Comstock (LODE) CORRESPCorrespondence with SEC

Response:

We concluded that the acquisition of PSI met the definition of a business acquisition, rather than an asset acquisition, under the ASC 805 framework. PSI’s assets were recorded at their fair values, and the difference between the consideration transferred and the fair values of such assets was recorded as goodwill. Our disclosure indicates we acquired 100% of the voting shares of PSI and expensed the acquisition costs, consistent with the accounting for a business combination. Our disclosure also indicates the PSI purchase price consideration was allocated to the net assets acquired, including goodwill, which is also consistent with the accounting for a business combination.

We made our determination to treat the PSI acquisition as a business acquisition based on the guidance in ASC 805-10-55-5D and our assessment of whether or not the set of acquired assets and activities met the definition of a business. A set of acquired assets and activities must have both an input and a substantive process that together significantly contribute to the ability to create outputs to be considered a business. The guidance notes that when the set of assets and activities acquired does not include outputs, it will have both an input and a substantive process only if the set includes employees that form an organized workforce and an input that the workforce could develop or convert into output. Although PSI did not have outputs, it had both inputs in the form of intangible assets and processes in the form of an experienced and developed workforce and infrastructure in place to perform activities related to renewable clean technology, such as research, development and commercialization, with an emphasis on the extraction and valorization of natural resources. Prior to the acquisition, PSI was a self-operating business and was run as a stand-alone business with a workforce that had the necessary skills and experience to provide the necessary processes capable of being applied to inputs to create outputs.

Substantially all of the gross assets acquired were not concentrated in the PSI license agreement. More than 90% of the gross assets acquired were comprised of PSI-developed technology. In addition to goodwill, we recorded the fair value of three intangible assets in the PSI acquisition, including a research agreement with Virginia Polytechnic Institute and State University, a license agreement with American Science Technology Corporation, and internally developed technology, which is comprised of patented proprietary process technologies that convert woody feedstocks into cellulosic ethanol and a number of co-products used in the production of bio-fuels, bio-graphite and bio-plastics. As of the acquisition date, PSI operated a pre-commercial pilot cellulosic fuel facility based on its technologies and was in the process of scaling up that production.

Response:

We considered the guidance in Rule 8-04, which applies Rule 3-05, to determine whether PSI met the definition of a significant subsidiary. Rule 3-05(b)(2) uses the investment, asset and income tests in Rule 1-02(w) to determine the periods for which financial statements of acquired businesses are to be filed. We determined none of the following conditions exceeded 20% with respect to the PSI acquisition, and accordingly, that financial statements were not required. The significant subsidiary tests for the PSI acquisition are detailed below:

Investment test — We compared the fair value of consideration transferred and the aggregate worldwide market value of our common equity (determined as the average of the last five trading days of August 2021, which was the most recently completed month ending prior to the September 7, 2021, agreement date of the acquisition) and determined the PSI acquisition was 9.9% of our total market capitalization at that time.

Asset test — We compared PSI’s total assets as of the date of acquisition, to our total assets as of December 31, 2020 and determined PSI was approximately 16% of our total assets as of December 31, 2020. PSI was incorporated on March 1, 2021, and had assets of $nil as of December 31, 2020.

Income test — The income test consists of an income component and a revenue component. Since PSI did not have material revenue prior to the acquisition, we evaluated the income component only. We compared our share of PSI’s pretax income or loss from continuing operations as reflected in their most recent annual pre-acquisition financial statements to our loss from continuing operations for the same period and determined PSI was 0% of our net loss. Because PSI was incorporated in March 2021, it did not have income in the year prior to acquisition.

Response:

The disclosure will be updated to present combined revenue and net loss in our annual 10-K filing. Please note that MANA was incorporated February 16, 2021 and there is no substantive difference in the combined results of operations reported in the Form 10-Q and the combined results of operations for the nine months ended September 30, 2021.

Response:

Under Rule 8-03(b)(3) of Regulation S-X, we assessed the individual significance of each equity method investment to determine if any constituted 20% or more of our consolidated assets, equity or income from continuing operations as of September 30, 2021. Our equity method investments are accounted for on a one quarter lag, and the assets and income amounts used for the investee were as of June 30, 2021. The individual significance evaluations for each equity method investment are detailed in Exhibit A.

We concluded none of our equity method investments exceeded the 20% threshold on an individual basis.

Under ASC 323-10-50-3c, we assessed the aggregate significance of our equity method investments to determine if the total constituted 50% or more of our consolidated assets, equity or income from continuing operations as of September 30, 2021 (based on Rule 3-05(b)(2)(iv) of Regulation S-X).

We concluded the aggregate significance of our equity method investments did not exceed the 50% threshold and accordingly, additional disclosures were not required.

Response:

We first entered into agreements with Sierra Springs Enterprises, Inc. in September 2019. We have amended the purchase and sale agreements with Sierra Springs Enterprises, Inc., on multiple occasions to extend the latest date of the closing on the sale of the Silver Springs properties. The most recent amendments extended the date of sale to June 30, 2022, and management is committed to sell the assets and expects them to be sold during this contract period. We believe we meet the exception under ASC 360-10-45-11(c) where events or circumstances beyond our control have delayed the sale beyond one year. Circumstances previously considered unlikely arose, in part due to COVID-related delays, with the buyer and the Company taking the actions necessary to respond by extending the closing date. We believe the price continues to be reasonable and the properties continue to meet the six criteria required to be met to be classified as assets held for sale under ASC 360-10-45-9 and, accordingly, are properly classified as assets held for sale.

Response:

The Natural Resource Renewal segment was first presented in our Form 10-Q for the quarterly period ended June 30, 2021, after the acquisition of Renewable Process Solutions Inc. (“RPS”), and consists of remediation, recycling and materials development operations, and related assets, including investments in and loans to MCU, MCU-P, LINICO, GenMat and RPS. There are no comparative results for this segment because substantially all of these investments and subsidiaries were acquired within the second and third quarter of 2021. After the RPS acquisition, the Company began managing this segment independently from the mining and real estate segments. Based on our judgment, we provided descriptions of material changes in our financial condition and results of operations from this and the real estate and mining segments in the comparative financial information and liquidity and capital resources sections.

As the new subsidiaries and investments are integrated into the business and management begins to receive more information and review the results of the Natural Resource Renewal segment, it will include disclosures allowing investors to view this segment from management’s perspective. Activities related to Natural Resource Renewal as of September 30, 2021, were primarily comprised of the previously disclosed engineering services revenue and costs and increase in labor costs related to employees from 2021 acquisitions. Results of operations for the real estate and mining segment are more detailed as these segments have been in existence for some time and have comparative information.