conta20220331b

conta20220331b_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35770

CONTANGO ORE, INC.

(Exact name of registrant as specified in its charter)

Delaware		27-3431051
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3700 BUFFALO SPEEDWAY, SUITE 925
Houston, Texas		77098
(Address of principal executive offices)		(Zip code)

(713) 877-1311

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, Par Value $0.01 per share	CTGO	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” or “emerging growth company” in Rule 12b-2 of the Exchange Act.:


Large accelerated filer ☐		Accelerated filer ☐		Non-accelerated filer ☒		Smaller reporting company ☒		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The total number of shares of common stock, par value $0.01 per share, outstanding as of May 11, 2022 was 6,769,923.

CONTANGO ORE, INC.

TABLE OF CONTENTS




		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2022 and June 30, 2021 (unaudited)	3
	Condensed Consolidated Statements of Operations for the three and nine months ended March 31, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended March 31, 2022 and 2021 (unaudited)	5
	Condensed Consolidated Statement of Shareholders’ Equity for the three and nine months ended March 31, 2022 and 2021 (unaudited)	6
	Notes to the Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4.	Controls and Procedures	26
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	29

All references in this Form 10-Q to the “Company”, “CORE”, “we”, “us” or “our” are to Contango ORE, Inc.

CONTANGO ORE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Item 1 - Financial Statements

	March 31, 2022			June 30, 2021
ASSETS

CURRENT ASSETS:
Cash	$	7,985,588		$	35,220,588
Restricted cash		231,000			—
Prepaid expenses and other		1,220,016			515,635
Income tax receivable		539,763			198,126
Total current assets		9,976,367			35,934,349

LONG-TERM ASSETS:
Investment in Peak Gold (Note 4)		—			—
Property & equipment, net		13,608,794			36,531
Total long-term assets		13,608,794			36,531

TOTAL ASSETS	$	23,585,161		$	35,970,880

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	585,683		$	26,268
Accrued liabilities		497,483			195,837
Income tax payable		141,906			—
Total current liabilities		1,225,072			222,105

NON-CURRENT LIABILITIES:
Advance royalty reimbursement		1,200,000			1,200,000
Asset retirement obligations		225,210			—
Contingent consideration liability		1,847,063			—
Total non-current liabilities		3,272,273			1,200,000

TOTAL LIABILITIES		4,497,345			1,422,105

COMMITMENTS AND CONTINGENCIES (NOTE 13)

SHAREHOLDERS’ EQUITY:
Common Stock, $0.01 par value, 45,000,000 shares authorized; 6,836,246 shares issued and 6,745,749 outstanding at March 31, 2022; 6,675,746 shares issued and outstanding at June 30, 2021		68,362			66,757
Additional paid-in capital		72,640,343			69,509,606
Treasury stock at cost (90,497 shares at March 31, 2022; and 0 at June 30, 2021)		(2,318,182	)		—
Accumulated deficit		(51,302,707	)		(35,027,588	)
TOTAL SHAREHOLDERS’ EQUITY		19,087,816			34,548,775

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	23,585,161		$	35,970,880

The accompanying notes are an integral part of these condensed consolidated financial statements.

CONTANGO ORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,						Nine Months Ended March 31,
	*2022*			*2021*			*2022*			*2021*
EXPENSES:
Claim rental expense	$	(157,162	)	$	(62,100	)	$	(464,135	)	$	(138,737	)
Exploration expense		(1,987,345	)		(47,116	)		(4,153,027	)		(51,916	)
Depreciation expense		(10,239	)		—			(23,954	)		—
Accretion expense		(2,723	)		—			(6,283	)		—
Impairment from casualty loss, net of recovery		(41,249	)		—			(41,249	)		—
General and administrative expense		(3,228,096	)		(2,146,480	)		(7,995,029	)		(8,274,062	)
Total expenses		(5,426,814	)		(2,255,696	)		(12,683,677	)		(8,464,715	)

OTHER INCOME/(EXPENSE):
Interest income		319			159			1,310			1,078
Interest expense		(3,103	)		—			(6,483	)		—
Loss from equity investment in Peak Gold, LLC (Note 4)		(1,518,000	)		(2,490,000	)		(3,706,000	)		(3,861,252	)
Gain on sale of a portion of the equity investment in Peak Gold, LLC		—			—			—			39,642,857
Total other income/(expense)		(1,520,784	)		(2,489,841	)		(3,711,173	)		35,782,683

INCOME/(LOSS) BEFORE TAXES		(6,947,598	)		(4,745,537	)		(16,394,850	)		27,317,968
Income tax (expense)/benefit		119,731			235,379			119,731			(1,599,546	)
NET INCOME/(LOSS)	$	(6,827,867	)	$	(4,510,158	)	$	(16,275,119	)	$	25,718,422

NET INCOME/(LOSS) PER SHARE
Basic and diluted	$	(1.01	)	$	(0.73	)	$	(2.42	)	$	4.11
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		6,743,528			6,153,334			6,725,079			6,261,102

The accompanying notes are an integral part of these condensed consolidated financial statements.

CONTANGO ORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended March 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss)	$	(16,275,119	)	$	25,718,422
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
Stock-based compensation		3,175,903			2,886,046
Depreciation expense		23,954			—
Accretion expense		6,283			—
Impairment expense		52,548			—
Loss from equity investment in Peak Gold, LLC		3,706,000			3,861,252
Gain on sale of a portion of the equity investment in Peak Gold, LLC		—			(39,642,857	)
Changes in operating assets and liabilities net of assets and liabilities acquired:
Increase in prepaid expenses and other		(589,749)			(536,873	)
Increase (decrease) in accounts payable and accrued liabilities		850,228			(285,312	)
Decrease (increase) in income tax receivable		(341,637	)		399,546
Increase (decrease) in income tax payable		141,906			—
Increase in advance royalty reimbursement		—			1,200,000
Net cash used in operating activities		(9,249,683	)		(6,399,776	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash invested in Peak Gold, LLC		(3,706,000	)		(3,861,252	)
Acquisition of property and equipment		(43,989	)		—
Cash paid for acquisition of Alaska Gold Torrent, LLC, net of cash received		(11,642,586	)		—
Cash proceeds from the sale of a portion of the equity investment in Peak Gold, LLC		—			31,200,000
Net cash provided/(used) by investing activities		(15,392,575	)		27,338,748

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid for shares withheld from employees for payroll tax withholding		(779,622	)		(876,551	)
Cash paid for shares purchased from directors for estimated tax obligations associated with stock vesting		(1,538,560	)		—
Cash proceeds from capital raise, net		(43,560	)		3,165,622
Net cash provided/(used) by financing activities		(2,361,742	)		2,289,071

NET INCREASE/(DECREASE) IN CASH		(27,004,000	)		23,228,043
CASH, BEGINNING OF PERIOD		35,220,588			3,011,918
CASH AND RESTRICTED CASH, END OF PERIOD	$	8,216,588		$	26,239,961

Supplemental disclosure of cash flow information
Cash paid for:
Income taxes	$	80,000		$	1,200,000
Non-cash investing activities
Asset retirement obligations		218,927			—
Contingent liability for acquisition of Alaska Gold Torrent, LLC		1,847,063			—
Total non-cash investing activities	$	2,065,990		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

CONTANGO ORE, INC.

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(Unaudited)

	Common Stock				Additional Paid-In			Treasury			Accumulated			Total Shareholders’
	Shares		Amount		Capital			Stock			Deficit			Equity
Balance at June 30, 2021		6,675,746	$	66,757	$	69,509,606		$	—		$	(35,027,588	)	$	34,548,775
Stock-based compensation		—		—		1,021,851			—			—			1,021,851
Cost of common stock issuance		—		—		(43,560	)		—			—			(43,560	)
Restricted stock activity		10,000		100		(100	)		—			—			—
Net loss for the period		—		—		—			—			(4,572,213	)		(4,572,213	)
Balance at September 30, 2021		6,685,746	$	66,857	$	70,487,797		$	—		$	(39,599,801	)	$	30,954,853
Stock-based compensation		—		—		1,256,309			—			—			1,256,309
Restricted stock activity		123,500		1,235		(1,235	)		—			—			—
Treasury shares withheld for employee taxes		—		—		—			(69,307	)		—			(69,307	)
Net loss for the period		—		—		—			—			(4,875,039	)		(4,875,039	)
Balance at December 31, 2021		6,809,246		68,092		71,742,871			(69,307	)		(44,474,840	)		27,266,816
Stock-based compensation		—		—		897,742			—			—			897,742
Restricted stock activity		27,000		270		(270	)		—			—			—
Treasury shares withheld for employee taxes		—		—		—			(710,315	)		—			(710,315	)
Treasury shares purchased from directors		—		—		—			(1,538,560	)		—			(1,538,560	)
Net loss for the period		—		—		—			—			(6,827,867	)		(6,827,867	)
Balance at March 31, 2022		6,836,246	$	68,362	$	72,640,343		$	(2,318,182	)	$	(51,302,707	)	$	19,087,816

	Common Stock						Additional Paid-In			Treasury			Accumulated			Total Shareholders’
	Shares			Amount			Capital			Stock			Deficit			Equity
Balance at June 30, 2020		6,590,113		$	65,901		$	61,302,249		$	(476,672	)	$	(58,896,711	)	$	1,994,767
Stock-based compensation		—			—			892,158			—			—			892,158
Issuance of common stock		214,298			2,143			2,796,189			476,672			—			3,275,004
Cost of common stock issuance		—			—			(109,382	)		—			—			(109,382)
Shares received from the partial sale of the investment in Peak Gold, LLC and retired		(809,744	)		(8,097	)		(8,434,760	)		—			—			(8,442,857	)
Net income for the period		—			—			—			—			33,442,625			33,442,625
Balance at September 30, 2020		5,994,667		$	59,947		$	56,446,454		$	—		$	(25,454,086	)	$	31,052,315
Stock-based compensation		—			—			1,009,900			—			—			1,009,900
Restricted stock activity		205,833			2,058			(2,058	)		—			—			—
Net loss for the period		—			—			—			—			(3,214,045	)		(3,214,045	)
Balance at December 31, 2020		6,200,500			62,005			57,454,296			—			(28,668,131	)		28,848,170
Stock-based compensation		—			—			983,988			—			—			983,988
Treasury shares withheld for employee taxes		—			—			—			(876,551	)		—			(876,551	)
Net loss for the period		—			—			—			—			(4,510,158	)		(4,510,158	)
Balance at March 31, 2021		6,200,500		$	62,005		$	58,438,284		$	(876,551	)	$	(33,178,289	)	$	24,445,449

The accompanying notes are an integral part of these condensed consolidated financial statements.

CONTANGO ORE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Business

Contango ORE, Inc. (“CORE” or the “Company”) engages in exploration for gold ore and associated minerals in Alaska. The Company conducts its operations through three primary means:

●

a 30.0% membership interest in Peak Gold, LLC (the “Peak Gold JV”), which leases approximately 675,000 acres from the Tetlin Tribal Council and holds approximately 13,000 additional acres of State of Alaska mining claims (such combined acreage, the “Peak Gold JV Property”) for exploration and development, including in connection with the Peak Gold JV's plan to mine ore from the Peak and North Peak deposits within the Peak Gold JV Property (the “Manh Choh Project”);

●

its wholly-owned subsidiary, Alaska Gold Torrent, LLC, an Alaska limited liability company (“AGT”), which leases the mineral rights to approximately 8,600 acres of State of Alaska and patented mining claims for exploration from Alaska Hard Rock, Inc., located in three former producing gold mines located on the patented claims in the Willow Mining District about 75 miles north of Anchorage, Alaska (the “Lucky Shot Property”) (See Note 9 - Acquisition of Lucky Shot Property); and

SEC Form 10-Q filed by Contango ORE Inc.