x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
|
NEVADA
|
1040
|
65-0955118
|
||
(State or other jurisdiction of
|
(Primary Standard Industrial
|
(I.R.S. Employer
|
||
incorporation or organization)
|
Classification Code Number)
|
Identification No.)
|
PART
I.
|
|
Item
1. Financial Statements.
|
4 |
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
4 |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
6 |
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
8 |
CONDENSED
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
|
10 |
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
11 |
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations.
|
33 |
Item
4. Controls and Procedures.
|
42 |
PART
II.
|
|
Item
1. Legal Proceedings.
|
43 |
Item
1A. Risk Factors.
|
43 |
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds.
|
43 |
Item
3. Defaults Upon Senior Securities.
|
44 |
Item
5. Other Information.
|
44 |
Item
6. Exhibits.
|
44 |
SIGNATURES
|
45 |
EXHIBIT
INDEX
|
|
Certification
of Principal Executive Officer and Principal Financial Officer Pursuant to
Rule 15d-14(a)
|
|
Certification
of Principal Executive Officer and Principal Financial Officer Pursuant to
Section 1350
|
|
|
Sept.
30,
2010
|
|
|
December 31,
2009
|
|
||
|
(Unaudited)
|
|||||||
ASSETS
|
||||||||
CURRENT
ASSETS
|
||||||||
Cash
and cash equivalents
|
$
|
102,634
|
$
|
246,214
|
||||
Prepaid
expenses
|
91,764
|
―
|
||||||
Total
Current Assets
|
194,398
|
246,214
|
||||||
MINERAL
RIGHTS, PLANT AND EQUIPMENT
|
||||||||
Mineral
rights
|
981,409
|
1,270,547
|
||||||
Plant
and equipment, net
|
3,292,459
|
2,301,466
|
||||||
Total
Mineral Rights, Plant and Equipment
|
4,273,868
|
3,572,013
|
||||||
RECLAMATION
BOND DEPOSIT
|
766,768
|
766,768
|
||||||
LONG-LIVED
DEFERRED RECLAMATION EXPENSE
|
351,973
|
340,159
|
||||||
TOTAL
ASSETS
|
$
|
5,587,007
|
$
|
4,925,154
|
|
|
Sept. 30,
2010
|
|
|
December 31,
2009
|
|
||
|
|
(Unaudited)
|
|
|
|
|||
LIABILITIES AND STOCKHOLDERS’
DEFICIT
|
||||||||
CURRENT
LIABILITIES
|
||||||||
Accounts
payable
|
$
|
1,635,552
|
$
|
1,608,493
|
||||
Accrued
expenses
|
369,505
|
271,054
|
||||||
Accrued
interest payable
|
7,027,569
|
4,870,713
|
||||||
Notes,
convertible notes, and debentures payable
|
17,092,778
|
15,145,698
|
||||||
Other
debt obligations
|
1,021,061
|
1,000,000
|
||||||
Total
Current Liabilities
|
27,146,465
|
22,895,958
|
||||||
LONG-TERM
DEBT AND OTHER LONG-TERM LIABILITIES
|
||||||||
Notes,
convertible notes, and debentures payable, net of current
portion
|
3,871,382
|
3,025,325
|
||||||
Long-term
debt obligation, net of current portion
|
688,941
|
490,000
|
||||||
Derivative
liability
|
13,548,862
|
4,500,189
|
||||||
Long-term
reclamation liability
|
1,309,528
|
1,186,966
|
||||||
Total
Long-Term Debt and Other Long-Term Liabilities
|
19,418,713
|
9,202,480
|
||||||
Total
Liabilities
|
46,565,178
|
32,098,438
|
||||||
COMMITMENTS
AND CONTINGENCIES
|
||||||||
STOCKHOLDERS’
DEFICIT
|
||||||||
Common
stock, $.000666 par value 3,950,000,000 shares authorized, shares issued
and outstanding were 19,406,382 (Sept. 30, 2010) and 18,310,339
(Dec. 31, 2009)
|
12,925
|
12,195
|
||||||
Additional
paid-in capital
|
29,195,009
|
27,742,913
|
||||||
Accumulated
deficit
|
(70,186,105
|
)
|
(54,928,392
|
)
|
||||
Total
Stockholders’ Deficit
|
(40,978,171
|
)
|
(27,173,284
|
)
|
||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
$
|
5,587,007
|
$
|
4,925,154
|
|
|
Three Months Ended Sept. 30,
|
|
|||||
|
|
2010
|
|
|
2009
|
|
||
REVENUE
FROM GOLD SALES, Net
|
$
|
―
|
$
|
―
|
||||
COST
AND EXPENSES
|
||||||||
Depletion,
depreciation and amortization
|
31,828
|
37,604
|
||||||
Reclamation,
exploration and test mining expenses
|
570,616
|
485,430
|
||||||
General
and administrative
|
583,156
|
330,453
|
||||||
Consultants
and professional fees
|
471,824
|
32,204
|
||||||
Total
Cost and Expenses
|
1,657,424
|
885,691
|
||||||
LOSS
FROM OPERATIONS
|
(1,657,424
|
)
|
(885,691
|
)
|
||||
OTHER
INCOME (EXPENSE):
|
||||||||
Financing
cost
|
―
|
(111,160
|
)
|
|||||
Gain
on sale of royalty
|
―
|
―
|
||||||
Derivative
change in fair value
|
(5,953,651
|
)
|
(42,643
|
)
|
||||
Interest
expense
|
(1,093,831
|
)
|
(1,693,994
|
)
|
||||
Total
Other Expense
|
(7,047,482
|
)
|
(1,847,797
|
)
|
||||
NET
LOSS
|
$
|
(8,704,906
|
)
|
$
|
(2,733,488
|
)
|
||
Net
loss per common share – basic and diluted
|
$
|
(0.45
|
)
|
$
|
(0.15
|
)
|
||
Basic
and diluted weighted average common shares outstanding
|
19,169,218
|
18,079,535
|
|
|
Nine Months Ended
September
30,
|
|
|||||
|
|
2010
|
|
|
2009
|
|
||
REVENUE
FROM GOLD SALES, Net
|
$
|
―
|
$
|
―
|
||||
COST
AND EXPENSES
|
||||||||
Depletion,
depreciation and amortization
|
178,884
|
114,073
|
||||||
Reclamation,
exploration and test mining expenses
|
2,331,869
|
2,577,821
|
||||||
General
and administrative
|
1,535,503
|
1,022,670
|
||||||
Consultants
and professional fees
|
855,673
|
177,610
|
||||||
Total
Cost and Expenses
|
4,901,929
|
3,892,174
|
||||||
LOSS
FROM OPERATIONS
|
(4,901,929
|
)
|
(3,892,174
|
)
|
||||
OTHER
INCOME (EXPENSE):
|
||||||||
Financing
cost
|
(169,247
|
)
|
(83,500
|
)
|
||||
Gain
on sale
|
300,000
|
25,000
|
||||||
Derivative
change in fair value
|
(7,472,128
|
)
|
(1,898,838
|
)
|
||||
Interest
expense
|
(3,014,408
|
)
|
(3,296,145
|
)
|
||||
Total
Other Expense
|
(10,355,783
|
)
|
(5,253,483
|
)
|
||||
NET
LOSS
|
$
|
15,257,712
|
)
|
$
|
(9,145,657
|
)
|
||
Net
loss per common share – basic and diluted
|
$
|
(0.81
|
)
|
$
|
(0.52
|
)
|
||
Basic
and diluted weighted average common shares outstanding
|
18,907,926
|
17,691,078
|
|
|
Nine
month Period Ended
September 30,
|
|
|||||
|
|
2010
|
|
|
2009
|
|
||
OPERATING
ACTIVITIES:
|
||||||||
Net
loss
|
$
|
(15,257,712
|
)
|
$
|
(9,145,657
|
)
|
||
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
Depreciation
and amortization
|
178,884
|
114,073
|
||||||
Stock
warrants and stock based compensation
|
117,183
|
2,025,152
|
||||||
G
Gain of sale of royalty interest
|
(300,000
|
)
|
―
|
|||||
Interest
paid through the issuance of stock
|
446,913
|
1,342,979
|
||||||
Accretion
and debt discount interest
|
419,280
|
1,013,513
|
||||||
Payments
through the issuance of company stock
|
34,000
|
36,000
|
||||||
Financing
costs
|
169,247
|
52,500
|
||||||
Derivative
change fair value
|
7,472,128
|
42,643
|
||||||
Net
loss adjusted for non-cash operating activities
|
(6720,077
|
)
|
(4,518,797
|
)
|
||||
Changes
in operating assets and liabilities:
|
||||||||
Prepaid
and other current assets
|
(91,764
|
)
|
―
|
|
||||
Accounts
payable
|
27,059
|
410,423
|
||||||
Accrued
expenses
|
2,255,307
|
1,150,945
|
||||||
Other,
net
|
―
|
―
|
||||||
NET
CASH USED IN OPERATING ACTIVITIES
|
(4,529,475
|
)
|
(2,957,429
|
)
|
||||
INVESTING
ACTIVITIES:
|
||||||||
Proceeds
received from sale of royalty less acquisition of mineral
claims
|
520,000
|
―
|
||||||
Acquisition of
plant and equipment
|
(329,107
|
)
|
(128,880
|
)
|
||||
NET
PROVIDED BY (CASH USED) IN INVESTING ACTIVITIES
|
190,893
|
(128,880
|
)
|
|||||
FINANCING
ACTIVITIES:
|
||||||||
Principal
payments on other debt obligations
|
(504,998
|
)
|
(37,040
|
)
|
||||
Net
proceeds from the issuance of company stock
|
―
|
902,500
|
||||||
Proceeds
from the issuance of convertible debentures, net of financing
cost
|
4,700,000
|
1,995,000
|
||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
4,195,002
|
2,860,460
|
||||||
DECREASE
IN CASH AND CASH EQUIVALENTS
|
(143,580
|
)
|
(225,849
|
)
|
||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF QUARTER
|
246,214
|
322,938
|
||||||
CASH
AND CASH EQUIVALENTS, END OF QUARTER
|
$
|
102,634
|
$
|
97,089
|
||||
SUPPLEMENTAL
CASH FLOW INFORMATION:
|
||||||||
INCOME
TAXES
|
$
|
―
|
$
|
―
|
||||
INTEREST
PAID
|
$
|
55,475
|
$
|
8,917
|
Nine
month Period Ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
Supplemental
disclosure of non-cash investing and financing activities:
|
||||||||
Issuance
of company stock for interest
|
$
|
446,913
|
$
|
1,342,979
|
||||
Conversion
of convertible debenture principal into company’s common
shares
|
$
|
835,483
|
$
|
―
|
||||
Seller
note for acquisition of land
|
$
|
725,000
|
$
|
120,000
|
|
|
Common
Shares Issued
|
|
|
Par value
$.000666
per share
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
|||||
December
31, 2008
|
16,904,742
|
$
|
11,259
|
$
|
24,961,957
|
$
|
(48,863,723
|
)
|
$
|
(23,890,507
|
)
|
|||||||||
Common
stock issued for:
|
||||||||||||||||||||
Debenture
principal
|
133,264
|
89
|
192,179
|
—
|
192,268
|
|||||||||||||||
Debenture
interest
|
751,833
|
501
|
1,477,096
|
—
|
1,477,597
|
|||||||||||||||
Employees
|
27,500
|
19
|
67,231
|
—
|
67,250
|
|||||||||||||||
Private
placement
|
493,000
|
327
|
902,173
|
—
|
902,500
|
|||||||||||||||
Subtotal
|
1,405,597
|
936
|
2,638,679
|
—
|
2,639,615
|
|||||||||||||||
Warrant
cost and stock based option compensation
|
142,277
|
142,277
|
||||||||||||||||||
Net
loss
|
—
|
—
|
—
|
(6,064,669
|
)
|
(6,064,669
|
)
|
|||||||||||||
December
31, 2009
|
18,310,339
|
$
|
12,195
|
$
|
27,742,913
|
$
|
(54,928,392
|
)
|
$
|
(27,173,284
|
)
|
|||||||||
Common
stock issued for:
|
||||||||||||||||||||
Debenture
principal
|
703,770
|
468
|
835,015
|
—
|
835,483
|
|||||||||||||||
Debenture
interest
|
359,630
|
240
|
446,673
|
—
|
446,913
|
|||||||||||||||
Employees
|
7,500
|
5
|
10,470
|
—
|
10,475
|
|||||||||||||||
Consultant
|
25,000
|
17
|
33,983
|
—
|
34,000
|
|||||||||||||||
Subtotal
|
1,095,900
|
730
|
1,326,141
|
—
|
1,326,871
|
|||||||||||||||
Stock
based option compensation and other, net
|
125,955
|
—
|
125,955
|
|||||||||||||||||
Other,
net
|
143
|
—
|
—
|
(1
|
)
|
142
|
||||||||||||||
Net
loss
|
—
|
—
|
—
|
(15,257,712
|
)
|
(15,257,712
|
)
|
|||||||||||||
September
30, 2010
|
19,406,382
|
$
|
12,925
|
$
|
29,195,009
|
$
|
(70,186,105
|
)
|
$
|
(40,978,171
|
)
|
Company
|
COMSTOCK
MINING Inc. and Subsidiaries
|
|
APB
|
Accounting
Principles Board
|
|
ARB
|
Accounting
Review Board
|
|
ASC
|
Accounting
Standards Codification Topic
|
|
ASU
|
Accounting
Standards Update
|
|
EITF
|
Emerging
Issues Task Force
|
|
FASB
|
Financial
Accounting Standards Board
|
|
FSP
|
FASB
Staff Position
|
|
Plum
LLC
|
Plum
Mining Company, LLC
|
|
SAB
|
SEC
Staff Accounting Bulletin
|
|
SEC
|
Securities
Exchange Commission
|
|
SOP
|
Statement
of Position
|
|
1)
|
Persuasive evidence of an
arrangement exists,
|
|
2)
|
Delivery has occurred or services
have been rendered,
|
|
3)
|
The seller’s price to the buyer
is fixed or determinable,
and
|
|
4)
|
Collectability is reasonably
assured.
|
|
|
Sept.
30,
2010
|
|
|
December 31,
2009
|
|
||
Comstock
Placer Claims
|
$
|
100,000
|
$
|
100,000
|
||||
Big
Mike Copper Claims
|
—
|
69,138
|
||||||
Comstock
Lode Claims
|
791,409
|
1,011,409
|
||||||
Water
rights
|
90,000
|
90,000
|
||||||
Total
Mineral Rights
|
$
|
981,409
|
$
|
1,270,547
|
|
|
Sept
30,
2010
|
|
|
December 31,
2009
|
|
||
Land
and Building
|
$
|
3,352,443
|
$
|
2,327,443
|
||||
Vehicle
and Equipment
|
314,094
|
302,094
|
||||||
Processing
and Lab
|
719,528
|
704,528
|
||||||
Furniture
and Fixtures
|
51,496
|
49,390
|
||||||
Property
and Equipment
|
4,437,561
|
3,383,455
|
||||||
Less
accumulated depreciation
|
(1,145,102
|
)
|
(1,081,989
|
)
|
||||
Total
Property and Equipment, net
|
$
|
3,292,459
|
$
|
2,301,466
|
|
9/30/10
|
12/31/09
|
||||||
Long-term
reclamation liability beginning of period
|
$
|
1,186,966
|
$
|
1,105,342
|
||||
Additional
obligations incurred
|
58,447
|
―
|
||||||
Liabilities
settled during the period
|
―
|
―
|
||||||
Increase
in present value of the reclamation obligation (accretion
expense)
|
64,115
|
81,624
|
||||||
Long-term
asset reclamation liability
|
$
|
1,309,528
|
$
|
1,186,966
|
|
9/30/10
|
12/31/09
|
||||||
Net
long-lived deferred reclamation expense beginning of
period
|
$
|
340,159
|
$
|
408,190
|
||||
Additional
obligations incurred
|
58,447
|
―
|
||||||
Amortization
of deferred reclamation expense
|
(46,633
|
)
|
(68,031
|
)
|
||||
Long-lived
deferred reclamation expense
|
$
|
351,973
|
$
|
340,159
|
|
|
9/30/10
|
|
|
12/31/09
|
|
||
Convertible
Debentures Payable – 2004 through August 2009
|
$
|
14,442,778
|
$
|
15,278,261
|
||||
Promissory
Notes Payable - 2005 through 2008
|
2,650,000
|
2,650,000
|
||||||
Convertible
Notes Payable – December 2009 through June 2010, net
|
3,064,533
|
242,762
|
||||||
Convertible
Notes Payable – June 2010, net
|
806,849
|
―
|
||||||
Subtotal
|
20,964,160
|
18,171,023
|
||||||
Less
current portion
|
(17,092,778
|
)
|
(15,145,698
|
)
|
||||
Long
term portion
|
$
|
3,871,382
|
$
|
3,025,325
|
|
|
9/30/10
|
|
|
12/31/09
|
|
||
Convertible
Debentures Payable – Investors
|
$
|
1,078,157
|
$
|
1,105,908
|
||||
Convertible
Debentures Payable - Mandatory Redemption payment
|
4,412,058
|
4,412,058
|
||||||
Convertible
Notes Payable - 2006 & 2007
|
2,170,000
|
2,170,000
|
||||||
Convertible
Notes Payable: June – November 2008
|
2,500,000
|
2,500,000
|
||||||
Convertible
Notes Payable – July 2008 Longview Amended and Restated
|
2,782,563
|
2,782,563
|
||||||
Convertible
Notes Payable – December 2008
|
500,000
|
500,000
|
||||||
Convertible
Notes Payable – May – August 2009
|
1,000,000
|
1,807,732
|
||||||
Total
|
14,442,778
|
15,278,261
|
Note Balance
9/30/10
|
Note Balance
12/31/09
|
|||||||
Balances
beginning of period
|
$
|
1.807,732
|
$
|
—
|
||||
Convertible
Note
|
—
|
2,000,000
|
||||||
Principal
Payments
|
(807,732
|
)
|
(192,268
|
)
|
||||
Note
Balance
|
1,000,000
|
1,807,732
|
9/30/10
|
12/31/09
|
|||||||
Promissory
Notes Payable-July 2005 Financing
|
$
|
1,200,000
|
$
|
1,200,000
|
||||
Promissory
Notes Payable-December 2007 Financing
|
600,000
|
600,000
|
||||||
Promissory
Notes Payable-January 2008 Financing
|
600,000
|
600,000
|
||||||
Promissory
Notes Payable-January 2008 Financing
|
250,000
|
250,000
|
||||||
$
|
2,650,000
|
$
|
2,650,000
|
Note Balance
as
of
9/30/10
|
Note Balance
as of
12/31/09
|
|||||||
Beginning
of period
|
$
|
242,762
|
$
|
—
|
||||
Convertible
Note
|
3,750,000
|
750,000
|
||||||
Debt
Discount, net
|
(928,229
|
)
|
(507,238
|
)
|
||||
End
of period
|
$
|
3,064,533
|
$
|
242,762
|
Note Principal
|
Debt Discount
|
Conversion
Price per
Share
|
Number of
Shares
Underlying
Convertible
Note
|
Effective
Interest Rate
|
Earnings per
Share Impact
|
|||||||||||||||||
$
|
750,000
|
$
|
518,030
|
$
|
1.34
|
559,701
|
23.0
|
%
|
0.03
|
|||||||||||||
1,750,000
|
498,720
|
1.34
|
1,305,970
|
9.5
|
%
|
0.07
|
||||||||||||||||
2,000,000
|
753,105
|
1.34
|
1,492,537
|
12.6
|
%
|
0.08
|
||||||||||||||||
$
|
4,500,000
|
$
|
1,769,855
|
$
|
1.34
|
3,358,208
|
13.1
|
%
|
0.18
|
9/30/10
|
12/31/09
|
|||||||
Debt
discount beginning balance – beginning of period
|
$
|
(507,238
|
)
|
$
|
—
|
|||
Debt
discount – embedded conversion feature
|
(911,512
|
)
|
(316,602
|
)
|
||||
Debt
discount – detachable warrants
|
(340,313
|
)
|
(201,428
|
)
|
||||
Less
amortization of debt discount
|
323,596
|
10,792
|
||||||
Unamortized
debt discount
|
$
|
(1,435,467
|
)
|
$
|
(507,238
|
)
|
Note Balance
as of 9/30/10
|
Note Balance
as of 12/31/09
|
|||||||
Beginning
of period
|
$
|
—
|
$
|
—
|
||||
Convertible
Note
|
1,100,000
|
—
|
||||||
Debt
Discount, net
|
(293,151
|
)
|
—
|
|||||
End
of period
|
$
|
806,849
|
$
|
—
|
Note Principal
|
Debt Discount
|
Conversion
Price per
Share
|
Number of
Shares
Underlying
Convertible
Note
|
Effective
Interest Rate
|
Earnings per
Share Impact
|
|||||||||||||||||
$
|
1,100,000
|
$
|
324,721
|
$
|
1.34
|
783,582
|
10.3
|
%
|
0.04
|
9/30/10
|
12/31/09
|
|||||||
Debt
discount beginning balance – beginning of period
|
$
|
—
|
$
|
—
|
||||
Debt
discount – embedded conversion feature
|
(220,667
|
)
|
—
|
|||||
Debt
discount – detachable warrants
|
(104,054
|
)
|
—
|
|||||
Less
amortization of debt discount
|
31,570
|
—
|
||||||
Unamortized
debt discount
|
$
|
(293,151
|
)
|
$
|
—
|
Debt Position with the Winfield Group
|
||||||||||||
At September
30, 2010
|
||||||||||||
Note Descriptions (Winfield Group)
|
Principal
|
Unpaid
Interest
|
Total
|
|||||||||
15%
Convertible Notes Payable – Investors
|
$
|
687,928
|
$
|
67,862
|
$
|
755,790
|
||||||
18%
Convertible Debentures Payable - Mandatory Redemption
Payment
|
4,412,058
|
1,592,889
|
6,004,947
|
|||||||||
18%
Convertible Notes Payable - 2006 – 2007
|
1,620,000
|
1,151,338
|
2,771,338
|
|||||||||
11%
Convertible Notes Payable - June - November 2008
|
2,500,000
|
675,076
|
3,175,076
|
|||||||||
11%
Convertible Notes Payable - December 2008
|
500,000
|
114,837
|
614,837
|
|||||||||
9%
Convertible Notes Payable - May - August 2009
|
1,000,000
|
120,754
|
1,120,754
|
|||||||||
8%
Convertible Notes Payable - December 2009
|
1,500,000
|
58,779
|
1,558,779
|
|||||||||
8%
Convertible Notes Payable – June 2010
|
250,000
|
5,453
|
255,453
|
|||||||||
17%
Promissory Note Payable - July 2005
|
1,200,000
|
1,671,915
|
2,871,915
|
|||||||||
18%
Promissory Note Payable - December 2007 Financing
|
600,000
|
263,921
|
863,921
|
|||||||||
18%
Promissory Note Payable - January 2008 Financing
|
600,000
|
248,612
|
848,612
|
|||||||||
5%
Debt Seller Note (Plum Mine)
|
250,000
|
65,625
|
315,625
|
|||||||||
Total
at September 30, 2010
|
$
|
15,119,986
|
$
|
6,037,061
|
$
|
21,157,047
|
9/30/10
|
12/31/09
|
|||||||
Debt
–Note (Obester Property)
|
900,000
|
1,400,000
|
||||||
Debt -
Note (Petrini)
|
90,000
|
90,000
|
||||||
Debt -
Note (Donavan Property)
|
720,002
|
—
|
||||||
Subtotal
|
1,710,002
|
1,490,000
|
||||||
Less
current portion
|
(1,021,061
|
)
|
(1,000,000
|
)
|
||||
Long
term portion of debt obligations
|
$
|
688,941
|
$
|
490,000
|
9/30/10
|
12/31/09
|
|||||||
Beginning
balance – beginning of period
|
$
|
1,400,000
|
$
|
—
|
||||
Seller
Note
|
—
|
1,400,000
|
||||||
Payments
|
(500,000
|
)
|
—
|
|||||
Note
balance
|
$
|
900,000
|
$
|
1,400,000
|
9/30/10
|
12/31/09
|
|||||||
Beginning
balance – beginning of period
|
$
|
—
|
$
|
—
|
||||
Seller
Note
|
725,000
|
—
|
||||||
Payments
|
(4,998
|
)
|
—
|
|||||
Note
balance
|
$
|
720,002
|
$
|
—
|
|
·
|
The conversion feature is an
embedded beneficial conversion feature, whereby debt is convertible into
Comstock Mining’s Common Stock at approximately the lesser of (a) a fixed
price or (b) 85% of market price (based on a “lookback”
formula),
|
|
·
|
The embedded beneficial
conversion feature is immediately
exercisable,
|
|
·
|
Exercising the embedded
beneficial conversion feature is not contingent on a future
event,
|
|
·
|
The embedded beneficial
conversion feature may be converted into cash or stock at the discretion
of the issuer (Comstock Mining),
and
|
|
·
|
The variable component of the
conversion price is a fixed discount, there is no stated price floor or
shares issued to cap to the potential number of conversion
shares.
|
|
·
|
Detachable warrants are included
with the debt offering, as debt “sweeteners,” that generally provide for
exercise at a fixed price,
|
|
·
|
The
warrants have anti-dilution
protection,
|
|
·
|
There is no active trading market
for our warrants, and
|
|
·
|
Comstock Mining may lack
sufficient authorized shares to satisfy all conversion options if
presented.
|
|
|
Embedded
Conversion
Option
Liability
|
|
|
Warrant
Liability
|
|
|
Total
|
|
|||
Beginning
balance Dec. 31, 2008
|
$
|
5,088,333
|
$
|
280,000
|
$
|
5,368,333
|
||||||
Initial
issuance note liability of new convertible notes and
warrants
|
1,214,469
|
746,832
|
1,961,301
|
|||||||||
Change
in Fair Value of liability during 2009
|
(3,558,743
|
)
|
729,298
|
(2,829,445
|
)
|
|||||||
Liability
at Dec. 31, 2009
|
2,744,059
|
1,756,130
|
4,500,189
|
|||||||||
Initial
issuance note liability of new convertible notes
|
1,132,178
|
444,367
|
1,576,545
|
|||||||||
Change
in Fair Value of liability during 2010
|
5,415,679
|
2,056,449
|
7,472,128
|
|||||||||
Liability
at Sept. 30, 2010
|
9,291,916
|
$
|
4,256,946
|
$
|
13,548,862
|
|
·
|
Level 1 – inputs are based upon
unadjusted quoted prices for identical instruments traded in active
markets.
|
|
·
|
Level 2 – inputs are based upon
quoted prices for similar instruments in active markets, quoted prices for
identical or similar instruments in markets that are not active, and
model-based valuation techniques for which all significant assumptions are
observable in the market or can be corroborated by observable market data
for substantially the full term of the assets or
liabilities.
|
|
·
|
Level 3 – inputs are generally
unobservable and typically reflect management’s estimates of assumptions
that market participants would use in pricing the asset or
liability. The fair values are therefore determined using
model-based techniques that include option pricing models, discontinued
cash flow models, and similar
techniques.
|
Fair Value Measurements at September 30, 2010
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Liabilities:
|
||||||||||||||||
Convertible
features and warrants
|
$
|
13,548,862
|
$
|
—
|
$
|
—
|
$
|
13,548,862
|
||||||||
Total
Liabilities
|
$
|
13,548,862
|
$
|
—
|
$
|
—
|
$
|
13,548,862
|
Fair Value Measurements at December 31, 2009
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Liabilities:
|
||||||||||||||||
Convertible
features and warrants
|
$
|
4,500,189
|
$
|
—
|
$
|
—
|
$
|
4,500,189
|
||||||||
Total
Liabilities
|
$
|
4,500,189
|
$
|
—
|
$
|
—
|
$
|
4,500,189
|
Liabilities
|
|||||||||||
As of September 30, 2010
|
As of December 31, 2009
|
||||||||||
Balance Sheet
Location
|
Fair Value
|
Balance Sheet
Location
|
Fair Value
|
||||||||
Derivative
not designated as hedging Instruments under ASC 815
|
|||||||||||
Convertible
features and warrants
|
Long-term liabilities
|
$
|
13,548,862
|
Long-term
liabilities
|
$
|
4,500,189
|
|||||
Total
Instruments not designated as hedging instruments under ASC
815
|
$
|
13,548,862
|
$
|
4,500,189
|
Amount of Loss Recognized in Income on
Derivative
|
||||||||||
Derivatives Not
Designated as Hedging
Instruments under ASC
815
|
Location of Loss
Recognized in income on
Derivative
|
For the nine
months ended
September 30, 2010
|
For the year ended
December 31, 2009
|
|||||||
Convertible
features and warrants
|
Interest Expense
|
$
|
355,165
|
$
|
1,454,063
|
|||||
Total:
|
$
|
355,165
|
$
|
1,454,063
|
Convertible
Features and
Warrants
|
||||
Balances
as of January 1, 2009
|
$
|
5,368,333
|
||
Additions
|
1,961,302
|
|||
Reductions
|
(2,829,446
|
)
|
||
Balances
as of December 31, 2009
|
4,500,189
|
|||
Additions
|
9,048,673
|
|||
Reductions
|
—
|
|||
Balances
as of September 30, 2010
|
$
|
13,548,862
|
Nine months ended 9/30/10
|
Year ended 12/31/09
|
|||||||||||||||
|
Share Issuances
|
Share Value
|
Share Issuances
|
Share Value
|
||||||||||||
Debenture
principal
|
703,770
|
$
|
835,483
|
133,264
|
$
|
192,268
|
||||||||||
Debenture
Interest
|
359,630
|
446,913
|
751,833
|
1,477,597
|
||||||||||||
Private
placements
|
—
|
—
|
493,000
|
986,000
|
||||||||||||
Consulting
|
25,000
|
34,000
|
—
|
—
|
||||||||||||
Employees
and directors
|
7,500
|
10,475
|
27,500
|
67,250
|
||||||||||||
Other
|
143
|
—
|
—
|
—
|
||||||||||||
Total
|
1,096,043
|
$
|
1,326,871
|
1,405,597
|
$
|
2,723,115
|
Principal Payment
|
Interest Payment
|
|||||||||||||||
Note Description
|
Number of
Shares
|
Value of
Shares
|
Number of
shares
|
Value of
Shares
|
||||||||||||
Convertible
Debentures Payable-Investors
|
25,467
|
$
|
27,751
|
60,000
|
$
|
67,728
|
||||||||||
Convertible
Debentures Payable- Mandatory Redemption payment
|
—
|
—
|
125,000
|
141,000
|
||||||||||||
Long-Term
Convertible Notes – July 2008 (Longview Amended and Restated
Note)
|
—
|
—
|
96,655
|
153,041
|
||||||||||||
Convertible
Notes: May 2009 – Aug. 2009
|
678,303
|
807,732
|
77,975
|
85,144
|
||||||||||||
703,770
|
$
|
835,483
|
359,630
|
$
|
446,913
|
Note Description
|
Principal
Payment
Number of
Shares
|
Value of
Shares
|
Interest
Payment
Number of
shares
|
Value of
Shares
|
||||||||||||
Convertible
Debentures Payable-Investors
|
—
|
$
|
—
|
29,373,214
|
$
|
257,618
|
||||||||||
Convertible
Debentures Payable- Mandatory Redemption payment
|
—
|
—
|
99,000,000
|
990,000
|
||||||||||||
Long-Term
Convertible Notes – July 2008 (Longview Amended and Restated
Note)
|
—
|
—
|
21,993,369
|
229,979
|
||||||||||||
Convertible
Notes: May 2009 – Aug. 2009
|
26,652,890
|
192,268
|
—
|
—
|
||||||||||||
26,652,890
|
$
|
192,268
|
150,366,583
|
$
|
1,477,597
|
|
For the nine Months Ended
September 30
(in Thousands)
|
|||||||
2010
|
2009
|
|||||||
Weighted
average number of common shares outstanding – basic
|
18,908
|
17,691
|
||||||
Dilution
from convertible debt, stock options and warrants
|
25,187
|
12,302
|
||||||
Weighted
average number of common shares outstanding – diluted
|
44,095
|
29,993
|
Debt
Exchanged for Series A Preferred Convertible Stock
|
||||||||||||
At August 31, 2010
|
||||||||||||
Note Descriptions
|
Principal
|
Unpaid
Interest
|
Total
|
|||||||||
15%
Convertible Notes Payable – Investors
|
$
|
1,078,157
|
$
|
264,131
|
$
|
1,342,288
|
||||||
18%
Convertible Debentures Payable - Mandatory Redemption
Payment
|
4,412,058
|
1,505,343
|
5,917,401
|
|||||||||
18%
Convertible Notes Payable - 2006 – 2007
|
2,170,000
|
1,498,063
|
3.668,063
|
|||||||||
11%
Convertible Notes Payable - June - November 2008
|
2,500,000
|
643,457
|
3,143,457
|
|||||||||
11%
Convertible Note Payable - July 2008 Amended and Restated
|
2,782,563
|
204,776
|
2,987,339
|
|||||||||
11%
Convertible Notes Payable - December 2008
|
500,000
|
108,803
|
608,803
|
|||||||||
9%
Convertible Notes Payable - May - August 2009
|
1,000,000
|
112,300
|
1,112,300
|
|||||||||
8%
Convertible Notes Payable - December 2009
|
4,500,000
|
165,135
|
4,665,135
|
|||||||||
8%
Convertible Notes Payable - June 2010
|
1,100,000
|
16,558
|
1,116,558
|
|||||||||
17%
Promissory Notes Payable - July 2005
|
1,200,000
|
1,631,552
|
2,831,552
|
|||||||||
18%
Promissory Notes Payable - December 2007 Financing
|
600,000
|
251,154
|
851,154
|
|||||||||
18%
Promissory Notes Payable - January 2008 Financing
|
600,000
|
236,071
|
836,071
|
|||||||||
5%
Debt Seller Note (Plum Mine)
|
250,000
|
64,584
|
314,584
|
|||||||||
Total
at August 31, 2010
|
$
|
22,692,778
|
$
|
6,701927
|
$
|
29,394,705
|
US$
(in
millions)
|
||||
Capital
Required for Production:
|
||||
Mobile
Mine Equipment
|
$ | 2.50 | ||
Leach
Pad Expansion
|
2.50 | |||
Crushing
Plant & Lab Refurbishment
|
3.00 | |||
Exploration
and Start Up:
|
||||
Exploration
& Mine Development
|
15.00 | |||
Production
Start up
|
4.00 | |||
General
Corporate Purposes/Feasibility
|
1.75 | |||
Land
Acquisition
|
4.00 | |||
Transaction
Fees and Related Expenses
|
3.00 | |||
Total:
|
$ | 35.75 |
As
of October 20, 2010
|
||||||||
Actual
|
As Adjusted
|
|||||||
Common
and Preferred Stock
|
||||||||
Common
Stock Outstanding on October 20, 2010
|
20,484,456 | 20,484,456 |
(1)
|
|||||
Series
A-1 Preferred Stock (on an as converted basis)
|
32,122,883 |
(2)
|
||||||
Series
A-2 Preferred Stock (on an as converted basis)
|
13,030,274 | |||||||
Series
B Preferred Stock (on an as converted basis)
|
21,666,666 | |||||||
Total Shares
Outstanding (on an as converted basis)
|
20,484,456 | 87,304,279 |
Debt
Exchanged for Series A Preferred Convertible Stock
|
||||||||||||
At August 31, 2010
|
||||||||||||
Note Descriptions
|
Principal
|
Unpaid
Interest
|
Total
|
|||||||||
15%
Convertible Notes Payable - Investors
|
$
|
1,078,157
|
$
|
264,131
|
$
|
1,342,288
|
||||||
18%
Convertible Debentures Payable - Mandatory Redemption
Payment
|
4,412,058
|
1,505,343
|
5,917,401
|
|||||||||
18%
Convertible Notes Payable - 2006 – 2007
|
2,170,000
|
1,498,063
|
3.668,063
|
|||||||||
11%
Convertible Notes Payable - June - November 2008
|
2,500,000
|
643,457
|
3,143,457
|
|||||||||
11%
Convertible Note Payable - July 2008 Amended and Restated
|
2,782,563
|
204,776
|
2,987,339
|
|||||||||
11%
Convertible Notes Payable - December 2008
|
500,000
|
108,803
|
608,803
|
|||||||||
9%
Convertible Notes Payable - May - August 2009
|
1,000,000
|
112,300
|
1,112,300
|
|||||||||
8%
Convertible Notes Payable - December 2009
|
4,500,000
|
165,135
|
4,665,135
|
|||||||||
8%
Convertible Notes Payable - June 2010
|
1,100,000
|
16,558
|
1,116,558
|
|||||||||
17%
Promissory Notes Payable - July 2005
|
1,200,000
|
1,631,552
|
2,831,552
|
|||||||||
18%
Promissory Notes Payable - December 2007 Financing
|
600,000
|
251,154
|
851,154
|
|||||||||
18%
Promissory Notes Payable - January 2008 Financing
|
600,000
|
236,071
|
836,071
|
|||||||||
5%
Debt Seller Note (Plum Mine)
|
250,000
|
64,584
|
314,584
|
|||||||||
Total
at August 31, 2010
|
$
|
22,692,778
|
$
|
6,701927
|
$
|
29,394,705
|
US$
(in
millions)
|
||||
Capital
Required for Production:
|
||||
Mobile
Mine Equipment
|
$ | 2.50 | ||
Leach
Pad Expansion
|
2.50 | |||
Crushing
Plant & Lab Refurbishment
|
3.00 | |||
Exploration
and Start Up:
|
||||
Exploration
& Mine Development
|
15.00 | |||
Production
Start up
|
4.00 | |||
General
Corporate Purposes/Feasibility
|
1.75 | |||
Land
Acquisition
|
4.00 | |||
Transaction
Fees and Related Expenses
|
3.00 | |||
Total:
|
$ | 35.75 |
|
Quarter
ended
Sept. 30, 2010
|
Quarter
ended
Sept. 30, 2009
|
Difference
|
|||||||||
Revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
Depletion
and amortization
|
31,828
|
37,604
|
(5,776
|
)
|
||||||||
Reclamation,
Exploration and Test Mining Expense
|
570,616
|
485,430
|
85,186
|
|||||||||
General
and Administration
|
583,156
|
330,453
|
252,703
|
|||||||||
Consulting
and Professional Service
|
471,824
|
32,204
|
439,620
|
|||||||||
Financing
cost
|
—
|
111,160
|
(111,160
|
)
|
||||||||
Derivative
change in fair value
|
5,953,651
|
42,643
|
5,911,008
|
|||||||||
Other
– Gain on sale
|
—
|
—
|
—
|
|||||||||
Interest
Expense
|
1,093,831
|
1,693,994
|
(600,163
|
)
|
||||||||
Net
Loss
|
$
|
(8,704,906
|
)
|
(2,733,488
|
)
|
5,971,418
|
|
Nine months
ended
Sept. 30, 2010
|
Nine months
ended
Sept. 30, 2009
|
Difference
|
|||||||||
Revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
Depletion
and amortization
|
178,884
|
114,073
|
64,811
|
|||||||||
Reclamation,
Exploration and Test Mining Expense
|
2,331,869
|
2,577,821
|
(245,952
|
)
|
||||||||
General
and Administration
|
1,535,503
|
1,022,670
|
512,833
|
|||||||||
Consulting
and Professional Service
|
855,673
|
177,610
|
678,063
|
|||||||||
Financing
cost
|
169,247
|
83,500
|
85,747
|
|||||||||
Derivative
change in fair value
|
7,472,128
|
1,898,838
|
5,573,290
|
|||||||||
Other
– Gain on sale
|
(300,000
|
)
|
(25,000
|
)
|
(275,000
|
)
|
||||||
Interest
Expense
|
3,014,408
|
3,296,145
|
(281,737
|
)
|
||||||||
Net
Loss
|
$
|
(15,257,712
|
)
|
(9,145,657
|
)
|
6,112,055
|
US$
(in
millions)
|
||||
Capital
Required for Production:
|
||||
Mobile
Mine Equipment
|
$ | 2.50 | ||
Leach
Pad Expansion
|
2.50 | |||
Crushing
Plant & Lab Refurbishment
|
3.00 | |||
Exploration
and Start Up:
|
||||
Exploration
& Mine Development
|
15.00 | |||
Production
Start up
|
4.00 | |||
General
Corporate Purposes/Feasibility
|
1.75 | |||
Land
Acquisition
|
4.00 | |||
Transaction
Fees and Related Expenses
|
3.00 | |||
Total:
|
$ | 35.75 |
|
·
|
In August 2010, pursuant to his
employment agreement, Mr. Larry Martin, our Chief Geologist, was issued a
total of two thousand five hundred (2,500) of our unregistered common
shares. The value of the common shares at the time of issuance
was $3,375, averaging $1.35 per share. Shares are valued at the
closing market price on date of
issue.
|
Consolidated
Balance Sheet as of September 30, 2010
(Unaudited)
|
|||
Consolidated
Statement of Operations for the three-month periods ended September 30,
2010 and 2009 (Unaudited)
|
|||
Consolidated
Statement of Operations for the nine-month periods ended September 30,
2010 and 2009 (Unaudited)
|
|||
Consolidated
Statement of Cash Flows for the nine-month periods ended September 30,
2010 and 2009 (Unaudited)
|
|||
Consolidated
Statement of Changes in Stockholders’ Deficit for the nine-month periods
ended September 30, 2010 (Unaudited)
|
|||
Notes
to Financial Statements
|
Exhibit
Number
|
Exhibit
|
|
|
||
31
|
Certifications
of Principal Executive Officer and Principal Financial Officer pursuant to
Rule 13a-14(a) and Rule 15d-14(a), promulgated under the Securities
Exchange Act of 1934, as amended.
|
|
|
||
32
|
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of
2002
|
COMSTOCK
MINING INC.
|
||
(Registrant)
|
||
Date:
November 12, 2010
|
By:
|
/s/
Corrado De Gasperis
|
Name:
Corrado De Gasperis
|
||
Title:
Chief Executive Officer (Principal
Executive
Officer and Principal Financial
Officer)
|
||
Date: November
12, 2010
|
By:
|
/s/
Robert T. Faber
|
Name:
Robert T. Faber
|
||
Title:
Chief Accounting
Officer
|