conta20230331c

conta20230331c_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, 2023

☐	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, 2023 was 7,619,718.

CONTANGO ORE, INC.

TABLE OF CONTENTS




		Page
	PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and June 30, 2022	3
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended March 31, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended March 31, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Nine Months Ended March 31, 2023 and 2022 (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

	March 31, 2023			June 30, 2022
ASSETS

CURRENT ASSETS:
Cash	$	2,919,091		$	23,095,101
Restricted cash		231,000			231,000
Prepaid expenses and other		977,382			453,353
Total current assets		4,127,473			23,779,454

LONG-TERM ASSETS:
Investment in Peak Gold (Note 5)		—			—
Property & equipment, net		13,412,607			13,514,531
Total long-term assets		13,412,607			13,514,531

TOTAL ASSETS	$	17,540,080		$	37,293,985

LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)

CURRENT LIABILITIES:
Accounts payable	$	74,956		$	633,856
Accrued liabilities		506,858			870,981
Total current liabilities		581,814			1,504,837

NON-CURRENT LIABILITIES:
Advance royalty reimbursement		1,200,000			1,200,000
Asset retirement obligations		236,921			228,082
Contingent consideration liability		1,847,063			1,847,063
Debt, net		19,397,832			19,239,960
Total non-current liabilities		22,681,816			22,515,105

TOTAL LIABILITIES		23,263,630			24,019,942

COMMITMENTS AND CONTINGENCIES (NOTE 14)

STOCKHOLDERS’ EQUITY/(DEFICIT):
Common Stock, $0.01 par value, 45,000,000 shares authorized; 7,306,718 shares issued and outstanding at March 31, 2023; 6,860,420 shares issued and 6,769,923 shares outstanding at June 30, 2022)		73,067			68,604
Additional paid-in capital		82,063,409			74,057,859
Treasury stock at cost (0 at March 31, 2023; and 90,497 shares at June 30, 2022)		—			(2,318,182	)
Accumulated deficit		(87,860,026	)		(58,534,238	)
TOTAL STOCKHOLDERS’ EQUITY/(DEFICIT)		(5,723,550	)		13,274,043

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)	$	17,540,080		$	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 March 31,						Nine Months Ended March 31,
	2023			2022			2023			2022
EXPENSES:
Claim rental expense	$	(126,452	)	$	(157,162	)	$	(399,828	)	$	(464,135	)
Exploration expense		(251,927	)		(1,987,345	)		(6,868,410	)		(4,153,027	)
Depreciation expense		(34,214	)		(10,239	)		(102,642	)		(23,954	)
Accretion expense		(2,865	)		(2,723	)		(8,839	)		(6,283	)
Impairment from casualty loss, net of recovery		—			(41,249	)		—			(41,249	)
General and administrative expense		(1,980,921	)		(3,228,096	)		(6,581,085	)		(7,995,029	)
Total expenses		(2,396,379	)		(5,426,814	)		(13,960,804	)		(12,683,677	)

OTHER INCOME/(EXPENSE):
Interest income		8,402			319			24,746			1,310
Interest expense		(447,510	)		(3,103	)		(1,343,687	)		(6,483	)
Loss from equity investment in Peak Gold, LLC (Note 5)		(5,090,000	)		(1,518,000	)		(14,400,000	)		(3,706,000	)
Insurance recoveries		—			—			338,301			—
Other income		—			—			15,656			—
Total other income/(expense)		(5,529,108	)		(1,520,784	)		(15,364,984	)		(3,711,173	)

LOSS BEFORE TAXES		(7,925,487	)		(6,947,598	)		(29,325,788	)		(16,394,850	)
Income tax benefit		—			119,731			—			119,731
NET LOSS	$	(7,925,487	)	$	(6,827,867	)	$	(29,325,788	)	$	(16,275,119	)

LOSS PER SHARE
Basic and diluted	$	(1.09	)	$	(1.01	)	$	(4.23	)	$	(2.42	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		7,243,345			6,743,528			6,938,664			6,725,079

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,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(29,325,788	)	$	(16,275,119	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		2,206,239			3,175,903
Depreciation expense		102,642			23,954
Accretion expense		8,839			6,283
Loss from equity investment in Peak Gold, LLC		14,400,000			3,706,000
Interest expense paid in stock		338,884			—
Amortization of debt discount and debt issuance fees		143,671			—
Changes in operating assets and liabilities:
Increase in prepaid expenses and other		(524,029	)		(589,749	)
Increase/(decrease) in accounts payable and accrued liabilities		(923,023	)		850,228
Decrease (increase) in income tax receivable		—			(341,637	)
Increase (decrease) in income tax payable		—			141,906
Net cash used in operating activities		(13,572,565	)		(9,249,683	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash invested in Peak Gold, LLC		(14,400,000	)		(3,706,000	)
Acquisition of property, plant, and equipment		—			(43,989	)
Cash paid for acquisition of Alaska Gold Torrent, LLC, net of cash received		(719	)		(11,642,586	)
Net cash used by investing activities		(14,400,719	)		(15,392,575	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid for shares withheld from employees for payroll tax withholding		(126,428	)		(779,622	)
Cash paid for shares purchased from directors for estimated tax obligations associated with stock vesting		—			(1,538,560	)
Debt issuance costs		14,202			—
Cash proceeds from capital raise, net		7,909,500			(43,560	)
Net cash provided/(used) by financing activities		7,797,274			(2,361,742	)

NET DECREASE IN CASH		(20,176,010	)		(27,004,000	)
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD		23,326,101			35,220,588
CASH AND RESTRICTED CASH, END OF PERIOD	$	3,150,091		$	8,216,588

Supplemental disclosure of cash flow information
Cash paid for:
Interest expense	$	1,016,689		$	—
Income taxes		—			80,000
Non-cash investing and financing activities
Asset retirement obligations		—			218,927
Contingent liability for acquisition of Alaska Gold Torrent, LLC		—			1,847,063
Total non-cash investing and financing activities	$	—		$	2,065,990

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	)
Stock-based compensation		—			—			607,818			—			—			607,818
Restricted stock activity		85,166			851			(851	)		—			—			—
Issuance of common stock		117,500			1,175			1,871,162			—			—			1,872,337
Treasury shares issued in common stock issuance		(1,527	)		(15	)		—			39,481			—			39,481
Warrants		—			—			438,182			—			—			438,182
Cost of common stock issuance		—			—			(39,000	)		—			—			(39,000	)
Shares issued for convertible note interest payment		4,184			42			99,956			—			—			99,998
Treasury shares withheld for employee taxes		—			—						(39,481	)		—			(39,496	)
Net loss for the period		—			—			—			—			(7,925,487	)		(7,925,487	)
Balance at March 31, 2023		7,306,718		$	73,067		$	82,063,409		$	—		$	(87,860,026	)	$	(5,723,550	)

	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
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

SEC Form 10-Q filed by Contango ORE Inc.