tango ORE(CTGO) - 2021 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents Contango ORE, Inc.'s unaudited condensed consolidated financial statements, detailing its financial position and performance Item 1. Financial Statements This section presents Contango ORE, Inc.'s unaudited condensed consolidated financial statements, detailing its financial position and performance Condensed Consolidated Balance Sheets | ASSETS / LIABILITIES AND SHAREHOLDERS' EQUITY | December 31, 2020 (Unaudited) | June 30, 2020 | | :-------------------------------------------- | :---------------------------- | :------------ | | CURRENT ASSETS: | | | | Cash | $31,939,882 | $3,011,918 | | Prepaid expenses and other | 412,761 | 72,244 | | Total current assets | 32,352,643 | 3,084,162 | | TOTAL ASSETS | $32,352,643 | $3,084,162| | CURRENT LIABILITIES: | | | | Accounts payable | $23,667 | $83,158 | | Accrued liabilities | 445,881 | 1,006,237 | | Income tax payable | 1,834,925 | — | | Total current liabilities | 2,304,473 | 1,089,395 | | NON-CURRENT LIABILITIES: | | | | Advance royalty reimbursement | 1,200,000 | — | | Total non-current liabilities | 1,200,000 | — | | TOTAL LIABILITIES | 3,504,473 | 1,089,395 | | SHAREHOLDERS' EQUITY: | | | | Common Stock | 62,005 | 65,901 | | Additional paid-in capital | 57,454,296 | 61,302,249 | | Treasury stock at cost | — | (476,672) | | Accumulated deficit | (28,668,131) | (58,896,711) |\ | TOTAL SHAREHOLDERS' EQUITY | 28,848,170 | 1,994,767 | | TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY| $32,352,643 | $3,084,162| - Total assets increased significantly from $3.08 million at June 30, 2020, to $32.35 million at December 31, 2020, primarily driven by a substantial increase in cash from $3.01 million to $31.94 million[6] - Total shareholders' equity rose from $1.99 million to $28.85 million, largely due to a reduction in accumulated deficit from $(58.90) million to $(28.67) million[6] Condensed Consolidated Statements of Operations | EXPENSES / OTHER INCOME/(EXPENSE) | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :-------------------------------- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Exploration expense | $(60,609) | $— | $(81,437) | $— | | General and administrative expense| (2,602,590) | (1,150,944) | (6,127,582) | (2,141,935) | | Total expenses | (2,663,199) | (1,150,944) | (6,209,019) | (2,141,935) | | Interest income | 705 | 22,412 | 919 | 62,069 | | Loss from equity investment in Peak Gold, LLC | (1,123,452) | (1,800,000) | (1,371,252) | (2,700,000) | | Gain on sale of a portion of the equity investment in Peak Gold, LLC | — | — | 39,642,857 | — | | Total other income/(expense) | (1,122,747) | (1,777,588) | 38,272,524 | (2,637,931) | | INCOME/(LOSS) BEFORE TAXES | (3,785,946) | (2,928,532) | 32,063,505 | (4,779,866) | | Income tax (expense)/benefit | 571,901 | — | (1,834,925) | — | | NET INCOME/(LOSS) | $(3,214,045) | $(2,928,532) | $30,228,580 | $(4,779,866) | | NET INCOME/(LOSS) PER SHARE Basic and diluted | $(0.53) | $(0.45) | $4.79 | $(0.75) | - For the six months ended December 31, 2020, the company reported a net income of $30.23 million, a significant improvement from a net loss of $4.78 million in the prior year, primarily driven by a $39.64 million gain on the sale of a portion of its equity investment in Peak Gold, LLC[8] - General and administrative expenses increased substantially for both the three-month and six-month periods ended December 31, 2020, due to increased payroll-related fees and non-recurring legal and transaction fees associated with the Kinross Transactions[8][81][83] Condensed Consolidated Statements of Cash Flows | CASH FLOWS FROM ACTIVITIES | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :------------------------- | :---------------------------- | :---------------------------- | | Net income/(loss) | $30,228,580 | $(4,779,866) | | Stock-based compensation | 1,902,058 | 1,623,323 | | Loss from equity investment in Peak Gold, LLC | 1,371,252 | 2,700,000 | | Gain on sale of a portion of the equity investment in Peak Gold, LLC | (39,642,857) | — | | Net cash used in operating activities | (4,066,406) | (545,817) | | Cash invested in Peak Gold, LLC | (1,371,252) | (2,700,000) | | 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 | 29,828,748 | (2,700,000) | | Cash proceeds from capital raise, net | 3,165,622 | — | | Net cash provided by financing activities | 3,165,622 | — | | NET INCREASE/(DECREASE) IN CASH | 28,927,964 | (3,245,817) | | CASH, BEGINNING OF PERIOD | 3,011,918 | 8,600,658 | | CASH, END OF PERIOD | $31,939,882 | $5,354,841 | - Net cash provided by investing activities dramatically increased to $29.83 million for the six months ended December 31, 2020, from a use of $2.70 million in the prior year, primarily due to $31.20 million in cash proceeds from the sale of a portion of the equity investment in Peak Gold, LLC[10] - The company experienced a net increase in cash of $28.93 million for the six months ended December 31, 2020, compared to a decrease of $3.25 million in the prior year, resulting in an ending cash balance of $31.94 million[10] Condensed Consolidated Statement of Shareholders' Equity | SHAREHOLDERS' EQUITY | Balance at June 30, 2020 | Stock-based compensation | Issuance of common stock | Cost of common stock issuance | Shares received from partial sale of investment in Peak Gold, LLC and retired | Net income for the period | Balance at September 30, 2020 | | :------------------- | :----------------------- | :----------------------- | :----------------------- | :---------------------------- | :---------------------------------------------------------------------------- | :------------------------ | :---------------------------- | | Common Shares | 6,590,113 | — | 214,298 | — | (809,744) | — | 5,994,667 | | Stock Amount | $65,901 | — | $2,143 | — | $(8,097) | — | $59,947 | | Additional Paid-In Capital | $61,302,249 | $892,158 | $2,796,189 | $(109,382) | $(8,434,760) | — | $56,446,454 | | Treasury Stock | $(476,672) | — | $476,672 | — | — | — | $— | | Accumulated Deficit | $(58,896,711) | — | — | — | — | $33,442,625 | $(25,454,086) | | Total Shareholders' Equity | $1,994,767 | $892,158 | $3,275,004 | $(109,382) | $(8,442,857) | $33,442,625 | $31,052,315 | | SHAREHOLDERS' EQUITY | Stock-based compensation | Restricted stock activity | Net income for the period | Balance at December 31, 2020 | | :------------------- | :----------------------- | :------------------------ | :------------------------ | :--------------------------- | | Common Shares | — | 205,833 | — | 6,200,500 | | Stock Amount | — | $2,058 | — | $62,005 | | Additional Paid-In Capital | $1,009,900 | $(2,058) | — | $57,454,296 | | Treasury Stock | — | — | — | $— | | Accumulated Deficit | — | — | $(3,214,045) | $(28,668,131) | | Total Shareholders' Equity | $1,009,900 | — | $(3,214,045) | $28,848,170 | - Total shareholders' equity increased significantly from $1.99 million at June 30, 2020, to $28.85 million at December 31, 2020, primarily due to net income for the period and stock-based compensation, partially offset by the retirement of shares from the partial sale of the Peak Gold investment[12] - The company issued 214,298 shares of common stock, generating $3.28 million, and retired 809,744 shares received from the partial sale of the Peak Gold, LLC investment, reducing common shares outstanding[12] Item 2. Notes to the Unaudited Condensed Consolidated Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations This section details financial statement notes and management's discussion and analysis of financial condition, operations, and liquidity Notes to Unaudited Condensed Consolidated Financial Statements 1. Organization and Business - Contango ORE, Inc. (CORE) is an exploration-stage company focused on gold, silver, and copper ores in Alaska[15] - CORE holds a 30.0% membership interest in Peak Gold, LLC (Joint Venture Company), which leases approximately 675,000 acres from the Tetlin Tribal Council[15] - CORE Alaska, LLC, a wholly-owned subsidiary, sold a 30.0% membership interest in the Joint Venture Company to KG Mining (an indirect wholly-owned subsidiary of Kinross Gold Corporation) for $32.4 million cash and 809,744 shares of CORE's common stock, which were subsequently canceled[16] - After the Kinross Transactions, CORE Alaska retained a 30.0% interest, and KG Mining obtained a 70.0% interest in the Joint Venture Company, with KG Mining becoming the manager and operator[17] - The Joint Venture Company plans to mine ore from Peak and North Peak deposits and process it at Kinross's Fort Knox mining and milling complex, which is expected to accelerate development and reduce upfront capital costs[18] - The Management Committee approved an $18.0 million budget for calendar year 2021 for in-fill drilling, engineering, environmental studies, and permitting, with CORE's share being approximately $5.4 million[18] 2. Basis of Presentation - The unaudited condensed consolidated financial statements conform to US GAAP for interim financial information and SEC rules, omitting some annual disclosure requirements[19] - Management's opinion is that all necessary adjustments for fair presentation have been included and are of a normal recurring nature[19] 3. Summary of Significant Accounting Policies - Key accounting policies include management estimates, fair value method for stock-based compensation, liability method for income taxes, and equity method for the investment in the Joint Venture Company[21] - The investment in the Joint Venture Company is recorded at historical cost, but due to cumulative losses exceeding this cost, the investment balance is zero as of December 31, 2020, and June 30, 2020[21] - The valuation of shares received from the sale of a portion of the Joint Venture Company interest was classified as a Level 3 fair value measurement due to significant unobservable data[21] - The company adopted ASU 2016-02 (Leases) in July 2019 with no material impact and does not anticipate a material impact from ASU 2020-01 (Investments—Equity Securities) effective after December 15, 2020[21] 4. Investment in the Joint Venture Company - The Company's investment in Peak Gold, LLC (Joint Venture Company) was initially recorded at $1.43 million and has accumulated contributions of approximately $13.2 million as of December 31, 2020[24] - Due to cumulative losses exceeding the historical cost, the investment balance in the Joint Venture Company is zero as of December 31, 2020, and June 30, 2020[25] - The Company's share of the Joint Venture Company's net loss was approximately $0.9 million for the three months ended December 31, 2020, and $1.3 million for the six months ended December 31, 2020[25] - Suspended losses for the period from inception to December 31, 2020, total approximately $21.8 million, which will be recognized against future earnings from the investment[25] 5. Prepaid Expenses and other | Prepaid Expenses and Other | December 31, 2020 | June 30, 2020 | | :------------------------- | :---------------- | :------------ | | Total | $412,761 | $72,244 | - Prepaid expenses increased significantly from $72,244 at June 30, 2020, to $412,761 at December 31, 2020, primarily related to prepaid insurance, annual claim rentals, and management fees[26] 6. Net Income/(Loss) Per Share | Metric | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | | :----- | :------------------------------ | :------------------------------ | :---------------------------- | :---------------------------- | | Net income/(loss) attributable to common stock | $(3,214,045) | $(2,928,532) | $30,228,580 | $(4,779,866) | | Weighted Average Shares Outstanding (Basic and Diluted) | 6,042,150 | 6,439,273 | 6,309,482 | 6,398,193 | | Net Income/(Loss) Per Share (Basic and Diluted) | $(0.53) | $(0.45) | $4.79 | $(0.75) | - For the six months ended December 31, 2020, basic and diluted net income per share was $4.79, a substantial increase from a loss of $(0.75) per share in the prior year[27] - Options to purchase 100,000 shares were outstanding but not included in diluted EPS calculations for the quarter ended December 31, 2020, due to being anti-dilutive[27] 7. Shareholders' Equity - Stockholders approved an increase in authorized common stock from 30,000,000 to 45,000,000 shares on December 11, 2020[28] - As of December 31, 2020, the company had 6,200,500 shares of Common Stock outstanding, including 740,499 shares of unvested restricted stock[28] - A private placement on September 23, 2020, issued 247,172 shares of Common Stock at $13.25 per share, generating approximately $3.2 million in net proceeds for working capital and funding the Joint Venture Company[28] - The company adopted a limited duration stockholder rights agreement (Rights Agreement) on September 23, 2020, replacing a prior plan, with a one-year duration expiring September 22, 2021[29] 8. Sales Transaction with KG Mining - On September 29, 2020, CORE Alaska sold a 30.0% membership interest in the Joint Venture Company to KG Mining for $32.4 million in cash and 809,744 shares of CORE Common Stock (subsequently canceled)[31] - The company recognized a gain on sale of $39.6 million from this transaction, valuing the stock consideration based on the implied fair value of the CORE Transactions[31] - KG Mining now holds a 70.0% membership interest and serves as the manager and operator of the Joint Venture Company, with CORE Alaska retaining 30.0%[31] - A $1.2 million cash prepayment from KG Mining for silver royalty reimbursements was recorded as a non-current liability, refundable under certain conditions[31] - The Joint Venture Company formed Contango Minerals and contributed approximately 167,000 acres of Alaska State mining claims to it, which were then assigned to CORE Alaska and distributed to the Company, making Contango Minerals a wholly-owned subsidiary[31] 9. Related Party Transactions - The company entered into a Second Amended and Restated Management Services Agreement with Juneau Exploration, L.P. (JEX), managed by Executive Chairman Brad Juneau, for office space and services at a monthly fee of $10,000[34] - President and CEO Rick Van Nieuwenhuyse purchased 75,472 shares of Common Stock for $1.0 million in the 2020 Private Placement, increasing his ownership to 2.2%[34] - Contango Minerals granted Royal Gold an additional 1% net smelter returns royalty on certain Alaska State mining claims, increasing the total royalty to 3.0%[34] - The Joint Venture Company granted Royal Gold a new 28.0% net smelter returns royalty on all silver produced from a defined area within the Tetlin Lease[35] 10. Stock-Based Compensation - The Board adopted the Second Amendment to the Equity Plan, increasing the maximum aggregate number of shares for individual award grants to 300,000 shares per calendar year[37] | Metric | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2019 | | :----- | :------------------------------ | :---------------------------- | :------------------------------ | :---------------------------- | | Stock-based compensation expense | $1,009,900 | $1,902,058 | $882,881 | $1,623,323 | - As of December 31, 2020, there were 740,499 shares of unvested restricted Common Stock and 100,000 options to purchase Common Stock outstanding[37] - Total unrecognized compensation cost for unvested awards was $5,240,642, and for nonvested options was $377,589, as of December 31, 2020[37][38] 11. Commitments and Contingencies - The Tetlin Lease term was extended to July 15, 2028, with exploration expenditure requirements satisfied through 2028[39] - The Tetlin Tribal Council exercised an option on December 30, 2020, to increase its production royalty by 0.75% for $450,000, which will be credited against future royalty payments[39] - The Joint Venture Company must pay an advance minimum royalty of approximately $75,000 per year to the Tetlin Tribal Council until production royalties begin[39] - Retention Agreements with executives provide for aggregate payments of $1,500,000 upon a change of control occurring before August 6, 2025[40] - Rick Van Nieuwenhuyse's Short Term Incentive Plan (STIP) provides for payouts up to 200% of his annual base salary, payable in cash and/or restricted stock, based on performance goals[40] 12. Income Taxes | Income Tax Metric | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Six Months Ended Dec 31, 2019 | | :---------------- | :------------------------------ | :---------------------------- | :------------------------------ | :---------------------------- | | Income tax (expense)/benefit | $571,901 | $(1,834,925) | $— | $— | | Effective tax rate | N/A | 5.71% | N/A | 0% | - The company recognized a $0.6 million income tax benefit for the three months ended December 31, 2020, and a $1.8 million income tax expense for the six months ended December 31, 2020[41] - A full valuation allowance is maintained on deferred tax assets due to a history of net operating losses and the non-recurring nature of the gain on the sale of the CORE JV Interest[41] - The effective tax rate for the six months ended December 31, 2020, was 5.71%, compared to 0% in the prior year[41] Management's Discussion and Analysis of Financial Condition and Results of Operations Overview - The Company explores for gold and associated minerals in Alaska through a 30.0% interest in Peak Gold, LLC (Joint Venture Company) and its wholly-owned subsidiary, Contango Minerals Alaska, LLC, which leases 167,000 acres[46] - CORE Alaska sold a 30.0% membership interest in the Joint Venture Company to KG Mining for $32.4 million cash and 809,744 shares of CORE common stock, resulting in KG Mining holding a 70.0% interest and CORE retaining 30.0%[46] - The Joint Venture Company plans to process ore from Peak and North Peak deposits at Kinross's Fort Knox mill, aiming to accelerate development and reduce costs[47] Background - The Joint Venture Company was formed in January 2015 with Royal Gold, which contributed $37.1 million by September 2020 for exploration[48] - The Kinross Transactions, which closed on September 30, 2020, involved KG Mining acquiring Royal Gold's 40.0% interest and CORE's 30.0% interest, making KG Mining the 70.0% owner and manager[49] - As of December 31, 2020, the Company had $31.9 million in cash and had funded $2.4 million to the Joint Venture Company for its 2020 budget[49] - The Management Committee approved an $18.0 million budget for 2021, with CORE's share being $5.4 million, for drilling, studies, and permitting[49] Properties - The Company's primary focus since 2009 has been exploration of the Tetlin Lease (675,000 acres) for minerals near Tok, Alaska[50] - The Tetlin Lease was extended to July 15, 2028, and requires production royalties ranging from 2.25% to 4.25% once commercial production begins[51] - Through the Separation Agreement, Contango Minerals (wholly-owned subsidiary) now controls approximately 167,000 acres of Alaska State mining claims, subject to an Option Agreement with the Joint Venture Company[51] | Property | Location | Commodities | Claims | Estimated Acres | Type | | :----------------- | :-------------- | :------------------- | :----- | :-------------- | :------------------ | | Contango Minerals: | | | | | | | Tetlin-Tok | Eastern Interior| Gold, Copper, Silver | 129 | 10,430 | State Mining Claims | | Eagle | Eastern Interior| Gold, Copper, Silver | 426 | 67,350 | State Mining Claims | | Triple Z Noah | Eastern Interior| Gold, Copper, Silver | 95 | 14,810 | State Mining Claims | | | Eastern Interior| Gold, Copper, Silver | 482 | 74,330 | State Mining Claims | | Joint Venture Company: | | | | | | | Tetlin-Village | Eastern Interior| Gold, Copper, Silver | - | 675,000 | Lease | | TOTALS: | | | 1,132 | 841,920 | | Strategy - The company's strategy includes retaining proven executive leadership, partnering with strategic industry participants for exploration, and structuring incentives to align executive and director interests with stockholders through equity ownership[53] - Rick Van Nieuwenhuyse was appointed President and CEO on January 6, 2020, bringing extensive mining industry experience[53] - KG Mining became the manager of the Joint Venture Company on October 1, 2020, with a Management Committee (one appointee from CORE, two from KG Mining) determining overall policies[53] - As of December 31, 2020, directors and executives beneficially owned approximately 25.1% of the Company's Common Stock[53] Exploration and Mining Property - The Company controls 167,000 acres of State of Alaska mining claims and the Joint Venture Company leases 675,000 acres of the Tetlin Lease for gold and associated minerals exploration[55] - The Joint Venture Company spent approximately $3.0 million on drilling, metallurgical testing, environmental, and engineering work during the quarter ended December 31, 2020[69] - The 2021 budget for the Joint Venture Company is $18.0 million, focusing on in-fill drilling, engineering, environmental studies, and permitting for the Peak and North Peak deposits[55][67] - From inception to December 31, 2020, the Joint Venture Company incurred $50.6 million in exploration program expenditures[57] 100% Owned State of Alaska Mining Claims - The Triple Z Prospect, covering 14,810 acres, shows promise for porphyry copper-gold-silver-molybdenum mineralization, with drilling planned for late 2021 pending a land transfer[58] - The Hona Prospect, located northwest of the Main Peak deposit, has identified three target areas (Hona 1, 2, and 3) with anomalous gold and copper values from reconnaissance and drilling programs[58] | DrillHole | Zone | From (meters) | To (meters) | Interval (meters) | Au_gpt | Ag_gpt | Cu % | | :--------- | :----- | :------------ | :---------- | :---------------- | :----- | :----- | :---- | | HN19001 | Hona 2 | 32.00 | 35.05 | 3.05 | 1.01 | 1.4 | 0.027 | | HN19001 | Hona 2 | 436.17 | 440.89 | 4.72 | 0.80 | - | 0.025 | | HN19002 | Hona 2 | 612.65 | 629.67 | 17.02 | 0.41 | 5.4 | 0.333 | Consulting Services provided by Avalon Development Corporation - Avalon Development Corporation previously provided geological consulting and exploration services to the Company and Joint Venture Company until its owner retired in February 2020[72] - The Joint Venture Company has retained key administrative, geology, and database management personnel from Avalon on a contract basis[72] - The Company's President and CEO, Rick Van Nieuwenhuyse, and former Avalon personnel are now assisting the Joint Venture Company[72] Services Provided by Tetlin Village Members - The Company has a long-standing practice of employing Tetlin Tribal members and their families in Joint Venture Company exploration programs, typically 10 to 15 residents seasonally[73] - These roles include reconnaissance sampling, drill core processing, drill pad construction, expediting, food services, database management, transportation, maintenance, reclamation, and project management[73] Community Affairs - The Joint Venture Company has a Community Support Agreement with the Tetlin Village, providing $100,000 annually through January 1, 2022, for agreed uses and auditing rights[74] - The Joint Venture Company also supports the Tetlin Village in maintaining the village access road[74] Adverse Climate Conditions - Weather conditions in Alaska affect the Joint Venture Company's ability to conduct exploration and mining activities[75] - While year-round operations are believed possible, the arctic climate limits many activities during certain seasons[75] Competition - The Company faces strong competition for new exploration-stage properties and mineral extraction in Alaska from larger mining companies with significantly greater financial resources and technical expertise[76] - Competition also exists in securing financing for mineral properties and obtaining services from third-party providers[76] Off-Balance Sheet Arrangements - The Company has no off-balance sheet arrangements[77] Contractual Obligations - The Tetlin Lease requires production royalties (2.25% to 4.25%) and an advance minimum royalty of approximately $75,000 per year to the Tetlin Tribal Council[77] - The Joint Venture Company is obligated to pay Royal Gold a 3.0% overriding royalty on Tetlin Lease minerals and a 28.0% net smelter returns silver royalty on silver from a defined area[77] - The Company pays claim rentals on State of Alaska mining claims, totaling $294,435 for the 2020–2021 assessment year[77] - Retention Agreements with executives entail payments of $1,500,000 in aggregate upon a change of control before August 6, 2025[77] - A $1.2 million reimbursement prepayment from Kinross for silver royalty payments is a refundable non-current liability if the Joint Venture Company terminates or CORE's interest falls below 5%[77] Application of Critical Accounting Policies and Management's Estimates - Critical accounting policies include stock-based compensation (fair value method, requiring assumptions like volatility and turnover) and investment in the Joint Venture Company (equity method)[78][79] - The investment in the Joint Venture Company is accounted for under the equity method, with the balance at zero due to cumulative losses exceeding historical cost[79] Results of Operations - Neither the Company nor the Joint Venture Company has commenced mining or generated revenue from mineral sales; future profitability depends on commercially recoverable minerals and capital raising[80] Three Months Ended December 31, 2020 Compared to Three Months Ended December 31, 2019 | Expense Category | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | Change (YoY) | | :--------------- | :------------------------------ | :------------------------------ | :----------- | | General and Administrative Expense | $2,602,591 | $1,150,944 | +126.1% | | Loss from Equity Investment in the Joint Venture Company | $1,123,452 | $1,800,000 | -37.6% | - General and administrative expense increased by 126.1% due to increased payroll-related fees (new employees, direct compensation for executives, bonuses) and stock-based compensation[81] - Loss from equity investment in the Joint Venture Company decreased by 37.6%, reflecting lower investment funding during the period[81] Six Months Ended December 31, 2020 Compared to Six Months Ended December 31, 2019 | Expense Category | Six Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2019 | Change (YoY) | | :--------------- | :---------------------------- | :---------------------------- | :----------- | | General and Administrative Expense | $6,127,582 | $2,141,935 | +186.1% | | Loss from Equity Investment in the Joint Venture Company | $1,371,252 | $2,700,000 | -49.2% | | Gain on Sale of a Portion of the Investment in the Joint Venture Company | $39,642,857 | $— | N/A | - General and administrative expense increased by 186.1% due to approximately $2.9 million in non-recurring legal and transaction fees related to the CORE Transactions, as well as increased payroll and bonuses[83] - The company recognized a significant gain of $39.6 million on the sale of a portion of its investment in the Joint Venture Company[83] Liquidity and Capital Resources - As of December 31, 2020, the Company had approximately $31.9 million in cash, which is believed to be sufficient to meet working capital requirements for the next twelve months, primarily due to $32.4 million received from the Kinross Transaction and a September 2020 capital raise[84] - Future cash needs will primarily be for capital calls from the Joint Venture Company (CORE's share of the 2021 budget is $5.4 million) and general and administrative expenses[84] - The Company may elect not to fund its portion of approved Joint Venture Company budgets, which would result in dilution of its membership interest[84] - The Company anticipates raising additional capital through equity issuances in the next six months to fund its share of future Joint Venture Company exploration and operating costs[84] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a "smaller reporting company," Contango ORE, Inc. is not required to provide quantitative and qualitative disclosures about market risk in this report - The Company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a "smaller reporting company"[89] Item 4. Controls and Procedures Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of December 31, 2020. There have been no material changes in internal control over financial reporting during the last fiscal quarter - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level as of December 31, 2020[90] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[90] PART II – OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, equity sales, mine safety, and exhibits Item 1. Legal Proceedings The Company is not currently a party to any material legal proceedings, nor is it aware of any contemplated proceedings that could have a material adverse effect on its financial condition, cash flows, or results of operations - The Company is not a party to any material legal or administrative proceedings[91] - No material proceedings are contemplated against the Company that could reasonably be expected to have a material adverse effect[91] Item 1A. Risk Factors As a smaller reporting company, the Company refers to its Annual Report on Form 10-K and prior 10-Q for risk factors, with updates in MD&A - The Company is exempt from providing a detailed risk factors section as a "smaller reporting company"[91] - Reference is made to the Annual Report on Form 10-K and prior Quarterly Report on Form 10-Q for comprehensive risk factors, with updates provided in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations"[91] - Updated risk factors include the Company's Common Stock being thinly traded, which can lead to disproportionately large price changes from small trades, and potential increases in tax expense due to changes in tax laws in key jurisdictions, such as proposed increases to the U.S. corporate income tax rate[86][87] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The Company reports no unregistered sales of equity securities or use of proceeds to disclose under this item - There are no unregistered sales of equity securities and use of proceeds to report[91] Item 4. Mine Safety Disclosures The Company has no mine safety disclosures to report - There are no mine safety disclosures to report[91] Item 5. Other Information The Company has no other information to disclose under this item - There is no other information to report[91] Item 6. Exhibits This section lists all exhibits filed as part of this Form 10-Q, including agreements, certificates, and certifications - The report includes a list of exhibits such as the Purchase Agreement with Skip Sub, Inc., Certificate of Incorporation amendments, Bylaws, Rights Agreement, Management Services Agreement with Juneau Exploration, L.P., and amendments to the Equity Compensation Plan[93] - Certifications from the Principal Executive Officer and Principal Financial Officer are filed herewith, as required by the Securities Exchange Act of 1934 and the Sarbanes-Oxley Act of 2002[93]