Comstock Inc.LODE
Comstock Inc. Goodwill & Intangibles Disclosure
INTANGIBLE ASSETS AND GOODWILL
The Company’s intangible assets at December 31, 2023 and 2022 include the following:
| Description | Estimated Economic Life | December 31, 2023 | December 31, 2022 | |||||||||||||||||
| Developed technologies | 10 years | $ | 19,582,402 | $ | 19,382,402 | |||||||||||||||
| License agreements | 10 years | 510,752 | 510,752 | |||||||||||||||||
| Customer agreements | 1 year | 122,885 | 122,885 | |||||||||||||||||
| Distribution agreements | 8 years | 19,733 | 19,733 | |||||||||||||||||
| Trademarks | 10 years | 7,000 | 7,000 | |||||||||||||||||
| Accumulated amortization | (4,376,740) | (2,379,091) | ||||||||||||||||||
| Intangible assets, net | $ | 15,866,032 | $ | 17,663,681 | ||||||||||||||||
The estimated economic lives shown above were at the closing dates of the respective acquisitions. The estimated economic lives of license agreements and developed technologies are based on the midpoint of the indicated lives derived from the related valuation analyses. The estimated economic lives of customer and distribution agreements are based on the specified terms of the respective agreements.
Accumulated amortization as of December 31, 2023 and 2022 consisted of the following:
| December 31, 2023 | December 31, 2022 | ||||||||||
| Developed technologies | $ | 4,113,045 | $ | 2,172,594 | |||||||
| License agreements | 131,917 | 78,415 | |||||||||
| Customer agreements | 122,885 | 122,884 | |||||||||
| Distribution agreements | 7,493 | 4,497 | |||||||||
| Trademarks | 1,400 | 701 | |||||||||
| Accumulated amortization | $ | 4,376,740 | $ | 2,379,091 | |||||||
Amortization expense related to intangible assets of $1,997,649 and $2,171,646 was recorded for the years ended December 31, 2023 and 2022, respectively.
Future minimum amortization expense is as follows at December 31, 2023:
| 2024 | $ | 2,013,499 | |||
| 2025 | 2,013,499 | ||||
| 2026 | 2,013,499 | ||||
| 2027 | 2,013,499 | ||||
| 2028 | 2,010,753 | ||||
| Thereafter | 5,801,283 | ||||
| $ | 15,866,032 | ||||
Changes in the intangible assets balances for the year ended December 31, 2023 are presented below:
| As of December 31, 2022 | Additions | Assets Held for Sale | Impairment | Amortization | As of December 31, 2023 | |||||||||||||||||||||||||||||||||
| Intangible assets | $ | 20,042,772 | $ | 200,000 | $ | — | $ | — | $ | — | $ | 20,242,772 | ||||||||||||||||||||||||||
| Accumulated amortization | (2,379,091) | — | — | — | (1,997,649) | (4,376,740) | ||||||||||||||||||||||||||||||||
| Total intangible assets | $ | 17,663,681 | $ | 200,000 | $ | — | $ | — | $ | (1,997,649) | $ | 15,866,032 | ||||||||||||||||||||||||||
Changes in the intangible assets and goodwill balances for the year ended December 31, 2022 are presented below:
As of December 31, 2021 | Additions | Assets Held for Sale | Impairment | Amortization | As of December 31, 2022 | |||||||||||||||||||||||||||||||||
| Intangible assets | $ | 23,514,259 | $ | 500,000 | $ | (3,621,487) | $ | (350,000) | $ | — | $ | 20,042,772 | ||||||||||||||||||||||||||
| Accumulated amortization | (338,958) | — | 119,548 | 11,965 | (2,171,646) | (2,379,091) | ||||||||||||||||||||||||||||||||
| Goodwill | 12,788,671 | — | — | (12,788,671) | — | — | ||||||||||||||||||||||||||||||||
| Total intangible assets and goodwill | $ | 35,963,972 | $ | 500,000 | $ | (3,501,939) | $ | (13,126,706) | $ | (2,171,646) | $ | 17,663,681 | ||||||||||||||||||||||||||
All intangibles and goodwill are associated with the Fuels and Metals Segments. In 2022, the Company fully impaired the goodwill associated with acquisitions in 2021 of $12,788,671 in the Fuels and Corporate Segments. Our assessment reviewed both qualitative and quantitative factors to derive the estimated fair value of our goodwill associated with our acquisitions in 2021. The Company fully impaired the goodwill associated with acquisitions in 2021 due to a decrease in the Company's stock price and market capitalization since the acquisition date. Our valuation method incorporated the present value of projected cash flows to calculate the discounted cash flows compared to the guideline for public companies. We compared the fair value as indicated by the discounted cash flows of the reporting unit to the carrying value of the goodwill and recognized a full impairment of goodwill associated with our 2021 acquisitions.
The Company is party to three license agreements with American Science and Technology Corporation (“AST”), pursuant to which the Company agreed to license certain intellectual property of AST for use at three facilities in exchange for three facility-specific license fees of $500,000 each, and a royalty fee equal to 1.0% of the gross revenue of each of the first three licensed facilities. During 2022, the Company paid $500,000 toward the license fees which are recognized as an addition to intangible assets - developed technologies. As of December 31, 2023, we have obtained the three license agreements and no additional payments are anticipated.
On December 28, 2023, the Company amended the asset purchase agreement with Flux Photon Corporation (“FPC”) dated on September 7, 2021, and amended on December 10, 2021 (as amended, the “FPC Asset Purchase Agreement”). Pursuant to the 2021 FPC Asset Purchase Agreement, the Company acquired certain intellectual property and related photocatalysis laboratory equipment (the “FPC Assets”). The original purchase price included a payable for the FPC assets of $17,650,000, payable only from 20% of future cash flows defined as the future monthly consolidated sales, less total variable costs, less operating expenses, maintenance, tax payments, and debt service payments of Comstock Inc. and its now and hereafter-existing subsidiaries until the purchase prices has been fully paid. The 2023 amended FPC Asset Purchase Agreement reduced the purchase price payable to $16,850,000. On the date of the amendment, the Company paid $200,000 with the remaining balance of $16,650,000 payable to Flux from future cash flows and accounted for as an acquisition of intellectual property. Mr. Kreisler, a member of the Company's board of directors and the Company's chief technology officer, is also the owner of 100% of the outstanding common stock of Flux and as such was the indirect beneficiary of all payments made to Flux pursuant to the FPC Asset Purchase Agreement (see Note 20, Related Party Transactions).
As of December 31, 2022, assets held for sale included a lease intangible with a balance of $3,501,939 which was net of related amortization of $119,548. The underlying lease and lease intangible were classified as Held for Sale at December 31, 2022 and were sold in April 2023 with the Company's acquisition of the associated leased assets (see Note 9, Sale of Manufacturing Facility).
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2023 | Feb 27, 2024 | Showing above |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 28, 2022 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.