conta20230930

conta20230930_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 September 30, 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 November 14, 2023 was 9,400,128.

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CONTANGO ORE, INC.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 30, 2023 (unaudited) and June 30, 2023	3
	Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Three Months Ended September 30, 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	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	28
Item 4.	Controls and Procedures	28
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30

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

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CONTANGO ORE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

Item 1 - Financial Statements

	*September 30, 2023*			*June 30, 2023*
ASSETS

CURRENT ASSETS:
Cash	$	18,507,308		$	11,646,194
Restricted cash		231,000			231,000
Prepaid expenses and other		795,111			413,907
Derivative contract asset		549,116			—
Total current assets		20,082,535			12,291,101

LONG-TERM ASSETS:
Investment in Peak Gold (Note 5)		21,420,712			—
Property & equipment, net		13,352,637			13,371,638
Total long-term assets		34,773,349			13,371,638

TOTAL ASSETS	$	54,855,884		$	25,662,739

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES:
Accounts payable	$	2,129,361		$	220,755
Accrued liabilities		871,728			2,077,870
Current portion of long-term debt		2,000,000			—
Total current liabilities		5,001,089			2,298,625

NON-CURRENT LIABILITIES:
Advance royalty reimbursement		1,200,000			1,200,000
Asset retirement obligations		243,126			239,942
Contingent consideration liability		1,240,563			1,240,563
Derivative contract liability		3,274,527			—
Debt, net		32,855,385			25,457,047
Total non-current liabilities		38,813,601			28,137,552

TOTAL LIABILITIES		43,814,690			30,436,177

COMMITMENTS AND CONTINGENCIES (NOTE 12)

STOCKHOLDERS’ EQUITY/(DEFICIT):
Common Stock, $0.01 par value, 45,000,000 shares authorized; 9,395,112 shares issued and 9,393,922 outstanding at September 30, 2023; 7,781,690 shares issued and outstanding at June 30, 2023		93,951			77,817
Additional paid-in capital		122,393,198			93,424,283
Treasury stock at cost (1,190 at September 30, 2023; and 0 shares at June 30, 2023)		(21,190	)		—
Accumulated deficit		(111,424,765	)		(98,275,538	)
TOTAL STOCKHOLDERS’ EQUITY/(DEFICIT)		11,041,194			(4,773,438	)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)	$	54,855,884		$	25,662,739

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

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CONTANGO ORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	*Three Months Ended September 30,*
	*2023*			*2022*
EXPENSES:
Claim rental expense	$	(127,006	)	$	(146,925	)
Exploration expense		(1,081,927	)		(4,396,570	)
Depreciation expense		(25,997	)		(34,214	)
Accretion expense		(3,183	)		(3,026	)
General and administrative expense		(2,767,477	)		(2,424,068	)
Total expenses		(4,005,590	)		(7,004,803	)

OTHER INCOME/(EXPENSE):
Interest income		39,045			8,546
Interest expense		(847,983	)		(449,470	)
Loss from equity investment in Peak Gold, LLC (Note 5)		(5,609,288	)		—
Insurance recoveries		—			338,301
Unrealized loss on derivative contracts		(2,725,411	)		—
Other income		—			15,656
Total other income/(expense)		(9,143,637	)		(86,967	)

NET LOSS	$	(13,149,227	)	$	(7,091,770	)

LOSS PER SHARE
Basic and diluted	$	(1.47	)	$	(1.05	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic and diluted		8,935,863			6,771,245

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

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CONTANGO ORE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	*Three Months Ended September 30,*
	*2023*			*2022*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(13,149,227	)	$	(7,091,770	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		739,783			787,874
Depreciation expense		25,997			34,214
Accretion expense		3,183			3,026
Loss from equity investment in Peak Gold, LLC		5,609,288			—
Unrealized loss from derivative contracts		2,725,411			—
Interest expense paid in stock		66,658			—
Amortization of debt discount and debt issuance fees		105,633			49,471
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses and other		(381,203	)		13,384
Increase in accounts payable and accrued liabilities		702,464			948,756
Net cash used in operating activities		(3,552,013	)		(5,255,045	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Cash invested in Peak Gold, LLC		(27,030,000	)		—
Acquisition of property and equipment		(6,995	)		—
Net cash used by investing activities		(27,036,995	)		—

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash paid for shares withheld from employees for payroll tax withholding		(21,190	)		(27,693	)
Cash proceeds from debt		10,000,000			—
Debt issuance costs		(707,296	)		(2,736	)
Cash proceeds from capital raise, net		28,178,608			—
Net cash provided/(used) by financing activities		37,450,122			(30,429	)

NET DECREASE (INCREASE) IN CASH		6,861,114			(5,285,474	)
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD		11,877,194			23,326,101
CASH AND RESTRICTED CASH, END OF PERIOD	$	18,738,308		$	18,040,627

Supplemental disclosure of cash flow information
Cash paid for:
Interest expense	$	472,184		$	416,670
Non-cash investing and financing activities
Interest expense paid with stock		66,658			138,886
Total non-cash investing and financing activities	$	66,658		$	138,886

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

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CONTANGO ORE, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY/(DEFICIT)

(Unaudited)

					*Additional*									*Total*
	*Common Stock*				*Paid-In*			*Treasury*			*Accumulated*			*Stockholders’*
	*Shares*		*Amount*		*Capital*			*Stock*			*Deficit*			*Equity/(Deficit)*
Balance at June 30, 2023		7,781,690	$	77,817	$	93,424,283		$	—		$	(98,275,538	)	$	(4,773,438	)
Stock-based compensation		—		—		739,783			—			—			739,783
Restricted stock activity		10,140		101		(101	)		—			—			—
Issuance of common stock		1,600,000		16,000		30,384,000			—			—			30,400,000
Cost of common stock issuance		—		—		(2,221,392	)		—			—			(2,221,392	)
Stock issued for convertible note interest payment		3,282		33		66,625			—			—			66,658
Treasury shares withheld for employee taxes		—		—		—			(21,190	)		—			(21,190	)
Net loss for the period		—		—		—			—			(13,149,227	)		(13,149,227	)
Balance at September 30, 2023		9,395,112	$	93,951	$	122,393,198		$	(21,190	)	$	(111,424,765	)	$	11,041,194

					*Additional*								*Total*
	*Common Stock*				*Paid-In*		*Treasury*			*Accumulated*			*Stockholders’*
	*Shares*		*Amount*		*Capital*		*Stock*			*Deficit*			*Equity*
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 stock issued for convertible note interest payment		—		—		—		138,886			—			138,886
Treasury stock 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

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

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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 business through three primary means:

●

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 Main and North Manh Choh deposits within the Peak Gold JV Property (“Manh Choh” or 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 (“Lucky Shot”, “Lucky Shot Property”, or the “Lucky Shot Project”) ; 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 Property in November 2022. The Company retained essentially all of the acreage where drilling work was performed in 2019 and 2021, and used sampling data to determine which acreage should be released.

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 since 2010, which has resulted in identifying two mineral deposits (Main and North Manh Choh) and several other gold, silver, and copper prospects. The other 70.0% membership interest in the Peak Gold JV is owned by KG Mining (Alaska), Inc. (“KG Mining”), an indirect wholly-owned subsidiary of Kinross Gold Corporation (“Kinross”). 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 Peak Gold JV has entered into an Ore Haul Agreement with Black Gold Transport, located in North Pole, Alaska to transport the run-of-mine ore from the Manh Choh mine site to the Fort Knox Mill complex. Peak Gold JV has also entered into a contract with Kiewit Mining Group to provide contract mining and site preparation work at the Manh Choh site. The Peak Gold JV will be charged a toll for using the Fort Knox facilities pursuant to a toll milling agreement by and between the Peak Gold JV and Fairbanks Gold Mining, Inc., which was entered into and became effective as of April 14, 2023.

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, LLC, a wholly-owned subsidiary of the Company (“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 (as amended the “A&R JV LLCA”). The First Amendment to the A&R JV LLCA provides that, beginning in 2023, the Company may fund its quarterly scheduled cash calls on a monthly basis. To date, the Peak Gold JV management committee (the “JV Management Committee”) has approved a budget for 2023, with cash calls totaling approximately $165.1 million, of which the Company’s share is approximately $49.5 million. As of September 30, 2023, the Company funded $39.8 million of the 2023 budget.

At the Lucky Shot Property, in August 2023, the Company began executing a program to complete surface drilling on the Coleman segment of the Lucky Shot vein. The program was shut down in September 2023 to preserve the safety of the Company's employees and contractors due to poor weather conditions.

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 2024. 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 2024.

During the current quarter, the Company obtained office space in Vancouver, Canada and created a Canadian subsidiary, Contango Mining Canada, Inc.

The Company’s fiscal year end is June 30.

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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, 2023. The results of operations for the three months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2024.

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. The JV Management Committee has proposed a significant budget to complete and start the operations of the Manh Choh mine, which will require the Company to either elect to fund its 30% portion or be subject to dilution. The JV Management Committee has approved a budget for 2023, with cash calls totaling approximately $165.1 million, of which the Company’s share is approximately $49.5 million. As of September 30, 2023, the Company had funded $39.8 million of its share of the 2023 cash calls. The Company will finance its remaining share of the Manh Choh project by drawing down on its secured credit facility (See Note 14 - Debt). The Company also completed an Underwritten Offering in July 2023 with net proceeds of $28.2 million. Management believes the Company will maintain sufficient liquidity to meet its working capital requirements for the next twelve months from the date of this report, because it has sufficient cash on hand to cover its general and administrative expenses and debt obligations. If necessary, the Company could elect not to fund its share of the Manh Choh Project, and have its interest diluted. 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. The Company has limited financial resources and the ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions, the exploration results achieved at the Peak Gold JV Property, as well as the market price of metals. The Company cannot be certain that financing will be available to the Company on acceptable terms, if at all.

4. Summary of Significant Accounting Policies

Please see the Company’s Form 10-K for the fiscal year ended June 30, 2023 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, except for the accounting policy related to derivative instruments below.

Derivative Instruments. The Company utilizes derivative instruments in order to manage exposure to risks associated with fluctuating commodity prices. The Company recognizes all derivatives as either assets or liabilities, measured at fair value, and recognizes changes in the fair value of derivatives in current earnings. The Company has elected to not designate any of its positions under the hedge accounting rules. Accordingly, these derivative contracts are mark-to-market and any changes in the estimated values of derivative contracts held at the balance sheet date are recognized in unrealized (loss) gain on derivative contracts, net in the Condensed Consolidated Statements of Operations as unrealized gains or losses on derivative contracts. Realized gains or losses on derivative contracts will be recognized in (Loss) gain on derivative contracts, net in the Condensed Consolidated Statements of Operations.

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 September 30, 2023, the Company has contributed approximately $67.5 million to the Peak Gold JV. As of September 30, 2023, 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 September 30, 2023:

	*Investment*
	*in Peak Gold, LLC*
Investment balance at June 30, 2022	$	—
Investment in Peak Gold, LLC		21,120,000
Loss from equity investment in Peak Gold, LLC		(21,120,000	)
Investment balance at June 30, 2023	$	—
Investment in Peak Gold, LLC		27,030,000
Loss from equity investment in Peak Gold, LLC		(5,609,288	)
Investment balance at September 30, 2023	$	21,420,712

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The following table presents the condensed unaudited results of operations for the Peak Gold JV for the three month periods ended September 30, 2023 and 2022 in accordance with US GAAP:

	Three Months Ended		Three Months Ended
	September 30, 2023		September 30, 2022
EXPENSES:
Exploration expense	$	4,509,967	$	1,438,756
General and administrative		65,013		77,050
Total expenses		4,574,980		1,515,806
NET LOSS	$	4,574,980	$	1,515,806

The Company’s share of the Peak Gold JV’s results of operations for the three months ended September 30, 2023 was a loss of approximately $1.4 million. The Company’s share in the results of operations for the three months ended September 30, 2022 was a loss of approximately $0.4 million. 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 September 30, 2023 and June 30, 2023, the Company’s share of the Peak Gold JV’s inception-to-date results of operations was a cumulative loss of approximately $46.1 million and $44.8 million, respectively. In previous quarters, the Company's cumulative losses exceeded its cumulative investment in the Peak Gold JV and the equity method of accounting was suspended, which resulted in suspended losses, and an investment balance of zero at June 30, 2023. During the current quarter, the Company's cumulative investment in the Peak Gold JV, exceeded its cumulative losses. Therefore the company recognized all of the previously suspended losses, approximately $4.3 million, and the investment in Peak Gold had a balance of $21.4 million at September 30, 2023, compared to $0 at June 30, 2023.

6. Prepaid Expenses and other assets

The Company has prepaid expenses and other assets of $795,111 and $413,907 as of September 30, 2023 and June 30, 2023, respectively. Prepaid expenses primarily relate to prepaid insurance, surety bond deposits, and commitment fees.

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 September 30,*
	*2023*								*2022*
				*Weighted Average*		*Loss*						*Weighted Average*		*Loss Per*
	*Net Loss*			*Shares*		*Per Share*			*Net Loss*			*Shares*		*Share*
Basic Net Loss per Share:
Net loss attributable to common stock	$	(13,149,227	)		8,935,863	$	(1.47	)	$	(7,091,770	)		6,771,245	$	(1.05	)
Diluted Net Loss per Share:
Net loss attributable to common stock	$	(13,149,227	)		8,935,863	$	(1.47	)	$	(7,091,770	)		6,771,245	$	(1.05	)

Options and warrants to purchase 501,000 shares of common stock of the Company were outstanding as of September 30, 2023, and options to purchase 100,000 shares of common stock were outstanding as of September 30, 2022. These options and warrants were not included in the computation of diluted earnings per share for the three month periods ended September 30, 2023 and 2022 due to being anti-dilutive. There were no warrants outstanding as of September 30, 2022.

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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 September 30, 2023, 9,393,922 shares of common stock were outstanding, including 436,183 shares of unvested restricted stock. As of September 30, 2023, options and warrants to purchase 501,000 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 2024 and August 2025.

Underwritten Offering

On July 24, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Maxim Group LLC and Freedom Capital Markets (collectively, the “Underwriters”), relating to an underwritten public offering and sale (the “Offering”) of 1,600,000 shares (the “Underwritten Shares”) of the Company’s common stock that was registered under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s registration statement on Form S-3. All of the Underwritten Shares were sold by the Company. The offering price of the Underwritten Shares was $19.00 per share, and the Underwriters agreed to purchase the Underwritten Shares from the Company pursuant to the Underwriting Agreement at a price of $17.77 per share (the “Purchase Price”) which included a 6.5% Underwriters discount. The net proceeds from the Offering were $28.2 million after deducting underwriting discounts and commissions and offering expenses. The Offering closed on July 26, 2023.

ATM Offering

On June 8, 2023, the Company entered into a Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (the “Agent”), pursuant to which the Company may offer and sell from time to time up to $40,000,000 of shares of the Company’s common stock through the Agent (the “ATM Offering”). The offer and sale of the common stock was registered under the Securities Act, pursuant to the Company’s registration statement on Form S-3. Sales of the common stock, pursuant to the Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through the New York Stock Exchange or on any other existing trading market for the Company’s common stock. The Company has no obligation to sell any of the common stock under the Sales Agreement and may at any time suspend or terminate the offering of its common stock pursuant to the Sales Agreement upon notice and subject to other conditions. The Agent will act as sales agent and will use commercially reasonable efforts to sell on the Company’s behalf all of the common stock requested to be sold by the Company, consistent with the Agent’s normal trading and sales practices, on mutually agreed terms between the Agent and the Company. The Company pays the Agent a commission of 2.75% of the gross proceeds of the Shares sold through it under the Sales Agreement. During the prior fiscal year, the Company had sold a total of 158,461 shares of common stock pursuant to the Sales Agreement for net proceeds of approximately $4.1 million. No further activity has occurred on the ATM Offering to date.

May 2023 Warrant Exercise

In May 2023, the Company offered the holders of its December 2022 Warrants and January 2023 Warrants with an original exercise price of $25.00, (collectively, “the Original Warrants”) the opportunity to exercise those warrants at the reduced exercise price of $22.00 (the “Modified Warrants”) and receive shares of common stock, par value $0.01 per share of the Company by paying the reduced exercise price in cash and surrendering the original warrants on or before May 9, 2023. A total of 313,000 Original Warrants were exercised resulting in total cash to the Company of $6.9 million (the “Warrant Exercise Proceeds”) and the issuance of 313,000 shares of Company common stock upon such exercise. Such shares of common stock were issued in reliance on an exemption from registration under the Securities Act, pursuant to Section 4(a)(2) thereof. The bases for the availability of this exemption include the facts that the issuance was a private transaction which did not involve a public offering and the shares were offered and sold to a limited number of purchasers. The Warrant Exercise Proceeds were used for working capital purposes and for funding future obligations of the Company. In connection with the accelerated exercise of the Original Warrants, the Company agreed to issue new warrants to purchase 313,000 shares of Company common stock at $30.00 per share to the exercising holders in the amount of the respective December 2022 Warrants and January 2023 Warrants that were exercised by such holders (the “May 2023 Warrants”). Consistent with the accounting guidance for modifications of a freestanding equity-classified warrant as a part of an equity offering, the Company recorded the excess in fair value of the Modified Warrants over the Original Warrants as an equity issuance cost, of approximately $383,000. The fair value of the Modified Warrants and the Original Warrants were calculated as of May 9, 2023 with the following weighted average assumptions used: (i) risk-free interest rate of 4.81%; (ii) expected life of 1 year; (iii) expected volatility of 42.5%; and (iv) expected dividend yield of 0%. The May 2023 Warrants were classified within equity and the Warrant Exercise Proceeds were allocated to the May 2023 Warrants based on their relative fair value. The fair value of each of the May 2023 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 4.81%; (ii) expected life of 1.5 years; (iii) expected volatility of 43.7%; and (iv) expected dividend yield of 0%.

January 2023 Private Placement

On January 19, 2023, the Company completed the issuance and sale of an aggregate of 117,500 shares (the “January 2023 Shares”) of the Company’s common stock, for $20.00 per share, and warrants (the “January 2023 Warrants”) entitling each purchaser to purchase shares of common stock for $25.00 per share (the “January 2023 Warrant Shares” and together with the January 2023 Shares and the January 2023 Warrants, the “January 2023 Securities”), in a private placement (the “January 2023 Private Placement”) to certain accredited investors (the “January 2023 Investors”) pursuant to Subscription Agreements (the “January 2023 Subscription Agreements”), dated as of January 19, 2023 between the Company and each of the January 2023 Investors.

Pursuant to the January 2023 Warrants between the Company and each of the January 2023 Investors, the January 2023 Warrants are 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 January 2023 Warrants 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 actions. The January 2023 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 January 2023 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 4.65%; (ii) expected life of 1 year; (iii) expected volatility of 40.4%; and (iv) expected dividend yield of 0%.

Petrie Partners Securities, LLC (“Petrie”) assisted the Company with the January 2023 Private Placement and received compensation equal to 3.25% of the proceeds from the January 2023 Investors solicited by Petrie. Net proceeds from the January 2023 Private Placement totaled approximately $2.3 million and were used to fund the Company’s exploration and development program and for general corporate purposes. The January 2023 Securities sold were not registered under the Securities Act, but the January 2023 Shares and the January 2023 Warrant Shares are subject to a Registration Rights Agreement allowing the shares to be registered by the holders at a future date.

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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.

Pursuant to the December 2022 Warrants between the Company and each of the December 2022 Investors, the December 2022 Warrants are 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 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 actions. 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 assisted the Company with the December 2022 Private Placement and received compensation equal to 3.25% of the proceeds from the December 2022 Investors solicited by Petrie. Net proceeds from the December 2022 Private Placement totaled approximately $5.6 million and were used to fund the Company’s exploration and development program and for general corporate purposes. The December 2022 Securities sold were not registered under 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. On September 13, 2023, the Board of Directors approved an amendment to the Rights Agreement, extending the term by an additional year to September 23, 2024.

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9. 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*	*September 30, 2023*			*June 30, 2023*
Mineral properties	N/A - Units of Production	$	11,700,726		$	11,700,726
Land	Not Depreciated		87,737			87,737
Buildings and improvements (years)	20 - 39		1,455,546			1,455,546
Machinery and equipment (years)	3 - 10		287,635			287,635
Vehicles (years)	5		135,862			135,862
Computer and office equipment (years)	5		23,235			16,239
Furniture & fixtures (years)	5		2,270			2,270
Less: Accumulated depreciation and amortization			(218,238	)		(192,241	)
Less: Accumulated impairment			(122,136	)		(122,136	)
Property & Equipment, net		$	13,352,637		$	13,371,638

10. Related Party Transactions

Mr. Brad Juneau, who served as the Company’s Chairman, President and Chief Executive Officer until January 6, 2020, and the Company’s Executive Chairman until November 11, 2021, and now serves as the Company’s Chairman is also the sole manager of Juneau Exploration, L.P. (“JEX”), a private company involved in the exploration and production of oil and natural gas. On December 11, 2020, the Company entered into a Second Amended and Restated Management Services Agreement (the “A&R MSA”) with JEX, which amends and restates the Amended and Restated Management Services Agreement between the Company and JEX dated as of November 20, 2019. Pursuant to the A&R MSA, JEX will continue, subject to direction of the board of directors of the Company (the “Board”), to provide certain facilities, equipment and services used in the conduct of the business and affairs of the Company and management of its membership interest in the Peak Gold JV. Pursuant to the A&R MSA, JEX provides the Company office space and office equipment, and certain related services. The A&R MSA was effective for one year beginning December 1, 2020 and renews automatically on a monthly basis unless terminated upon ninety days’ prior notice by either the Company or JEX. Pursuant to the A&R MSA, the Company paid JEX a monthly fee of $10,000, which included an allocation of approximately $6,900 for office space and equipment. JEX is also reimbursed for its reasonable and necessary costs and expenses of third parties incurred for the Company. The A&R MSA includes customary indemnification provisions. In January 2023, the monthly fee paid to JEX was reduced to $3,000, and only covers office equipment and related services.

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11. Stock-Based Compensation

On September 15, 2010, the Board adopted the Contango ORE, Inc. Equity Compensation Plan (the “2010 Plan”). On November 10, 2022, the stockholders of the Company approved and adopted the Second Amendment to the Contango ORE, Inc. Amended and Restated 2010 Equity Compensation Plan (as amended, the “Amended Equity Plan”) which increased the number of shares of common stock that the Company may issue under the Amended Equity Plan by 600,000 shares. Under the Amended Equity Plan, the Board may issue up to 2,600,000 shares of common stock and options to officers, directors, employees or consultants of the Company. Awards made under the Amended Equity Plan are subject to such restrictions, terms and conditions, including forfeitures, if any, as may be determined by the Board. On November 14, 2023, the stockholders of the Company approved and adopted the 2023 Omnibus Incentive Plan (the “2023 Plan”) which will replace the 2010 Plan with respect to new grants by the Company. Shares available for grant under the 2023 Plan consist of 193,500 shares of common stock plus (i) any shares remaining available for grant under the 2010 Plan (462,567 shares as of September 30, 2023), (ii) unexercised shares subject to appreciation awards (i.e. stock options or other stock-based awards based on the appreciation in value of a share of the Company’s common stock) granted under the 2010 Plan that expire, terminate, or are canceled for any reason without having been exercised in full, and (iii) shares subject to awards that are not appreciation awards granted under the 2010 Plan that are forfeited for any reason.

As of September 30, 2023, there were 436.183 shares of unvested restricted common stock outstanding and 100,000 options to purchase shares of common stock outstanding issued under the Amended Equity Plan. Stock-based compensation expense for the three months ended September 30, 2023 and 2022 was $739,783 and $787,784, respectively. The amount of compensation expense recognized does not reflect cash compensation actually received by the individuals during the current period, but rather represents the amount of expense recognized by the Company in accordance with US GAAP. All restricted stock grants are expensed over the applicable vesting period based on the fair value at the date the stock is granted. The grant date fair value may differ from the fair value on the date the individual’s restricted stock actually vests.

Restricted Stock.

On December 1, 2020, the Company granted an aggregate 20,000 shares of common stock to two new employees. The restricted stock granted to such employees vests in equal installments over three years on the anniversary of the grant date. As of September 30, 2023, 3,334 shares of restricted stock granted in December 2020 remained unvested.

On August 16, 2021, the Company granted 10,000 shares of common stock to a new employee. The restricted stock granted to the employee vests in equal installments over three years on the anniversary of the grant date. As of September 30, 2023, 3,334 shares of restricted stock granted in August 2021 remain unvested.

On November 11, 2021, the Company granted 123,500 restricted shares of common stock to its executives and non-executive directors. The restricted stock granted to the executives and non-executive directors vests between January 2023 and January 2024. As of September 30, 2023, all 113,500 shares of such restricted stock granted remained unvested.

On February 2, 2022, the Company granted to four employees a total of 12,000 shares of restricted stock. These restricted shares vest between January 2023 and January 2025. As of September 30, 2023, 6,000 shares of such restricted stock granted remained unvested.

In December 2022, the Company cancelled 167,500 shares of unvested restricted stock held by executives and the non-executive directors that were set to vest in January 2023. The Company also granted 209,375 restricted shares of common stock to its executives and non-executive directors. The restricted shares cancellation and the subsequent new grants were accounted for as modification to the original restricted stock grants. The incremental fair value will be recognized over the vesting period. The impact of the modification to the current quarter was immaterial. All of the restricted stock granted in December 2022 vest in January 2025. As of September 30, 2023, there were 209,375 shares of such restricted stock that remained unvested.

On February 7, 2023, the Company granted 90,500 restricted shares of common stock to its executives and non-executive directors. The restricted stock granted to the executives and non-executive directors vests in January 2025. As of September 30, 2023, all 90,500 shares of such restricted stock granted remained unvested.

On August 18, 2023, the Company granted 10,140 restricted shares of common stock to two executives. The restricted stock vests equally over three years on each anniversary date of the grant. As of September 30, 2023, all 10,140 shares of such restricted stock granted remained unvested.

As of September 30, 2023, the total compensation cost related to unvested awards not yet recognized was $2,666,958. The remaining costs will be recognized over the remaining vesting period of the awards.

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Stock options. There were no stock option exercises during the three months ended September 30, 2023. There were also no stock option exercises during the three months ended September 30, 2022. The Company applies the fair value method to account for stock option expense. Under this method, cash flows from the exercise of stock options resulting from tax benefits in excess of recognized cumulative compensation cost (excess tax benefits) are classified as financing cash flows. All employee stock option grants are expensed over the stock option’s vesting period based on the fair value at the date the options are granted. The fair value of each option is estimated as of the date of grant using the Black-Scholes options-pricing model (Level 2 of the fair value hierarchy). As of September 30, 2023, the stock options had a weighted-average remaining life of 1.27 years. All of the compensation cost related to these stock options had been recognized as of September 30, 2023.

A summary of the status of stock options granted under the Amended Equity Plan as of September 30, 2023 and changes during the three months then ended, is presented in the table below:

	*Three Months Ended*
	*September 30, 2023*
	*Shares Under Options*		*Weighted Average Exercise Price*
Outstanding as of June 30, 2023		100,000	$	14.50
Granted		—
Exercised		—
Forfeited		—
Outstanding at the end of the period		100,000	$	14.50
Aggregate intrinsic value	$	545,000
Exercisable, end of the period		100,000
Aggregate intrinsic value	$	545,000
Available for grant, end of period		462,567
Weighted average fair value per share of options granted during the period	$	—

12. Commitments and Contingencies

Tetlin Lease. The Tetlin Lease has a ten-year term that expires on July 15, 2028, and continues for so long thereafter as the Peak Gold JV initiates and continues to conduct mining operations on the Tetlin Lease.

Pursuant to the terms of the Tetlin Lease, the Peak Gold JV is required to spend $350,000 per year until July 15, 2028 in exploration costs. The Company’s exploration expenditures through the 2023 exploration program have satisfied this requirement because exploration funds spent in any year in excess of $350,000 are credited toward future years’ exploration cost requirements. Additionally, should the Peak Gold JV derive revenues from the properties covered under the Tetlin Lease, the Peak Gold JV is required to pay the Tetlin Tribal Council a production royalty ranging from 3.0% to 5.0%, depending on the type of metal produced and the year of production. In lieu of a $450,000 cash payment to the Peak Gold JV from the Tetlin Tribal Council to increase its production royalty by 0.75%, the Peak Gold JV agreed to credit the $450,000 against future production royalty and advance minimum royalty payments due to the Tetlin Tribal Council under the lease once production begins. Until such time as production royalties begin, the Peak Gold JV must pay the Tetlin Tribal Council an advance minimum royalty of approximately $75,000 per year, and subsequent years are escalated by an inflation adjustment.

Gold Exploration. The Company’s Triple Z, Eagle/Hona, Shamrock, Willow, and Lucky Shot claims are all located on State of Alaska lands. The annual claim rentals on these projects vary based on the age of the claims, and are due and payable in full by November 30 of each year. Annual claims rentals for the 2023-2024 assessment year totaled $362,465. The Company paid the current year claim rentals in October 2023. The associated rental expense is amortized over the rental claim period, September 1 through August 31 of each year. As of September 30, 2023, the Peak Gold JV had met the annual labor requirements for the State of Alaska acreage for the next four years, which is the maximum period allowable by Alaska law.

Lucky Shot Property. With regard to the Lucky Shot Property, the Company will be obligated to pay CRH Funding II PTE. LTD, a Singapore private limited corporation (“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.

Royal Gold Royalties. Royal Gold currently holds a 3.0% overriding royalty on the Tetlin Lease and certain state mining claims. Royal Gold also holds a 28.0% net smelter returns silver royalty on all silver produced from a defined area within the Tetlin Lease.

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Retention Agreements. In February 2019, the Company entered into retention agreements with its then Chief Executive Officer, Brad Juneau, its Chief Financial Officer, Leah Gaines, and one other employee providing for payments in an aggregate amount of $1,500,000 upon the occurrence of certain conditions (collectively, the “Retention Agreements”). The Retention Agreements are triggered upon a change of control (as defined in the applicable retention agreement), provided that the recipient is employed by the Company when the change of control occurs. On February 6, 2020, the Company entered into amendments to the Retention Agreements to extend the term of the change of control period from August 6, 2020 until August 6, 2025. Mr. Juneau and Ms. Gaines will receive a payment of $1,000,000 and $250,000, respectively, upon a change of control that takes place prior to August 6, 2025. On June 10, 2020, the Company entered into a retention payment agreement with Rick Van Nieuwenhuyse, the Company’s President and Chief Executive Officer, providing for a payment in an amount of $350,000 upon the occurrence of certain conditions (the “Retention Payment Agreement”). The Retention Payment Agreement is triggered upon a change of control (as defined in the Retention Payment Agreement) which occurs on or prior to August 6, 2025, provided that Mr. Van Nieuwenhuyse is employed by the Company when the change of control occurs. On August 4, 2023, the Company entered into a new retention agreement (the “New Retention Agreement”) with Leah Gaines, Vice President, Chief Financial Officer, Chief Accounting Officer, Treasurer and Secretary and one other employee, for payments in the aggregate amount totaling $540,000. The New Retention Agreement replaces Ms. Gaines’ previous retention agreement dated February 6, 2019 and the amendment to the retention agreement dated February 6, 2020. Pursuant to the New Retention Agreement, Ms. Gaines will remain in her positions with the Company (including as the Company’s principal financial officer and principal accounting officer) until the earlier of (i) December 31, 2023 or (ii) a date determined by the Company. Any transition is not the result of any disagreements between the Company and Ms. Gaines.

Employment Agreement. Effective July 11, 2023, Michael Clark was appointed to serve as Executive Vice President, Finance of the Company. Mr. Clark will perform certain of the functions of the Company’s principal financial officer. Pursuant to his employment agreement (the “Employment Agreement”), Mr. Clark will receive a base salary of $300,000 per annum. Beginning with fiscal year 2023, Mr. Clark will be entitled to receive short-term incentive plan and long-term incentive plan bonuses and awards that will be paid in the form of a combination of cash, restricted stock and options, which will be set forth in plans and agreements adopted, or to be adopted, by the Board. He will also receive 12 months of his regular base salary, all bonus amounts paid in the 12 months preceding the termination, and reimbursement for continued group health insurance coverage for 12 months following the termination or the date he becomes eligible for alternative coverage through subsequent employment as severance benefits in the event that his employment with the Company is terminated by the Company other than for just cause or he resigns due to a material, uncured breach of the Employment Agreement by the Company. He is also entitled to enhanced severance benefits if he terminates his employment within 30 days following a change of control. Any payment of severance benefits to him under the Employment Agreement is conditioned on his timely agreement to, and non-revocation of, a full and final release of legal claims in favor of the Company.

Short Term Incentive Plan. The Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) adopted a Short-Term Incentive Plan (the “STIP”) effective as of June 10, 2020, for the benefit of Mr. Van Nieuwenhuyse. Pursuant to the terms of the STIP, the Compensation Committee establishes performance goals each year and evaluates the extent to which, if any, Mr. Van Nieuwenhuyse meets such goals. The STIP provides for a payout equal to 25.0% of Mr. Van Nieuwenhuyse’s annual base salary if the minimum performance target established by the Compensation Committee is met, 100.0% of his annual base salary if all performance goals are met, and up to 200.0% of his annual base salary if the maximum performance target is met. Amounts due under the STIP are payable 50.0% in cash and 50.0% in the form of restricted stock granted under the Amended Equity Plan, vesting in two equal annual installments on the first and second anniversaries of the grant date, and subject to the terms of the Amended Equity Plan. In addition, in the event of a Change of Control (as defined in the Amended Equity Plan) during the term of the STIP, the Compensation Committee, in its sole and absolute discretion, may make a payment to Mr. Van Nieuwenhuyse in an amount up to 200.0% of his annual base salary, payable in cash, shares of common stock of the Company under the Amended Equity Plan or a combination of both, as determined by the Compensation Committee, not later than 30 days following such Change of Control. In conjunction with the STIP plan, in January 2022, Mr. Van Nieuwenhuyse received a $300,000 cash bonus and 15,000 restricted shares of common stock, which were to vest on January 15, 2023. These 15,000 restricted shares were cancelled in December 2022, and 18,750 shares were issued to Mr. Van Nieuwenhuyse under the STIP plan which will vest in January 2025. In September 2023, Mr.Van Nieuwenhuyse received a $200,000 cash bonus in conjunction with the STIP plan.

On August 2, 2023, CORE Alaska, a subsidiary of the Company, pursuant to an ISDA Master Agreement entered into with ING Capital Markets LLC (the “ING ISDA Master Agreement”) and an ISDA Master Agreement entered into with Macquarie Bank Limited (the “Macquarie ISDA Master Agreement”), in accordance with its obligations under that certain Credit and Guarantee Agreement, by and among the Company, its subsidiaries, ING Capital LLC and Macquarie Bank Limited, entered into a series of hedging agreements with ING Capital LLC and Macquarie Bank Limited for the sale of an aggregate of 124,600 ounces of gold at a weighted average price of $2,025 per ounce. The hedge agreements have delivery obligations beginning in July 2024 and ending in December 2026, and represent approximately 45% of the Company’s interest in the projected production from the Manh Choh mine over the current anticipated life of the mine (See Note 15 - Derivatives and Hedging Activities).

13. Income Taxes

The Company recognized a full valuation allowance on its deferred tax asset as of September 30, 2023 and June 30, 2023 and has recognized zero income tax expense for the three months ended September 30, 2023 and September 30, 2022. The effective tax rate was 0% for the three months ended September 30, 2023 and 2022. The Company has historically had a full valuation allowance, which resulted in no net deferred tax asset or liability appearing on its statement of financial position. The Company recorded this valuation allowance after an evaluation of all available evidence (including the Company's history of net operating losses) that led to a conclusion that, based upon the more-likely-than-not standard of the accounting literature, these deferred tax assets were unrecoverable. The Company is forecasting a book and taxable net loss for its fiscal year end, June 30, 2023. The Company reviews its tax positions quarterly for tax uncertainties. The Company did not have any uncertain tax positions as of September 30, 2023 or June 30, 2023.

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14. Debt

The table below shows the components of Debt, net as of September 30, 2023 and June 30, 2023:


	*September 30, 2023*			*June 30, 2023*
*Secured Debt Facility*
Principal amount	$	20,000,000		$	10,000,000
Unamortized debt discount		(2,388,728	)		(2,342,484	)
Unamortized debt issuance costs		(2,212,417	)		(1,628,012	)
Debt, net	$	15,398,855		$	6,029,504

*Convertible Debenture*
Principal amount	$	20,000,000		$	20,000,000
Unamortized debt discount		(438,264	)		(461,639	)
Unamortized debt issuance costs		(105,206	)		(110,818	)
Debt, net	$	19,456,530		$	19,427,543

Total Debt, net	$	34,855,385		$	25,457,047

Secured Credit Facility

On May 17, 2023, the Company entered into a credit and guarantee agreement (the “Credit Agreement”), by and among CORE Alaska, LLC as the borrower, each of the Company, Alaska Gold Torrent, LLC, and Contango Minerals Alaska, LLC, as guarantors, each of the lenders party thereto from time to time, ING Capital LLC (“ING”), as administrative agent for the lenders, and Macquarie Bank Limited (“Macquarie”), as collateral agent for the secured parties. The Credit Agreement provides for a senior secured loan facility (the “Facility”) of up to US$70 million, of which $65 million is committed in the form of a term loan facility and $5 million is uncommitted in the form of a liquidity facility.

The Credit Agreement will mature on December 31, 2026 (the “Maturity Date”) and will be repaid via quarterly repayments over the life of the loan. The Facility has an upfront fee and a production linked arrangement fee based upon the projected total production of gold ounces in the base case financial model delivered on the closing date, payable quarterly based on attributable production, with any balance due upon the maturity or termination of the Credit Agreement. The Credit Agreement is secured by all the assets and properties of the Company and its subsidiaries, including the Company’s 30% interest in Peak Gold, LLC, but excluding the Company’s equity interests of AGT in respect of the Lucky Shot mine. As a condition precedent to the second borrowing, the Company was required to hedge approximately 125,000 ounces of its attributable gold production from Manh Choh. On August 2, 2023, CORE Alaska entered into a series of hedging agreements with ING and Macquarie for the sale of an aggregate of 124,600 ounces of gold at a weighted average price of $2,025 per ounce, which satisfied the condition of the second borrowing. The hedge agreements have delivery obligations beginning in July 2024 and ending in December 2026. See Note 15 - Derivatives and Hedging Activities.

Term loans, which can be made quarterly are to be used only to finance cash calls to the Peak Gold JV, fund the debt service reserve account, pay corporate costs in accordance with budget and base case financial model and fees and expenses in connection with the loan. Liquidity loans, which can be made once a month, are to be used for cost overruns. Any outstanding liquidity loans must be repaid on July 31, 2025.

Loans under the Facility can be Base Rate loans at the Base Rate plus the Applicable Margin or Secured Overnight Financing Rate (“SOFR”) loans at the three month adjusted term SOFR plus the Applicable Margin. The type of loan is requested by the borrower at the time of the borrowing and the type loan may be converted. The “Base Rate” is the highest of Prime Rate, Federal Funds Rate plus .50% or Adjusted Term SOFR for one month plus 1%. “Adjusted Term SOFR” is Term SOFR plus a SOFR Adjustment of .15% per annum. “Term SOFR” is the secured overnight financing rate as administered by the Term SOFR Administrator. The “Applicable Margin” is (i) 6.00% per annum prior to the completion date for the Manh Choh Project and (ii) 5.00% per annum thereafter, which will be payable quarterly.

Interest is payable commencing on the date of each loan and ending on the next payment date. The interest payment dates prior to November 1, 2025 are the last day of July, October, January and April; thereafter the payment dates are the last day of March, June, September and December. The Company also will pay commitment fee on average daily unused borrowings equal to a rate of 40% of the Applicable Margin. The commitment fee is payable in arrears on each interest payment date with the final on the commitment termination date, which is 18 months after the closing date of May 17, 2023. As of September 30, 2023, the Company had unused borrowing commitments of $45 million.

The Credit Agreement contains representations and warranties and affirmative and negative covenants customary for credit facilities of this type, including limitations on the Company and its subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates and entry into hedging arrangements. The Credit Agreement also requires the Company to maintain, as of the last day of each fiscal quarter, (i) a historical debt service coverage ratio of no less than 1.30 to 1.00, (ii) a projected debt service coverage ratio until the Maturity Date of no less than 1.30 to 1.00; (iii) a loan life coverage ratio until the Maturity Date of no less than 1.40 to 1.00; (iv) a discounted present value cash flow coverage ratio until the Manh Choh gold project termination date of no less than 1.70 to 1.00; and (v) a reserve tail (i.e., gold production) ratio until the Maturity Date of no less than 25%. The Credit Agreement also includes customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by the Company or any of its material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting the Company or any of its material subsidiaries, certain ERISA events, material judgments and a change in control, in each case, subject to cure periods and thresholds where customary. The Company is also required to maintain a minimum cash balance of $2 million. As of September 30, 2023, the Company was in compliance with all of the required debt covenants.

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The Company drew $10 million on the term loan facility at the initial closing and an additional $10 million on September 29, 2023. The Company will repay $2 million of the amount drawn on July 31, 2024, and the remaining $18 million will be divided into quarterly repayments until December 31, 2026.

Borrowings under the term loan facility carried an original issue discount of $2.3 million and debt issuance costs of approximately $1.6 million. As of September 30, 2023, the unamortized discount and issuance costs were $2.4 million and $2.2 million, respectively and the carrying amount, net of the unamortized discount and issuance costs was $15.4 million. As of June 30, 2023, the unamortized discount and issuance costs were $2.3 million and $1.6 million, respectively and the carrying amount, net of the unamortized discount and issuance costs was $6.0 million.The fair value of the debt (Level 2) as of September 30, 2023 and June 30, 2023 was $20.0 million and $10.0 million, respectively. The Company recognized interest expense totaling $0.4 million related to this debt for the three months ended September 30, 2023 (inclusive of approximately $292,000 of contractual interest, and approximately $77,000 related to the amortization of the discount and issuance fees). There was no interest expense related to the Facility for the three months ended September 30, 2022, because the Facility was not yet in place. The effective interest rate of the term loan facility was 11.58% as of September 30, 2023 and 11.75% as of June 30, 2023. As of September 30, 2023 and June 30, 2023, the effective interest rate for the amortization of the discount and issuance costs was 4.8% and 2.4%, respectively.

Convertible Debenture

On April 26, 2022, the Company closed on a $20,000,000 unsecured convertible debenture (the “Debenture”) with Queen’s Road Capital Investment, Ltd. (“QRC”). The Company used the proceeds from the sale of the Debenture to fund commitments to the Peak Gold JV, the exploration and development at its Lucky Shot property, and for general corporate purposes.

In connection with the closing of the Credit Agreement, the Company entered into a letter agreement with QRC (the “Letter Agreement”) which amended the terms of the Debenture. In accordance with the Letter Agreement, QRC acknowledged that the Debenture would be subordinate to the loans under the Credit Agreement, and acknowledged that the Company entering into the loans under the Credit Agreement would not constitute a breach of the negative covenants of the Debenture. QRC also waived its put right in respect of the Debenture that would require Contango to redeem the Debenture in whole or in part upon the completion of a secured financing or a change of control. In consideration for QRC entering into the Letter Agreement, the Company agreed to amend the interest rate of the Debenture from 8% to 9%. In accordance with the Letter Agreement the interest payment dates were modified to be the last business day of July, October, January, and April, prior to November 1, 2025 and thereafter the last business day of March, June, September, and December. The maturity date also changed from April 26, 2026 to May 26, 2028.

The Debenture currently bears interest at 9% per annum, payable quarterly, with 7% paid in cash and 2% paid in shares of common stock issued at the market price at the time of payment based on a 20-day volumetric weighted average price (“VWAP”). The Debenture is unsecured. QRC may convert the Debenture into common stock at any time at a conversion price of $30.50 per share (equivalent to 655,738 shares), subject to adjustment. The Company may redeem the Debenture after the third anniversary of issuance at 105% of par, provided that the market price (based on a 20-day VWAP) of the Company’s common stock is at least 130% of the conversion price.

The Debenture carried an original issue discount of $0.6 million and debt issuance costs of approximately $0.2 million. As of September 30, 2023 and June 30, 2023, the unamortized discount and issuance costs were $0.5 million and $0.6 million, respectively. The carrying amount of the debt at September 30, 2023 and June 30, 2023, net of the unamortized discount and issuance costs was $19.5 million and $19.4 million respectively. The fair value of the Debenture (Level 2) as of September 30, 2023 and June 30, 2023 was $20.0 million. The Company recognized interest expense totaling $0.5 million related to this debt for the three months ended September 30, 2023 (inclusive of approximately $450,000 of contractual interest, and approximately $29,000 related to the amortization of the discount and issuance fees). The Company recognized interest expense totaling $0.4 million related to this debt for the quarter ended September 30, 2022 (inclusive of approximately $400,000 of contractual interest, and approximately $49,000 related to the amortization of the discount and issuance fees).The effective interest rate of the Debenture is the same as the stated interest rate, 9.0%. The effective interest rate for the amortization of the discount and issuance costs as of September 30, 2023 and June 30, 2023 was 0.6% and 0.6%, respectively. The Company reviewed the provisions of the debt agreement to determine if the agreement included any embedded features. The Company concluded that the change of control provisions within the debt agreement met the characteristics of a derivative and required bifurcation and separate accounting. The fair value of the identified derivative was determined to be de minimis at April 26, 2022, June 30, 2023, and September 30, 2023 as the probability of a change of control was negligible as of those dates. For each subsequent reporting period, the Company will evaluate each potential derivative feature to conclude whether or not they qualify for derivative accounting. Any derivatives identified will be recorded at the applicable fair value as of the end of each reporting period.

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15. Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity, and credit risk primarily by managing the amount, sources, and duration of its assets and liabilities and the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by gold future pricing. The Company’s derivative financial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments.

Non-designated Hedges

Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to gold movements and the Company has elected not to apply hedge accounting. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings.

As of September 30, 2023, the Company had the following outstanding derivatives that were not designated as hedges in qualifying hedging relationships:

Period	Commodity	Volume		Weighted Average Price ($/oz)
2024	Gold		21,100	$	2,025.17
2025	Gold		62,400	$	2,025.17
2026	Gold		41,100	$	2,025.17

Fair Values of Derivative Instruments on the

SEC Form 10-Q filed by Contango ORE Inc.