As of September 30, 2023
Ionic convertible debt derivative
$
(420,000
)
$
1,519,587
$
(1,099,587
)
$
—
$
—
LINICO related derivative
(6,053,162
)
—
455,000
1,825,000
(3,773,162
)
Haywood derivative
(1,480,000
)
—
195,000
200,000
(1,085,000
)
GenMat derivative
(6,592,638
)
—
343,623
3,600,000
(2,649,015
)
Total derivative liabilities measured at fair value
$
(14,545,800
)
$
1,519,587
$
(105,964
)
$
5,625,000
$
(7,507,177
)
At September 30, 2024, December 31, 2023 and September 30, 2023, the fair value of the LINICO, the Haywood Property, and GenMat derivatives was based on a trading price of the Company’s shares of $0.47, $0.55 and $0.41, respectively.
2023 Kips Bay Select LP Conversion Option
On December 27, 2023, the Company recorded a derivative liability on the consolidated balance sheets in connection with the 2023 Kips Bay Note. On that date, the $1,360,000 fair value of the derivative liability was determined based on bifurcation of the derivative conversion option from the 2023 Kips Bay Note. On January 27, 2024, the Company recorded an additional $836,000 associated with the additional borrowings under the 2023 Kips Bay Note (see Note 8,Debt Obligations). At December 31, 2023, the derivative was valued using a Monte Carlo valuation model with a conversion price equal to 90% of the average price capped at $1.00, discount rate of 35%, risk free rate of 4.54%, and volatility of 96.0%. For debt conversions occurring during 2024 and for the valuation at September 30, 2024, the derivative was valued using a Monte Carlo valuation model with a conversion price equal to 90% of the average price capped at $0.88, discount rate range of 35% to 35%, risk free rate range of 4.30% to 5.13%, and volatility range of 61.0% to 96%. During three and nine-months ended September 30, 2024, $55,206 and $725,125, respectively, of the derivative liability was decreased in connection with the conversion of the related debt into shares of common stock. The derivative liability was classified within Level 3 of the valuation hierarchy.
2024 Kips Bay Select LP Conversion Option
On September 19, 2024, the Company recorded a derivative liability on the condensed consolidated balance sheets in connection with the 2024 Kips Bay Note (see Note 8,Debt Obligations). On that date, the $1,120,000 fair value of the derivative liability was determined based on the bifurcation of the derivative conversion option from the 2024 Kips Bay Note. The derivative was valued using a Monte Carlo valuation model with a conversion price equal to 88% of the seven day minimum VWAP, discount rate of 35%, risk free rate of 3.75%, and volatility of 78.0%. At September 30, 2024, the derivative was valued using a Monte Carlo valuation model with a conversion price equal to 88% of the seven day minimum VWAP, discount rate of 35%, risk free rate of 3.81%, and volatility of 81.0%. During three and nine-months ended September 30, 2024, $0 of the derivative liability was converted. The derivative liability was classified within Level 3 of the valuation hierarchy.
Leviston Resources LLC Conversion Option
On July 19, 2024, the Company recorded a derivative liability on the condensed consolidated balance sheets in connection with the Leviston Note (see Note 8,Debt Obligations). On that date, the $1,210,000 fair value of the derivative liability was determined based on the bifurcation of the derivative conversion option from the Leviston Note. For debt conversions occurring during third quarter of 2024, the derivative was valued using a Monte Carlo valuation model with a conversion price equal to the lower of (i) the closing day price times 150% or (ii) 80% of minimum historical 10 day VWAP, discount rate range of 35% to 35%, risk free rate range of 4.33% to 4.65%, and volatility range of 70.0% to 79.0%. During three and nine-months ended September 30, 2024, $1,080,000 of the derivative liability was decreased in connection with the conversion of the related debt into shares of common stock. At September 30, 2024, the Leviston Note was fully converted. The derivative liability was classified within Level 3 of the valuation hierarchy.
GenMat Derivative Instrument
On June 24, 2021, the Company recorded a derivative asset on the condensed consolidated balance sheets in connection with the GenMat Membership Interest Purchase Agreement. On that date, the $530,000 fair value of the derivative asset was determined based on the excess of the fair value of 3,000,000 shares of our common stock issued to and held by GenMat over the $10,000,000 contractual stock consideration required under the agreement. The value of the shares was based on the $3.51 closing price per share of our common stock on that date. At December 31, 2023, the fair value of Comstock’s shares held by GenMat of 2,513,451 shares was based on the closing price per share of our common stock of $0.55 with a fair value of the derivative liability of $781,966. On May 17, 2024, Comstock fulfilled our initial funding requirements of $15.0 million which satisfied the make-whole provision and first investment tranche and removed the requirement to account for the commitment as a derivative. The derivative liability was classified in Level 2 of the valuation hierarchy.
Haywood Derivative Instrument
On April 7, 2022, we recorded a derivative asset on the consolidated balance sheets in connection with the Haywood acquisition and lease from Haywood (see Note 7,Leases). On that date, the $245,000 fair value of the derivative asset was determined based on the excess of the fair value of 1,500,000 shares of our common stock issued to and held by Haywood and a deposit of $50,000 over the initial $2,100,000 contractual stock consideration required under the agreement. The agreement was amended in 2024 (see Note 7,Leases) increasing the commitment by $100,000 from $2.1 million to $2.2 million. During the nine-months ended September 30, 2024 and the year-ended December 31,2023, the Company paid Haywood $300,000 and $200,000, respectively, which resulted in a decrease in contractual stock consideration. On April 11, 2024, the Company issued an additional 1,500,000 shares of our common stock issued to and held by Haywood with a fair value of $509,850 at the closing price of $0.34 (see Note 7,Leases). At September 30, 2024, the fair value of the 3.0 million shares was based on the closing price per share of our common stock of $0.47 and the fair value of the derivative asset was $428,850. The derivative liability is classified within Level 2 of the valuation hierarchy.
On December 30, 2021, the Company entered into an agreement to acquire 3,129,081 LINICO common shares from its former chief executive officer and director in exchange for 3,500,000 shares of the Company's common stock. If and to the extent that the sale of the shares results in net proceeds greater than $7,258,162, then former chief executive officer was required to pay all of such excess proceeds to the Company. If and to the extent that the sale of the shares results in net proceeds less than $7,258,162, then the Company was required to pay the former chief executive officer equal to such shortfall. In 2024, the former chief executive officer sold 3,500,000 of the Company's shares for net proceeds of $1,064,309. Net proceeds from the sale of the Company's shares of $1,064,309 and make whole cash payments to date of $2,950,000 resulted in a short fall of $3,243,853 of the contract consideration of $7,258,162. The Company included a payable of $3,243,853 recorded in accrued expenses and other liabilities in our condensed consolidated balance sheet (see Note 6,Accrued Expenses and Other Liabilities). The derivative liability was classified within Level 2 of the valuation hierarchy.
Ionic Ventures, LLC Conversion Option
On December 16, 2022, we recorded a derivative liability on the consolidated balance sheets in connection with the Ionic Note. During the three and nine-months ended September 30, 2023, the Company recorded a gain of $76,667 and a loss of $1,099,587, respectively, for the change in fair value of the derivative. In 2023, the derivative was fully converted. The derivative liability was classified within Level 3 of the valuation hierarchy.
American Battery Technology Investment
In connection with the sale of the Facility, the Company received 11 million shares of restricted common stock from the purchaser of the Facility, ABTC, with an initial fair value of $9,365,000. The fair value of our investment in ABTC restricted common shares acquired in connection with the sale of the Facility valued using a Monte Carlo valuation model.
Date
Description
Fair Value
Beginning Stock Price
Volatility
Risk Free Rate
April 6, 2023
10 million ABTC shares (make-whole provision $6.6 million to $7.6 million)
$
7,000,000
$
0.78
94.0
%
4.80
%
April 21, 2023
Change in fair value of the 10 million ABTC shares for a change in make-whole commitment
$
2,000,000
$
0.86
95.0
%
5.00
%
May 12, 2023
1 million ABTC shares
$
365,000
$
0.74
95.0
%
5.07
%
Other Financial Instruments
At September 30, 2024, the carrying amount of cash and cash equivalents, notes receivable and debt carried at amortized costs, approximates fair value because of the short-term maturity of these financial instruments.
Net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding during the period. For the three and nine-months ended September 30, 2024, all common stock equivalent shares, including warrants to purchase common stocks, stock options or awards and a conversion option on a convertible debt, are antidilutive. For the three and nine-months ended September 30, 2023, the calculation of incremental shares for diluted weighted average shares outstanding did not include the following items due to their anti-dilutive impact: 439,583 performance award shares, 527,500 market condition award shares, and 700,000 warrant shares. Additionally, the incremental share calculation for the nine-months ended September 30, 2023, did not include the anti-dilutive impact of 1,718,952 convertible debt shares.
For the three and nine-months ended September 30, 2023, the weighted average number of shares outstanding, for the purpose of calculating earnings per share, were reduced by treasury shares of 2,605,322, which is the number of treasury shares through our ownership in LINICO. On January 5,2024, the Company elected to retire 2,605,322 treasury shares of the Company’s common stock from LINICO for cancellation upon receipt, resulting in no treasury shares reduction for calculating earnings per share in 2024.
NOTE 13SEGMENT REPORTING
We have the following segments and reporting units: Fuels, Metals, Mining, Strategic Investments and Corporate. The Company’s goal is to accelerate the commercialization of decarbonizing technologies. Once a technology achieves a certain technology readiness or a justifiable critical mass or market distinction, we strategically plan its commercialization and dedicate resources toward that end. Until then, it is managed with corporate resources.
Summarized financial information relating to our reportable segments is provided below. In 2023, our chief operating decision maker (“CODM”) reassessed the Company's performance and allocation of resources. Based on this reassessment, the Company's segments were determined to be Fuels, Metals, Mining, Strategic Investments and Corporate. Previously, our CODM assessed performance and allocation of resources to three business segments and reporting units including Renewable Energy, Mining and Strategic Investments. Certain amounts have been reclassified to conform to the current period presentation on a comparable basis. The Company plans, executes and monitors each reporting segment and has dedicated personnel responsible for each reportable segment. Our Fuels Segment represents our lignocellulosic biomass into biointermediates for refining into renewable fuels. Our Metals Segment represents our recycling of electrification products. Our Mining Segment includes our gold and silver mining assets and related real estate. Our Strategic Investments Segment includes our investments in GenMat, Green Li-ion and SSOF and our Corporate Segment includes all other assets and general corporate costs. Mining revenue is from leasing mineral claims and other real estate.
The following related party transactions occurred during the nine-months ended September 30, 2024 and 2023.
TRANSACTIONS INVOLVING SIERRA SPRINGS OPPORTUNITY FUND
On December 29, 2023, the Company and SSOF agreed to convert total advances into 3,880,556 shares of SSOF common stock (see Note 2,Investments). At September 30, 2024, the Company’s total investment in SSOF was $19,575,000, representing 10,875,000 common shares of SSOF, or 17.38% of the total SSOF outstanding common shares on a fully diluted, if converted basis.
The Company's executive chairman and chief executive officer co-founded SSOF and SSE and serves as the chief executive officer of SSOF and as an executive of SSE along with a diverse team of qualified financial, capital markets, real estate and operational professionals that together govern, lead, and manage SSOF and SSE. The $525,000 investment and 8,667,666 voting shares of our chief executive officer and two of our directors represent 13.85% of total as converted SSOF common shares. The Company's chief executive officer has not received compensation from either SSOF or SSE.
SSOF is a qualified opportunity zone fund, which owns 100% of SSE, a qualified opportunity zone business. SSE and its subsidiaries own or control 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 high tech companies like Tesla, Switch, Google, Microsoft, Tract and Redwood Materials, amongst many others that are currently located, expanding or locating in this industrializing region.
TRANSACTIONS INVOLVING FLUX PHOTON CORPORATION
On September 7, 2021, the Company entered into the FPC Asset Purchase Agreement with FPC to acquire the FPC Assets. The purchase price payable for the FPC Assets was $18,000,000 payable in cash to FPC at a rate equal to 20% of the future monthly consolidated sales, less total variable costs, less operating expenses, maintenance, tax payments, and debt service payments of the Company and its now and hereafter-existing subsidiaries, until the purchase price of $18,000,000 has been fully paid. The Company assigned the FPC Assets to the Company immediately after closing. On December 10, 2021, the FPC Asset Purchase Agreement was amended to provide for the payment by the Company of a $350,000 down payment against the purchase price, with a remaining performance-based cash payment of $17,650,000 required under the FPC Asset Purchase Agreement. The Company’s chief technology officer and the president of Comstock Fuels are indirect beneficiaries of all payments made to FPC under the FPC Asset Purchase Agreement. The Company additionally agreed to appoint the Company's chief technology officer to the Company’s Board of Directors in connection with the Company’s acquisition of Comstock Innovations Corporation on September 7, 2021.
On December 28, 2023, the Company entered into the 2023 FPC Asset Purchase Agreement Amendment to reduce the purchase price payable from the remaining purchase price of $17,650,000 to $16,850,000. On December 28, 2023, the Company paid $200,000 on this payable which was accounted for as an acquisition of intellectual property. The remaining balance of $16,650,000 will be paid to FPC from future cash flows. The Company’s chief technology officer and a member of the Company's board of directors, is also the owner of 100% of the outstanding common stock of FPC and as such was the indirect beneficiary of all payments made to FPC pursuant to the FPC Asset Purchase Agreement. On September 20, 2024, the Company paid an additional $100,000 to FPC from future cash flows with a remaining balance of $16,550,000.
LEASE AND PURCHASE AGREEMENT FOR FACILITY
In 2021, LINICO, a majority-owned subsidiary of the Company, had a finance lease, as lessee, with AQMS, for the Facility. The chief financial officer of AQMS was on the Company's board of directors until he resigned effective as of April 5, 2023. On April 26, 2023, the Company closed on the purchase of AQMT, a subsidiary of AQMS, whose sole asset was the Facility, and paid $12.0 million due to AQMS, effectively taking full ownership of the Facility. The previously existing lease between LINICO and AQMS was terminated.
PURCHASE OF METAL RECYCLING FURNACE
On December 15, 2023, the Company and Dr. Fortunato Villamagna, president of Comstock Metals, signed an agreement in which Dr. Villamagna agreed to contribute a metal recycling furnace to the Company. The Company agreed to make payments for the metal recycling furnace totaling $375,000 from an amount not exceeding 20% of excess cash flow generated by Comstock Metals, defined as excess cash available after the satisfaction of all planned growth capital for Comstock Metals and the repayment of intercompany loans. At September 30, 2024 and December 31, 2023, the metal recycling furnace is included in Properties, plant and equipment, net and the corresponding liability is included in other liabilities (long-term) on the condensed consolidated balance sheet.
OTHER
Sierra Clean Processing LLC, a wholly owned subsidiary of SSOF, owns the building at 600 Lake Avenue, Silver Springs, Nevada which the Company entered into the Building Lease on August 15, 2023 and a Real Estate and Building Lease on July 1, 2024 (see Note 7,Leases). The Company's chief executive officer is an executive and director of Sierra Clean Processing LLC.
On May 17, 2024, the chief executive officer purchased 1,250,000 restricted shares of the Company's common stock at a price of $0.40 per share, or $500,000 in net proceeds. Separately, the chief executive officer entered into a personal promissory note with Alvin Fund LLC (“Alvin”), who is separately a creditor and shareholder of the Company. The promissory note has a principal of $1,100,000 and accrues interest at 6% per annum for one year and 8% per annum thereafter and matures three years from the date of issuance. The obligations under the chief executive officer's personal promissory note are secured by a security interest in SSOF shares owned by the chief executive officer. The chief executive officer assigned 500,000 shares of SSOF owned by him to the Alvin as partial consideration for the extension of credit. The Company is not a party to the chief executive officer's arrangements with the Alvin.
On October 1, 2024, pursuant to the 2023 Kips Bay Note, the Company issued 547,605 shares to Kips Bay at a conversion price of $149,004 at an average conversion price of $0.27. The Company plans to pay the remaining principal balance of $361,419 with cash in the fourth quarter of 2024.
In October 2024, pursuant to the 2024 Kips Bay Note, the Company issued 1,392,219 shares to Kips Bay at a conversion price of $536,840 at an average conversion price of $0.39.
On October 1, 2024, the Company executed an Exclusive License Agreement (“ELA”) and a Cooperative Research and Development Agreement (“CRADA”) with Alliance for Sustainable Energy LLC (“Alliance”), the managing and operating contractor of the U.S. Department of Energy’s (“DOE”) National Renewable Energy Laboratory (“NREL”), involving technologies developed by NREL and the Massachusetts Institute of Technology (“MIT”) for conversion of lignocellulosic biomass into aromatic sustainable aviation fuel (“SAF”). NREL and MIT are separately party to an Inter-Institutional Agreement that appointed NREL the exclusive right to license NREL’s and MIT’s joint intellectual properties. The ELA provides the Company with the exclusive worldwide right to use the NREL technologies in the processing and conversion of seed plants to renewable fuels and renewable fuel feedstocks, subject to limited geographic restrictions, in exchange for royalty and other fees linked to sales of licensed products and sublicensing. The terms of the CRADA involve a three-year scope of work to jointly develop an integrated process based on the Company's existing process and the NREL technologies for the solvocatalytic refining of woody biomass into aromatic SAF and other renewable fuels. The Company will fund the research and contribute staff, equipment, and use of its pilot facility in Wisconsin and the joint work will be supported by NREL, MIT, and Washington State University.
On October 1, 2024, the Company entered into a binding letter agreement (the “Letter Agreement” with Deep Interstellar Research LLC (“DIR”) and Quantum Generative Materials LLC (“GenMat”) to (i) separate GenMat’s materials development activities (“Materials Science Business”) and space development activities (“Space Business”); (ii) assign all assets, operations, and liabilities relating to the Materials Business to GenMat; (iii) assign all assets, operations, and liabilities relating to the Space Business to GenMat Development LLC; (iv) exchange 100% of GenMat’s equity in GenMat Development LLC for 100% of DIR’s equity in GenMat; and (v) devise and implement a mutually agreeable transition plan to assist GenMat in developing independent operations for the Material Science Business without the need for support from assets, personnel, and vendors that are utilized by the Space Business. In connection with the foregoing transactions, GenMat will additionally pay $1,000,000 to the founder of GenMat in exchange for assignment of all rights to related intellectual properties, plus a contingent earn-out payment equal to 3% of either (a) the consideration paid in connection with the liquidation of substantially all of the equity of GenMat in excess of $100,000,000, or (b) the funds raised by GenMat upon completion of an initial public offering of GenMat at a valuation in excess of $100,000,000. Upon completion of the transactions described above, GenMat will become a 100% owned subsidiary of the Company.
On October 7, 2024, pursuant to the 2024 Kips Bay Note, the Company issued Kips Bay 406,352 registered shares of the Company's common stock representing 3% of the principal amount of the 2024 Kips Bay Note, 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 2024 Kips Bay Note and ending on the 10th trading day after the closing of the 2024 Kips Bay Note (the “VWAP Period”), for no additional consideration. On October 9, 2024, pursuant to the 2024 Kips Bay Note, the Company issued Kips Bay 270,901 restricted shares of the Company's common stock representing 2% of the principal amount of the 2024 Kips Bay Note, based on a price per share equal to the 20-day VWAP for the VWAP period, for no additional consideration.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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 innovates and commercializes technologies that enable systemic decarbonization, primarily by enabling the extraction and conversion of under-utilized natural resources into renewable energy and related products that integrate into existing global supply chains, facilitate the clean energy transition 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 accelerating the rate that our system innovates, enables and commercializes material science solutions that use our technologies to reduce reliance on long cycle fossil fuels, shift to short cycle fuels, and 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 systems unique design, our teams’ unique skills, our diverse technology portfolio, and our frontier research networks toward achieving breakthrough innovations that deliver meaningful positive impact across 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 commercial adoption.
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 and partnerships 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 industrial and commercial properties, strategic water rights and about twelve square miles of mining claims and related 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.
Our partnerships include licensing and development agreements with, for example, RenFuel and the Alliance for Sustainable Energy LLC (“Alliance”), the managing and operating contractor of the U.S. Department of Energy’s (“DOE”) and the National Renewable Energy Laboratory (“NREL”), involving technologies developed by NREL and the Massachusetts Institute of Technology (“MIT”) (and collectively, the NREL Technologies).
RenFuel’s license is for the expansive use of their technologies and for the continued development and commercialization of advanced applications of RenFuel’s and Comstock’s complimentary technologies and with an unaffiliated research and development company for purposes of conducting certain research and development work for increasing fuel yields, reducing carbon impact and lowering costs.
NREL’s license represents an exclusive worldwide right to use the NREL Technologies in the processing and conversion of woody biomass to renewable fuels, subject to limited geographic restrictions, in exchange for royalty and other fees linked to related sales.
The Company recently executed an indicative term sheet for $325 million (about $315 million net of transaction fees) in funding through SBC Commerce LLC (“SBCC”), a U.S. based, globally positioned, private equity group. The transaction is subject to final due diligence and applicable regulatory approvals, including $200 million into Comstock Fuels Corporation; $22 million into Comstock Metals; $50 million into Comstock Mining; and $50 million for the sales of the Company's real estate and water rights in Silver Springs, NV. This term sheet represents a combination of direct equity and/or debt financing and certain asset sales that secures timely and essential growth capital to advance, elevate and accelerate the commercialization of the Company’s fuels, metals and mining businesses.
The transaction package includes $275 million (about $267 million net of transaction fees) of direct investments into Comstock’s three main operating subsidiaries, including a $3 million direct equity investment into common shares of Comstock itself, as well as an agreement to sell the membership interests in the entities that own Comstock’s directly owned Nevada real estate and water rights for gross proceeds of $50 million ($47 million, net of transaction expenses).
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.
On October 1, 2024, the Company executed an Exclusive License Agreement (“ELA”) and a Cooperative Research and Development Agreement (“CRADA”) with Alliance for Sustainable Energy LLC (“Alliance”), the managing and operating contractor of the U.S. Department of Energy’s (“DOE”) National Renewable Energy Laboratory (“NREL”), involving technologies developed by NREL and the Massachusetts Institute of Technology (“MIT”) for conversion of lignocellulosic biomass into aromatic sustainable aviation fuel (“SAF”). The ELA provides the Company with the exclusive worldwide right to use the NREL technologies in the processing and conversion of seed plants to renewable fuels and renewable fuel feedstocks, subject to limited geographic restrictions, in exchange for royalty and other fees linked to sales of licensed products and sublicensing. The terms of the CRADA involve a three-year scope of work to jointly develop an integrated process based on the Company's existing process and the NREL technologies for the solvocatalytic refining of woody biomass into aromatic SAF and other renewable fuels. The Company will fund the research and contribute staff, equipment, and use of its pilot facility in Wisconsin and the joint work will be supported by NREL, MIT, and Washington State University.
While innovation and development are ongoing and we expect additional advancements, our existing commercially available technologies have proven the potential to produce up to 125 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 and extend conventional hydroprocessed FOG feedstocks to enhance production of renewable fuels. Complimentary technologies have been secured that can add up to 15 more GGEs.
On September 18, 2024, Comstock Fuels executed a term sheet with SACL Pte. Ltd. (“SACL”), a Singapore-based project development and management company that intends to develop renewable energy projects in Australia and New Zealand (the “Territory”). The term sheet is non-binding, but binding in respect of the essential economic terms until such time as the parties execute definitive agreements.
Comstock Fuels will grant SACL an exclusive marketing agreement for Comstock Fuels’ advanced lignocellulosic biomass refining processes in Australia and New Zealand, and a master non-exclusive license to certain intellectual property for the sole purpose of developing, financing, constructing, and the ongoing management of these renewable production facilities (each, a “Licensed Facility”).
Comstock Fuels and the owner of each Licensed Facility (“Producer”) will execute a separate non-exclusive, site-specific license agreement (“Site License Agreement”) for the development, financing, construction, and management of the corresponding Licensed Facility, and the direct use of the certain intellectual property of Comstock Fuels to produce and sell renewable fuels and related products.
Comstock Fuels will contribute the site-specific license to develop, finance, build, and manage the corresponding Licensed Facility in exchange for 20% of Producer’s fully diluted equity on a post-money basis after completion of construction financing for the corresponding Licensed Facility or scope expansion.
Comstock Fuels will provide each Producer with engineering support services in exchange for 3% of each applicable Producer’s total capital and construction costs, increasing to 6% at and above a capacity of 250,000 metric tons per year (“MTPY”), including an initial upfront payment of $2,500,000 payable upon execution of each applicable Site License Agreement.
Each applicable Producer will also agree to pay to Comstock Fuels an ongoing royalty fee equal to 3% of the total sales of licensed products by each Licensed Facility (“Royalty Fees”), increasing to 6% at and above a capacity of 250,000 MTPY. Royalty Fees shall be paid monthly.
We are also evaluating our own 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 of up to $200 million into Comstock Fuels Corporation, for deploying that first demonstration scale commercial facility, primarily from clean energy facilitating, technologically sophisticated and well capitalized partners.
Closing on $200 million of direct equity and/or debt financing into Comstock Fuels for the development and deployment of our first demonstration scale commercial facility, plus the execution of additional commercial agreements, including joint development agreements, offtake agreements, feedstock agreements, and additional licensing agreements represents our 2024 and ongoing objectives.
Metals Segment
Our Metals Segment recently secured its first industry-scale facility lease, the related county permit for storage, and increasingly significant 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 2024 second quarter, and revenue from recycled metal and residual material sales from processed end-of-life PV materials during the 2024 third quarter.
During the nine months of 2024, we expanded our metals recycling team, commissioned our first production site, secured all permitting for our first demonstration scale commercial facility, secured long term supply agreements from our first customers, commenced production commissioning activities and recorded revenue from both tipping fees and recycled metal sales, while we continued expanding existing revenue generating supply commitments that included additional decommissioning services for certain customers. We have also completed the site selection and secured 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.
Closing on $22 million of direct equity and/or debt financing into Comstock Metals, submitting all prerequisite permits, finalizing the industry-scale engineering, ordering all of the industry-scale equipment for our first industry-scale facility, and accelerating site selection for our second and third facilities, are the key 2024 Metals objectives.
Our Mining Segment generated income in the form of leases, licenses, and related fees during the first nine months of 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”).
Closing on $50 million of direct equity and/or debt financing into the Mining segment for the full development of the Dayton mine, closing on the sale of the equity interest of the entity that holds certain claims in Storey County, other than the Lucerne resource and processing assets, advancing the preliminary economic assessment for the Dayton resource and progressing toward full economic feasibility for the southern part of the district and the development of preliminary Dayton mine and reclamation plans are key 2024 objectives.
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 and equity-linked investments in GenMat (physics-based artificial intelligence), Green Li-ion Pte Limited (lithium-ion battery component recycler and remanufacturing), RenFuel (advanced biofuel development and production) and Sierra Springs Opportunity Fund (northern Nevada real estate) and other equity investments.
Investment in GenMat – Our investments in GenMat represent an integral component of our innovation strategy. GenMat has developed and launched a material science based AI that we believe can simulate 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 material science based AI models can be employed today, on GenMat’s existing high-performance computing platform, for immediately productive uses.
During 2023, GenMat developed its proprietary Hyperspectral Remote Sensing Imaging (“HRSI”) satellite, the GENMAT-1, and deployed it into Low Earth Orbit (LEO). Hyperspectral imaging collects and processes information from across the electromagnetic spectrum using contiguous bands and is useful for mineral exploration, oil and gas exploration, agriculture, and forest management. GenMat has also developed and operationalized the GenMat MCS, its proprietary mission control software. The purpose of the GENMAT-1 and MCS is for researching and developing mineral exploration capabilities using their proprietary physics-based artificial intelligence (AI) known as ZENO.
On October 1, 2024, the Company entered into a binding letter agreement (the “Letter Agreement” with Deep Interstellar Research LLC (“DIR”) and GenMat to (i) separate GenMat’s materials development activities (“Materials Science Business”) and space development activities (“Space Business”); (ii) assign all assets, operations, and liabilities relating to the Materials Business to GenMat; (iii) assign all assets, operations, and liabilities relating to the Space Business to GenMat Development LLC; (iv) exchange 100% of GenMat’s equity in GenMat Development LLC for 100% of DIR’s equity in GenMat; and (v) devise and implement a mutually agreeable transition plan to assist GenMat in developing independent operations for the Material Science Business without the need for support from assets, personnel, and vendors that are utilized by the Space Business. In connection with the foregoing transactions, GenMat will additionally pay $1,000,000 to the founder of GenMat in exchange for assignment of all rights to related intellectual properties, plus a contingent earn-out payment equal to 3% upon the cash realization from GenMat of a valuation in excess of $100,000,000.
Upon completion of the transactions described above, GenMat will become a 100% owned subsidiary of the Company.
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 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. For the nine months ended 2024, the Company invested an additional $530,000 in SSOF at $1.80 per share increasing our equity ownership to 17.38%.
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 high tech companies like Tesla, Switch, Google, Microsoft, Tract and Redwood Materials, and over one hundred other 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 is scheduled to 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 September 30, 2024, the future remaining payments, net implied interest, totaled $1,122,424 (see Note 6, Accrued Expenses and Other Liabilities). For the three and nine-months ended September 30, 2024, the Company recorded $25,964 and $74,364, respectively, in equity loss from affiliates for our investment in the Developer. During the three and nine-months ended September 30, 2024, Comstock paid $60,000 and $240,000, 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 classified these assets as held for sale in the condensed consolidated balance sheet.
COMPARATIVE FINANCIAL INFORMATION
Three-Months Ended September 30, 2024 Compared to Three-Months Ended September 30, 2023
Net loss for the three-months ended September 30, 2024 increased by $28,735,747 to $14,994,583 from net income of $13,741,164 for the comparable 2023 period. The increase in net loss primarily resulted due to gain on investments in 2023 of $14,074,875 with no similar investment sales in 2024, higher impairment of intangible assets and properties plant and equipment of $8,667,869 and $324,047, respectively, lower gain on sale of Facility in 2023 of $7,126,377 with no similar gain in 2024, change in loss on conversion of debt of $2,508,206, higher interest expense of $376,181, loss on debt extinguishment of $222,634, and lower revenues of $204,338. The increase is partially offset by change in estimated fair value of the derivative assets of $3,719,546 with a $1,350,370 gain recorded in 2024 as compared to a $2,369,176 loss in 2023, lower other income (expense) by $1,008,763, and lower depreciation and amortization expense of $114,323.
Below we set forth a summary of comparative financial information for the three-months ended September 30, 2024 and 2023:
September 30, 2024
September 30, 2023
Change
Revenue
$
556,383
$
760,721
$
(204,338
)
Operating Expenses:
Selling, general and administrative expenses
3,176,373
3,140,080
36,293
Research and development
1,440,367
1,394,860
45,507
Depreciation and amortization
562,456
676,779
(114,323
)
Impairment of intangible assets
8,667,869
—
8,667,869
Impairment of properties, plant and equipment
324,047
—
324,047
Gain on sale of Facility
—
(7,126,377
)
7,126,377
Total operating expenses
14,171,112
(1,914,658
)
16,085,770
Income (loss) from operations
(13,614,729
)
2,675,379
(16,290,108
)
Other Income (Expense)
Gain on investments
—
14,074,875
(14,074,875
)
Interest expense
(696,996
)
(320,815
)
(376,181
)
Interest income
81,015
73,067
7,948
Change in fair value of derivative instruments
1,350,370
(2,369,176
)
3,719,546
Gain (loss) on conversion of debt
(2,218,694
)
289,512
(2,508,206
)
Loss on debt extinguishment
(222,634
)
—
(222,634
)
Other income (expense)
327,085
(681,678
)
1,008,763
Total other income (expense), net
(1,379,854
)
11,065,785
(12,445,639
)
Net income (loss)
$
(14,994,583
)
$
13,741,164
$
(28,735,747
)
Net income (loss) attributable to noncontrolling interest
Three-Months Ended September 30, 2024 Compared to Three-Months Ended September 30, 2023
Revenues for the three-months ended September 30, 2024 decreased by $204,338 to $556,383 from $760,721 for the comparable 2023 period, primarily due to lower revenues from the ABTC lease of $237,473 and lower revenues from the Mackay mineral lease of $100,000, partially offset by revenues from Comstock Metals of $128,558.
Revenue and costs of sales 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 September 30, 2024 increased by $36,293 to $3,176,373 from $3,140,080 in the comparable 2023 period, primarily as a result of higher consulting expense of $259,878, higher share-based compensation of $214,778, and higher rent expense of $181,931; partially offset by lower employee costs of $325,478 attributed to lower incentive compensation and lower bad debt expense of $240,000 attributed to the 2023 impairment of a Fenix deposit.
Research and development expenses for the three-months ended September 30, 2024 increased by $45,507 to $1,440,367 from $1,394,860 in the comparable 2023 period. The increase is primarily related to higher costs for processing crushing and separating electrification products of $309,427; offset partially by lower employee costs of $215,965 for salaries and incentive compensation.
Depreciation and amortization for the three-months ended September 30, 2024 decreased by $114,323 to $562,456 from $676,779 in the comparable 2023 period. The decrease is primarily related to lower amortization for impaired intangible assets in 2024.
Impairment of intangible assets and properties, plant and equipment assets for the three-months ended September 30, 2024 of $8,667,869 and $324,047, respectively, was attributed to the impairment of intangible assets and equipment in 2024 (see Note 4, Properties, Plant and Equipment, Net and Mineral Rights and Note 5, Intangible Assets).
In 2023, we recognized a gain on the sale of the Facility of $7,126,377, with no comparable amount in 2024.
Gain on investments for the three-months ended September 30, 2024 decreased by $14,074,875 to $0 from $14,074,875 in the comparable 2023 period. The decrease is primarily related to the 2023 realized gain of $597,248 on the sale of 1,500 shares of our Green Li-ion investment and the adjusted fair value unrealized gain of $14,577,627 recorded on the remaining 35,662 Green Li-ion preferred shares at $530.34 per share; offset by $1,100,000 in loss on the ABTC investment as we sold 9,076,923 ABTC shares for the three-months ended September 30, 2023, with no comparable amount in 2024.
Interest expense for the three-months ended September 30, 2024 increased by $376,181 to $696,996 from $320,815 in the comparable 2023 period, primarily due to higher interest and higher amortization of the original issue discount (“OID”) on the 2023 Kips Bay Note and 2023 Alvin Fund Note originating in the fourth quarter of 2023 and the 2024 Leviston Note and 2024 Kips Bay Note originating in the third quarter of 2024.
Interest income for the three-months ended September 30, 2024 increased by $7,948 to $81,015 from $73,067 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 September 30, 2024 increased by $3,719,546 to a gain of $1,350,370 from a loss of $2,369,176 in the comparable 2023 period, as a result of an increase 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 gain was attributed to gain of $8,575 for the LINICO investment, gain of $927,000 for the Haywood investment, gain of $404,794 on the derivative liability for 2023 Kips Bay Note and gain of $130,000 for the 2024 Leviston Note; partially offset by a loss of $120,000 for the 2024 Kips Bay Note. The loss from the three-months ended September 30, 2023 was attributed to $1,120,000 for the LINICO investment, $845,843 for the GenMat investment and $480,000 for the Haywood investment, partially offset by a gain of $76,667 on the derivative liability for Ionic Note.
Loss of $2,218,694 on the conversion of debt to equity for the three-months ended September 30, 2024 is attributed to the 2023 Kips Bay Note and 2024 Leviston Note debt conversions associated with 7,891,480 and 24,680,175, respectively, of the Company's common shares issued for the conversion of the debt during the three-months ended September 30, 2024. Gain of $289,512 on the conversion of debt to equity for the three-months ended September 30, 2023 was attributed to the Ionic Note debt conversions associated with 2,818,714 of the Company's common shares used for the conversion during the three-months ended September 30, 2023.
Loss on debt extinguishment of $222,634 resulted from the Company using cash to redeem $500,000 of principal on the 2023 Kips Bay Note at a 10% redemption premium totaling $50,000 and loss on debt extinguishment of $172,634.
Other income (expense), net for the three-months ended September 30, 2024 were $327,085, primarily consisting of unrealized gain on fair value change of GenMat advances of $776,656, partially offset by losses from our equity method investments of $449,883 substantially all of which were from GenMat.
Other income (expense), net for the three-months ended September 30, 2023 were $681,678, primarily consisting of losses from our equity method investments of $531,535 substantially all of which were from GenMat.
COMPARATIVE FINANCIAL INFORMATION
Nine-Months Ended September 30, 2024 Compared to Nine-Months Ended September 30, 2023
Net loss for the nine-months ended September 30, 2024 increased by $33,120,008 to $30,565,175 from net income of $2,554,833 for the comparable 2023 period. The increase in net loss primarily resulted due to gain on investments in 2023 of $13,309,875 with no investment sales in 2024, higher impairment of intangible assets and properties plant and equipment of $8,667,869 and $324,047, respectively, lower gain on sale of Facility in 2023 of $7,304,570 with no similar gain in 2024, change in loss on conversion of debt of $3,742,616, higher interest expense of $985,944, loss on debt extinguishment of $744,256, and higher research development expenses of $454,304. The increased loss is partially offset by a change in estimated fair value of the derivative assets of $622,720 with a $516,756 gain recorded in 2024 as compared to a loss of $105,964 in 2023, higher revenues of $590,362, lower selling, general and administration expenses of $529,185, lower other income (expense) of $493,011, and lower depreciation and amortization expense of $137,550.
Below we set forth a summary of comparative financial information for the nine-months ended September 30, 2024 and 2023:
September 30, 2024
September 30, 2023
Change
Revenue
$
1,417,158
$
826,796
$
590,362
Operating Expenses:
Selling, general and administrative expenses
9,496,719
10,025,904
(529,185
)
Research and development
4,880,847
4,426,543
454,304
Depreciation and amortization
1,875,151
2,012,701
(137,550
)
Impairment of intangible assets
8,667,869
—
8,667,869
Impairment of properties, plant and equipment
324,047
—
324,047
Gain on sale of Facility
—
(7,304,570
)
7,304,570
Total operating expenses
25,244,633
9,160,578
16,084,055
Income (loss) from operations
(23,827,475
)
(8,333,782
)
(15,493,693
)
Other Income (Expense)
Gain on investments
—
13,309,875
(13,309,875
)
Interest expense
(2,298,098
)
(1,312,154
)
(985,944
)
Interest income
220,587
179,942
40,645
Change in fair value of derivative instruments
516,756
(105,964
)
622,720
Gain (loss) on conversion of debt
(3,690,760
)
51,856
(3,742,616
)
Loss on debt extinguishment
(744,256
)
—
(744,256
)
Other income (expense)
(741,929
)
(1,234,940
)
493,011
Total other income (expense), net
(6,737,700
)
10,888,615
(17,626,315
)
Net income (loss)
$
(30,565,175
)
$
2,554,833
$
(33,120,008
)
Net income (loss) attributable to noncontrolling interest
$
(62,196
)
$
1,327,283
$
(1,389,479
)
Net income (loss) attributable to Comstock Inc.
$
(30,502,979
)
$
1,227,550
$
(31,730,529
)
RESULTS OF OPERATIONS
Nine-Months Ended September 30, 2024 Compared to Nine-Months Ended September 30, 2023
Revenues for the nine-months ended September 30, 2024, increased $590,362 to $1,417,158 from $826,796 for the comparable 2023 period, primarily due to higher revenues from the Mackay mineral lease of $681,251 and revenues from Comstock Metals of $136,157 partially offset by lower revenues from the ABTC lease of $237,473 in 2023.
Revenue and costs of sales 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 nine-months ended September 30, 2024 decreased by $529,185 to $9,496,719 from $10,025,904 in the comparable 2023 period, primarily as a result of lower insurance expense of $406,012, lower bad debt expense $220,269, lower employee related costs of $190,369, lower marketing expense of $187,075 and lower legal fees of $157,381; partially offset by higher consulting fees of $413,495 and higher share based compensation expense of $272,387.
Research and development expenses for the nine-months ended September 30, 2024 increased by $454,304 to $4,880,847 from $4,426,543 in the comparable 2023 period. The increase is primarily related to higher rent expense of $1,430,046 attributed to the AST research and development rent of $1,208,180 paid in April 2024 (see Note 7, Leases) and higher costs for processing crushing and separating electrification products of $602,356; offset partially by lower employee costs of $1,283,859 for salaries and incentive compensation and lower consulting fees of $355,283.
Depreciation and amortization during the nine-months ended September 30, 2024 decreased by $137,550 to $1,875,151 from $2,012,701 in the comparable 2023 period. The decrease is primarily related to lower amortization for impaired intangible assets in 2024.
Impairment of intangible assets and properties, plant and equipment assets for the three-months ended September 30, 2024 of $8,667,869 and $324,047, respectively, was attributed to the impairment of intangible assets and equipment in 2024 (see Note 4, Properties, Plant and Equipment, Net and Mineral Rights and Note 5, Intangible Assets).
In 2023, we recognized a gain on the sale of the Facility of $7,304,570, with no comparable amount in 2024.
Gain on investments for the nine-months ended September 30, 2024 decreased by $13,309,875 to $0 from $13,309,875 in the comparable 2023 period. The decrease is primarily related to the 2023 realized gain of $597,248 on the sale of 1,500 shares of our Green Li-ion investment and the adjusted fair value unrealized gain of $14,577,627 recorded on the remaining 35,662 Green Li-ion preferred shares at $530.34 per share; offset by $1,865,000 in loss on the ABTC investment as we sold 9,076,923 ABTC shares for the nine-months ended September 30, 2023, with no comparable amount in 2024.
Interest expense for the nine-months ended September 30, 2024, increased by $985,944 to $2,298,098 from $1,312,154 for the comparable 2023 period, primarily due to interest and related amortization of the original issue discount (“OID”) on the 2023 Kips Bay Note and 2023 Alvin Fund Note originating in the fourth quarter of 2023 and the 2024 Leviston Note and 2024 Kips Bay Note originating in the third quarter of 2024.
Interest income for the nine-months ended September 30, 2024, of $220,587 was comparable to 2023 of $179,942.
Change in fair value of our derivative instruments for the nine-months ended September 30, 2024, increased by $622,720 to a gain of $516,756 in 2024 compared to a loss in 2023 of $105,964 resulting from an increase 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 gain was attributed to gain of $1,460,875 on the derivative liability for the 2023 Kips Bay Note, gain of $594,000 for the Haywood investment, gain of $130,000 on the derivative liability for the 2024 Leviston Note, partially offset by a $860,691 loss for the LINICO investment, loss of $120,000 for the 2024 Kips Bay Note, and $687,428 loss for the GenMat investment. The 2023 loss was attributed to a loss of $1,099,587 on the derivative liability for the Ionic Note, partially offset by a gain of $455,000 for the LINICO investment, $343,623 for the GenMat investment and $195,000 for the Haywood investment.
Loss of $3,690,760 on conversion of debt for the nine-months ended September 30, 2024 are attributed to the 2023 Kips Bay Note and 2024 Leviston Note debt conversions associated with 22,412,980, and 24,680,175, respectively of the Company's common shares used for the conversion during the nine-months ended September 30, 2024. Gain of $51,856 on conversion of debt for the nine-months ended September 30, 2023 are attributed to the Ionic Note conversions of 9,309,375 of the Company's common shares.
Loss on debt extinguishment of $744,256 attributed to the debt modifications for the Amended GHF 2021 Note and Amended Alvin Fund 2023 Note and from the Company using cash to redeem $500,000 of principal on the 2023 Kips Bay Note at a 10% redemption premium totaling $50,000 and loss on debt extinguishment of $172,634.
Other income (expense), net, for the nine-months ended September 30, 2024 were $741,929, primarily consisting of income recognized on SSOF deposits of $400,000 and unrealized gain on fair value change of GenMat advances of $493,892, partially offset by losses from our equity method investments of $1,675,069 substantially all of which were from GenMat.
Other income (expense), net, for the nine-months ended September 30, 2023 were $1,234,940, primarily consisting of losses from our equity method investments of $1,337,801 substantially all of which were from GenMat.
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, engineering and actionable commercialization of our 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 planning 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 constructed and commissioned its first commercial demonstration facility. The facility is operating 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 first “Industry Scale” photovoltaic recycling facility and related storage capacity. Industry Scale facilities are anticipated to scale up to 15-20 times the capacity of the operating demonstration facility (that is, from approximately 5,000-7,000 tons per annum of capacity for the demonstration facility up to 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:
Line of Business
Technology
12/2023
12/2024 Goal
Lignocellulosic Fuels
Conversion of under-utilized woody biomass into renewable fuels at high yield
TRL 6
TRL 6
Metals
Scalable extraction of metals from electrification products
TRL 6
TRL 7
Mining
Reduced exploration costs with hyperspectral imaging and AI-based analytics
TRL 3
TRL 6
Artificial Intelligence
AI that simulates new materials at exponentially increased speed
TRL 3
TRL 4
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.
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.
Comstock Fuel’s objectives for the fourth quarter of 2024 include:
•
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.
Additionally, closing on the $200 million SBCC direct equity and/or debt financing, enables our first commercial demonstration facility which is designed to be profitable and to confirm the scale of multiple industry facilities. Then, the Company plans to build its own, three U.S. based industrial scale facilities designed for inputs of up to 1 million tons per year of woody biomass feedstock and producing up to 125 million GGE of advanced biofuels, including renewable diesel and sustainable aviation fuels. Our commercialization plans also includes multiple, global joint development projects, with each joint development project, like SACL, with the potential for generating in millions of dollars of technical services and engineering revenues and license agreements for additional production facilities that 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.
Comstock Metal’s objectives for the fourth quarter of 2024 include:
•
Commencing full, three-shift production of the demonstration scale production facility;
•
Confirming the ongoing 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 decommissioning, supply and offtake commitments; and
•
Commencing permitting for our first “industry-scale” facility in Silver Springs, NV.
Comstock Metals is operating its demonstration scale production facility in Silver Springs, NV, and has also secured the initial county level permits for industry-scale operations and storage and is actively engaged in garnering expanded revenue generating supply. Additionally, closing on the $22 million direct equity and/or debt financing, accelerates the deployment of the next two commercial demonstration facilities. Comstock Metals is also further expanding our business into decommissioning services both as a revenue generator and a feeder for our recycling business, and establishing markets for the sale of residual material including aluminum, glass and silver.
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. Mackay paid a lease initiation fee of $1,250,000 and made additional, quarterly lease payments to date totaling approximately $2,000,000.
The Company’s objectives for the fourth quarter of 2024 include:
•
Receive cash proceeds of more than $2 million from mineral leases and asset sales leveraging the northern district claims;
•
Commercialize mineral development agreements that enable resource expansion of the central district claims; and
•
Complete the preliminary 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 preliminary 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. Additionally, closing on the SBCC $50 million direct equity and/or debt financing, accelerates the development of the Dayton mine plan, broader resource expansions for the southern district claims and the design and engineering of the post productive real estate 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 material science based 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.
The Company is integrating GenMat’s capabilities into its own advanced innovation capacity and plans elevating new material simulation to TRL 6 by simulating, synthesizing and directly testing the AI’s ability to predict material properties to confirm the precision and accuracy of those simulations, for both Comstock and third-party material developments and breakthroughs.
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 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 September 30, 2024 and December 31, 2023 were $1,363,327 and $3,785,577, respectively. The Company had current assets of $29,885,153 and current liabilities of $12,205,732, representing working capital excess of $17,679,421 at September 30, 2024.
The current liabilities include derivative liabilities of $1,250,000 for the contingent make-whole liabilities and $6,053,784 of accrued expenses and other liabilities, including $3,243,853 for the remaining LINICO make whole provision, $1,082,813 for incentive compensation and $768,174 for accrued payroll and related expenses.
Our primary source of liquidity during the first nine-months of 2024 was cash from financing activities. During the nine-months ended September 30, 2024, we generated $14,058,395 in cash from our financing activities and we used $9,617,985 and $6,862,660, respectively, in cash in our operating and investing activities.
During the nine-months ended September 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 September 19, 2024, the Company entered into a securities purchase agreement (“2024 Kips Bay Agreement”) for an unsecured convertible promissory note (the “2024 Kips Bay Note”) with Kips Bay Select, LP ("Kips Bay") with a principal amount of $5,319,149, of which $319,149 was an original issue discount. The full principal is due on January 19, 2026. Interest is payable monthly at a rate of 6% annually. On September 19, 2024, Kips Bay funded an initial tranche of $3,500,000, which shall result in an aggregate principal amount of $3,723,404 ($3,500,000 in cash plus original issue discount of $223,404). On October 30, 2024, the Company may elect to request an additional funding of $1,500,000, which shall result in a principal amount for such second tranche of $1,595,745 ($1,500,000 in cash plus $95,745 of original issue discount). The Company can redeem the 2024 Kips Bay Note for cash 30-days following closing at 120% of the face value, plus accrued interest.
On July 19, 2024, the Company entered into a securities purchase agreement (“2024 Leviston Agreement”) for an unsecured convertible promissory note (the “Leviston Note”) with Leviston Resources LLC ("Leviston") with a principal amount of $2,717,500, of which $2,500,000 was funded and $217,500 was an original issue discount. The full principal was due on October 31, 2025. Interest was payable monthly at a rate of 8% annually. The Company could redeem the Leviston Note for cash 30-days following closing at 125% of the face value, plus accrued interest. As of September 30, 2024, the Company delivered 24,680,175 shares of common stock with a fair value of $3,957,052 at an average conversion price per share of $0.16 upon the conversion of a principal balance of $2,717,500 and accrued interest of $16,082. 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 Leviston Note and ending on the 10th trading day after the closing of the Leviston Note (the “VWAP Period”), and (ii) 506,681 registered shares of the Company’s common stock representing 3% of the principal amount of the Leviston Note, based on a price per share equal to the 20-day VWAP for the VWAP Period, in each case, for no additional consideration. As of September 30, 2024, the Leviston Note was fully converted.
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 September 30, 2024, the Company issued 20,787,773 registered shares of common stock to ClearThink for an aggregate sales price of $4,250,000 at an average price per share of $0.20. 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.
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 nine-month period ended September 30, 2024, the Company delivered 22,412,980 shares of common stock with a fair value of $5,566,817 at an average conversion price per share of $0.25 upon the conversion of a principal balance of $4,263,908 and accrued interest of $181,854. On July 19, 2024, the Company redeemed $500,000 of principal on the Kips Bay Note at a 10% redemption premium, for $550,000 in cash.
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, issuance of subsidiary-level equity, 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, non-registered equity issued directly from certain subsidiaries, 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 planned sales of non-strategic assets, sales from our solar panel recycling operations, sales from licensing our lignocellulosic technology and related engineering services, issuance of subsidiary-level equity, and borrowings and other various equity financing alternatives from our existing shelf and other registration statements.
Net cash used in operating activities for the nine-months ended September 30, 2024 decreased by $1,565,999 to $9,617,985 from $11,183,984 in the comparable 2023 period, due primarily to decreases in operating expenses and increases in sources of cash from working capital, primarily increases in accounts payable, discussed in Financial Condition and Results of Operating Information.
Net cash used in investing activities for the nine-months ended September 30, 2024 was $6,862,660, compared to net cash provided by investing activities of $6,457,386 in the comparable 2023 period, resulting in a $13,320,046 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 proceeds received in 2023 for the sale of ABTC shares of $5,365,981 with no sales in 2024, funding of RenFuel note of $1,350,000, advances to GenMat of $1,235,636, proceeds from sale of Green Li-ion shares in 2023 of $779,600 and investment in SSOF of $530,000; partially offset by lower make-whole payments for our investments of $3,160,636, lower advances to SSOF of $1,470,000 and lower purchase of mineral rights and property, plant and equipment of $710,604.
Net cash provided in financing activities for the nine-months ended September 30, 2024 increased $8,413,484 to $14,058,395 from $5,644,911 for the comparable 2023 period, primarily as a result of additional funding from the 2023 Kips Bay Note, 2024 Leviston Note and the 2024 Kips Bay Note of $2,000,000, $2,500,000 and $3,500,000, respectively. Increase also due to an increase in proceeds from issuance of common stock of $863,710.
Risks to our liquidity could result from future operating expenditures above management’s expectations, including but not limited to pre-development, research and 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 direct equity from our subsidiaries or the issuance of equity under our existing shelf registration statement or amounts to be raised directly from the non-registered equity of our subsidiaries, 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.
ITEM 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 and other currencies.
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.
ITEM 4CONTROLS AND PROCEDURES
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 both our Principal Executive and Financial Officer and our Principal 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 September 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 September 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.
The Company’s business activities, including cellulosic fuels, battery recycling, storage, mining, and exploration, are subject to various laws and regulations governing environmental protection. These laws and regulations are frequently changing and generally becoming more restrictive. The Company believes its operations are compliant with applicable laws and regulations, in all material respects and continuously spends money to comply with such laws and regulations and cannot predict the full amount of such future expenditures.
ITEM 1A RISK FACTORS
Our investors should consider the risks set forth in Part I, Item 1A, Risk Factors, of our Annual Report on Form 10-K for the year ended December 31, 2023 that could affect our business. Additionally, investors should consider the following risk factors identified since the filing of our Annual Report.
Our plans to expand our revenue sources through commercializing our market-ready technologies and developing new technology with commercial applicability may not be successful and could materially adversely affect our long-term business, financial condition and operating results.
As part of our business strategy, we are seeking to expand our revenue sources through the continued development, commercialization and licensing of technology projects. Our technology development activities may experience delays, or the markets for our technology solutions may fail to materialize to the extent or at the rate we expect, each of which could reduce our opportunities for technology sales and licensing. In addition, there could be fewer applications for our technology and products than we expect. The development of technology markets also could be affected by general economic conditions, customer buying patterns, timeliness of equipment development, and the availability of capital for, and the high cost of, infrastructure improvements. Additionally, investing in technology development is costly and may require structural changes to the organization that could require additional costs, including without limitation legal and accounting fees. Furthermore, delays or failures to enter into additional partnering relationships to facilitate technology development efforts or delays or failures to enter into technology licensing agreements to secure integration of additional functionality could impair our ability to introduce into the market portions of our technology and resulting products, cause us to miss critical market windows, or decrease our ability to remain competitive. In addition, the commercialization of certain technologies could potentially lead to patent exhaustion or implied license issues that could limit our ability to derive licensing revenue from certain patents under our patent licensing program. In the event that any of these risks materialize, our long-term business, financial condition and operating results may be materially adversely affected.
We face risks from doing business in international markets.
A significant portion of our licensees, potential licensees and customers are international, and our licensees, potential licensees and customers sell their products to markets throughout the world. Accordingly, we could be subject to the effects of a variety of uncontrollable and changing factors, including, but not limited to: difficulty in protecting our intellectual property in foreign jurisdictions; enforcing contractual commitments in foreign jurisdictions or against foreign corporations; government regulations, tariffs and other applicable trade barriers; biased enforcement of foreign laws and regulations to promote industrial or economic policies at our expense; currency control regulations and variability in the value of the U.S. dollar against foreign currency; social, economic and political instability; natural disasters, acts of terrorism, widespread illness and war; potentially adverse tax consequences; and general delays in remittance of and difficulties collecting non-U.S. payments. In addition, we also are subject to risks specific to the individual countries in which we and our licensees, potential licensees and customers do business.
Our current and future licensing arrangements may not be successful and may make us susceptible to the actions of third parties over whom we have limited control.
We have entered into a select number of product licensing agreements with companies that plan to produce and sell products requiring specialized expertise. We have also entered into a number of select licensing agreements pursuant to which we have granted third parties certain rights to distribute and sell our products in certain geographical areas outside of the United States. In the future, we may enter into additional licensing arrangements. Although we take steps to carefully select our licensing partners, such arrangements may not be successful. Our licensing partners may fail to fulfill their obligations under their license agreements or have interests that differ from or conflict with our own, such as the timing of new store openings, the pricing of our products and the offering of competitive products. In addition, the risks applicable to the business of our licensing partners may be different than the risks applicable to our business, including risks associated with each such partner’s ability to:
•
obtain capital;
•
exercise operational and financial control over its business;
•
manage its labor relations;
•
maintain relationships with suppliers;
•
manage its credit and bankruptcy risks; and
•
maintain customer relationships.
Any of the foregoing risks, or the inability of any of our licensing partners to successfully market our products or otherwise conduct its business, may result in loss of revenue and competitive harm to our operations in regions or product categories where we have entered into such licensing arrangements.
ITEM 2UNREGISTERED SALES OF EQUITY SECURITIES AND USES OF PROCEEDS
On September 3, 2024, the Company issued 2,920,702 shares of unregistered restricted common stock with a fair value of $482,500 to Northern Comstock LLC as payment for obligations due under the Northern Comstock operating agreement.
In August 2024, the Company issued 773,745 shares of unregistered restricted common shares with a fair value of $144,175 to Alvin Fund in lieu of cash for interest expense due under the Alvin Fund 2022 Note and the Alvin Fund 2023 Note pursuant to Section 4(a)(2) of the Securities Act.
On August 16, 2024, the Company issued 5,000,000 shares of restricted unregistered common stock to a single investor for $1,000,000.
On August 6, 2024, pursuant to the 2024 Leviston Agreement, the Company issued to Leviston Resources LLC 337,787 restricted shares of the Company's common stock representing 2% of the principal amount of the Leviston Note based on a price per share equal to the 20-day VWAP for the VWAP period for no additional consideration.
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 104 of Regulation S-K, we are required to disclose items believed to be violations of the Federal Mine Safety and Health Act of 1977, any health and safety standard, or any regulation, as administered by the Federal Mine Safety and Health Administration. The required information is included in Exhibit 95 to this Report on Form 10-Q.
ITEM 5OTHER INFORMATION
None.
ITEM 6EXHIBITS
The exhibits required to be filed as a part of this Report on Form 10-Q are listed in the Exhibit Index attached hereto, which is incorporated herein by reference.
(1) Exhibits filed as part of this Report:
See Exhibits for which the Exhibit number is noted with an asterisk on the Exhibit Index attached hereto.
Interactive Data File (Quarterly Report on Form 10-Q, for the periods ended September 30, 2024, furnished in iXBRL (Inline eXtensible Business Reporting Language)).
Attached as Exhibit 101 to this report are the following documents formatted in XBRL: (i) the Condensed Consolidated Balance Sheets at September 30, 2024 and December 31, 2023, (ii) the Condensed Consolidated Statements of Operations for the three and nine-months ended September 30, 2024 and 2023, (iii) the Condensed Consolidated Statements of Changes in Equity for the three and nine-months ended September 30, 2024 and 2023, (iv) the Condensed Consolidated Statements of Cash Flows for nine-months ended September 30, 2024 and 2023 and (v) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text. Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the date indicated.
