conta20221231c

conta20221231c_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 December 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 February 6, 2023 was 7,217,368.

CONTANGO ORE, INC.

TABLE OF CONTENTS




		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of December 31, 2022 and June 30, 2022 (unaudited)	3
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 31, 2022 and 2021 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2022 and 2021 (unaudited)	5
	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Six Months Ended December 31, 2022 and 2021 (unaudited)	6
	Notes to 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	27
Item 4.	Controls and Procedures	27
	PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
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

	December 31, 2022			June 30, 2022
ASSETS

CURRENT ASSETS:
Cash	$	8,765,154		$	23,095,101
Restricted cash		231,000			231,000
Prepaid expenses and other		816,596			453,353
Total current assets		9,812,750			23,779,454

LONG-TERM ASSETS:
Investment in Peak Gold (Note 5)		—			—
Property & equipment, net		13,446,822			13,514,531
Total long-term assets		13,446,822			13,514,531

TOTAL ASSETS	$	23,259,572		$	37,293,985

LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)

CURRENT LIABILITIES:
Accounts payable	$	150,677		$	633,856
Accrued liabilities		1,254,837			870,981
Total current liabilities		1,405,514			1,504,837

NON-CURRENT LIABILITIES:
Advance royalty reimbursement		1,200,000			1,200,000
Asset retirement obligations		234,056			228,082
Contingent consideration liability		1,847,063			1,847,063
Debt, net		19,350,322			19,239,960
Total non-current liabilities		22,631,441			22,515,105

TOTAL LIABILITIES		24,036,955			24,019,942

COMMITMENTS AND CONTINGENCIES (NOTE 14)

STOCKHOLDERS’ EQUITY/(DEFICIT):
Common Stock, $0.01 par value, 45,000,000 shares authorized; 7,101,395 shares issued and outstanding at December 31, 2022; 6,860,420 shares issued and 6,769,923 shares outstanding at June 30, 2022)		71,014			68,604
Additional paid-in capital		79,086,142			74,057,859
Treasury stock at cost (0 at December 31, 2022; and 90,497 shares at June 30, 2022)		—			(2,318,182	)
Accumulated deficit		(79,934,539	)		(58,534,238	)
TOTAL STOCKHOLDERS’ EQUITY/(DEFICIT)		(777,383	)		13,274,043

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)	$	23,259,572		$	37,293,985

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 December 31,						Six Months Ended December 31,
	2022			2021			2022			2021
EXPENSES:
Claim rental expense	$	(126,451	)	$	(157,163	)	$	(273,376	)	$	(306,973	)
Exploration expense		(2,219,913	)		(1,219,437	)		(6,616,483	)		(2,165,682	)
Depreciation expense		(34,214	)		(8,933	)		(68,428	)		(13,715	)
Accretion expense		(2,948	)		(3,560	)		(5,974	)		(3,560	)
General and administrative expense		(2,176,097	)		(2,796,664	)		(4,600,164	)		(4,766,933	)
Total expenses		(4,559,623	)		(4,185,757	)		(11,564,425	)		(7,256,863	)

OTHER INCOME/(EXPENSE):
Interest income		7,799			494			16,344			991
Interest expense		(446,707	)		53,224			(896,177	)		(3,380	)
Loss from equity investment in Peak Gold, LLC (Note 5)		(9,310,000	)		(743,000	)		(9,310,000	)		(2,188,000	)
Insurance recoveries		—			—			338,301			—
Other income		—			—			15,656			—
Total other income/(expense)		(9,748,908	)		(689,282	)		(9,835,876	)		(2,190,389	)

LOSS BEFORE TAXES		(14,308,531	)		(4,875,039	)		(21,400,301	)		(9,447,252	)
Income tax (expense)/benefit		—			—			—			—
NET LOSS	$	(14,308,531	)	$	(4,875,039	)	$	(21,400,301	)	$	(9,447,252	)

LOSS PER SHARE
Basic and diluted	$	(2.10	)	$	(0.72	)	$	(3.15	)	$	(1.41	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		6,807,317			6,751,581			6,787,864			6,716,076

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

CONTANGO ORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended December 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(21,400,301	)	$	(9,447,252	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		1,598,421			2,278,160
Depreciation expense		68,428			13,715
Accretion expense		5,974			3,560
Loss from equity investment in Peak Gold, LLC		9,310,000			2,188,000
Amortization of debt discount and debt issuance fees		335,047			—
Changes in operating assets and liabilities:
Increase in prepaid expenses and other		(363,243	)		(721,162	)
Increase/(decrease) in accounts payable and accrued liabilities		(100,043	)		337,558
Decrease in income tax receivable		—			(80,000	)
Net cash used in operating activities		(10,545,717	)		(5,427,421	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash invested in Peak Gold, LLC		(9,310,000	)		(2,188,000	)
Acquisition of property, plant, and equipment		—			(13	)
Cash paid for acquisition of Alaska Gold Torrent, LLC, net of cash received		—			(5,393,305	)
Net cash used by investing activities		(9,310,000	)		(7,581,318	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid for shares withheld from employees for payroll tax withholding		(86,932	)		(69,307	)
Debt issuance costs		14,202			—
Cash proceeds from capital raise, net		5,598,500			(43,560	)
Net cash provided by financing activities		5,525,770			(112,867	)

NET DECREASE IN CASH		(14,239,947	)		(13,121,606	)
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD		23,326,101			35,220,588
CASH AND RESTRICTED CASH, END OF PERIOD	$	8,996,154		$	22,098,982

Supplemental disclosure of cash flow information
Cash paid for:
Interest expense	$	716,687		$	—
Income taxes		—			80,000
Non-cash investing and financing activities
Interest expense paid with treasury stock		238,886			—
Note payable issued for acquisition of Alaska Gold Torrent, LLC		—			6,250,000
Direct transaction costs for acquisition of Alaska Gold Torrent, LLC financed in accounts payable		—			719
Asset retirement obligations		—			218,927
Contingent liability for acquisition of Alaska Gold Torrent, LLC		—			1,847,063
Total non-cash investing activities	$	238,886		$	8,316,709

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

CONTANGO ORE, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY/(DEFICIT)

(Unaudited)

	Common Stock						Additional Paid-In			Treasury			Accumulated			Total Stockholders’
	Shares			Amount			Capital			Stock			Deficit			Equity/(Deficit)
Balance at June 30, 2022		6,860,420		$	68,604		$	74,057,859		$	(2,318,182	)	$	(58,534,238	)	$	13,274,043
Stock-based compensation		—			—			787,874			—			—			787,874
Treasury shares issued for convertible note interest payment		—			—			—			138,886			—			138,886
Treasury shares withheld for employee taxes		—			—			—			(27,693	)		—			(27,693	)
Net loss for the period		—			—			—			—			(7,091,770	)		(7,091,770	)
Balance at September 30, 2022		6,860,420			68,604			74,845,733			(2,206,989	)		(65,626,008	)		7,081,340
Stock-based compensation		—			—			810,547			—			—			810,547
Issuance of common stock		283,500			2,835			2,844,257			—			—			2,847,092
Treasury shares issued in common stock issuance		(42,525	)		(425	)					2,166,228			—			2,165,803
Warrants		—			—			657,105			—			—			657,105
Cost of common stock issuance		—			—			(71,500	)		—			—			(71,500	)
Treasury shares issued for convertible note interest payment		—			—			—			100,000			—			100,000
Treasury shares withheld for employee taxes		—			—			—			(59,239	)		—			(59,239	)
Net loss for the period		—			—			—			—			(14,308,531	)		(14,308,531	)
Balance at December 31, 2022		7,101,395		$	71,014		$	79,086,142		$	—		$	(79,934,539	)	$	(777,383	)

	Common Stock				Additional Paid-In			Treasury			Accumulated			Total Stockholders’
	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 shares 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

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 10 - Acquisition of Lucky Shot Property); and

●

its wholly-owned subsidiary, Contango Minerals Alaska, LLC (“Contango Minerals”), which separately owns the mineral rights to approximately 145,280 acres of State of Alaska mining claims for exploration, including (i) approximately 69,780 acres located immediately northwest of the Peak Gold JV Property (the “Eagle/Hona Property”), (ii) approximately 14,800 acres located northeast of the Peak Gold JV Property (the “Triple Z Property”), (iii) approximately 52,700 acres of new property in the Richardson district of Alaska (the “Shamrock Property”) and (iv) approximately 8,000 acres located to the north and east of the Lucky Shot Property (the “Willow Property” and, together with the Eagle/Hona Property, the Triple Z Property, and the Shamrock Property, collectively the “Minerals Property”). The Company relinquished approximately 69,000 acres located on the Eagle/Hona prospect in November 2022.

The Lucky Shot Property and the Minerals Property are collectively referred to in these Notes to Unaudited Condensed Consolidated Financial Statements as the “Contango Properties”.

The Company’s Manh Choh Project is in the development stage. All other projects are in the exploration stage.

The Company has been involved, directly and through the Peak Gold JV, in exploration on the Manh Choh Project for twelve years, which has resulted in identifying two mineral deposits (Main and North Manh Choh) and several other gold, silver, and copper prospects. The Peak Gold JV plans to mine ore from the Main and North Manh Choh deposits and then process the ore at the existing Fort Knox mining and milling complex located approximately 240 miles (400 km) away. The use of the Fort Knox facilities is expected to accelerate the development of the Peak Gold JV Property and result in reduced upfront capital development costs, smaller environmental footprint, a shorter permitting and development timeline and less overall execution risk for the Peak Gold JV to advance the Main and North Manh Choh deposits to production. The Peak Gold JV will be charged a toll for using the Fort Knox facilities. A toll milling agreement is expected to be finalized during the current calendar year.

The Management Committee of the Peak Gold JV (the "Management Committee") approved a calendar year 2022 budget which covered the following areas of work: feasibility study, permitting, on-going environmental monitoring, community engagement, engineering, road and camp construction, and exploration. Kinross Gold Corporation (“Kinross”) released a combined feasibility study for the Fort Knox mill and the Peak Gold JV in July 2022. Also, in July 2022, Kinross announced that its board of directors (the “Kinross Board”) made a decision to proceed with development of the Manh Choh project. Effective December 31, 2022, CORE Alaska, KG Mining and the Peak Gold JV executed the First Amendment to the Amended and Restated Limited Liability Company Agreement of the Peak Gold JV (the “A&R JV LLCA Amendment”). The A&R JV LLCA Amendment provides that, beginning in 2023, the budget of the Peak Gold JV shall be determined on a quarterly basis. The Management Committee has approved a budget of $13.6 million for the first calendar quarter of 2023, of which the Company's share is $2.7 million. To date the Company, has funded $1 million of the approved first calendar quarter budget. This budget primarily relates to access road construction and costs incurred for the refurbishment and expansion of the Manh Choh Camp. The Manh Choh camp facilities, located in Tok, Alaska, have now been completed and construction work on the road will continue through the winter months. The Mine Operating permit issued by the State of Alaska Department of Natural Resources has been submitted. Once issued mine site construction and mine development of the Manh Choh project site can be undertaken so that the project remains on schedule for first gold production in the second half of 2024.

At the Lucky Shot Property, the Company engaged Atkinson Construction and Major Drilling as contractors to execute the 2022 exploration/development program. The Company completed 29 exploration drill holes on the property. Drilling began in late June 2022, and ended in November when activities ceased in preparation for the winter months. All 29 holes intersected the Lucky Shot vein structure. The Company has engaged a third-party structural geologist from Oriented Targeted Solutions Inc. to complete a structural analysis of the vein structure based on underground mapping and drill core logging. The Company will release all assay results once the results have been finalized and quality assurance and quality control has been completed. The Company anticipates completing an initial resource estimate, and then making plans for a follow up program to continue exploration of the Lucky Shot vein structure. Once a sufficient size and quality of mineralized material has been defined the Company expects to initiate a technical study to determine if commercial mining is viable.

On the Shamrock Property, the Company conducted soil and surface rock chip sampling during 2021. Follow up trenching and detailed geologic mapping is planned for the summer of 2023. At the Eagle/Hona Property, the Company carried out a detailed reconnaissance of the northern and eastern portions of the large claim block that had not previously been detail sampled. Due to the steep topography, a helicopter was used to execute the program safely. Follow up geologic mapping and sampling is planned for the summer of 2023.

The Company’s 30.0% membership interest in the Peak Gold JV, its ownership of AGT and Contango Minerals, and cash on hand constitute substantially all of the Company’s assets.

The Company’s fiscal year end is June 30.

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), including instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by US GAAP for complete annual consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the consolidated financial statements have been included. All such adjustments are of a normal recurring nature. The consolidated financial statements should be read in conjunction with the consolidated audited financial statements and notes included in the Company’s Form 10-K for the fiscal year ended June 30,2022. The results of operations for the three and six months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30,2023.

3. Liquidity

The Company’s cash needs going forward will primarily relate to capital calls from the Peak Gold JV, exploration of the Contango Properties, and general and administrative expenses of the Company. If a large budget is undertaken by the Peak Gold JV, and no additional financing is obtained, the Company may elect not to fund its portion of the approved budget and dilute its interest in the Peak Gold JV, in which case management believes the Company would maintain sufficient liquidity to meet its working capital requirements for the next twelve months from the date of this report. If the Company's interest in the Peak Gold JV is diluted, the Company may not be able to fully realize its investment in the Peak Gold JV. Also, if no additional financing is obtained, the Company may not be able to fully realize its investment in the Contango Properties.

4. Summary of Significant Accounting Policies

Please see the Company's Form 10-K for the fiscal year ended June 30, 2022 for a summary of the Company's significant accounting policies, as there have been no changes to the Company's significant accounting polices since the time of that filing.

5. Investment in the Peak Gold JV

The Company initially recorded its investment at the historical book value of the assets contributed to the Peak Gold JV, which was approximately $1.4 million. As of December 31, 2022, the Company has contributed approximately $28.7 million to the Peak Gold JV. KG Mining acquired 70% of the Peak Gold JV on December 31, 2020 in connection with the Kinross Transactions. As of December 31, 2022, the Company held a 30.0% membership interest in the Peak Gold JV.

The following table is a roll-forward of the Company's investment in the Peak Gold JV as of December 31, 2022:

	Investment
	in Peak Gold, LLC
Investment balance at June 30, 2021	$	—
Investment in Peak Gold, LLC		3,706,000
Loss from equity investment in Peak Gold, LLC		(3,706,000	)
Investment balance at June 30, 2022	$	—
Investment in Peak Gold, LLC		9,310,000
Loss from equity investment in Peak Gold, LLC		(9,310,000	)
Investment balance at December 31, 2022	$	—

In conjunction with the CORE Transactions, and KG Mining assuming the role of manager of the Peak Gold JV, the Peak Gold JV converted its method of accounting from US GAAP to International Financial Reporting Standards (“IFRS”). The condensed unaudited financial statements presented below have been converted from IFRS to US GAAP for presentation purposes. The following table presents the condensed unaudited results of operations for the Peak Gold JV for the three and six month periods ended December 31, 2022 and 2021, and for the period from inception through December 31, 2022 in accordance with US GAAP:

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended		Period from Inception January 8, 2015 to
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021		December 31, 2022
EXPENSES:
Exploration expense	$	2,552,237	$	2,293,331	$	3,990,993	$	5,349,435	$	62,402,520
General and administrative		31,843		387,100		108,892		692,157		12,389,912
Total expenses		2,584,080		2,680,431		4,099,885		6,041,592		74,792,432
NET LOSS	$	2,584,080	$	2,680,431	$	4,099,885	$	6,041,592	$	74,792,432

The Company’s share of the Peak Gold JV’s results of operations for the three and six months ended December 31, 2022 was a loss of approximately $0.8 million and $1.2 million, respectively. The Company’s share in the results of operations for the three and six months ended December 31, 2021 was a loss of approximately $0.8 million and $1.8 million respectively. The Peak Gold JV loss does not include any provisions related to income taxes as the Peak Gold JV is treated as a partnership for income tax purposes. As of December 31, 2022 and June 30, 2022, the Company’s share of the Peak Gold JV’s inception-to-date cumulative loss of approximately $43.2 million and $42.0 million, respectively, exceeded the historical book value of our investment in the Peak Gold JV, of $28.7 million. Therefore, the investment in the Peak Gold JV had a balance of zero as of each December 31, 2022 and June 30, 2022. The Company is currently obligated to make additional capital contributions to the Peak Gold JV in proportion to its percentage membership interest in the Peak Gold JV in order to maintain its ownership in the Peak Gold JV and not be diluted. Therefore, the Company only records losses up to the point of its cumulative investment, which was approximately $28.7 million as of December 31, 2022. The portion of the cumulative loss that exceeds the Company’s investment will be suspended and recognized against earnings, if any, from the Company’s investment in the Peak Gold JV in future periods. The suspended losses for the period from inception to December 31, 2022 are approximately $14.5 million.

6. Prepaid Expenses and other assets

The Company has prepaid expenses and other assets of $816,596 and $453,353 as of December 31, 2022 and June 30, 2022, respectively. Prepaid expenses primarily relate to prepaid insurance and prepaid annual claim rentals.

7. Net Loss Per Share

A reconciliation of the components of basic and diluted net loss per share of Common Stock is presented below:

	Three Months Ended December 31,
	2022								2021
	Net Loss			Weighted Average Shares		Loss Per Share			Net Loss			Weighted Average Shares		Loss Per Share
Basic Net Loss per Share:
Net loss attributable to common stock	$	(14,308,531	)		6,807,317	$	(2.10	)	$	(4,875,039	)		6,751,581	$	(0.72	)
Diluted Net Loss per Share:
Net loss attributable to common stock	$	(14,308,531	)		6,807,317	$	(2.10	)	$	(4,875,039	)		6,751,581	$	(0.72	)

	Six Months Ended December 31,
	2022								2021
	Net Loss			Weighted Average Shares		Loss Per Share			Net Loss			Weighted Average Shares		Loss Per Share
Basic Net Loss per Share:
Net loss attributable to common stock	$	(21,400,301	)		6,787,864	$	(3.15	)	$	(9,447,252	)		6,716,076	$	(1.41	)
Diluted Net Loss per Share:
Net loss attributable to common stock	$	(21,400,301	)		6,787,864	$	(3.15	)	$	(9,447,252	)		6,716,076	$	(1.41	)

Options and warrants to purchase 383,500 shares of Common Stock of the Company were outstanding as of December 31, 2022, and options to purchase 100,000 shares of Common Stock were outstanding as of December 31, 2021. These options and warrants were not included in the computation of diluted earnings per share for the three and six month periods ended December 31, 2022 and 2021 due to being anti-dilutive. There were no warrants outstanding as of December 31, 2021.

8. Stockholders’ Equity

The Company has 45,000,000 shares of Common Stock authorized, and 15,000,000 authorized shares of preferred stock. As of December 31, 2022, 7,101,395 shares of Common Stock were outstanding, including 348,210 shares of unvested restricted stock. As of December 31, 2022, options and warrants to purchase 383,500 shares of Common Stock of the Company were outstanding. No shares of preferred stock have been issued. The remaining restricted stock outstanding will vest between January 2023 and January 2025.

December 2022 Private Placement

On December 23, 2022 the Company completed the issuance and sale of an aggregate of 283,500 shares (the “December 2022 Shares”) of the Company’s Common Stock, for $20.00 per share, and warrants (the “December 2022 Warrants”) entitling each purchaser to purchase shares of Common Stock for $25.00 per share (the “December 2022 Warrant Shares” and together with the December 2022 Shares and the December 2022 Warrants, the “December 2022 Securities”), in a private placement (the “December 2022 Private Placement”) to certain accredited investors (the “December 2022 Investors”) pursuant to Subscription Agreements (the “December 2022 Subscription Agreements”), dated as of December 23, 2022 between the Company and each of the December 2022 Investors. The December 2022 Subscription Agreements include customary representations, warranties, and covenants by the December 2022 Investors and the Company.

Pursuant to the December 2022 Warrants between the Company and each of the December 2022 Investors, the December 2022 Warrants will be exercisable, in full or in part, at any time until the second anniversary of their issuance, at an exercise price of $25.00 per share of Common Stock. The December 2022 Warrants will also provide for certain adjustments that may be made to the exercise price and the number of shares of Common Stock issuable upon exercise due to future corporate events or otherwise. The December 2022 Warrants were classified within equity and the proceeds from the capital raise were allocated to the warrants based on their relative fair value. The fair value of each of the December 2022 Warrants was estimated as of the date of grant using the Black-Scholes option-pricing model (Level 2 of the fair value hierarchy) with the following weighted average assumptions used: (i) risk-free interest rate of 4.66%; (ii) expected life of 1 year; (iii) expected volatility of 37.73%; and (iv) expected dividend yield of 0%.

Petrie Partners Securities, LLC (“Petrie”) assisted the Company with the December 2022 Private Placement and will be entitled to receive compensation equal to 3.25 percent for the December 2022 Investors solicited by Petrie. Net proceeds from the December 2022 Private Placement totaled approximately $5.6 million. The Company will use these proceeds to fund its exploration and development program and for general corporate purposes. The December 2022 Securities sold were not registered under the Securities Act of 1933, as amended (the “Securities Act”), but the December 2022 Shares and the December 2022 Warrant Shares are subject to a Registration Rights Agreement allowing the shares to be registered by the holders at a future date.

Rights Plan Termination and Rights Agreement

On September 23, 2020, the Company adopted a limited duration stockholder rights agreement (the “Rights Agreement”) to replace the Company’s prior stockholder rights plan, which was terminated upon adoption of the Rights Agreement.

Pursuant to the Rights Agreement, the Board declared a dividend of one preferred stock purchase right (a “Right”) for each share of the Company’s Common Stock held of record as of October 5, 2020. The Rights will trade with the Company’s Common Stock and no separate Rights certificates will be issued, unless and until the Rights become exercisable. In general, the Rights will become exercisable only if a person or group acquires beneficial ownership of 18.0% (or 20.0% for certain passive investors) or more of the Company’s outstanding Common Stock or announces a tender or exchange offer that would result in beneficial ownership of 18.0% (or 20.0% for certain passive investors) or more of Common Stock. Each Right will entitle the holder to buy one one-thousandth (1/1000) of a share of a series of junior preferred stock at an exercise price of $100.00 per Right, subject to anti-dilution adjustments.

The Rights Agreement had an initial term of one year, expiring on September 22, 2021. On September 21, 2021, the Board of Directors of the Company approved an amendment to the Rights Agreement, extending the term of the Rights Agreement by an additional year to September 22, 2022. On August 31, 2022, the Board of Directors approved an amendment the Rights Agreement, extending the term of the Rights Agreement by an additional year to September 22, 2023.

9. Sales Transaction with KG Mining

On September 29, 2020, the Company, CORE Alaska, LLC and KG Mining, entered into the CORE Purchase Agreement pursuant to which CORE Alaska sold a 30.0% membership interest in the Peak Gold JV, to KG Mining. The CORE Transactions closed on September 30, 2020. In consideration for the CORE JV Interest, the Company received $32.4 million in cash and 809,744 shares of Common Stock. The 809,744 shares of Common Stock were acquired by KG Mining from Royal Gold, as part of the Royal Gold Transactions and were subsequently canceled by the Company. Of the $32.4 million cash consideration, $1.2 million constituted a reimbursement prepayment to the Company relating to its proportionate share of silver royalty payments that the Peak Gold JV may be obligated to pay to Royal Gold, with the understanding that KG Mining will bear the entire economic impact of those royalty payments due from the Peak Gold JV.

Concurrently with the Purchase Agreement, KG Mining, in a separate transaction, acquired from Royal Gold (i) 100% of the equity of Royal Alaska, LLC , which held a 40.0% membership interest in the Peak Gold JV and (ii) 809,744 shares of Common Stock held by Royal Gold. After the consummation of the Kinross Transactions, CORE Alaska retains a 30.0% membership interest in the Peak Gold JV. KG Mining now holds a 70.0% membership interest in the Peak Gold JV and serves as the manager and operator of the Peak Gold JV. KG Mining and CORE Alaska entered into the Amended and Restated Limited Liability Company Agreement of Peak Gold JV (“A&R JV LLCA”) on October 1, 2020 to address the new ownership arrangements and to incorporate additional terms that will permit the Peak Gold JV to further develop and produce from its properties.

The Company recorded the $32.4 million cash proceeds and the 809,744 shares of Common Stock, received from the CORE Transactions, at fair value and recognized a gain on sale of $39.6 million. The Company valued the Common Stock consideration from the CORE Transactions consistent with the accounting guidance for non-monetary exchanges. The stock consideration was valued based on the implied fair value of the CORE Transactions in total less the cash proceeds. The total value of the CORE Transactions was equated to the value of the Company's 30.0% ownership in the Peak Gold JV, post the 30.0% membership interest transferred to KG Mining. The Common Stock consideration received in the CORE Transactions is classified within Level 3 of the fair value hierarchy. As of the date of the CORE Transactions, the Company's investment in the Peak Gold JV had a zero balance, therefore the $39.6 million gain approximates the full fair value of the CORE JV Interest surrendered in the CORE Transactions.

The Company recorded a non-current liability totaling $1.2 million associated with the cash received for the reimbursement prepayment to the Company of its proportionate share of certain silver royalty payments that the Peak Gold JV may be obligated to pay Royal Gold. The liability arises, because pursuant to Article IV of the A&R JV LLCA, if the Peak Gold JV terminates, or the Company’s membership interest falls below 5% prior to when the prepaid royalty is paid out, the $1.2 million (less any portion already paid out) is refundable to KG Mining.

Prior to the CORE Transactions, the Peak Gold JV was a variable interest entity as defined by FASB ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis. The Company was not the primary beneficiary since it did not have the power to direct the activities of the Peak Gold JV. The Company’s ownership interest in the Peak Gold JV has therefore historically applied the equity method of accounting for its investment. After the Kinross Transactions, the Company retained a 30.0% membership interest in the Peak Gold JV. The Company continues to have significant influence in the Peak Gold JV pursuant to its right to designate one of the three seats on the Management Committee. Therefore, the Company will continue to account for its investment in the Peak Gold JV under the equity method.

10. Acquisition of Lucky Shot Property

On August 24, 2021 the Company completed the purchase of all outstanding membership interests (the “Interests”) of AGT from CRH Funding II PTE. LTD, a Singapore private limited corporation (“CRH”) (the “Lucky Shot Transaction”). AGT holds rights to the Lucky Shot Property. The Company agreed to purchase the Interests for a total purchase price of up to $30 million. The purchase price included an initial payment at closing of $5 million in cash and a promissory note in the original principal amount of $6.25 million, payable by the Company to CRH (the “Promissory Note”), with a maturity date of February 28, 2022 (the “Maturity Date”). The Promissory Note was secured by the Interests. The Company had the option to pay the Promissory Note through the issuance to CRH of shares of the Company’s common stock if the Company completed an offering and obtained a listing of its shares on the NYSE American prior to the Maturity Date. In November 2021, the Company’s common stock commenced listing on the NYSE American. Since the Company did not complete the required offering, it paid the Promissory Note in cash on February 25, 2022.

The Company will be obligated to pay CRH additional consideration if production on the Lucky Shot Property meets two separate milestone payment thresholds. If the first threshold of (1) an aggregate “mineral resource” equal to 500,000 ounces of gold or (2) production and receipt by the Company of an aggregate of 30,000 ounces of gold (including any silver based on a 1:65 gold:silver ratio) is met, then the Company will pay CRH $5 million in cash and $3.75 million in newly issued shares of CORE common stock. If the second threshold of (1) an aggregate “mineral resource” equal to 1,000,000 ounces of gold or (2) production and receipt by the Company of an aggregate of 60,000 ounces of gold (including any silver based on a 1:65 gold:silver ratio) is met, then the Company will pay CRH $5 million in cash and $5 million in newly issued shares of CORE common stock. If payable, the additional share consideration will be issued based on the 30-day volume weighted average price for each of the thirty trading days immediately prior to the satisfaction of the relevant production goal. If the milestones are not met, no additional payments would be made to CRH.

The Company also agreed to make $10,000,000 in expenditures during the 36-month period following closing toward the existence, location, quantity, quality or commercial value of mineral deposits in, under and upon the Lucky Shot Property. As of December 31, 2022, the Company had exceeded the required $10,000,000 in expenditures.

The Company evaluated this acquisition under ASC 805, Business Combinations. ASC 805 requires that an acquirer determine whether it has acquired a business. If the criteria of ASC 805 are met, a transaction would be accounted for as a business combination and the purchase price is allocated to the respective net assets assumed based on their fair values and a determination is made whether any goodwill results from the transaction. In evaluating the criteria outlined by this standard, the Company concluded that the acquired set of assets did not meet the US GAAP definition of a business (the assembled workforce does not currently perform a substantive process). Therefore, the Company accounted for the purchase as an asset acquisition, and allocated the total consideration transferred on the date of the acquisition, approximately $13.5 million, to the assets acquired on a relative fair value basis. The total consideration transferred was comprised of $5.1 million in cash, a $6.25 million promissory note, $0.3 million in direct transactions costs, plus the fair value of the contingent liability (described above), net of cash received. The Company accounted for the share portion of the contingent liability in accordance with ASC 480 and measured at fair value at inception, approximately $1.85 million. The fair value of this liability was calculated using management’s projected timing of mining activities and mineral resources being defined and an estimate of the probability of achieving those targets. The share portion of the contingent consideration is classified within Level 3 of the fair value hierarchy. Changes in value in subsequent periods, based on management’s ongoing assessment of probability, will be recorded in earnings. There was no change in probability, and thus no change in value of the liability during the current period. The Company’s accounting policy is to recognize the contingent consideration associated with cash contingent payments related to the asset acquisitions when the contingency is resolved. Any amounts issued in excess of the contingent consideration initially recognized as a liability would be an additional cost of the asset acquisition allocated to increase the eligible assets on a relative fair value basis. Amounts issued that are less than the contingent consideration initially recognized as a liability would be a reduction of the cost of the asset(s) acquired and would reduce the eligible assets on a relative value basis.

11. Property & Equipment

The table below sets forth the book value by type of fixed asset as well as the estimated useful life:

Asset Type	Estimated Useful Life	December 31, 2022			June 30, 2022
Mineral properties	N/A - Units of Production	$	11,700,726		$	11,700,007
Land	Not Depreciated		87,737			87,737
Buildings and improvements	20-39 years		1,455,546			1,455,546
Machinery and equipment	3 - 10 years		287,635			287,635
Vehicles	5 years		135,862			135,862
Computer and office equipment	5 years		16,239			16,239
Furniture & fixtures	5 years		2,270			2,270
Less: Accumulated depreciation and amortization			(124,168	)

SEC Form 10-Q filed by Contango ORE Inc.