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Interim Financial Statements | 9 Months Ended
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Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Interim Financial Statements | Interim Financial Statements Basis of Presentation and Principles of Consolidation The interim condensed consolidated financial statements include the accounts of Comstock Mining Inc., and its wholly owned subsidiaries prepared in accordance with accounting principles generally accepted in the United States ("GAAP"): Comstock Processing LLC, Comstock Northern Exploration LLC, Comstock Exploration & Development LLC, Comstock Real Estate Inc., Comstock Industrial LLC, Downtown Silver Springs LLC ("DTSS"), and prior to its sale in the quarter ended September 30, 2020, Comstock Mining LLC (collectively "Comstock", the "Company", "we", "our" or "us"). Inter-company transactions and balances have been eliminated. The Company completed a sale of 100% of the membership interests in Comstock Mining LLC (“CML”) to Tonogold Resources Inc. (“Tonogold”) on September 8, 2020. The condensed consolidated financial statements do not include CML subsequent to that date (Note 20). Variable interest entities (VIEs) are consolidated when the Company is the primary beneficiary. The Company is the primary beneficiary when it has power over the activities that impact the VIE’s economic performance and at the same time has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The Company has an investment in Sierra Springs Opportunity Fund Inc. (“SSOF”), of which the Company's CEO is an executive (Note 23). Management concluded that SSOF is a VIE of the Company because the Company has both operational and equity risk related to SSOF, and SSOF currently has insufficient equity at risk. Management also concluded that the Company is not the primary beneficiary because no one individual or entity has unilateral control over significant decisions of SSOF and decisions require consent from all investors. As the Company is not the primary beneficiary, SSOF is not consolidated. The Company’s investment in SSOF is presented in the condensed consolidated balance sheets at September 30, 2020 and December 31, 2019 as a non-current investment. Operating results for the three and nine months ended September 30, 2020, may not be indicative of the results expected for the full year ending December 31, 2020. For further information, refer to the financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the Company's financial position as of September 30, 2020, and its results of operations, cash flows, and changes in stockholders’ equity for the three and nine months ended September 30, 2020 and 2019. The financial statements do not include all of the information and notes required by GAAP for complete financial statements. Liquidity, Capital Resources and Management Plans The condensed consolidated financial statements are prepared on the going concern basis of accounting which assumes the realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company’s current capital resources include cash and cash equivalents and other net working capital resources, planned sales of Tonogold Resources Inc ("Tonogold") common shares, and proceeds from the planned sale of the Silver Springs properties to Sierra Springs Enterprises Inc. ("SSE"). The Company has recurring net losses from operations and an accumulated deficit of $217.5 million as of September 30, 2020. For the nine months ended September 30, 2020, the Company generated net income of $18.3 million and used $2.4 million of cash in operating activities. As of September 30, 2020, the Company had cash and cash equivalents of $1.7 million. Through September 30, 2020, the Company had converted $3.9 million of the $6.1 million in Tonogold Series D Convertible Junior Participating Non-Cumulative Perpetual Preferred Stock ("CPS”) in exchange for 21,777,778 common shares of Tonogold and realized approximately $1.4 million in gross cash proceeds from the sale of 3,557,209 common shares at an average price of approximately $0.40 per share. At September 30, 2020, the Company continues to hold 18,220,569 common shares with an estimated value of $7.1 million, in addition to a $4.5 million 12% Tonogold senior secured note receivable ("Note"), with payment due to the Company on September 20, 2021. At September 30, 2020, the Company had debt obligations of approximately $4.7 million that mature on or before September 30, 2021. On October 2, 2020, Tonogold redeemed the remaining $2.2 million of CPS for cash proceeds to the Company of $2.6 million, representing 120% of the CPS face value. With the cash proceeds, the Company made payments on its unsecured promissory notes, reducing the principal balance from $4.5 million on September 30, 2020, to $1.9 million on October 9, 2020. The Company intends to finance its operations over the next twelve months through its existing cash, receipts on notes receivable, proceeds from the planned sale of Tonogold common shares and proceeds from the planned sale of its Silver Springs properties, together significantly in excess of current debt obligations due. While the Company has been successful in the past in obtaining the necessary capital to support its operations, including registered equity financings from its existing shelf registration statement, borrowings, and other means, there is no assurance the Company will be able to obtain additional equity capital or other financing, if needed. However, management believes it will have sufficient funds to sustain its operations during the 12 months following the date the financial statements were issued as a result of the funding sources described above. On April 30, 2020, the Company received a Paycheck Protection Program (“PPP”) grant of $0.3 million, as part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, and the rules promulgated thereunder. The amounts received were all used to fund payroll costs and the Company expects all proceeds received to be forgiven. On February 18, 2019, the Company filed a new shelf registration statement on Form S-3 (the “S-3 Shelf”), for the sale of up to $50 million of the Company’s securities, from time to time, and used $8.2 million of that capacity through September 30, 2020, leaving an aggregate unused capacity of $41.8 million. So long as the aggregate market value of the Company’s voting and non-voting common equity held by non-affiliates is less than $75 million, the aggregate market value of securities sold by or on behalf of the Company pursuant to the S-3 Shelf during the period of 12 calendar months immediately prior to such sales, is limited to being no more than one-third of the aggregate market value of the Company’s non-affiliated voting and non-voting common equity. On September 30, 2020, these limitations resulted in approximately $10.5 million of unrestricted, available S-3 Shelf capacity. There can be no assurance the Company can sell common shares up to the capacity. In February 2019, the Company also entered into an equity purchase agreement (the "2019 Equity Agreement") with the Murray Family Office ("Murray FO") for the sale of up to $5 million in shares of the Company's common stock from time to time, at the Company’s option, subject to certain restrictions and at a 10% discount to a volume weighted average price. As of September 30, 2020, the 2019 Equity Agreement has no remaining unused capacity. In July 2020, the Company entered into a common stock purchase agreement (the "2020 Triton Equity Agreement") with Triton Funds L.P., (“Triton”) and filed a prospectus supplement to offer and sell shares of common stock at an aggregate offering price of up to $1.25 million, from time to time, to Triton. On July 22, 2020, the Company issued 2,040,483 common shares to Triton for net proceeds of $1.25 million, at a price of $0.61 per common share. As of September 30, 2020, the 2020 Triton Equity Agreement has no remaining unused capacity. In July 2020, the Company also entered into a new equity purchase agreement (the “2020 Leviston Equity Agreement”) with Leviston Resources LLC (“Leviston”) and filed a prospectus supplement to offer and sell shares of common stock at an aggregate offering price of up to $2.5 million, from time to time, to Leviston, and paid a 5% fee by issuing 173,611 restricted common shares, with a fair value of $125,000. From July 13, 2020 through September 23, 2020, the Company raised $2.5 million by issuing to Leviston 2,793,586 common shares at a price of $0.89 per common share. As of September 30, 2020, the 2020 Leviston Equity Agreement has no remaining unused capacity. Future operating expenditures above management’s expectations, including exploration and pre-development expenditures in excess of planned proceeds from notes receivable, planned proceeds from the sale of Tonogold securities and the Silver Springs properties and amounts to be raised from the issuance of equity under the S-3 Shelf, declines in the market value of properties held for sale, or declines in the share price of the Company's common stock would adversely affect the Company’s results of operations, financial condition and cash flows. If the Company was unable to obtain necessary additional funds, this could have an immediate material adverse effect on liquidity and raise substantial doubt about the Company’s ability to continue as a going concern. In such case, the Company could be required to limit or discontinue certain business plans, activities or operations, reduce or delay certain capital expenditures or sell certain assets or businesses. There can be no assurance the Company would be able to take any such actions on favorable terms, in a timely manner or at all. Use of Estimates In preparing financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements, and related estimated receipts and expenditures during the reported periods. Actual results could differ materially from those estimates. Estimates may include those pertaining to estimated useful lives and valuation of properties, plant, and equipment, assets held for sale, mineral rights, deferred tax assets, derivative assets and liabilities, valuation of the Tonogold CPS and Note, reclamation liabilities, stock-based compensation, and contingent assets and liabilities. Reclassifications Certain prior period amounts have been reclassified to conform to the 2020 financial statement presentation. Reclassifications had no effect on net income (loss), stockholders' equity, or cash flows as previously reported. Investments Investments in Securities: From time to time, the Company holds investments in the form of both debt and equity securities. Debt securities are classified as either trading, available for sale, or held to maturity. Convertible debt securities are typically classified as available for sale unless the Company elects to account for a specific instrument at fair value. When a debt security is classified as available for sale, it is measured at fair value at the end of each reporting period. Unrealized holding gains and losses for available for sale securities are excluded from current earnings and are reported in other comprehensive income until realized. Upon sale of a debt security, the realized gain or loss is recognized in earnings. At September 30, 2020, the Company is the holder of two debt securities, the Tonogold CPS and Tonogold Note (Note 3), for both of which the Company has elected the fair value option with unrealized holding gains and losses recognized in current earnings. Equity securities are generally measured at fair value. Unrealized gains and losses for equity securities are included in earnings. If an equity security does not have a readily determinable fair value, the Company may elect to measure the security at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The Company reassesses, at each reporting period, whether the equity security without a readily determinable fair value qualifies to be measured at cost minus impairment. Upon sale of an equity security, the realized gain or loss is recognized in earnings. At the end of each reporting period, the Company considers whether impairment indicators exist to evaluate whether the investment is impaired and, if so, records an impairment loss. At September 30, 2020, the Company has one equity security, Tonogold common shares (Note 3), that has a readily determinable fair value for which unrealized gains or losses are recognized in earnings. At September 30, 2020, the Company has one equity security, Investment in Sierra Springs Opportunity Fund Inc (Note 23), that does not have a readily determinable fair value and thus is accounted for at its cost minus impairment. Investments - Equity Method and Joint Ventures: Investments in companies and joint ventures in which we have the ability to exercise significant influence, but do not control, would be accounted for under the equity method of accounting and included on the condensed consolidated balance sheets. In determining whether significant influence exists, the Company considers its participation in policy-making decisions and its representation on the companies or venture’s management committee. Under the equity method of accounting, our share of the net earnings or losses of the investee would be included in net income (loss) on the condensed consolidated statements of operations, since the activities of the investee would be closely aligned with the operations of the business segment holding the investment. We would evaluate equity method investments whenever events or changes in circumstance indicate the carrying amounts of such investments may be impaired. If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in earnings in the current period. At September 30, 2020, the Company's 25% investment in Pelen LLC (Note 21) is accounted for using the equity method. For investments in companies and joint ventures in which the Company does not have joint control or significant influence, the investment is accounted for similar to investments in equity securities. For companies and joint ventures where the Company holds more than 50% of the voting interests, but less than 100%, and has significant influence, the company or joint venture is consolidated, and other investor interests are presented as noncontrolling. The Company’s investment in Comstock Mining LLC was consolidated with presentation of noncontrolling interest through September 8, 2020 when the Company’s remaining membership interest was sold (Note 20). Convertible Instruments In June 2019, the Company issued 1,274 shares of convertible preferred stock which, prior to September 30, 2019, were converted into 2,240,441 shares of the Company’s common stock (as adjusted for the November 2019 1-for-5 reverse stock split). The convertible preferred stock contained no embedded conversion features that were required to be separated from the host contract under prior accounting standards. As of September 30, 2020 and December 31, 2019, the Company had no convertible instruments outstanding. Derivative Instruments Derivative instruments are recognized as either assets or liabilities in the condensed consolidated balance sheets at fair value. The accounting for changes in the fair value of derivative instruments depends on their intended use and resulting hedge designations. Changes in the fair value of derivative instruments not designated as hedges are recorded in the consolidated statements of operations, as a component of other income (expense). Reverse Stock Split Effective November 28, 2019, the Company completed a 1-for-5 (reverse) stock split of its authorized and outstanding common stock, as approved by its Board of Directors. All common shares and per share balances herein give effect to this reverse split. Income Taxes The Company’s income tax expense and deferred tax assets and liabilities reflect management’s best assessment of estimated future taxes to be paid. Significant judgments and estimates are required in determining consolidated income tax expense. Income taxes are provided for using the asset and liability method under which deferred income taxes arise from the net tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities. These temporary differences result in taxable or deductible amounts in future years and are measured using the tax rates and laws in effect when such differences are expected to reverse. The Company is required to establish a valuation allowance against the deferred tax assets if, based on the weight of all available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. In evaluating the Company’s ability to recover its deferred tax assets, management considers all available positive and negative evidence, including the reversal of temporary differences, projected future taxable income, tax planning strategies and recent financial operations. These assumptions require significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates the Company uses to manage the underlying businesses. Our income tax expense, and deferred tax assets and liabilities reflect management's best estimate of current and future taxes to be paid. As of September 30, 2020, the Company has determined that a full valuation allowance is necessary against its net deferred tax assets based on the weight of all available evidence, and the Company currently estimates its annual effective income tax rate to be 0%. The effective tax rate for the Company differs from the federal rate of 21% primarily due to recording a full valuation allowance. Income (Loss) per Common Share Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. Dilutive income (loss) per share includes any additional dilution from common stock equivalents, such as stock options, warrants, and convertible instruments, if the impact is not antidilutive. Related Parties and Transactions The Company identifies related parties, and accounts for and discloses related party transactions. Parties, which can be a corporation or individual, are considered to be related if either party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Companies are also considered to be related if they are subject to common control or common significant influence. See notes 5, 8, 11, 13, 22, and 23 to the condensed consolidated financial statements for the three and nine months ended September 30, 2020. Recently Issued Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06 Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles for certain financial instruments with characteristics of liabilities and equity. The update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years and with early adoption permitted. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements. In January 2020, the FASB issued ASU No. 2020-01, Clarifying the Interactions Between Topic 321, Topic 323 and Topic 815. ASU 2020-01 which makes improvements related to accounting for certain equity securities when the equity method of accounting is applied or discontinued, and scope considerations related to forward contracts and purchased options on certain securities. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements. In October 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”), which expands the application of a specific private company alternative related to VIEs and changes the guidance for determining whether a decision-making fee is a variable interest. Under the new guidance, to determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety. ASU 2018-17 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted in any interim period. ASU 2018-17 is required to be applied retrospectively from the date the guidance is first applied. The Company's adoption of this standard has not had a material impact on its consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which removes, modifies and adds various disclosure requirements related to fair value disclosures. Disclosures related to transfers between fair value hierarchy levels will be removed and further detail around changes in unrealized gains and losses for the period and unobservable inputs used in determining level 3 fair value measurements will be added, among other changes. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, and early adoption is permitted. The Company modified its disclosures beginning in the first quarter of 2020 to conform to this guidance. The Company's adoption of this standard and the associated changes to the disclosures have not had a material impact on its consolidated financial statements. COVID-19 The outbreak of the coronavirus (aka “COVID-19”) has 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. Nevada Governor Steve Sisolak signed Emergency Directive 033 that became effective on October 1, 2020, to facilitate larger gatherings and events while still diminishing personal contact and increasing the level of disinfection in high use areas. The controlling guidance below accompanies the requirements set forth in Directive 033. In order to minimize the risk of contracting and spreading the virus, minimum strict adherence to safety and infection prevention measures must be followed. All event venues, gathering organizers, hosts and individuals throughout the State must be fully compliant to ensure a successful next step in our reopening. The controlling guidance below is for planning, coordinating, or hosting in-person gatherings (e.g., events, conventions, corporate meetings, services, ceremonies and celebrations). These gatherings may take place in outdoor or indoor venues, including but not limited to, community centers, fellowship halls and gatherings spaces in faith-based buildings, halls, rental space in event centers, or outdoor event spaces. The guidance includes, but is not limited to, implementing 6-foot physical distancing practices, wearing face coverings at all times, conducting health screenings for all events, employees, and visitors by measuring temperature, and assessing detectible symptoms, among other required practices. The Company is operating in alignment with these guidelines for protecting the health of our employees, partners, and suppliers, and limiting the spread of COVID-19, that have already resulted in delays of Mercury Clean Up LLC’s plans for commencing mercury recovery testing on the Comstock and in the Philippines (Note 22). It is not currently possible to reliably estimate the length and severity of these delays and the impact on the Company's financial condition, and that of its subsidiaries and partners, in future periods.

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- Definition The entire disclosure for quarterly financial data. Includes, but is not limited to, tabular presentation of financial information for fiscal quarters, effect of year-end adjustments, and an explanation of matters or transactions that affect comparability of the information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 270 -URI http://asc.fasb.org/topic&trid=2126967 + Details
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