tango ORE(CTGO) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements Presents Contango ORE, Inc.'s unaudited condensed consolidated financial statements for periods ended December 31, 2022, covering balance sheets, operations, cash flows, and equity Condensed Consolidated Balance Sheets Total assets decreased from $37.3 million to $23.3 million by December 31, 2022, primarily due to reduced cash, resulting in an equity deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | December 31, 2022 ($) | June 30, 2022 ($) | | :--- | :--- | :--- | | Total Current Assets | 9,812,750 | 23,779,454 | | Cash | 8,765,154 | 23,095,101 | | Total Assets | 23,259,572 | 37,293,985 | | Total Current Liabilities | 1,405,514 | 1,504,837 | | Debt, net (Non-current) | 19,350,322 | 19,239,960 | | Total Liabilities | 24,036,955 | 24,019,942 | | Total Stockholders' Equity/(Deficit) | (777,383) | 13,274,043 | Condensed Consolidated Statements of Operations Net loss significantly increased for periods ended December 31, 2022, primarily due to higher Peak Gold JV losses and exploration expenses Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Dec 31, 2022 ($) | Three Months Ended Dec 31, 2021 ($) | Six Months Ended Dec 31, 2022 ($) | Six Months Ended Dec 31, 2021 ($) | | :--- | :--- | :--- | :--- | :--- | | Exploration Expense | (2,219,913) | (1,219,437) | (6,616,483) | (2,165,682) | | General & Administrative Expense | (2,176,097) | (2,796,664) | (4,600,164) | (4,766,933) | | Loss from equity investment in Peak Gold, LLC | (9,310,000) | (743,000) | (9,310,000) | (2,188,000) | | Net Loss | (14,308,531) | (4,875,039) | (21,400,301) | (9,447,252) | | Loss Per Share (Basic & Diluted) | (2.10) | (0.72) | (3.15) | (1.41) | Condensed Consolidated Statements of Cash Flows Net cash decreased by $14.2 million for the six months ended December 31, 2022, primarily from operating and investing activities, ending with $9.0 million cash Cash Flow Summary for Six Months Ended December 31 (Unaudited) | Cash Flow Activity | 2022 ($) | 2021 ($) | | :--- | :--- | :--- | | Net cash used in operating activities | (10,545,717) | (5,427,421) | | Net cash used by investing activities | (9,310,000) | (7,581,318) | | 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, End of Period | 8,996,154 | 22,098,982 | Notes to Unaudited Condensed Consolidated Financial Statements These notes detail the company's business, accounting policies, and financial items, covering Peak Gold JV, Lucky Shot Property, compensation, and convertible debenture - The company engages in gold ore exploration in Alaska through three primary means: a 30% interest in the Peak Gold JV (Manh Choh Project), the wholly-owned Lucky Shot Property, and the wholly-owned Minerals Property[22][30] - The company's investment in the Peak Gold JV has a balance of zero as of December 31, 2022, because the company's share of cumulative losses ($43.2 million) exceeded its total investment ($28.7 million); suspended losses to be recognized against future earnings are approximately $14.5 million[37] - In December 2022, the company completed a private placement, issuing 283,500 shares of common stock at $20.00 per share and warrants, raising net proceeds of approximately $5.6 million[42][44] - The company acquired the Lucky Shot Property with an initial payment and a promissory note, plus contingent consideration of up to $18.75 million in cash and stock, payable upon meeting specific mineral resource or production milestones[55][56] - On April 26, 2022, the company closed a $20 million unsecured convertible debenture with an 8% annual interest rate, a four-year maturity, and a conversion price of $30.50 per share[85][86] - Subsequent to the quarter end, on January 19, 2023, the company completed another private placement, issuing 117,500 shares at $20.00 per share and warrants, raising net proceeds of approximately $2.3 million[89][91] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses operational overview, strategic direction, and financial performance, highlighting Manh Choh Project advancement, Lucky Shot exploration, increased net losses, and liquidity strategies Overview The company focuses on gold exploration in Alaska, with the Manh Choh Project targeting production in H2 2024 and ongoing exploration at Lucky Shot Property - The Manh Choh Project is in development, with a plan to mine ore and process it at the Fort Knox complex, targeting first gold production in the second half of 2024[100][101][102] - At the Lucky Shot Property, an exploration program involving 29 drill holes was completed in November 2022, with assay results pending for an initial resource estimate and follow-up planning[103] - The Peak Gold JV management committee approved a $13.6 million budget for Q1 2023, with CORE's share being $2.7 million, primarily for access road and camp construction for the Manh Choh project[102] Results of Operations Net loss significantly increased for periods ended December 31, 2022, primarily due to higher exploration expenses and increased Peak Gold JV losses Comparison of Results for the Three Months Ended December 31 | Expense/Loss Item ($ in millions) | 2022 | 2021 | Change Driver | | :--- | :--- | :--- | :--- | | Exploration Expense | 2.2 | 1.2 | Increased activity at Lucky Shot Property | | General & Administrative Expense | 2.2 | 2.8 | Decrease in stock-based compensation | | Loss from Equity Investment in Peak Gold JV | 9.3 | 0.7 | Higher cash needs as project moves to development | Comparison of Results for the Six Months Ended December 31 | Expense/Loss Item ($ in millions) | 2022 | 2021 | Change Driver | | :--- | :--- | :--- | :--- | | Exploration Expense | 6.6 | 2.2 | Increased activity at Lucky Shot Property | | General & Administrative Expense | 4.6 | 4.8 | Decrease in stock-based compensation | | Loss from Equity Investment in Peak Gold JV | 9.3 | 2.2 | Higher cash needs as project moves to development | Liquidity and Capital Resources As of December 31, 2022, the company had $9.0 million in cash, funding Peak Gold JV and exploration through recent capital raises, with potential JV dilution risk - The company held approximately $9.0 million in cash as of December 31, 2022[146] - Recent financing activities include a $20 million convertible debenture in April 2022, a $5.6 million private placement in December 2022, and a $2.3 million private placement in January 2023[145][146] - Future cash needs are primarily for capital calls from the Peak Gold JV and exploration of Contango Properties, with potential dilution of its Peak Gold JV interest if it cannot fund its proportionate share of approved budgets[147][148] Quantitative and Qualitative Disclosures about Market Risk The company is exempt from providing quantitative and qualitative disclosures about market risk as a "smaller reporting company" - As a "smaller reporting company," the Company is exempt from providing quantitative and qualitative disclosures about market risk[150] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of December 31, 2022, with no material changes in internal control over financial reporting - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of December 31, 2022[151] - No material changes to the company's internal control over financial reporting occurred during the quarter ended December 31, 2022[152] PART II – OTHER INFORMATION Legal Proceedings The company is not a party to any material legal proceedings and is unaware of any contemplated proceedings that would materially affect its financial condition - As of the filing date, the company is not involved in any material legal proceedings[155] Risk Factors No material changes have occurred in the company's risk factors since the Annual Report on Form 10-K for the fiscal year ended June 30, 2022 - No material changes have occurred in the company's risk factors since the Annual Report on Form 10-K for the year ended June 30, 2022[156] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None reported for the period[157] Mine Safety Disclosures The company reported no mine safety disclosures for the period - None reported for the period[158] Other Information The company reported no other information for the period - None reported for the period[159] Exhibits This section lists exhibits filed as part of the Form 10-Q, including corporate governance documents, private placement agreements, and officer certifications - Exhibits filed include certifications by the Principal Executive Officer and Principal Financial Officer, as well as documents related to recent private placements such as subscription agreements and forms of warrants[162]