On January 24, 2019, the Company entered into an agreement, as amended and restated on September 8, 2020, to sell its interests in Comstock Mining LLC (“CML”), a wholly-owned subsidiary whose sole net assets are the Lucerne properties and related permits, to Tonogold (the "Purchase Agreement”), with the initial closing on November 18, 2019.

On November 18, 2019, Tonogold received 50% of the membership interests of CML, in exchange for the consideration paid to date of $6.0 million in cash and CPS with fair value when received of $7.6 million. The Company retained all management control and authority over CML until Tonogold's membership interests totaled 100%. Accordingly, Tonogold’s membership interests in CML were accounted for as a noncontrolling interest in the condensed consolidated financial statements through September 8, 2020. The Company recorded the fair value received from Tonogold in excess of the noncontrolling interest as additional paid in capital.

On September 8, 2020, the Purchase Agreement was closed, and 100% of the membership interests were acquired by Tonogold. The fair value of the consideration by Tonogold for the membership interests in CML was $18.8 million, including cash, CPS, and a note receivable. The Company's gain on the sale was $18.3 million, recorded during the three months ended September 30, 2020 on the condensed consolidated statements of operations.


	Fair Value
Cash	$	7,065,000
Non-cash items - fair value on date received
Tonogold CPS (Note 17)	7,607,263
Tonogold note receivable (Note 17)	6,141,497
Contingent forward asset - fair value on settlement date (Note 17)	(1,998,832)
Total Consideration	18,814,928

Net carrying value Comstock Mining LLC	(539,082)

Net gain on sale	$	18,275,846

Other features of the Purchase Agreement include Tonogold guaranteeing the Company’s future payments for its membership interests in Northern Comstock LLC, which owns and leases certain mineral properties in the Lucerne area, and the assumption of certain reclamation liabilities. The Company also retains a 1.5% net smelter returns ("NSR") royalty on the Lucerne properties.

Tonogold CPS - During 2019, the Company received $6.1 million in Tonogold Convertible Preferred Stock ("CPS"). The CPS became convertible into common shares on May 22, 2020. The conversion price for the CPS is the lower of (1) 85% of the 20-day volume weighted closing price or (2) 0.18 cents per share. Tonogold can redeem the CPS prior to conversion, at a price of 120% of the face value of the CPS. The CPS was recorded at a fair value of $7.6 million when received (Note 17).

Contingent Forward - On March 20, 2020 the Company and Tonogold secured the cash consideration remaining at that time with a 12% senior secured convertible note with an initial principal balance of $5.475 million (the "Note"). The Note is secured by the membership interests held by Tonogold, and was secured by all of CML's assets after the Company's Debenture (Note 11) was been paid in full and the related liens released.

In evaluating the accounting for the Note, the Company determined that although the Note represents legal form debt, it should be evaluated and accounted for based on the substance of the arrangement rather than its legal form. The Company concluded that the Note represented a contingent forward for the Company’s right to sell its membership interests in CML to Tonogold at a future date in exchange for cash consideration or common stock of Tonogold if certain options are elected (the “Contingent Forward”). The Company identified the Contingent Forward as a derivative which was adjusted to fair value at the end of each reporting period. The Company recorded the $1.2 million initial fair value of the Contingent Forward in additional paid in capital since Tonogold, a related party at the time, owned 50% of the membership interests of CML. The fair value of the contingent forward asset on September 8, 2020 was $2.0 million, and was an offset to the consideration received for the sale of Comstock Mining LLC recorded in the three months ended September 30, 2020.

Tonogold Note Receivable - After closing the transaction on September 8, 2020, the Contingent Forward was settled, and the Note was recharacterized as a note receivable from Tonogold. On that date, the remaining principal balance was $4,475,000, bearing a 12% annual interest rate. Interest is due and payable monthly with the principal due and payable on September 20, 2021 (the “Maturity Date”). The Note may be converted into Tonogold common shares, at the sole discretion of the Company, at the Maturity Date, upon an event of default or upon a partial or whole prepayment of the Note by Tonogold. The Maturity Date may be extended at the Company’s option if an event of default has occurred or is expected to occur, or a fundamental transaction (as defined in the Note) has been announced but not yet closed. Fair value of the Note is based on a Monte Carlo model with the following inputs: Tonogold common share price - $0.39; volatility – 96%; risk free rate – 0.15%; cost of debt – 11.12%; conversion premium – 30%; probability of prepayment – 5% at both March and June 2021; probability of change in control – 5% at June 2021; probability of default – 27% at September 2021. The Company recorded the Note at a fair value of $6.1 million at closing on September 8, 2020 and recorded an additional $0.3 million in other income for the change in fair value from September 8, 2020 to September 30, 2020.

On September 16, 2019, as amended and restated on December 23, 2019, the Company, as lessor, entered into a ten-year, renewable mineral exploration and mining lease with Tonogold for certain mineral properties owned or controlled by the Company in Storey County, Nevada (the "Exploration Lease"). The Exploration Lease grants Tonogold the right to use these properties for mineral exploration and development, and ultimately the production, removal and sale of minerals and certain other materials.

Tonogold pays a quarterly lease fee of $10,000. The lease fee will escalate 10% each year on the anniversary date of the Exploration Lease. Tonogold also reimburses the Company for all costs associated with owning the properties, including lease payments for any underlying, third-party leases. The Exploration Lease also provides for royalty payments after mining operations commence. For the first year following the commencement of mining, royalties will be paid to the Company at the rate of 3.0% of NSR for the properties. The rate will be reduced to 1.5% of NSR thereafter.

The Exploration Lease provides that Tonogold’s exploration spending, permitting, and engineering commitments will be a cumulative total of at least $20 million over 20 years, at the rate of $1 million per year. Tonogold also committed to specific milestones for issuing technical reports on their results, culminating in a published Feasibility report by the 20th anniversary of the Exploration Lease.

The initial term of the Exploration Lease (the "Exploration Term") is 5 years, with Tonogold committing to spending at least $5 million for exploration, and to producing an NI 43-101 compliant technical report by the end of the 5th year. The Exploration Lease will automatically renew for a second, 10-year term (the "Development Term") as long as the commitments have been met. During the Development Term, Tonogold is committed to $10 million of additional expenditures for exploration, development, and technical reporting, and to producing an economically viable mine plan and an NI 43-101 compliant Pre-Feasibility report before the agreement's 15th anniversary.

The Exploration Lease will automatically renew for a third, 5-year term (“the Planning Term”) provided that the prior spending and reporting commitments have been met. During the Planning Term, Tonogold is committed to $5 million in additional expenditures for exploration, development, permitting, and technical reporting. By the 20th anniversary of the agreement, Tonogold also commits to producing an economically viable mine plan, and an NI 43-101 compliant Feasibility report, and will produce a mutually agreed-upon schedule for placing the properties into production.

If the spending and other commitments have been met during the Planning Term, the Exploration Lease will automatically continue in effect as long as development and permitting activities continue in compliance with a mutually agreed-upon schedule, or for so long as minerals are produced from the properties or from adjacent properties (the “Extended Term”).

On November 18, 2019, the Company, as lessor, entered into a lease-option to lease its permitted American Flat property, plant and equipment to Tonogold for crushing, leaching and processing material from the Lucerne mine (the "Lease Option Agreement"). Under the Lease Option Agreement, Tonogold is required to reimburse the Company approximately $1.1 million in expenses per year to maintain the option. If such option is exercised, Tonogold will then pay the Company a rental fee of $1.0 million per year plus $1 per processed ton, in addition to all the costs of operating and maintaining the facility, up to and

For the nine months ended September 30, 2020, the Company received advance expense reimbursements from Tonogold totaling $2.3 million, and invoiced actual expense reimbursements totaling $2.2 million under the Purchase Agreement, the Exploration Lease, and the Lease Option Agreement. The remaining $0.1 million is recorded as a deposit in the current liabilities section of the condensed consolidated balance sheets.

Pelen is the 100% owner of the historic Sutro Tunnel Company that owns the Sutro townsite, the historic 6-mile Sutro Tunnel, the federal land grants and mining rights extending 1,000 feet on each side of the 6-mile tunnel, the rights to the tunnel’s water, and the patented mining claims and private lands on Gold Hill.

In January 2018, the Company issued 295,082 shares of restricted common stock as initial payment to acquire 25% of the total membership interests of Pelen. In November 2018, the Company issued 351,637 shares of restricted common stock as additional shares based on the shortfall on the aggregate proceeds for the initial shares. In December 2018, the agreement was amended to have a cut-off date of December 31, 2019, for closing the transaction and any unsold shares returned to the Company, with the Company required to make up any shortfall in cash.

On April 24, 2020, the Company completed the acquisition of 25% of the total membership interests of Pelen. The total purchase price was $0.6 million, paid in stock and cash and accounted for as "Investment in Pelen LLC", a non-current asset on the condensed consolidated balance sheets. The investment is accounted for as an equity method investment.

The agreement with the member from whom the Company was acquiring the 25% interest contained a provision whereby the Company was required to issue additional shares of its common stock (“make whole”) for the difference between the valuation of the Company's common shares received by the member and the required stock-based investment. The accrued make-whole was valued based on the difference between the valuation of the outstanding shares held by the seller of the Pelen membership interests at the volume-weighted price per share for five consecutive trading days preceding the date of determination of $0.47 at December 31, 2019, as compared to the remaining aggregate proceeds due. In April 2020, the Company purchased 25% of the membership interests in Pelen, settling all remaining amounts due with a cash payment of $150,000. No make-whole accrual remains in the condensed consolidated balance sheets at September 30, 2020.

On September 1, 2020, the Company paid $100,000 for a one-year option (the "Option") to purchase the remaining 75% of the membership interests of Pelen, for a purchase price of $3.8 million. The Option can be extended for a second year for an additional option fee of $100,000, with the purchase price increased to $4.4 million; and can be extended for a third year for another additional option fee of $100,000, with the purchase price increased again to $5.0 million. If the Option is exercised, half of all option payments will be credited to the purchase price. The $100,000 option payment is included in prepaid expenses and other current assets on the condensed consolidated balance sheets at September 30, 2020.

On September 1, 2020, the Company entered into a new mineral exploration and mining lease with the Sutro Tunnel Company ("Sutro"), 100% owned by Pelen (Note 5). The lease covers patented mining claims, exploration rights, and access over and through town lots in Gold Hill and Virginia City, Nevada. The lease also provides the right to explore the Sutro Tunnel. The previous lease with Sutro expired December 31, 2017, and had been extended on a month-to-month basis.

On June 21, 2019, as amended July 3, 2019, the Company entered into a Mercury Remediation Pilot, Investment and Joint Venture Agreement (the “MCU Agreement”) with MCU”. Pursuant to the MCU Agreement, the Company committed $2.0 million of capital contributions that was payable in cash of $1.15 million and shares of the Company's common stock of $0.85 million, in exchange for 15% of the fully-diluted equity ownership of MCU and the first right to participate in 50% of the equity of any future joint ventures formed with MCU (the “Joint Ventures”).

Based on successful proof of technical and commercial viability, the Company has the rights to coordinate an additional $3.0 million in financing for the Joint Venture, and MCU would then contribute the 25-ton-per-hour system, based on an agreed upon capital plan (equipment and working capital uses) and a time-specific project schedule, including the timing of the capital needs. Such financing entitles the Company to acquire an additional 10% of the fully-diluted equity interests of MCU.

Shares of Common Stock - The MCU agreement contains a provision whereby the Company is required to issue addition shares of its common stock (“make whole”) for the difference between the valuation of the Company's common shares received by MCU and the required stock-based investment of $850,000. On July 18, 2019, the Company issued 900,000 shares of restricted common stock with a fair value of $751,050 to fund the MCU capital contribution. During the three months ended June 30, 2020, MCU sold the 900,000 Comstock common shares for net proceeds of $465,127, reducing the remaining make-whole liability to $384,873. On May 15, 2020, the Company issued MCU an additional 625,000 shares of restricted common stock with a fair value of $314,687. MCU has not yet sold these shares. The accrued make-whole is zero at September 30, 2020, because the value of the Company's common shares held by MCU at the Company's closing share price of $1.08 on that date exceeded the remaining liability.

The Company’s deposit on investment in MCU is $1.9 million which is comprised of $1.15 million in cash and shares of common stock issued with a fair value of $751,050. Since the transaction has not closed, these amounts are recorded as deposits for investment in Mercury Clean Up LLC in the condensed consolidated balance sheets at September 30, 2020. The Company expects to close the MCU transaction in the fourth quarter of 2020.

On April 10, 2020, the Company entered into a second amendment of the MCU Agreement, wherein MCU and the Company have identified an opportunity to remediate mercury in the Philippines, particularly in the province of Davao d' Oro (the “Philippine Opportunity”). Comstock and MCU formed a new entity called MCU Philippines Inc. ("MCU-P") to engage in the Philippine Opportunity. During the three months ended September 30, 2020, the Company made cash investments of $1.0 million and committed another $1.0 million in equity investments, and up to an additional $1.0 million in secured loans. The Company investments, when completed, will result in an additional 10% interest in MCU and additional direct 50% joint venture participation in both the Philippine and Comstock Lode mercury remediation project opportunities. Since the transaction has not closed, these amounts are recorded as "Deposits for investment in MCU Philippines Inc" in the condensed consolidated balance sheets at September 30, 2020. The Company expects to close the MCU-P transaction in the first quarter of 2021. The Company’s chief executive officer is a director of MCU-P.