What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-16 compared with 2022-03-28 · 185 added, 91 removed, 105 unchanged (72% of the section changed)

3 unchanged sentences

This discussion should be read in conjunction with the Consolidated Financial Statements included herewith and the footnotes thereto and the risk factors contained herein.

Comstock innovates technologies that contribute to global decarbonization and circularity by efficiently converting massive supplies of under-utilized natural resources into renewable fuels and electrification products that contribute to balancing global uses and emissions of carbon .

We intend to use our technologies to achieve exponential growth and extraordinary financial, natural and social returns by:

building, owning, and operating a fleet of advanced carbon neutral extraction and refining facilities;

selling an array of complimentary process solutions and related services, and

licensing selected technologies to qualified strategic partners.

Our objective is to generate over $16 billion in revenue on an annualized basis by 2030, by responsibly producing and selling renewable energy products that enable us, our clients, and their downstream stakeholders to reduce greenhouse gas emissions by at least 100 million metric tons per year.

Meeting that objective would offset the equivalent of more than 234 million barrels per year of fossil fuel, or about 6% of the U.S.

transportation burn.

Our technologies unlock vast quantities of historically wasted and unused feedstock supplies with enough short cycle carbon to offset many billions of metric tons of long cycle fossil fuel emissions worldwide.

Most of that potential is provided by our Cellulosic Fuels technologies, which efficiently convert wasted, unused, widely-available and rapidly-replenishable woody biomass into intermediates and precursors for the production of carbon neutral oil, ethanol, gasoline, renewable diesel, jet fuel, marine fuel, and other renewable replacements for long cycle fossil derivatives.

Our full portfolio of patented, patent-pending and proprietary technologies includes many additional processes that complement and add to that potential.

We expect to use our technologies to meet our 2030 objectives with less than just 8% of the biomass residues produced annually in the U.S., however, we have structured our business to achieve and enable exponentially greater gains.

We believe that the Earth’s natural carbon cycle provides the simplest, fastest, most scalable and most practical path for enabling systemic decarbonization and achieving a net zero carbon world.

Our strategic plan is consequently based on innovating and using our technologies and renewable energy products to simultaneously:

reduce reliance on long cycle fossil fuels;

shift supply chains that terminate in combustion to short cycle renewable fuels;

lead and support the adoption and growth of a highly profitable, balanced worldwide short cycle ecosystem that continuously offsets, recycles, and contributes to neutralizing global carbon emissions by rapidly growing and replenishing vast quantities of feedstock for renewable circular fuels

In that fashion, we plan to empower our clients, the industries in which they operate, and the populations they serve to Burn Less fossil fuels, to Burn Smarter with renewable fuels, to Burn Cleaner by recycling emissions into additional renewable fuels, and to thereby make disruptive contributions to global decarbonization and helping to achieve a net zero carbon world.

Comstock innovates technologies that efficiently use wasted and under-utilized natural resources to produce renewable energy and other products that contribute to balancing global uses and emissions of carbon and enhance mineral and material discoveries.

We plan on achieving exponential growth and extraordinary financial, natural and social returns by using our and other technologies to develop production projects, to license qualified clients, and to sell an array of complimentary process solutions and related products and services.

Our Cellulosic Fuels technologies include proprietary processes that have the potential to convert vast quantities of historically wasted and unused but widely available and rapidly replenishable woody biomass supplies into advanced renewable fuels possibly capable of sustainably offsetting billions of metric tons of fossil fuel emissions worldwide.

Our Electrification Metals technologies also include a two-stage lithium-ion battery (“LIB”) recycling process designed to crush, separate, and condition LIBs, for direct production of high purity black mass containing minerals available for extracting battery grade metals.

We own and operate demonstration facilities for our Cellulosic Fuels and Electrification Metals technologies that we use in our ongoing technology development and commercialization efforts.

We also hold a worldwide license to advanced new mineral discovery and mining technologies that will use machine learning and artificial intelligence algorithms, hyperspectral orbital imaging, and ultimately, quantum-enabled sensors to provide prospecting data for mineral discovery and mining applications.

Our mining segment has consolidated the most significant portions of the historic Comstock mining district, amassed the single largest known repository of historical and current geological data on the Comstock region, secured permits, built an infrastructure and completed two phases of test production.

Comstock and its mining subsidiaries own, control, or retain interest in twelve square miles of primarily mineralized properties, or 9,472 acres (and due to overlapping interests, the combined area is approximately 7,586 acres) located in Storey and Lyon Counties, Nevada, just south of Virginia City, Nevada (referred to collectively herein as the “Comstock Lode District”).

Because of the Comstock Lode District’s historical significance, the geology is well known and has been extensively studied.

The volume of geologic data is significant, particularly in the Lucerne and Dayton resource areas.

We have completed extensive geological mapping, sampling and drilling on a limited portion of the Comstock Lode District’s property, particularly the Lucerne and Dayton resource areas, in order to characterize the mineralized material.

We have performed metallurgical testing, mine planning and economic analysis, and have produced an SEC Regulation S-K Subpart 1300 (“S-K 1300”) compliant report for the Dayton resource area.

We conducted extensive test mining operations from 2004 through 2006 and 2012 through 2016.

Most of the remaining portion of the Comstock Mineral Estate is comprised of exploration stage properties that we intend to develop with our mining technologies.

RECENT DEVELOPMENTS

1 unchanged sentence

Between 2012 and 2016, we mined and processed about 2.6 million tons of mineralized material from the Comstock Mineral Estate, producing 59,515 ounces of gold and 735,252 ounces of silver.

We subsequently focused on mineral exploration and development activities in anticipation of continued production, while

evaluating and exploiting opportunities for the monetization of selected assets, debt elimination, new investments, and diversification.

During 2020 and 2021, we completed a series of transactions that were designed to build on our competencies and reposition us to capitalize on the global transition to clean energy.

Those transactions primarily included (i) our sale of Comstock Mining LLC, the owner of our Lucerne resource area in Storey County, Nevada, and related permits, (ii) our acquisitions of 100% of Comstock Innovations Corporation (F/K/A Plain Sight Innovations Corporation), 100% of Comstock Engineering Corporation (F/K/A Renewable Process Solutions, Inc.), 100% of MANA Corporation, and 90% of LINICO Corporation, (iii) our acquisition of the intellectual property portfolio from FLUX Photon Corporation, and (iv) our investments of 48.19% of Quantum Generative Materials LLC, 25.0% of Mercury Clean Up LLC, and 50.0% of MCU Philippines, Inc.

These transactions added the management, employees, facilities, intellectual properties, and other assets needed to transform our company and business into an emerging leader in the innovation and sustainable production of renewable energy products, primarily by commercializing two new lines of business, cellulosic fuels and electrification metals.

Additional information on these transactions is provided in Note 2 to our Consolidated Financial Statements, Acquisitions and Investments .

We subsequently focused on diversification and during 2021 and 2022, we completed a series of transactions that were designed to build on our competencies and reposition us to capitalize on the global transition to clean energy.

Those transactions primarily included our acquisitions of 100% of Comstock Innovations, 100% of Comstock Engineering Corporation, 88.21% of LINICO Corporation, our acquisition of 48.19% of Quantum Generative Materials LLC, and our acquisition of the intellectual property portfolio from FLUX Photon Corporation.

These transactions added the management, employees, facilities, intellectual properties, and other assets needed to transform our company and business into an emerging leader in the innovation and sustainable production of renewable energy, primarily by commercializing two new lines of business, cellulosic fuels and electrification metals.

Additional information on these transactions is provided in Note 2, Acquisitions and Investments, to our Consolidated Financial Statements.

SUMMARY RESULTS OF OPERATIONS

We earned $862,165 and $201,700 in revenue for each of the years ended December 31, 2021 and 2020, respectively, 26.5% of which was attributable to mining and property development activities in our all other segment in 2021.

We had loss from operations of $6,405,921 and $5,474,261 for the years ended December 31, 2021 and 2020, respectively.

We had total assets of $43,001,837 and $83,952,795 in our renewable energy products and all other segments at December 31, 2021, respectively.

We had total assets of $43,123,562 in our all other segment at December 31, 2020 and no assets in our renewable energy products segment in 2020.

In 2021, the Company reestablished itself and its primary reporting segment as a renewable energy company (see Note 20, Segment Reporting , to the Consolidated Financial Statements).

Net loss for the year ended December 31, 2022, increased $22,154,639 to $46,738,259 from a net loss of $24,583,620 in 2021.

The increase of $22.2 million was primarily the result of the higher operating expenses of $12.5 million, decrease in other income (expense), net $3.5 million, including the impairment of goodwill and investments, and reduction of the $5.7 million prior year 2021 benefit from the deferred income tax benefit.

Below we set forth a summary of comparative financial information for the years ended December 31, 2022 and 2021:

6 unchanged sentences

Depreciation and amortization 3,328,570 1,034,486 2,294,084

Gain on sale of Daney Ranch (1,055,623) — (1,055,623)

Total operating expenses 19,539,432 6,996,004 12,543,428

2 unchanged sentences

Gain (loss) on investments 7,310 (2,244,951) 2,252,261

Gain on sale of membership interests in Comstock Mining, LLC — 18,275,846 (18,275,846)

Change in estimated fair value of contingent forward asset — 765,880 (765,880)

Interest expense (1,651,435) (168,881) (1,482,554)

1 unchanged sentence

Change in fair value of derivative instruments (7,727,638) (13,155,946) 5,428,308

Impairment of goodwill and intangible assets (6,394,610) — (6,394,610)

Impairment of intangibles (338,035) (230,764) (107,271)

Impairment of investment, net recovery (2,204,715) — (2,204,715)

Impairment of goodwill (12,788,671) (6,163,846) (6,624,825)

Other income (expense) (3,061,401) (2,979,363) (82,038)

Total other income (expense), net (27,376,977) (23,925,804) (3,451,173)

Net income (loss) before deferred income tax benefit $ (30,331,725) $ 14,931,970 $ (45,263,695)

Net loss before deferred income tax benefit (46,738,259) (30,331,725) (16,406,534)

Deferred income tax benefit — 5,748,105 (5,748,105)

Net income (loss) $ (24,583,620) $ 14,931,970 $ (39,515,590)

Net loss (46,738,259) (24,583,620) (22,154,639)

Net loss attributable to noncontrolling interest 789,515 — 789,515

Net loss attributable to Comstock Inc.

$ (45,948,744) $ (24,583,620) $ (21,365,124)

We had loss from operations of $10,619,429 and $1,801,595 per year for the years ended December 31, 2022 and 2021, respectively, in our renewable energy segment.

We had loss from operations of $346,115 and $81,125 per year for the years ended December 31, 2022 and 2021, respectively, in our mining segment.

We had loss from operations of $8,395,738 and $4,523,201 per year for the years ended December 31, 2022 and 2021, respectively, in our strategic and other investments segment.

We had total assets of $12,524,408 and $43,001,837 in our renewable energy segment at December 31, 2022 and 2021.

We had total assets of $8,322,920 and $11,304,024 in our mining segment at December 31, 2022 and 2021.

We had total assets of $79,206,431 and $72,648,771 in our strategic and other investments segment at December 31, 2022 and 2021.

In 2022, the Company reestablished itself and its primary reporting segment as a renewable energy company.

See Note 18, Segment Reporting , to the Consolidated Financial Statements.

COMPONENTS OF REVENUES AND EXPENSES

Our revenues are primarily derived from the sale of supporting engineering and related services and other returns generated by our investments.

Our costs of sales primarily include allocable labor, materials and incidental expenses incurred in connection with our provision of services.

Our revenues are primarily derived from the sale of engineering and related services and real estate revenues generated by our investments.

Our costs of goods sold primarily include allocable labor, materials and incidental expenses incurred in connection with our provision of services.

Selling, general and administrative expenses consist of payroll, office expenses, insurance and professional fees for marketing, selling, legal, consulting, accounting and investor relations activities.

Payroll, including employee compensation, and benefits, are the largest single category of expenditures in selling, general and administrative expenses.

Other income (expense) includes interest income, interest expenses, income or expenses relating equity gains or losses in affiliates, impairment losses of goodwill and intangible assets, change in fair value of derivative assets and notes receivable, gain (loss) on investments and other non-operating items.

Other income (expense) includes interest income, interest expenses, income or expenses relating to equity income (losses) in affiliates, impairment losses of goodwill, investments and intangibles, change in fair value of derivative assets and notes receivable, gain (loss) on investments and other non-operating items.

RESULTS OF OPERATIONS

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenues for the year ended December 31, 2021, increased to $862,165 from $201,700 for 2020, as a result of higher engineering services revenue, attributable to our 2021 acquisition of Comstock Engineering.

Costs of sales for the year ended December 31, 2021, increased to $272,082 as compared to $51,890 for 2020, primarily resulting from costs associated with engineering sales that were not incurred in 2020.

Gross profit correspondingly increased to $590,083 for the year ended December 31, 2021, as compared to $149,810 for 2020, with substantially all of the increase attributable to higher engineering service sales.

Selling, general and administrative expense for the year ended December 31, 2021 increased to $5,546,767 from $4,401,633 for 2020, as a result of higher employee costs related to new employees from acquisitions, stock-based compensation related to 2021 grants and higher professional fees related to our recent acquisitions.

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

During 2021, the Company recorded a loss on investments of $2,244,951, as compared to a gain on investments in 2020 of $3,152,702.

The 2021 loss was primarily due to an increase of $2,286,867 in the fair value of Tonogold common shares and a realized gain of $66,821 in Tonogold common shares sold, offset in part by a decrease in the market value of other securities.

During 2020, the Company recorded a gain of $18,275,846 from the sale of membership interest in Comstock Mining, LLC, the entity that owns the Lucerne mine, the related reclamation liability, and permits.

There was no comparable transaction in 2021.

The change in fair value of our derivative instruments increased by $13,583,784, consisting primarily of $13,155,946 in 2021 losses from changes in the fair value of derivative assets and liabilities related to new investments and acquisitions, primarily those associated with potential make whole obligations for minimum value commitments on the Company’s common shares, including $6,660,000 for Quantum Generative Materials LLC ("GenMat"), $6,300,000 for LP Biosciences LLC ("LPB"), $2,743,162 from the LINICO purchase from the former founder, somewhat offset by $2,049,966 in gains from changes in fair value associated with similar make whole obligation from the original LINICO purchase.

The increase from 2020, was also attributable to $427,838 in 2020 gains, primarily from $403,179 in fair value changes in the MCU derivatives.

For the year ended December 31, 2021, the Company recorded $6,394,610 for the impairment of goodwill and other intangibles associated with the full impairment the MANA intangible asset related to the termination of the LP Biosciences contract during the first quarter 2022, consisting of $6,163,846 associated with the goodwill impairment and $230,764 associated with other intangibles impairment.

There were no comparable impairments during 2020.

Other expenses, net, for the year ended December 31, 2021, were $2,979,363, primarily consisting of $1,076,258 in expenses associated with our withdrawal from the LP Biosciences transaction, $2,049,070 of losses from equity method investments including $1,282,336 from LINICO, $675,713 from GenMat, $718,500 of other losses from valuation and impairment losses on notes receivable, and, $168,881in interest expense, which amounts were partially offset by $437,699 of other income, primarily consisting of amendment fees from Tonogold.

Other expenses, net for the year ended December 31, 2020 were $2,267,829, primarily consisted of a $2,544,000 loss related to fair value adjustments to the Tonogold preferred shares and losses from the change in fair value of the Tonogold note receivable of $642,997, which amounts were partially offset by other gains of $261,170 for PPP loan forgiveness, $234,944 in reimbursements of acquisition costs and $425,185 of other income, net, from sales of mining claims, settlement of amounts due to vendors, and other expenses.

Interest income increased by $544,266 for the year ended December 31, 2021, as compared to 2020, primarily due to an increase in the average Tonogold outstanding note receivable principal balance from 2021, and an increase in the average interest rate, due to an increase from the stated 12% rate to the 18% default rate since September 2021.

Interest expense decreased by $253,006 for the year ended December 31, 2021, as compared to 2020, primarily due to lower average debt outstanding, including the early retirement of prior debt obligations in March 2021, which amounts were partially offset by a higher interest rate and discounts on the Promissory Notes.

Deferred income tax benefit for the year ended December 31, 2021, was $5,748,105, resulting from temporary differences between our accounting and tax treatment associated with our recent acquisitions.

There were no comparable deferred income tax benefits in 2020.

Net loss for the year ended December 31, 2021, was $24,583,620 as compared to net income of $14,931,970 for the year ended

December 31, 2020.

The decrease of $39,515,590 was primarily the result of the gain of $18,275,846 on the sale of Comstock Mining LLC, and other gains on investments of $3,152,702 during 2020, that did not recur in 2021, coupled with the 2021 other expenses of $2,979,363, changes in fair value of derivative instruments of $13,155,946, and losses on investments of $2,244,951, which amounts were partially offset deferred tax benefits of $5,748,105, and to a lesser extent, higher interest income.

Revenues for the year ended December 31, 2022, decreased $684,015 to $178,150 in 2022 from $862,165 in 2021, primarily due to engineering services revenue recognized in 2021 related to LINICO, which was an investment until a majority stake was acquired in the fourth quarter 2021, when the Company then consolidated LINICO.

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

Selling, general and administrative expense for the year ended December 31, 2022 increased $4,696,586 to $10,243,353 in 2022 from $5,546,767 in 2021, primarily due to higher legal and professional fees of $1.2 million related to increased corporate activities, acquisitions, financing and other transactions, higher bad debt expense of $1.2 million attributed to the Tonogold accounts receivable impairment, $1.2 million increase in other costs, including payroll bonus accrual and other compensation related to the 2021 acquisitions and $0.4 million in higher insurance costs, and a $0.3 million increase due to a change in the estimate for reclamation liabilities.

Research and development expenses for the year ended December 31, 2022 increased $6,608,381 to $7,023,132 in 2022 from $414,751 in 2021.

The increase primarily related to costs for the development of two pilot-scale systems, one for processing woody biomass into bio-intermediate materials for low-carbon pulps, paper, cellulosic sugars and cellulosic fuels and the other for crushing, separating and conditioning black mass derived from lithium-ion batteries and, to a lesser extent, increased salaries and other compensation, including bonus accruals of $557,000 associated with these efforts.

These systems are being used to validate the processes and develop parameters for upscaling and commercializing these renewable energy technologies.

Our Comstock Innovations and Comstock Engineering subsidiaries, respectively, are leading the efforts for commercializing these technologies.

Depreciation and amortization expense for the year ended December 31, 2022, increased $2,294,084 to $3,328,570 in 2022 from $1,034,486 in 2021, primarily due to increased amortization from intangible and right of use assets acquired during 2021.

Gain on sale of Daney Ranch for the year ended December 31, 2022, was $1,055,623.

Gain on investments of $7,310 in 2022, increased $2,252,261 as compared to a loss on investments in 2021 of $2,244,951.

The 2022 gain was due to an increase in the fair value of Tonogold common shares during 2022, as compared to a more significant decrease in the fair value of the Tonogold common shares during 2021.

Interest expense for the year ended December 31, 2022, increased by $1,482,554 to $1,651,435 in 2022 from $168,881 in 2021, primarily due to higher interest on the AQMS lease liability incurred in conjunction with the LINICO acquisition during the 2021 fourth quarter, higher AST lease liability commencing during the 2022 second quarter, and interest and related amortization of the original issue discount ("OID") on the GHF promissory note that originated during the 2021 fourth quarter.

Interest income for the year ended December 31, 2022, decreased by $630,339 to $387,608 in 2022, from $1,017,947 in 2021, primarily as a result of the transaction that extinguished the $6,650,000 Tonogold interest bearing note receivable in exchange for the 100% membership interest in Comstock LLC, the entity that owns the Lucerne mine properties and related permit, and the extinguishment of the MCU-P note receivable that was exchanged for the MCU assets, both no longer accruing interest income.

The change in fair value of our derivative instruments changed by $5,428,308, to a loss of $7,727,638 in 2022 from a loss of $13,155,946, as a result of a lower impact from the decrease in the Company's share price and a settlement of the investment associated with LINICO, in connection with potential make-whole obligations for minimum value commitments on the Company's common shares.

The 2022 loss primarily includes $3,535,000 for the acquisition of LINICO equity from the former founder, $3,030,000 for the investment in Quantum Generative Materials LLC ("GenMat"), and $1,875,000 associated with the acquisition of the Haywood Quarry.

Impairment of intangible assets f or the year ended December 31, 2022, changed by $107,271 to $338,035 from an impairment of $230,764 in 2021, primarily from the $338,035 impairment of intangible assets related to Flux Carbon.

The $230,764 impairment from 2021 was primarily due to the impairment of other intangibles associated with the full impairment of the MANA intangible asset related to the termination of the LP Biosciences contract.

Impairment of investments was $2,204,715 in 2022 due to a $2,455,333 impairment of the MCU and MCU-P investments which was offset by $305,204 in cash and proceeds of MCU assets which were liquidated as well as a $54,587 impairment of the investment in LPB.

There was no comparable loss in 2021.

Impairment of goodwill for the year ended December 31, 2022, increased by $6,624,825 to $12,788,671 primarily from the 2022 impairment of $10.6 million of goodwill from the acquisition of Plain Sight Innovations and $2.2 million from the impairment of Renewable Process Solutions as compared to the 2021 impairment of $6.2 million for the impairment of goodwill associated with the full impairment of the MANA goodwill related to the termination of the LP Biosciences contract.

Other income (expenses), net, for the year ended December 31, 2022, were $3,061,401 in 2022, primarily consisting of losses from our equity method investments of $1.1 million, a decrease in the value of the Tonogold note receivable of $0.6 million and an LPB settlement expense of $0.3 million.

Other income (expenses), net, for the year ended December 31, 2021, were $2,979,363, primarily consisting of loss from our equity method investments of $2.0 million, $1.1 million in expenses associated with our withdrawal from the LP Biosciences transaction and a decrease in the value of the Tonogold note receivable of $0.4 million, partially offset by $0.8 million of other income, primarily consisting of $0.4 million from Tonogold amendment fees and $0.4 million of LINICO dividend income.

Deferred income tax benefit for the year ended December 31, 2021, was $5,748,105, resulting from temporary differences between our accounting and tax treatment from our 2021 acquisitions.

No deferred income tax benefit was recorded in 2022.

LIQUIDITY AND CAPITAL RESOURCES

Our financial position and liquidity is based on our ability to generate cash flows from our operations, as well as our net sources of capital from financing as generally compared to our net uses of capital from investing activities.

Our cash balances at December 31, 2021 and December 31, 2020 were $5,912,188 and $2,431,944, respectively.

Our financial position and liquidity is based on our net sources of capital from financing as generally compared to our net uses of capital from investing activities and ultimately, our ability to generate cash flows from our operations.

Our cash balances at December 31, 2022 and 2021 were $2,521,772 and $5,912,188, respectively.

The Company had current assets of $30,767,613 and current liabilities of $31,628,676, representing working capital deficit of $861,063 at December 31, 2022.

Our primary source of liquidity during 2022 was cash from financing activities.

During the year ended December 31, 2021, we used $7,492,402 in cash in our operating activities and $16,097,485 in our investing activities, and we generated $27,070,131 in cash from our financing activities.

During the year ended December 31, 2020, we used $3,764,575 in cash in our operating activities, and we sourced $3,207,696 from our investing activities and $1,972,966 from our financing activities.

During 2021, 9,220,123 common shares were issued through equity issuance and private placement agreements, at an average price per share of $2.97 corresponding to net proceeds of $26,335,500, net of cash issuance fees of $1,064,498.

During 2020, 5,747,608 common shares were issued through equity issuance and private placement agreements at an average price per share of $0.73 and net proceeds of $4,067,552, net of cash issuance fees of $130,186.

We intend to fund our operations over the next twelve months from existing cash and cash equivalents, planned sales and profits from our cellulosic technology and related engineering services, planned sales of strategic and other investments, including our existing non-mining assets and investments in Tonogold and previously funded capital into our LINICO subsidiary.

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, borrowings and various other means, there is no assurance we will be able to obtain additional equity capital or other financing, if needed.

Net cash used in operating activities for the year ended December 31, 2021 increased by $3,727,827 from 2020 primarily from increases in operating costs, decreased cash reimbursements, partially offset by increased revenue, and net uses of cash for working capital.

Net cash used in investing activities for the year ended December 31, 2021 increased by $19,305,181 from the comparable year ended 2020 primarily due to $13,320,537 for cash payments incurred in connection with our acquisitions and investments as well as $3,285,000 in advances to SSOF during 2021, as compared to $6,700,929 of proceeds from investing activities in 2020, primarily from the sales and collections on Tonogold securities as well as $1,650,000 in advances to SSOF.

Net cash provided by financing activities for the year ended December 31, 2021 increased by $25,097,165 from 2020, primarily from a net increase in proceeds from the issuance of common stock of $22,267,949 during 2021 as compared to 2020, plus a change of $3,076,354 resulting from increased debt in 2021, as compared to a net use of cash from debt reductions in 2021.

Risks to our liquidity could result from future operating expenditures above management’s expectations, including but not limited to exploration, pre-development, research and development, selling, general and administrative, and investment related expenditures in excess of planned proceeds from the sale of Tonogold securities, repayment of the Note and advances to SSOF and sale of the Silver Springs Properties, amounts to be raised from the issuance of equity under our existing shelf registration statement, declines in the market value of properties held for sale, or declines in the share price of our common stock would adversely affect our results of operations, financial condition and cash flows.

During the year ended December 31, 2022, we generated $12,446,702 in cash from our financing activities and we used $12,105,169 and $3,731,949 in cash in our operating and investing activities, respectively.

During the year ended December 31, 2021, we generated $27,070,131 from our financing activities and we used $7,492,402 and $16,097,485 in cash from our operating and investing activities, respectively.

During 2022, we issued 20,666,674 common shares through equity issuance and private placement agreements, at an average price per share of $0.52 corresponding to proceeds of $10,488,180, net of cash issuance fees of $298,000.

During 2021, we issued 9,220,123 common shares through equity issuance and private placement agreements at an average price per share of $2.97 and proceeds of $26,335,501, net of cash issuance fees of $1,064,498.

On June 21, 2022, the Company entered into an equity purchase agreement (the “Purchase Agreement”) with Tysadco Partners, LLC (“Tysadco”) for the private placement of 3,076,923 common shares at a purchase price of $0.65 per share.

The Company paid $140,000 in cash and delivered 57,143 common shares with a fair value of $40,000 to the placement agent in connection with such sale.

Such sale was exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

The Company also entered into an agreement with Tysadco for the purchase of up to $10,000,000 worth of shares of the Company’s common stock from time to time, at the Company’s option.

Any shares offered and sold to Tysadco will be registered for resale pursuant to a registration statement on Form S-1 filed with U.S.

Securities and Exchange Commission pursuant to the Securities Act of 1933 (the “Securities Act”).

The Company paid a commission of 428,571 additional shares of common stock with a fair value of $300,000 to Tysadco in connection with such sale.

Sales of common stock, if any, under the Purchase Agreement are made at a 10% discount to the volume weighted average sales price of the common stock on the date that Tysadco receives such a capital call from the Company.

On April 12, 2022, the Company entered into an equity purchase agreement (the “Leviston Agreement”) with Leviston Resources LLC (“Leviston”) for the purchase of up to $10,000,000 worth of shares of the Company’s common stock from time to time, at the Company’s option, on terms deemed favorable to the Company.

Any shares offered and sold are issued pursuant to the Company’s shelf registration statement on Form S-3 and the related prospectus (File No.

333-263930) filed by the Company with the U.S.

Securities and Exchange Commission pursuant to the Securities Act of 1933 (the “Securities Act”).

Sales of common stock, if any, under the Purchase Agreement may be made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act, at a discount of 10% to the volume weighted average sales price of the common stock on the date that Leviston receives a capital call from the Company.

For consideration to enter into the Leviston Agreement, the Company agreed to deliver additional shares of common stock to Leviston, for no additional consideration, on the first settlement date with respect to a put notice delivered by the Company.

For the year ended December 31, 2022, we issued to Leviston 13,156,117 common shares with an aggregate sales price of $7,311,180, at an average price per share of $0.64, and an additional 206,897 common shares at a fair value of $300,000 in commitment fees.

The Company issued 136,986 unregistered common shares with a fair value of $200,000 in due diligence fees.

As of December 31, 2022, the 2022 Leviston Agreement has no remaining capacity, and the facility was closed.

On December 16, 2022, the Company entered into a securities purchase agreement for an unsecured convertible promissory note ("Ionic 2022 Convertible Note") with Ionic Ventures, LLC.

with a principal amount of $3,150,000, of which $2,975,000 was funded and $175,000 was an original issue discount ("OID") and issued with a 5% OID.

The full principal is due on March 16, 2024.

Interest is payable monthly at a rate of 8% annually.

The Company can redeem up to $2,000,000 of the Convertible Note for cash 30-days following closing at 110% of the Face Value, plus accrued interest.

The Ionic 2022 Convertible Note contains conversion terms that are based on percentages of trading price and volumes over defined measurement periods.

The terms require the conversion option to be bifurcated as a derivative.

As of December 31, 2022, the Company bifurcated the conversion feature and recorded a derivative liability of $420,000 reflected in our consolidated balance sheet.

On October 25, 2022, we entered into a short-term promissory note ("Alvin Fund 2022 Note") with Alvin Fund LLC with a principal amount of $2,000,000.

In consideration of the lender providing the financing, the Company issued $250,000 in shares to the lender.

The full principal is due on October 25, 2023.

Interest is payable monthly at a rate of 9% annually.

Prepayment is allowed in full or in part at any time without premium or penalty.

The loan is secured by all the property commonly referred to as the Dayton properties.

On December 15, 2021, we entered into a long-term promissory note ("GHF 2021 Note") with GHF, Inc.

(“GHF”) with a principal amount of $5,000,000, of which $4,550,000 was funded and $450,000 was an original issue discount ("OID").

The full principal is due on December 15, 2024.

Interest is payable monthly at a rate of 6% annually.

Prepayment is allowed in full or in part at any time without premium or penalty.

The loan is secured by all non-mining related assets of the Company, Silver Springs land and water rights, and the Daney Ranch, excluding the Lucerne and Dayton properties.

The Company is required to prepay the promissory note with any net cash proceeds received in the sale of any collateral.

On March 4, 2021, we retired our existing unsecured promissory notes ("Promissory Notes") by paying the remaining principal balance of $3.1 million plus earned OID of $0.1 million.

We intend to fund our operations over the next twelve months from existing cash and cash equivalents, planned sales of non-strategic assets and other investments, planned licensing, sales and profits from our cellulosic and battery metal recycling

technology and related engineering services, and previously funded capital into our LINICO subsidiary and Quantum investment.

While we have been successful in the past in obtaining the necessary capital to support our operations, including registered equity financings from our existing shelf registration statement, non-registered equity placements, borrowings and various other means.

There is no assurance we will be able to obtain additional equity capital or other financing, if needed.

Net cash used in operating activities for the year ended December 31, 2022 increased $4,612,767 to $12,105,169 in 2022 from $7,492,402 in 2021 primarily from an increase of $13.0 million in operating costs.

Net cash used in investing activities for the year ended December 31, 2022, decreased by $12,365,536 to $3,731,949 from $16,097,485 in 2022 from 2021 almost solely due to a $15.5 million decrease in cash payments associated with our 2021 acquisitions, investments and advances, including $6.0 million investment in LINICO, $4.25 million investment in GenMat, $1.9 million investment in Plain Sight Innovations, and $3.3 million in advances to SSOF during 2021.

Net cash provided by financing activities for the year ended December 31, 2022, decreased by $14,623,429 to $12,446,702 in 2022 from $27,070,131 in 2021, primarily as a result of reduced net proceeds from the issuance of common stock of $16.6 million, and the issuance convertible debentures of $3.0 million, partially offset by reduced principal payments on debt of $3.1 million, and a reduction in issuance of promissory notes of $2.6 million.

Risks to our liquidity could result from future operating expenditures above management’s expectations, including but not limited to research and development, pre-development, exploration, selling, general and administrative, and investment related expenditures in excess of repayments of the advances to SSOF, and sale proceeds our non-strategic assets and other investments, amounts to be raised from the issuance of equity under our existing shelf registration statement, declines in the market value of properties planned for sale, or declines in the share price of our common stock that would adversely affect our results of operations, financial condition and cash flows.

If we were unable to obtain any necessary additional funds, this could have an immediate material adverse effect on liquidity and raise substantial doubt about our ability to continue as a going concern.

1 unchanged sentence

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.

The acquisitions and business integrations during 2021 established our new renewable energy platform for growth.

We will innovate and commercialize technologies that contribute to global decarbonization by efficiently converting under-utilized natural resources into renewable fuels and electrification products that shift supply chains away from fossil fuels.

We will also lead and support the adoption and growth of a balanced net zero ecosystem based on the feedstocks unlocked by our technologies, with powerful embedded economic incentives for our clients, their industries, and the populations they serve to decarbonize.

We will rapidly achieve exponential growth and extraordinary financial, natural, and social gains by building, owning, and operating a fleet of advanced carbon neutral extraction and refining facilities, by selling an array of complimentary process solutions and related services, and by licensing selected technologies to qualified strategic partners

Our goal is to generate over $16 billion in revenue on an annualized basis by 2030, by producing and selling renewable energy products that enable us, our clients, and their downstream stakeholders to reduce greenhouse gas emissions by at least 100 million metric tons per year.

Meeting that objective would offset more than 234 million barrels per year of fossil fuel, or about 6% of the U.S.

transportation burn, and require an estimated 8% of the existing biomass residues produced annually in the U.S.

Such scales are achievable by leveraging existing external fuel infrastructure.

Our expanded team has extensive experience in the renewable fuels industry, having designed and built several dozen renewable fuel production facilities in the U.S.

We have already made remarkable progress.

We are currently building commercial pilot scale cellulosic fuels and LIB facilities, and we are preparing to commence operations at our full-scale LIB recycling facility later this year.

We have also made significant strides in developing and establishing our new facilities and forging new revenue and licensing streams that we will soon share.

We have also made meaningful progress and will complete the monetization of our non-strategic assets, as quickly as possible, while funding our new businesses and limiting our outlook and focus to the objectives outlined above.

The Company’s Annual General Meeting is scheduled for May 26, 2022, where we plan presenting a more detailed outlook of our business plans, schedules, and near-term revenues and showcasing our renewable energy businesses.

The primary focus for 2023 is commercialization.

The Company’s biorefining technologies are commercially ready and offer unprecedented performance for the Company’s prospective customers.

The Company is actively pursuing revenue producing licensing opportunities with globally recognized renewable fuel producers.

The Company’s metals and GenMat’s generative AI solutions have made significant technological advancements in the past two years with the 2023 goal of commercial readiness first followed by commercialization with early adopting customers.

Commercialization

Comstock’s team has decades of diverse technology development and commercialization experience.

The Company uses a disciplined approach to devising, qualifying, and elevating innovations from conception through increasing degrees of commercial readiness.

The Company has adopted a widely used Technology Readiness Level (“TRL”) measurement system for objectively assessing Comstock’s progress, risks, investment qualifications, and commercial maturity.

There are nine readiness levels on the TRL scale, starting with TRL 1.

Progression up the scale requires achievement of “SMART” milestones that are Specific, Measurable, Achievable, Relevant, and Timely.

Proof of concept occurs at TRL 3.

TRL 4 and 5 involve increasing degrees of process validation.

TRL 6 is the first true demonstration of commercial readiness.

TRL 7 and 8 involve various functional prototypes and pilots with increasing fidelity and sophistication.

A TRL 9 technology is commercially mature and fully deployed.

Depending on the technology and other applicable factors, revenue can commence at TRL 6 for early adopting and generally sophisticated commercial clients with continued development to TRL 7, 8, and 9.

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

Line of Business Technology 12/2021 12/2022 12/2023 Goal

Cellulosic Fuels Conversion of under-utilized woody biomass into renewable fuels at high yield TRL 4 TRL 6 TRL 7

Artificial Intelligence Generative AI that simulates new materials at exponentially increased speed TRL 3 TRL 4 TRL 6

Metals Scalable extraction of purified black mass concentrate from lithium-ion batteries TRL 2 TRL 5 TRL 6

Mining Technology Dramatically reduced exploration costs with hyperspectral imaging and AI-based analytics TRL 0 TRL 2 TRL 3

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

Cellulosic Fuels

Most current forms of renewable fuel draw from the same pool of conventional feedstocks, including corn and vegetable oils in the U.S., but the entire available supply of those feedstocks could only meet a small fraction of the demand for renewable fuels.

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

The Company’s objectives for 2023 include:

• Executing one or more early adopter license agreements and commencing development on commercial scale projects for operationally experienced, technologically sophisticated and well capitalized customers .

• Completion of full technical documentation and engineering submittal packages.

• Completion of an independent lifecycle carbon analysis to prove the carbon emissions reduction benefits of the fuels produced with Comstock’s known processes.

• Continuous operation of the integrated bio-intermediate production process at the Company’s demonstration plant for sufficient time to achieve and broadly demonstrate TRL 7.

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

Artificial Intelligence

Investment in artificial intelligence (“AI”) is a crucial component of Comstock’s technology innovation strategy.

Quantum Generative Materials LLC ("GenMat"), develops and commercializes cutting-edge generative artificial intelligence models for the discovery and manipulation of matter.

GenMat is a company in which Comstock has a 48.19% investment interest.

This includes generative AI models that can be employed today, for commercial use on GenMat’s existing, high-performance computing platforms, well before quantum computers become mainstream.

GenMat's AI operates similarly to the large language models widely discussed in the media today, but instead of words and language, it uses atoms and molecules to generate physical systems and harness math and science to discover new materials in an exponentially shorter time than traditional methods allow.

To put this into perspective, new material discovery typically takes many years and many millions of dollars.

GenMat's AI will simulate thousands of unique new materials in seconds.

GenMat’s objectives for 2023 include:

• Elevate new material simulation to TRL 6 by synthesizing and directly testing the AI’s simulated materials to confirm the precision and accuracy of those simulations.

• Commercialize an enterprise-oriented API and other generative AI solutions to early adopter enterprise clients for advanced materials simulation and synthesis.

• Launch and make operational a space-based hyperspectral imaging sensor for mineral discovery applications.

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

Mining and Minerals

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

The Company’s objectives for 2023 include:

• Publish preliminary economic assessments for both the Lucerne and Dayton resource areas.

• Develop, in collaboration with GenMat, a next-generation geostatistical digital twin model of the Dayton resource area using the Company’s existing geologic and geophysical data.

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

Metal Recycling

Resource scarcity and supply are generally the main drivers presented when discussing battery recycling.

From a market perspective what is often missed is that electric vehicle batteries are only one of many metals-based products that can cause a massive amount of pollution if simply landfilled at the end of life with no recovery of the underlying metal values.

Comstock Metals objectives for 2023 include:

• Physically reposition and broaden the addressable market for commercialization of our metals recycling.

• Advancing the technology readiness for broader material recycling, including photovoltaics and more.

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

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

CRITICAL ACCOUNTING ESTIMATES

1 unchanged sentence

The SEC has indicated that a “critical accounting policy” is one which is both important to the representation of the registrant’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

We base our estimates on past experience and on various other assumptions our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

We base our estimates on experience and on various other assumptions our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results will differ and may differ materially from these estimates under different assumptions or conditions.

Additionally, changes in accounting estimates could occur in the future from period to period.

Changes in accounting estimates could occur in the future from period to period.

Our management has discussed the development and selection of our most critical financial estimates with the Audit and Finance Committee of our Board of Directors.

The following paragraphs identify our most critical accounting policies:

The following summarizes our most critical accounting policies:

We accounted for our convertible debt in accordance with ASC 815, Derivatives and Hedging as the conversion feature embedded in the convertible debentures could result in the note principal and related accrued interest being converted to a variable number of our common shares.

28 unchanged sentences

The Company recognizes forfeitures of unvested common stock, performance shares and stock option grants as they occur.

Impairment of Mineral Rights and Properties, Plant and Equipment

Impairment of Mineral Rights, Properties, Plant and Equipment, Goodwill, Intangible Assets and Investments

The Company assesses its mineral rights and properties, plant and equipment for possible impairment whenever events or changes in circumstances indicate the carrying value of the assets may not be recoverable.

12 unchanged sentences

Goodwill is tested for impairment at the reporting unit level on an annual basis, and on an interim basis if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value.

Management performs its annual goodwill impairment tests at December 31.

Management performs its annual goodwill impairment tests as of October 1.

For the year ended December 31, 2021, the Company performed its annual goodwill impairment tests as of December 31, 2021.

The Company accelerated the annual goodwill impairment assessment date to October in order to provide a timelier assessment of our goodwill impairment analysis.

The change in the assessment date did not affect the impairment charge for the year ended December 31, 2021.

Reclamation and Remediation Obligations

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis