COMSTOCK INC. --------------------------------------------------------------------------------
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 Consolidated Financial Statements included herewith, the footnotes thereto and the risk factors herein.
OVERVIEW
Comstock Inc. (together with its wholly-owned subsidiaries), is a leading innovator of technologies that enable systemic decarbonization and circularity by efficiently converting under-utilized waste and renewable natural resources into fuels and electrification products that contribute to balancing global uses and emissions of carbon. We expect to generate revenue by developing, using, selling, and supporting new clean technologies that facilitate the more efficient use of scarce natural resources. We are commercializing environment-enhancing, material science-based technologies, products, and processes including carbon neutral cellulosic bio-fuels and carbon reducing lithium-ion battery ("LIB") metal recycling.
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 theU.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 ourCellulosic 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 theU.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;
and
- 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
RECENT DEVELOPMENTS
Comstock historically focused on natural resource exploration, development, and production, with an emphasis on mining gold and silver resources from its extensive contiguous property holdings in the historic Comstock andSilver City mining districts inNevada (collectively, the "Comstock Mineral Estate "). We subsequently focused on mineral exploration and development activities while evaluating opportunities for the monetization of selected assets, debt elimination and new investments. -------------------------------------------------------------------------------- During 2022 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 option to sellComstock Mining LLC , the owner of our Lucerne resource area inStorey County, Nevada , and related permits, (ii) our acquisitions of 100% ofComstock Innovations Corporation (F/K/A Plain Sight Innovations Corporation ), 100% ofComstock Engineering Corporation (F/K/A Renewable Process Solutions, Inc. ), 100% ofMANA Corporation , and approximately 90% ofLINICO Corporation , (iii) our acquisition of the intellectual property portfolio fromFLUX Photon Corporation , and (iv) our investments of 48.19% ofQuantum Generative Materials LLC , and other minority investments. 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 Condensed Consolidated Financial Statements, Acquisitions and Investments. The acquisitions and business integrations during 2021 and 2022 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 accelerate the commercialization of decarbonizing technologies and generate billions 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 theU.S. transportation burn, and require an estimated 8% of the existing biomass residues produced annually in theU.S. We also announced a significant expansion of our leading cellulosic technology portfolio by filing for a new patent covering breakthrough pathways to produce renewable diesel, marine, sustainable aviation fuel ("SAF") and gasoline from woody biomass, at dramatically improved yield, efficiency, and cost in comparison to all known methods. These technology advancements enable a new sustainable feedstock capable of neutralizing a substantial share of currentU.S. mobility emissions. Renewable fuels provide a critical opportunity for decarbonization, however, most of the existingU.S. renewable fuel refineries draw from the same limited pool of constrained feedstocks. Comstock's plans to decarbonize with renewable fuels involves abundant feedstocks that are not used today, enabling a vast untapped energy source with superior benefits. Based on current performance data, Comstock projects best-in-class renewable fuel yields exceeding 80 gallons per dry ton (on a gasoline gallon equivalent basis), with lifecycle greenhouse gas emissions reductions well exceeding 80% over petroleum. About half of America's historical forest lands were clear cut for less productive uses. Restoring and using just about a quarter of that amount, or approximately 140 million acres, to sustainably grow, harvest, and replant fast-growing trees for use in producing renewable fuels would be sufficient to permanently neutralize more than 40% of America's mobility emissions. 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 theU.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 lithium-ion battery 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.
COVID-19
--------------------------------------------------------------------------------
The outbreak in 2020 of the novel coronavirus ("COVID-19") resulted in
governments worldwide enacting emergency measures to combat the spread of the
virus. These measures, including the implementation of social distancing
measures, quarantine periods and travel bans, have caused material disruptions
to many businesses and negatively impacted economic activities. Global equity
markets have experienced significant volatility. Governments and their central
banks have reacted with significant fiscal and monetary interventions designed
to mitigate the impacts and stabilize economic conditions. The impact and
ultimate duration of the COVID-19 outbreak is currently unknown, as is the
efficacy of these governmental interventions.
For more than two years in Nevada , local governments, state health officials,
emergency managers, local health authorities and community partners have come
together in a statewide response to COVID-19. Processes continue to be in place
to support testing, contact tracing, disease investigation and vaccine rollout
in communities throughout the state. We are operating in alignment with these
guidelines for protecting the health of our employees, partners and suppliers.
On May 20, 2022 , Nevada Governor Steve Sisolak effected the end of the
Declaration of Emergency, originally declared on March 12, 2020 , to facilitate
the State's response to the COVID-19 pandemic. The Declaration and subsequent
directives ensured the State of Nevada could effectively prevent infections,
reduce the impacts on patient care in the healthcare system and reduce the
number of Nevadans who died from the disease caused by the virus.
COMPARATIVE FINANCIAL INFORMATION
Below we set forth a summary of comparative financial information for the three
months ended
6/30/22 6/30/21 Change
Revenue $ 52,925 $ 54,625 $ (1,700)
Cost of goods sold - - -
Gross profit 52,925 54,625 (1,700)
Selling, general and administrative expenses 2,508,573 1,649,711 858,862
Research and development 2,579,150 - 2,579,150
Depreciation and amortization 808,894 114,631 694,263
Total operating expenses 5,896,617 1,764,342 4,132,275
Loss from operations (5,843,692) (1,709,717) (4,133,975)
Other Income (Expense)
Gain (loss) on investments (298,801) (1,120,571) 821,770
Interest expense (312,026) 253 (312,279)
Interest income 1,491 231,496 (230,005)
Change in fair value of derivative instruments (8,190,000) (2,489,999) (5,700,001)
Recovery (impairment) of investments and intangible assets 895,204
- 895,204
Other income (expense) (342,773) (1,232,454) 889,681
Total other income (expense), net (8,246,905) (4,611,275) (3,635,630)
Net income (loss) $ (14,090,597) $ (6,320,992) (7,769,605)
Net loss attributable to noncontrolling interest $ (323,751) $ - (323,751)
Net income (loss) attributable to Comstock Inc, $ (13,766,846) $ (6,320,992) $ (7,445,854)
RESULTS OF OPERATIONS
--------------------------------------------------------------------------------
Three Months Ended
Revenues and gross profit for the three months endedJune 30, 2022 , decreased slightly to$52,925 from$54,625 for the same period in 2021, as a result of the loss of one lessee. Selling, general and administrative expense for the three months endedJune 30, 2022 increased to$2,508,573 from$1,649,711 for 2021, primarily as a result of$0.5 million increase in personnel, insurance and other costs related to 2021 acquisitions and$0.4 million increase in legal and professional fees related to our acquisitions, corporate governance and other transactions. Research and development expenses for the three months endedJune 30, 2022 were$2,579,150 and included costs related to development of a pilot scale system for processing woody biomass into intermediate materials that can be converted into paper products and fuels and the pilot scale system for crushing and separating lithium ion batteries. These systems will be used to validate the processes and develop parameters for upscaling these renewable technologies. Our Comstock Engineering, Comstock Innovations and LINICO subsidiaries, which were acquired in the second, third and fourth quarters of 2021, respectively, are leading the developments of these commercializing technologies. No similar costs were incurred in the second quarter 2021. Depreciation and amortization increased by$694,263 during the three months endedJune 30, 2022 , compared to the same 2021 period, related to intangible and right of use asset amortization related to 2021 acquisitions, primarily during the last half of 2021. During the three months endedJune 30, 2022 , the Company recorded a loss on investments of$298,801 , as compared to a loss on investments for the same 2021 period of$1,120,571 . The 2022 loss was primarily due to realized losses on sales of 6,813,314 shares of Tonogold common stock. The 2021 loss was primarily due to a decrease in fair value of Tonogold common stock of$938,573 and realized losses on sales of Tonogold shares of$180,254 , and a decrease in the market value of other securities. The change in fair value of our derivative instruments increased by$5,700,001 for the three months endedJune 30, 2022 as compared to the change in fair value of our derivatives for the same period in 2021, as a result of a decrease in the Company's share price in connection with potential make whole obligations for minimum value commitments on the Company's common shares, including$3,150,000 forQuantum Generative Materials LLC ("GenMat"),$1,365,000 from the Haywood acquisition and$3,675,000 from the additional LINICO investment made onDecember 30, 2021 . The change in fair value from the three months endedJune 30, 2021 , was attributable to a$360,000 gain for GenMat offset by a$2,849,999 loss on the LINICO derivative asset. We recognized a recovery of credit losses on the MCU-P note receivable for the three months endedJune 30, 2022 of$895,204 which was primarily a result of cash distributions to the Company from MCU and MCU-P. Other expenses, net for the three months endedJune 30, 2022 were$342,773 , which primarily consisted of losses from our equity method investments of$311,917 and other losses of$30,856 . Other expenses, net for the three months endedJune 30, 2021 were$1,232,454 , primarily from losses from the change in fair value of the Tonogold note receivable of$1,173,000 andTono Note amendment fee income of$100,000 , and losses from our equity method investments of$159,313 , and$141 other expense. Interest income decreased by$230,005 for the three months endedJune 30, 2022 , as compared to 2021, as a result of the transaction that extinguished the Tonogold note in exchange for the 100% membership interest inComstock LLC and the extinguishment of the MCU-P note that was exchanged for the MCU assets, both of which are no longer accruing interest. Interest expense increased by$312,279 for the three months endedJune 30, 2022 , as compared to 2021, primarily due to$0.2 million in interest on the AQMS lease liability acquired with the LINICO acquisition at the end of Q4 2021 and$0.1 million in interest and amortization of OID on GHF note, which originated inDec 2021 . Net loss was$14,090,597 for the three months endedJune 30, 2022 , as compared to net loss of$6,320,992 for the same period in 2021. The$7,769,605 increase in net loss primarily resulted from a$5,700,001 increase in losses from the estimated fair value of the derivative assets related to LINICO, GenMat and Haywood, an increase of$2,579,150 for research and development expenses, an increase of$858,862 in selling, general and administrative expenses, partially offset by a$895,204 recovery of losses related to the MCU-P note receivable. --------------------------------------------------------------------------------
Below we set forth a summary of comparative financial information for the six
months ended
6/30/2022 6/30/2021 Change
Revenue $ 107,550 $ 103,125 $ 4,425
Cost of goods sold - - -
Gross profit 107,550 103,125 4,425
Selling, general and administrative expenses 4,911,339 1,184,485 3,726,854
Research and development 3,774,568 - 3,774,568
Depreciation and amortization 1,653,423 230,599 1,422,824
Total operating expenses 10,339,330 1,415,084 8,924,246
Loss from operations (10,231,780) (1,311,959) (8,919,821)
Other Income (Expense)
Gain (loss) on investments 52,823 (1,827,482) 1,880,305
Interest expense (636,750) (144,576) (492,174)
Interest income 358,352 386,969 (28,617)
Change in fair value of derivative instruments (5,125,000) 4,997,250 (10,122,250)
Recovery (impairment) of investments and intangible assets (3,581,685)
- (3,581,685)
Other income (expense) (1,473,580) (232,963) (1,240,617)
Total other income (expense), net (10,405,840) 3,179,198 (13,585,038)
Net income (loss) $ (20,637,620) $ 1,867,239 (22,504,859)
Net loss attributable to noncontrolling interest $ (492,219) $ - (492,219)
Net income (loss) attributable to Comstock Inc, $ (20,145,401) $ 1,867,239 $ (22,012,640)
RESULTS OF OPERATIONS
Six Months Ended
Revenues and gross profit for the six months ended
Revenue, costs of sales and gross profit in future periods will vary significantly depending on a number of factors, including the amount of renewable energy products that we produce and sell, the market prices for those products, the extent to which we secure and collect reasonable royalties, the degree to which we can provide event-driven engineering services, and the costs associated with each component of the aforementioned revenues. Selling, general and administrative expense for the six months endedJune 30, 2022 increased to$4,911,339 from$1,184,485 for 2021, primarily as a result of 2021 adjustments to the reclamation liability estimate, which was reduced by$0.9 million as a result of extending the estimated reclamation timing to five years, and the Northern Comstock accelerated payment reimbursed by Tonogold of$0.8 million , which adjustments reduced expenses during the six months endedJune 30, 2021 . In addition, we had an increase of approximately$0.9 million from higher employee costs related to new employees from 2021 acquisitions --------------------------------------------------------------------------------
during the six months ended
Research and development expenses for the six months endedJune 30, 2022 were$3,774,568 and included costs related to development of a pilot scale system for processing woody biomass into intermediate materials that can be converted into paper products and fuels and the pilot scale system for crushing and separating lithium ion batteries. These systems will be used to validate the processes and develop parameters for upscaling these renewable technologies. Our Comstock Engineering, Comstock Innovations and LINICO subsidiaries, which were acquired in the second, third and fourth quarters of 2021, respectively, are leading the developments of these commercializing technologies. No similar costs were incurred in the first half of 2021.
Depreciation and amortization increased by
During the six months endedJune 30, 2022 , the Company recorded a gain on investments of$52,823 , as compared to a loss on investments for the same period in 2021 of$1,827,482 . The 2022 gain was primarily a result of sales of 8,065,924 shares of Tonogold stock at an average price of$0.12 per share compared to the share price of$0.11 as ofDecember 31, 2021 . The 2021 loss was primarily due to a decrease in fair value of$1,829,611 , and a loss of$13,409 from a decrease in the market value of other securities. The change in fair value of our derivative instruments was a loss of$5,125,000 for the six months endedJune 30, 2022 as compared to a gain of$4,997,250 for the same period in 2021 as a result of a decrease in the Company's share price in connection with potential make whole obligations for minimum value commitments on the Company's common shares. The change in fair value of derivatives for the six months endedJune 30, 2022 included losses of$2,010,000 for GenMat,$1,365,000 for the Haywood acquisition,$2,345,000 from the additional LINICO investment made onDecember 30, 2021 , partially offset by a gain of$595,000 forLP Biosciences LLC ("LPB"). The increase from the six months endedJune 30, 2021 , was attributable to an increase in the fair values of the GenMat derivative asset of$360,000 , the MCU derivative asset of$497,250 and the LINICO derivative asset of$4,140,000 . Impairment losses net of recoveries for the six months endedJune 30, 2022 were$3,581,685 on investments in MCU and MCU-P and the MCU-P note receivable, which were deemed unrecoverable as ofMarch 31, 2022 . InJune 2022 , we recovered$895,204 in cash related to the investments. We also recognized impairment losses of$338,035 related to the FPC intangible asset, and$595,000 related to the LPB investment prior to settlement that resulted in the return to the Company of 3,500,000 of its common shares. Other expenses, net for the six months endedJune 30, 2022 were$1,473,580 , which primarily consisted of a reduction in value of the Tonogold note receivable of$605,000 , losses from our equity method investments of$578,819 , LPB settlement expense of$250,000 and other losses of$39,761 . Other expenses, net for the six months endedJune 30, 2021 were$232,963 , which primarily consisted of losses from the change in fair value of the Tonogold note receivable of$427,500 and losses from our equity method investments of$190,767 , partially offset by Tonogold note amendment fee income of$362,500 and other income of$22,804 . Interest income decreased by$28,617 for the six months endedJune 30, 2022 , as compared to 2021, as a result of the transaction in which the Tonogold note was exchanged forComstock LLC stock and the write-off of the MCU-P note receivable, which was forgiven in exchange for the MCU assets, both of which are no longer accruing interest. Interest expense increased by$492,174 for the six months endedJune 30, 2022 , as compared to 2021, primarily due to$0.4 million in interest on the AQMS lease liability acquired with the LINICO acquisition at the end of 2021 and$0.2 million in interest and amortization of OID on the GHF note, which originated in lateDecember 2021 , partially offset by$0.14 million in interest on prior promissory notes that were paid off in Q1 2022. Net loss was$20,637,620 for the six months endedJune 30, 2022 , as compared to a net income of$1,867,239 for the same period in 2021. The$22,504,859 decrease in net income primarily resulted from a$10,122,250 decrease in the estimated fair value of the derivative assets and liabilities, a$3,581,685 increase in impairment losses on MCU and MCU-P related investments and notes receivable, net and to a lesser extent, the Flux Photon intangible.$3,726,854 , increase in selling, general and administrative expenses,$3,774,568 increase in research and development expenses. A$1,240,617 increase in other expenses somewhat offset the$895,204 recovery of losses on the MCU-P note receivable. --------------------------------------------------------------------------------
OUTLOOK The 2021 cellulosic fuels and lithium-ion battery recycling acquisitions and business integrations 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 the adoption and growth of a balanced net zero ecosystem based on an abundance of woody biomass feedstocks unlocked by our cellulosic fuels technologies, with powerful economic benefits to us, our clients, their industries, and the populations they serve to decarbonize. These two renewable energy businesses position us to 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 and lithium-ion battery recycling facilities, producing an array of renewable fuels and electrification products. Our objective is to accelerate the commercialization of these decarbonizing technologies, and generate billions in revenue on an annualized basis by 2030, by producing and selling renewable energy products that enable us and our customers 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 theU.S. transportation burn, and only require an estimated 8% of the existing biomass residues produced annually in theU.S. Such scales are achievable quickly 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 theU.S. We have already made remarkable progress. We are currently building commercial pilot scale cellulosic fuels and LIB facilities, and we are preparing pilot-scale operations of our crushing and separating systems that will produce mineral-rich black mass at our 137,000 square foot state of the art manufacturing facility later this year and also deploy our lithium extraction pilot capability in the same facility, both in 2023.
Our pilot scale cellulosic fuel system will also be operational in 2023, positioning the scaling and ramp of our first cellulosic fuel bio refinery that will produce an array of bio intermediaries and biofuels for today's infrastructure.
We expect to receive our operating permit for battery metal processing during the fourth quarter of 2022, and our air quality permit in the first quarter of 2023. We are currently engaged with and building a coalition of strategic suppliers, partners, and/or customers in both of our renewable businesses. We have also made meaningful progress and will complete the monetization of our non-strategic assets, during 2022, while funding our new businesses and limiting our outlook and focus to the objectives outlined above.
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 atJune 30, 2022 andDecember 31, 2021 were$4,345,315 and$5,912,188 , respectively. The Company had current assets of$11,088,560 and current liabilities of$30,935,063 , representing working capital deficit, net of cash, of$24,191,818 atJune 30, 2022 . During the six months endedJune 30, 2022 , we used$7,714,703 in cash in our operating activities, provided$516,145 in our investing activities, and sourced$5,631,685 from our financing activities. During the six months endedJune 30, 2021 , we used$3,326,611 in cash in our operating activities, and$7,075,315 in our investing activities and we sourced$13,222,530 from our financing activities. During the six months endedJune 30, 2022 , 7,545,620 common shares were issued through equity issuance and private placement agreements at an average price per share of$0.72 and net proceeds of$3,457,084 , net of cash issuance fees of$213,000 . OnApril 12, 2022 , the Company entered into an equity purchase agreement (the "Purchase Agreement") withLeviston 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 will be 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 theU.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. In consideration of Leviston's agreement to enter the Purchase 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 three and six months endedJune 30, 2022 , we issued to Leviston 4,377,697 common shares with an aggregate sales price of$3,460,000 , at an average price per share of$0.79 , and an additional 343,883 common shares at a fair value of$500,000 in commitment and due diligence fees. As ofJune 30, 2022 , the 2022 Leviston Sales Agreement has$6,540,000 of remaining capacity. OnJune 21, 2022 , the Company entered into an equity purchase agreement (the "Purchase Agreement") withTysadco 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. The Company also entered into an agreement 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 withU.S. Securities and Exchange Commission pursuant to the Securities Act of 1933 (the "Securities Act"). Such sale was exempt from registration pursuant to Section 4(a)(2) of the Securities Act. The Company will pay commissions equal to 5% of the offering proceeds to the placement agent in connection with any such sale. In consideration to enter the Purchase Agreement, the Company delivered 428,571 additional shares of common stock to Tysadco. 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 a capital call from the Company. 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 six months endedJune 30, 2022 increased by$4,388,092 from the same period in 2021 primarily from net increases in operating costs, partially offset by an increase in net sources of cash for working capital. Net cash used in investing activities for the six months endedJune 30, 2022 decreased by$7,591,460 from the comparable six months ended 2021 primarily due to decreases of$2,735,000 in advances to SSOF, cash payments to LINICO of$2,000,000 and GenMat of$2,000,000 , and loans toComstock IP Holdings and LP Biosciences of$1,161,258 , and an$820,000 use for the MCU-P note receivable in 2021, partially offset by 2022 source of cash proceeds from the$750,000 Tonogold option payment received. Net cash provided in financing activities for the six months endedJune 30, 2022 decreased$7,590,845 compared to the same period in 2021, primarily as a result of reduced net proceeds from the issuance of common stock of$11,780,000 , partially offset by reduced principal payments on debt of$3,448,288 and contributions of$500,000 from AQMS for additional shares in LINICO. 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 repayments of the advances to SSOF and sale of theSilver Springs Properties , amounts to be raised from the issuance of equity under our existing shelf registration statement, declines in the market value of properties planned for sale, or declines in the share price of our common stock that would adversely affect our results of operations, financial condition and cash flows. If we were unable to obtain any necessary additional funds, this could have an immediate material adverse effect on liquidity and raise substantial doubt about our ability to continue as a going concern. In such case, we could be required to limit or discontinue certain business plans, activities or operations, reduce or delay certain capital expenditures or -------------------------------------------------------------------------------- investments, or sell certain assets or businesses. There can be no assurance that we would be able to take any such actions on favorable terms, in a timely manner, or at all.
CRITICAL ACCOUNTING ESTIMATES
There have been no significant changes to the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Form 10-K.
--------------------------------------------------------------------------------
© Edgar Online, source
