19. Stock-Based Compensation

In 2011, the Company adopted the Comstock Mining Inc. 2011 Equity Incentive Plan (the "2011 Plan"). The Plan replaced the equity plans previously adopted by the Company, including, without limitation, those adopted in 2005 and 2006. The maximum number of shares of the Company's common stock that may be delivered pursuant to awards granted under the Plan is 6,000,000 shares of common stock. The plan provides for the grant of various types of awards, including but not limited to restricted stock (including performance awards), restricted stock units, stock options, and other types of stock-based awards.

Options

Prior to the 2011 Plan, the Company had previously issued options under prior programs. At December 31, 2012 and 2011, our Company had 50,000 and 450,000, respectively, outstanding employee and director options to acquire common shares for these previous programs. At December 31, 2012 and 2011, 50,000 and 450,000, respectively of these options were vested and exercisable. During 2012 and 2011, there were no additional options issued. During 2012 and 2010, 400,000 and 450,000 of these options were exercised using the cashless exercise option resulting in the issuance of 122,848 and 195,020 common shares, respectively. The 2012 and 2010 option exercise price was $2.24 and $1.93, respectively, and the intrinsic value of the options exercised in 2012 and 2010 was approximately $396,800 and $663,000, respectively. Because our Company maintained a full valuation allowance on our deferred tax assets, it did not recognize any tax benefit related to stock-based compensation expense for the years ended 2012, 2011, and 2010.

Our Company recognizes stock-based compensation expense net of forfeiture rate over the requisite service period of the individual grant, which generally equals the vesting period. The fair value of the award is based upon the market price, volatility, the risk-free interest rate, and dividend yields of the underlying common stock as of the date of grant and is amortized over the applicable vesting period using the straight-line method. The fair value of grants is estimated at the date of grant using the Black-Scholes-Merton option-pricing model. The risk free rate is based on the U.S. Treasury yield curve on affect at date of grant. Expected volatilities utilized in the model are based primarily on the historical volatility of the common share price and other factors.

A summary of the option activity under the plan for 2012 is as follows:

	2012
				Weighted
				Average
				Exercise		Intrinsic
	Options			Price		Value
Balance, January 1, 2012		450,000		$	2.43
Granted		-			-
Exercised		(400,000	)		2.24
Forfeited		-			-
Balance, December 31, 2012		50,000		$	4.00	$	-
Exercisable at December 31, 2012		50,000		$	4.00	$	-
Vested at December 31, 2012		50,000		$	4.00	$	-

The following table summarizes information about stock options outstanding at December 31, 2012:

Outstanding

Vested

Remaining

Weighted

Vested

Weighted

Contractual

Average

Contractual

Average

Outstanding

Life

Exercise

Vested

Life

Exercise

Price

Options

in Years

Price

Options

in Years

Price

4.00

50,000

5.75

4.00

50,000

5.75

4.00

Common Stock

During 2011, the outside directors of the Company were granted 300,000 shares of the Company's common stock valued at $980,000. The shares were immediately vested and the related stock-based compensation has been recorded as $980,000 of general and administrative expenses in the accompanying consolidated statements of operations for the year ended December 31, 2011.

Restricted Stock

On December 21, 2011, May 31, 2012 and September 15, 2012, the Board of Directors granted 4,710,000 shares, 755,000 shares and 525,000 shares, respectively, of restricted stock (performance awards) to certain employees and contracted employees under the 2011 Equity Incentive Plan. These awards vest primarily based on specific performance conditions including the validation of both resources (at least measured and indicated and / or proven and probable reserves) at levels of 1,000,000, 1,500,000, 2,000,000, and 3,250,000 of gold equivalent ounces by an independent third party, completing the first pour from the mining operations, and achieving certain annual mining production rates at levels of 15,000, 17,500, and 20,000 of gold equivalent ounces for a period of at least 90 days. Certain of these awards will vest at the latter of the aforementioned performance conditions or January 31, 2014.

The restricted stock fair value was $1.89, $2.02 and $2.89 per share (with a total gross value of $8,901,900, $1,525,000 and $1,517,250, respectively) at the dates of grant in December 2011, May 2012 and September 2012, respectively. The fair value of the restricted stock was determined based on the fair value of the underlying common stock as of the date of grant. The unvested restricted stock awards expire five years after the grant date.

Information related to non-vested restricted stock issued under the 2011 Plan is as follows:

				Weighted Average
	Number of			Grant Date
	Shares			Fair Value
Balances at January 1, 2012		4,710,000		$	1.89
Grants		1,280,000			2.41
Vested		(716,500	)		2.02
Forfeitures		(249,100	)		2.10
Balances at December 31, 2012		5,024,400		$	1.99

We recognize compensation expense related to these restricted stock grants over the performance period based on a periodic assessment of the probability that the performance criteria will be achieved. At December 31, 2012, the Company has estimated that certain of these performance conditions are probable of being achieved and has therefore recognized compensation expense related to these restricted shares. Additionally, the Company has estimated that certain of these performance conditions are not probable of being achieved and therefore no expense related to those conditions has been recognized.

We recorded stock-based compensation (including restricted stock grants and other common stock grants) as follows:

	Year Ended
	December 31,
	2012		2011		2010
Costs applicable to mining revenue	$	429,916	$	-	$	-
Reclamation and exploration expenses		1,765,963		203,731		-
General and administrative		3,644,602		980,000		106,708
Hospitality operating costs		47,112		-		-
Total	$	5,887,593	$	1,183,731	$	106,708

At December 31, 2012, total unrecognized compensation cost related to non-vested share restricted stock awards expected to vest was approximately $1.3 million which is expected to be recognized over a weighted average period of 10.4 months.