Contango Silver & Gold Inc. 10-Q

Item 1 - Financial Statements March 31, 2021 June 30, 2020 ASSETS CURRENT ASSETS: Cash $ 26,239,961 $ 3,011,918 Prepaid expenses and other 609,117 72,244 Total current assets 26,849,078 3,084,162 OTHER ASSETS: Investment in Peak Gold (Note 4) — — Total other assets — — TOTAL ASSETS $ 26,849,078 $ 3,084,162 LIABILITIES AND SHAREHOLDERS ’ EQUITY CURRENT LIABILITIES: Accounts payable $ 69,790 $ 83,158 Accrued liabilities 734,293 1,006,237 Income tax payable 399,546 — Total current liabilities 1,203,629 1,089,395 NON-CURRENT LIABILITIES: Advance royalty reimbursement 1,200,000 — Total non-current liabilities 1,200,000 — TOTAL LIABILITIES 2,403,629 1,089,395 COMMITMENTS AND CONTINGENCIES (NOTE 11) SHAREHOLDERS ’ EQUITY: Common Stock, $0.01 par value, 45,000,000 shares authorized; 6,200,500 shares issued 6,151,937 and outstanding at March 31, 2021; 6,590,113 shares issued and 6,557,239 outstanding at June 30, 2020 62,005 65,901 Additional paid-in capital 58,438,284 61,302,249 Treasury stock at cost (48,563 shares at March 31, 2021; and 32,874 at June 30, 2020) (876,551 ) (476,672 ) Accumulated deficit (33,178,289 ) (58,896,711 ) TOTAL SHAREHOLDERS ’ EQUITY 24,445,449 1,994,767 TOTAL LIABILITIES AND SHAREHOLDERS ’ EQUITY $ 26,849,078 $ 3,084,162 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 CONTANGO ORE, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, Nine Months Ended March 31, 2021 2020 2021 2020 EXPENSES: Exploration expense $ (109,216 ) $ — $ (190,653 ) $ — General and administrative expense (2,146,480 ) (1,322,125 ) (8,274,062 ) (3,464,060 ) Total expenses (2,255,696 ) (1,322,125 ) (8,464,715 ) (3,464,060 ) OTHER INCOME/(EXPENSE): Interest income 159 11,801 1,078 73,869 Loss from equity investment in Peak Gold, LLC (Note 4) (2,490,000 ) (600,000 ) (3,861,252 ) (3,300,000 ) Gain on sale of a portion of the equity investment in Peak Gold, LLC — — 39,642,857 — Total other income/(expense) (2,489,841) (588,199 ) 35,782,683 (3,226,131 ) INCOME/(LOSS) BEFORE TAXES (4,745,537 ) (1,910,324 ) 27,317,968 (6,690,191 ) Income tax (expense)/benefit 235,379 — (1,599,546 ) — NET INCOME/(LOSS) $ (4,510,158 ) $ (1,910,324 ) $ 25,718,422 $ (6,690,191 ) NET INCOME/(LOSS) PER SHARE Basic and diluted $ (0.73 ) $ (0.29 ) $ 4.11 $ (1.04 ) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic and diluted 6,153,334 6,550,068 6,261,102 6,449,345 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 CONTANGO ORE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended March 31, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income/(loss) $ 25,718,422 $ (6,690,191 ) Adjustments to reconcile net income/(loss) to net cash used in operating activities: Stock-based compensation 2,886,046 2,485,448 Loss from equity investment in Peak Gold, LLC 3,861,252 3,300,000 Gain on sale of a portion of the equity investment in Peak Gold, LLC (39,642,857 ) — Changes in operating assets and liabilities: Increase in prepaid expenses and other (536,873 ) (90,986 ) Decrease in accounts payable and accrued liabilities (285,312 ) (234,613 ) Increase in income taxes payable 399,546 — Increase in advance royalty reimbursement 1,200,000 — Net cash used in operating activities (6,399,776 ) (1,230,342 ) CASH FLOWS FROM INVESTING ACTIVITIES: Cash invested in Peak Gold, LLC (3,861,252 ) (3,300,000 ) 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 27,338,748 (3,300,000 ) CASH FLOWS FROM FINANCING ACTIVITIES: Cash paid for shares withheld from employees for payroll tax withholding (876,551 ) (476,672 ) Cash proceeds from capital raise, net 3,165,622 — Net cash provided/(used) by financing activities 2,289,071 (476,672 ) NET INCREASE/(DECREASE) IN CASH 23,228,043 (5,007,014 ) CASH, BEGINNING OF PERIOD 3,011,918 8,600,658 CASH, END OF PERIOD $ 26,239,961 $ 3,593,644 Supplemental cash flow information Cash paid for income taxes $ 1,200,000 — The accompanying notes are an integral part of these condensed consolidated financial statements. 5 CONTANGO ORE, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS ’ EQUITY (Unaudited) Common Stock Additional Paid-In Treasury Accumulated Total Shareholders ’ Shares Amount Capital Stock Deficit Equity Balance at June 30, 2020 6,590,113 $ 65,901 $ 61,302,249 $ (476,672 ) $ (58,896,711 ) $ 1,994,767 Stock-based compensation — — 892,158 — — 892,158 Issuance of common stock 214,298 2,143 2,796,189 476,672 — 3,275,004 Cost of common stock issuance — — (109,382 ) — — (109,382) Shares received from the partial sale of the investment in Peak Gold, LLC and retired (809,744 ) (8,097 ) (8,434,760 ) — — (8,442,857 ) Net income for the period — — — — 33,442,625 33,442,625 Balance at September 30, 2020 5,994,667 59,947 56,446,454 — (25,454,086 ) 31,052,315 Stock-based compensation — — 1,009,900 — — 1,009,900 Restricted stock activity 205,833 2,058 (2,058 ) — — — Net loss for the period — — — — (3,214,045 ) (3,214,045 ) Balance at December 31, 2020 6,200,500 62,005 57,454,296 — (28,668,131 ) 28,848,170 Stock-based compensation — — 983,988 — — 983,988 Treasury shares withheld for employee taxes — — — (876,551 ) — (876,551 ) Net loss for the period — — — — (4,510,158 ) (4,510,158 ) Balance at March 31, 2021 6,200,500 $ 62,005 $ 58,438,284 $ (876,551 ) $ ( 33,178,289 ) $ 24,445,449 Common Stock Additional Paid-In Treasury Accumulated Total Shareholders ’ Shares Amount Capital Stock Deficit Equity Balance at June 30, 2019 6,357,113 $ 63,571 $ 57,935,663 $ — $ (49,656,670 ) $ 8,342,564 Stock-based compensation — — 740,442 — — 740,442 Net loss for the period — — — — (1,851,334 ) (1,851,334 ) Balance at September 30, 2019 6,357,113 63,571 58,676,105 — (51,508,004 ) 7,231,672 Stock-based compensation — — 882,881 — — 882,881 Restricted stock activity 158,000 1,580 (1,580 ) — — — Net loss for period — — — — (2,928,532 ) (2,928,532 ) Balance at December 31, 2019 6,515,113 65,151 59,557,406 — (54,436,536 ) 5,186,021 Stock-based compensation — — 862,125 — — 862,125 Restricted stock activity 75,000 750 (750 ) — — — Treasury shares withheld for employee taxes — — — (476,672 ) — (476,672 ) Net loss for period — — — — (1,910,325 ) (1,910,325 ) Balance at March 31, 2020 6,515,113 $ 65,151 $ 60,418,781 $ (476,672 ) $ (56,346,861 ) $ 3,661,149 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 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, silver and copper ores in Alaska. The Company has a 30.0% membership interest in Peak Gold, LLC (the “Joint Venture Company”), which leases approximately 675,000 acres from the Tetlin Tribal Council (the "Tetlin Lease") for exploration and development through its wholly-owned subsidiary, CORE Alaska, LLC (“CORE Alaska”). The Company's wholly-owned subsidiary, Contango Minerals, LLC (“Contango Minerals”) also owns 100% interest in the mineral rights to approximately 220,000 acres of State of Alaska mining claims located north and northwest of the Tetlin Lease. During the quarter ended March 31, 2021, the Company staked a new property called Shamrock in the Richardson Mining District located in central Alaska, along the Alaska Hwy corridor approximately 70 miles from Fairbanks, Alaska. The property includes a total of 368 Alaska State mining claims covering approximately 52,920 acres. The Company is in an exploration stage. The Company’s fiscal year end is June 30. On January 8, 2015, the Company and a subsidiary of Royal Gold, Inc. (“Royal Gold”) formed the Joint Venture Company. The Company contributed a 100% leasehold interest in an estimated 675,000 acres (the “Tetlin Lease”) from the Tetlin Tribal Council, the council formed by the governing body for the Native Village of Tetlin, an Alaska Native Tribe (the “Tetlin Tribal Council”); and State of Alaska mining claims near Tok, Alaska (together with other property, the “Peak Gold Joint Venture Property”), and Royal Gold made an initial investment into the Joint Venture Company of $5.0 million. By September 29, 2020, Royal Gold had contributed approximately $37.1 million to the Joint Venture Company and earned a cumulative economic interest of 40.0%. The proceeds from the investments were used for exploration of the Peak Gold Joint Venture Property. Royal Gold served as the manager of the Joint Venture Company and managed, directed, and controlled operations of the Joint Venture Company until the Kinross Transactions (described below). On September 29, 2020, the Company, CORE Alaska, LLC and KG Mining (Alaska), Inc. (“KG Mining”), an indirect wholly-owned subsidiary of Kinross Gold Corporation, a corporation formed under the laws of Ontario, Canada (“Kinross”), entered into a Purchase Agreement (the “CORE Purchase Agreement”), pursuant to which CORE Alaska sold a 30.0% membership interest (the “CORE JV Interest”) in the Joint Venture Company, to KG Mining (the “CORE Transactions”). Kinross is a large gold producer with a diverse global portfolio and has extensive operating experience in Alaska. The CORE Transactions closed on September 30, 2020. In consideration for the CORE JV Interest, the Company received $32.4 million in cash and 809,744 shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”). The 809,744 shares of Common Stock were acquired by KG Mining from Royal Gold, as part of the Royal Gold Transactions (described below) and were subsequently canceled by the Company. Of the $32.4 million cash consideration, $1.2 million constituted a reimbursement prepayment to the Company by KG Mining of amounts relating to CORE Alaska’s proportionate share of certain silver royalty payments that the Joint Venture Company may be obligated to pay to Royal Gold, with the understanding that because of such reimbursements, KG Mining would bear the entire economic impact of those silver royalty payments due from the Joint Venture Company. Concurrently with the closing of the CORE Transactions, KG Mining, in a separate transaction, acquired from Royal Gold (i) 100% of the equity of Royal Alaska, LLC (“Royal Alaska”), which held a 40.0% membership interest in the Joint Venture Company and (ii) 809,744 shares of Common Stock held by Royal Gold (the “Royal Gold Transactions” and, together with the CORE Transactions, the “Kinross Transactions”). After the consummation of the Kinross Transactions, CORE Alaska retained a 30.0% membership interest in the Joint Venture Company, and KG Mining obtained a 70.0% membership interest in the Joint Venture Company (though the joint venture partners changed after the consummation of the Kinross Transactions, the legal entity remains Peak Gold, LLC, thus it will continue to be referred to as the “Joint Venture Company” throughout the document). KG Mining serves as the manager and operator of the Joint Venture Company. KG Mining and CORE Alaska entered into the Amended and Restated Limited Liability Company Agreement of the Joint Venture Company (the “A&R JV LLCA”) on October 1, 2020 to address the new ownership arrangements and to incorporate additional terms that will permit the Joint Venture Company to further develop and produce from its properties. Prior to the Kinross Transactions, the Joint Venture Company, the Company, Contango Minerals, CORE Alaska, Royal Gold and Royal Alaska entered into a Separation and Distribution Agreement, dated as of September 29, 2020 (the “Separation Agreement”). Pursuant to the Separation Agreement, the Joint Venture Company completed the formation of Contango Minerals and contributed approximately 167,000 acres of Alaska State mining claims to it, subject to the Option Agreement (described below) and a 1.0% net smelter returns royalty interest on certain of the contributed Alaska state mining claims. After the formation and contribution to Contango Minerals, the Joint Venture Company made simultaneous distributions to Royal Alaska and CORE Alaska by (i) granting to Royal Gold a new 28.0% net smelter returns silver royalty on all silver produced from a defined area within the Tetlin Lease and also transferring the additional 1.0% net smelter returns royalty on the contributed Alaska state mining claims to Royal Gold and (ii) assigning 100% of the membership interests in Contango Minerals to CORE Alaska, which were in turn distributed to the Company, resulting in Contango Minerals becoming a wholly-owned subsidiary of the Company. The Separation Agreement contains customary representations, warranties and covenants. 7 In connection with the Separation Agreement, the Joint Venture Company and Contango Minerals entered into an Option Agreement, dated as of September 29, 2020 (the “Option Agreement”). Under the Option Agreement, Contango Minerals granted the Joint Venture Company an option, subject to certain conditions contained in the Option Agreement, to purchase approximately 13,000 acres of the Alaska state mining claims which were contributed to Contango Minerals pursuant to the Separation Agreement, together with all extralateral rights, water and water rights, and easements and rights of way in connection therewith, that are held by Contango Minerals. Subject to the conditions in the Option Agreement, the Joint Venture Company may exercise the option to purchase the Alaska state mining claims, in whole or in part, at an exercise price of $50,000. The Joint Venture Company’s option to purchase the Alaska state mining claims from the Contango Minerals expires and is of no further force and effect upon the earlier of (i) 18 months after the date of the Option Agreement, or (ii) the termination of the Option Agreement pursuant to its terms. The Option Agreement may be terminated (a) by the Joint Venture Company at any time upon written notice to Contango Minerals, (b) if the Joint Venture Company fails to timely pay or reimburse Contango Minerals for certain fees, including taxes and certain other fees necessary to maintain the Alaska state mining claims in good standing under applicable laws, or (c) in the event the Alaska state mining claims are subject to a condemnation under eminent domain. The Joint Venture Company has reimbursed Contango Minerals for the cost of the annual rentals associated with option claims for the 2020-2021 assessment year. In February 2021, the Tetlin Tribal Council approved a new name for the Peak Gold Joint Venture Project. From now on, the project will be referred to as the Manh Choh Project. The renaming was a result of close consultation with the local Upper Tanana Athabascan Village of Tetlin on whose land the project is situated. The name ‘Manh Choh’ (“mon-CHO”) was chosen by the Village of Tetlin Tribal Council and can be translated from the Upper Tanana Athabascan language to “Big Lake,” referring to the nearby Tetlin Lake, a site of high cultural and subsistence significance for the community. The Company has been involved in the exploration on the Manh Choh Joint Venture Property, formerly the “Peak Gold Joint Venture Property,” for eleven years, which has resulted in identifying two mineral deposits (Peak and North Peak) and several other gold, silver, and copper prospects. The Joint Venture Company plans to mine ore from the Peak and North Peak deposits and then process the ore at the existing Fort Knox mining and milling complex located approximately 250 miles away. The use of the Fort Knox mill is expected to accelerate the development of the Manh Choh Joint Venture Property and result in significantly reduced upfront capital development costs, smaller environmental footprint, a shorter permitting and development timeline and less overall execution risk for the Joint Venture Company to advance the Peak and North Peak deposits to a production decision. . On December 10, 2020, the Management Committee of the Joint Venture Company (the “ Management Committee”) approved a total budget of $18.0 million for the calendar year 2021 to undertake in-fill drilling, engineering, and environmental studies necessary to complete a feasibility level study, additional exploration, community relations, and to prepare the project for formal permitting. The Company’s proportionate share of the approved budget is approximately $5.4 million. As of March 31, 2021, the Company had funded approximately $2.5 million to the Joint Venture Company during calendar year 2021. In addition, the Company plans to fund a roughly $3.0 million exploration program to explore for additional resources on 100%-owned Triple Z prospect in late 2021, focused on the areas immediately adjacent to the known Joint Venture Company resources. The Company also plans to continue its exploration efforts on its earlier stage Eagle and Hona projects located immediately north of the Manh Choh project area. The Company’s 30.0% membership interest in the Joint Venture Company, its ownership of Contango Minerals, and cash on hand constitute substantially all of the Company’s assets. The Company has no debt. 8 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, 2020. The results of operations for the three and nine months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending June 30, 2021. 3. Summary of Significant Accounting Policies The Company ’s significant accounting policies are described below . Management Estimates. The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates . Stock-Based Compensation . The Company applies the fair value method of accounting for stock-based compensation. Under this method, compensation cost is measured at the grant date based on the fair value of the award and is recognized over the award vesting period. The Company classifies the benefits of tax deductions in excess of the compensation cost recognized for the options (excess tax benefit) as financing cash flows. The fair value of each option award is estimated as of the date of grant using the Black-Scholes option-pricing model. The fair value of each restricted stock award is equal to the Company’s stock price on the date the award is granted . Income Taxes. The Company follows the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences of (i) temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements and (ii) operating loss and tax credit carry-forwards for tax purposes. Deferred tax assets are reduced by a valuation allowance when, based upon management’s estimates, it is more likely than not that a portion of the deferred tax assets will not be realized in a future period. Investment in the Joint Venture Company. The Company’s consolidated financial statements include the investment in the Joint Venture Company, which is accounted for under the equity method. The Company held a 30.0% membership interest in the Joint Venture Company on March 31, 2021 and designated one of the three members of the Management Committee. The Company recorded its investment at the historical cost of the assets contributed. The cumulative losses of the Joint Venture Company exceed the historical cost of the assets contributed to the Joint Venture Company; therefore, the Company’s investment in the Joint Venture Company as of March 31, 2021 and June 30, 2020 is zero. The portion of the cumulative loss that exceeds the Company’s investment will be suspended and recognized against earnings, if any, from the investment in the Joint Venture Company in future periods. Fair Value Measurement. Accounting guidelines for measuring fair value establish a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy categorizes assets and liabilities measured at fair value into one of three different levels depending on the observability of the inputs employed in the measurement. The three levels are defined as follows: Level 1 – Observable inputs such as quoted prices in active markets at the measurement date for identical, unrestricted assets or liabilities. Level 2 – Other inputs that are observable directly or indirectly, such as quoted prices in markets that are not active or inputs, which are observable, either directly or indirectly, for substantially the full term of the asset or liability. Level 3 – Unobservable inputs for which there are little or no market data and which the Company makes its own assumptions about how market participants would price the assets and liabilities. The Company received 809,744 shares of its Common Stock as part of the consideration received for the sale of a portion of its membership interest in the Joint Venture Company (See Note 8 for further discussion of the sale transaction with KG Mining). The value assigned to the Company’s remaining 30.0% membership interest in the Joint Venture Company was determined using unobservable data and was a significant component used to determine the value of the shares. Due to the significance of the unobservable data used, the valuation of the shares were classified as a level 3 valuation. Recently Issued Accounting Pronouncements. In February 2016, the Financial Accounting Standards Board “FASB” issued Accounting Standards Update “ASU” 2016-02, Leases (Topic 842) , which requires recognition of right-of-use assets and lease payment liabilities on the balanc e sheet by lessees for all leases with terms greater than twelve months. Classification of leases as either a finance or operating lease will determine the recognition, measurement and presentation of expenses. ASU 2016-02 also requires certain quantitative and qualitative disclosures about leasing arrangements. The Joint Venture Company owns the Tetlin lease and any impact of the new standard related to that lease will be evaluated at the Joint Venture Company level. The new standard was adopted in July 2019. Adopting this standard did not have an impact on the Company's financials. In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments— Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815), which clarifies the interaction between the three standards. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company accounts for the Joint Venture Company under the equity method of accounting. The Company does not anticipate that this update will have a material impact on its financial statements. 9 The Company has evaluated all other recent acco unting pronouncements and believes that none of them will have a significant effect on the Company’s consolidated financial statements . 4 . Investment in the Joint Venture Company The Company initially recorded its investment at the historical book value of the assets contributed to the Joint Venture Company, which was approximately $1.4 million. As of March 31, 2021, the Company has contributed approximately $15.7 million to the Joint Venture Company. KG Mining acquired 70% of the Joint Venture Company on September 30, 2020 in connection with the Kinross Transactions. As of March 31, 2021, the Company held a 3 0.0% membership interest in the Joint Venture Company. The following table is a roll-forward of the Company's investment in the Joint Venture Company from January 8, 2015 ( inception) to March 31, 2021: Investment in Peak Gold, LLC Investment balance at June 30, 2014 $ — Investment in Peak Gold, LLC, at inception January 8, 2015 1,433,886 Loss from equity investment in Peak Gold, LLC (1,433,886 ) Investment balance at June 30, 2015 $ — Investment in Peak Gold, LLC — Loss from equity investment in Peak Gold, LLC — Investment balance at June 30, 2016 $ — Investment in Peak Gold, LLC — Loss from equity investment in Peak Gold, LLC — Investment balance at June 30, 2017 $ — Investment in Peak Gold, LLC 2,580,000 Loss from equity investment in Peak Gold, LLC (2,580,000 ) Investment balance as June 30, 2018 $ — Investment in Peak Gold, LLC 4,140,000 Loss from equity investment in Peak Gold, LLC (4,140,000 ) Investment balance at June 30, 2019 $ — Investment in Peak Gold, LLC 3,720,000 Loss from equity investment in Peak Gold, LLC (3,720,000 ) Investment balance at June 30, 2020 $ — Investment in Peak Gold, LLC 3,861,252 Loss from equity investment in Peak Gold, LLC (3,861,252 ) Investment balance at March 31, 2021 $ — 10 In conjunction with the CORE Transactions, and Kinross assuming the role of manager of the Joint Venture Company, the Joint Venture Company converted its method of accounting from US GAAP to International Financial Reporting Standards (“IFRS”) and changed its fiscal year end from June 30 to December 31, effective for the quarter ended December 31, 2020. The condensed unaudited financial statements presented below have been converted from IFRS to US GAAP for presentation purposes. The following table presents the condensed unaudited results of operations for the Joint Venture Company for the three and nine month period ended March 31, 2021 and 2020, and for the period from inception through March 31, 2021 in accordance with US GAAP; Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended Period from Inception January 8, 2015 to March 31, 2021 March 31, 2020 March 31, 2021 March 31, 2020 March 31, 2021 EXPENSES: Exploration expense $ 2,420,725 $ 342,077 $ 5,547,617 $ 3,648,059 $ 43,426,627 General and administrative 398,402 250,160 798,500 1,290,924 9,985,549 Total expenses 2,819,127 592,237 6,346,117 4,938,983 53,412,176 NET LOSS $ 2,819,127 $ 592,237 $ 6,346,117 $ 4,938,983 $ 53,412,176 The Company’s share of the Joint Venture Company’s results of operations for the three and nine months ended March 31, 2021 was a loss of approximately $0.8 million and $1.9 million, respectively. The Company’s share in the results of operations for the three and nine months ended March 31 , 2020 was a loss of approximately $0.3 million and $3.0 million, respectively . The Joint Venture Company loss does not include any provisions related to income taxes as the Joint Venture Company is treated as a partnership for income tax purposes. As of March 31, 2021 and June 30, 2020, the Company’s share of the Joint Venture Company’s inception-to-date cumulative loss of approximately $36.8 million and $34.7 million, respectively, exceeded the historical book value of our investment in the Joint Venture Company, of $15.7 million. Therefore, the investment in the Joint Venture Company had a balance of zero as of each March 31, 2021 and June 30, 2020. The Company is currently obligated to make additional capital contributions to the Joint Venture Company in proportion to its percentage membership interest in the Joint Venture Company in order to maintain its ownership in the Joint Venture Company and not be diluted. Therefore, the Company only records losses up to the point of its cumulative investment, which was approximately $15.7 million as of March 31, 2021. The portion of the cumulative loss that exceeds the Company’s investment will be suspended and recognized against earnings, if any, from the Company’s investment in the Joint Venture Company in future periods. The suspended losses for the period from inception to March 31, 2021 are approximately $21.1 million. 5. Prepaid Expenses and other assets The Company has prepaid expenses and other assets of $609,117 and $72,244 as of March 31, 2021 and June 30, 2020, respectively. Prepaid expenses primarily relate to prepaid insurance, prepaid annual claim rentals, and management fees. The Company also had $211,000 of capitalized legal fees as of March 31, 2021. 6. Net Income/(Loss) Per Share A reconciliation of the components of basic and diluted net income/(loss) per share of Common Stock is presented below: Three Months Ended March 31, 2021 2020 Net Loss Weighted Average Shares Loss Per Share Net Loss Weighted Average Shares Loss Per Share Basic Net Loss per Share: Net loss attributable to common stock $ (4,510,158 ) 6,153,334 $ (0.73 ) $ (1,910,324 ) 6,550,068 $ (0.29 ) Diluted Net Loss per Share: Net loss attributable to common stock $ (4,510,158 ) 6,153,334 $ (0.73 ) $ (1,910,324 ) 6,550,068 $ (0.29 ) Nine Months Ended March 31, 2021 2020 Net Income Weighted Average Shares Income Per Share Net Loss Weighted Average Shares Loss Per Share Basic Net Income/(Loss) per Share: Net income/(loss) attributable to common stock $ 25,718,422 6,261,102 $ 4.11 $ (6,690,191 ) 6,449,345 $ (1.04 ) Diluted Net Income/(Loss) per Share: Net income/(loss) attributable to common stock $ 25,718,422 6,261,102 $ 4.11 $ (6,690,191 ) 6,449,345 $ (1.04 ) Options to purchase 100,000 shares of Common Stock of the Company were outstanding as of March 31, 2021 and June 30, 2020 respectively. The 100,000 options were not included in the computation of diluted earnings per share for the quarters ended March 31, 2021 and December 31, 2020 due to being anti-dilutive. The 100,000 options were not included for the quarter ended September 30, 2020 due to the options being out of the money for such period. There were no options or warrants outstanding as of March 31, 2020. 11 7. Shareholders ’ Equity On December 11, 2020, at the Annual Meeting, the Company’s stockholders approved the proposal to amend the Company’s Certificate of Incorporation to increase the number of authorized shares of its Common Stock from 30,000,000 shares to 45,000,000 shares. The Company has 15,000,000 authorized shares of preferred stock. As of March 31, 2021, the Company had 6,151,937 shares of Common Stock outstanding, including 401,333 share s of unvested restricted stock, which takes into account the issuance of shares of Common Stock in the 2020 Private Placement as described below and the redemption of 809,744 shares of Common Stock from KG Mining in the Kinross Transactions . As of March 31, 2021, the Company also had outstanding options to purchase 100,000 shares of Common Stock of the Company. No shares of preferred stock have been issued. The remaining restricted stock outstanding will vest between December 2021 and December 2023. On September 23, 2020, the Company completed the issuance and sale of an aggregate of 247,172 shares of Common Stock, in a private placement (the “2020 Private Placement”) to certain purchasers who are accredited investors. Of the total 247,172 shares issued, 32,874 were issued from Company’s treasury account. The shares of the Common Stock were sold at a price of $13.25 per share, resulting in gross proceeds to the Company of approximately $3.3 million and net proceeds to the Company of approximately $3.2 million. The Company will use the net proceeds from the 2020 Private Placement for working capital purposes and for funding the Joint Venture Company and Contango Minerals. Petrie Partners Securities, LLC (“Petrie”) acted as the sole placement agent in connection with the 2020 Private Placement and received a placement agent fee equal to 3.25% of the gross proceeds raised from the subscribers whom they solicited, or a total of approximately $50,000 in placement agent fees. Petrie has provided to the Company in the past and may provide from time to time in the future certain securities offering, financial advisory, investment banking and other services for which it has received and may continue to receive customary fees and commissions. The shares sold in the 2020 Private Placement were issued in reliance on an exemption from registration under the Securities Act of 1933, as amended, 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 Company’s President and Chief Executive Officer, Rick Van Nieuwenhuyse, purchased 75,472 shares of Common Stock of the Company in the 2020 Private Placement, for total consideration of $1.0 million, on the same terms and conditions as all other purchasers. The Audit Committee of the Company has reviewed and approved all agreements and arrangements relating to Mr. Van Nieuwenhuyse’s participation in the 2020 Private Placement. Rights Plan Termination and Rights Agreement On December 19, 2012, the Company adopted a Rights Plan, which was amended on March 21, 2013, September 29, 2014, December 18, 2014, November 11, 2015, April 22, 2018, and November 20, 2019. The Board adopted an amendment to accelerate the expiration date of its prior stockholder rights agreement to September 23, 2020, such that, at the close of business on September 23, 2020, the purchase rights thereunder expired and the prior stockholder rights agreement was no longer in force and effect. 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 has been terminated. 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, par value $0.01 per share, of the Company, held of record as of October 5, 2020. The Rights Agreement has a one-year duration, expiring on September 22, 2021. 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. 12 8. Sales Transaction with KG Mining On September 29, 2020, the Company, CORE Alaska, LLC and KG Mining, entered into the CORE Purchase Agreement pursuant to which CORE Alaska sold a 30.0% membership interest in the Joint Venture Company, to KG Mining. The CORE Transactions closed on September 30, 2020. In consideration for the CORE JV Interest, the Company received $32.4 million in cash and 809,744 shares of Common Stock. The 809,744 shares of Common Stock were acquired by KG Mining from Royal Gold, as part of the Royal Gold Transactions and were subsequently canceled by the Company. Of the $32.4 million cash consideration, $1.2 million constituted a reimbursement prepayment to the Company relating to its proportionate share of silver royalty payments that the Joint Venture Company may be obligated to pay to Royal Gold, with the understanding that KG Mining will bear the entire economic impact of those royalty payments due from the Joint Venture Company. Concurrently with the Purchase Agreement, KG Mining, in a separate transaction, acquired from Royal Gold (i) 100% of the equity of Royal Alaska, LLC , which held a 40.0% membership interest in the Joint Venture Company and (ii) 809,744 shares of Common Stock held by Royal Gold. After the consummation of the Kinross Transactions, CORE Alaska retains a 30.0% membership interest in the Joint Venture Company. KG Mining now holds a 70.0% membership interest in the Joint Venture Company and serves as the manager and operator of the Joint Venture Company. KG Mining and CORE Alaska entered into the A&R JV LLCA on October 1, 2020 to address the new ownership arrangements and to incorporate additional terms that will permit the Joint Venture Company to further develop and produce from its properties. The Company recorded the $32.4 million cash proceeds and the 809,744 shares of Common Stock, received from the CORE Transactions, at fair value and recognized a gain on sale of $39.6 million. The Company valued the Common Stock consideration from the CORE Transactions consistent with the accounting guidance for non-monetary exchanges. The stock consideration was valued based on the implied fair value of the CORE Transactions in total less the cash proceeds. The total value of the CORE Transactions was equated to the value of the Company's 30.0% ownership in the Joint Venture Company, post the 30.0% membership interest transferred to KG Mining. The Common Stock consideration received in the CORE Transactions is classified within Level 3 of the fair value hierarchy referenced in Note 3 - Summary of Significant Accounting Policies. As of the date of the CORE Transactions, the Company's investment in the Joint Venture Company had a zero balance, therefore the $39.6 million gain approximates the full fair value of the JV Interest surrendered in the CORE Transactions. The Company recorded a non-current liability totaling $1.2 million associated with the cash received for the reimbursement prepayment to the Company of its proportionate share of certain silver royalty payments that the Joint Venture Company may be obligated to pay Royal Gold. The liability arises, because pursuant to Article IV of the A&R JV LLCA, if the Joint Venture Company terminates, or the Company’s membership interest falls below 5% prior to when the prepaid royalty is paid out, the $1.2 million (less any portion already paid out) is refundable to KG Mining. Prior to the Kinross Transactions, the Joint Venture Company, Contango Minerals, the Company, CORE Alaska, Royal Gold and Royal Alaska entered into the Separation Agreement. Pursuant to the Separation Agreement, the Joint Venture Company completed the formation of Contango Minerals, and contributed approximately 167,000 acres of Alaska State mining claims to it, subject to the Option Agreement (described below), and retained an additional 1.0% net smelter returns royalty interest on certain of the contributed Alaska state mining claims that were contributed. After the formation and contribution to Contango Minerals, the Joint Venture Company made simultaneous distributions to Royal Alaska and CORE Alaska by (i) granting to Royal Gold a new 28.0% net smelter returns silver royalty on all silver produced from a defined area within the Tetlin Lease and also transferring the additional 1.0% net smelter returns royalty described above on the contributed Alaska state mining claims to Royal Gold (bringing the total net smelter royalty due to Royal Gold to 3%) and (ii) assigning one hundred percent (100%) of the membership interests in Contango Minerals to CORE Alaska, which were in turn distributed to the Company, resulting in Contango Minerals becoming a wholly-owned subsidiary of the Company. The Separation Agreement contains customary representations, warranties and covenants. The distribution of the Alaska state mining claims to Contango Minerals meets the definition of a non-reciprocal nonmonetary transfer as defined in Accounting Standards Codification (“ASC”) 845 and would generally be recorded at fair value to the extent fair value is determinable. However, to date, the Joint Venture Company's gold exploration has concentrated on the Tetlin Lease (which was retained by the Joint Venture Company), with only a limited amount of work performed on the State of Alaska mining claims. The Company has concluded that the fair value of the state claims is not determinable within reasonable limits, and therefore has recorded the distribution at historical book value. The Joint Venture Company’s historical book value associated with the Alaska state mining claims is zero as of the date of the CORE Transactions because the costs associated with exploration performed on these claims were expensed when incurred. Therefore, the Company's balance sheet has a net book value of zero for these claims as of the date of the CORE Transactions. In connection with the Separation Agreement, the Joint Venture Company and Contango Minerals entered into the Option Agreement. Under the Option Agreement, Contango Minerals granted the Joint Venture Company an option, subject to certain conditions contained in the Option Agreement, to purchase approximately 13,000 acres of the Alaska state mining claims which were contributed to Contango Minerals pursuant to the Separation Agreement, together with all extralateral rights, water and water rights, and easements and rights of way in connection therewith, that are held by Contango Minerals. The signing of the Option Agreement did not result in any accounting implications for the Company. On October 1, 2020, CORE Alaska and KG Mining entered into the A&R JV LLCA. The A&R JV LLCA supersedes and replaces in its entirety the JV LLCA, as amended. The A&R JV LLCA is the operating agreement for the Joint Venture Company and provides for understandings between the members with respect to matters regarding percentage ownership interests, governance, transfers of ownership interests and other operational matters. CORE Alaska and KG Mining will be required, subject to the terms of the A&R JV LLCA, to make additional capital contributions to the Joint Venture Company for any approved programs budgets in accordance with their respective percentage membership interests. After the consummation of the Kinross Transactions, Kinross, through KG Mining, replaced Royal Gold as the Company’s joint venture partner and as manager of the Joint Venture Company. After consummation of the Kinross Transactions, CORE Alaska holds a 30.0% membership interest in the Joint Venture Company and KG Mining holds a 70.0% membership interest in the Joint Venture Company. The A&R JV LLCA established the Management Committee to determine the overall policies, objectives, procedures, methods and actions of the Joint Venture Company. The Management Committee currently consists of one representative designated by CORE Alaska and two representatives designated by KG Mining (each a “Representative”). The Representatives designated by each member of the Joint Venture Company vote as a group, and in accordance with their respective membership interests in the Joint Venture Company. Except in the case of certain actions that require approval by unanimous vote of the Representatives, the affirmative vote of a majority of the membership interests in the Joint Venture Company constitutes the action of the Management Committee. Prior to the CORE Transactions, the Joint Venture Company was a variable interest entity as defined by FASB ASU No. 2015 - 02, Consolidation (Topic 810 ): Amendments to the Consolidation Analysis. The Company was not the primary beneficiary since it did not have the power to direct the activities of the Joint Venture Company. The Company’s ownership interest in the Joint Venture Company has therefore historically applied the equity method of accounting for its investment. After the Kinross Transactions, the Company retained a 30.0% membership interest in the Joint Venture Company. The Company continues to have significant influence in the Joint Venture Company pursuant to its right to designate one of the three seats on the Management Committee. Therefore, the Company will continue to account for its investment in the Joint Venture Company under the equity method. 13 9. Related Party Transactions Mr. Brad Juneau, who served as the Company’s Chairman, President and Chief Executive Officer until January 6, 2020, and serves as the Company’s Executive Chairman effective January 6, 2020, 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 Joint Venture Company. Pursuant to the A&R MSA, JEX will provide to the Company office space and office equipment, and certain related services. The A&R MSA will be effective for one year beginning December 1, 2020 and will renew automatically on a monthly basis as of December 1, 2021 unless terminated upon ninety days’ prior notice by either the Company or JEX. Pursuant to the A&R MSA, the Company will pay to JEX a monthly fee of $10,000, which includes an allocation of approximately $6,900 for office space and equipment. JEX will also be reimbursed for its reasonable and necessary costs and expenses of third parties incurred for the Company. The A&R MSA includes customary indemnification provisions. On September 23, 2020, the Company completed the issuance and sale of an aggregate of 247,172 shares of the Company’s Common Stock, in a private placement to certain purchasers who are accredited investors. Of the total 247,172 shares issued, 32,874 were issued from Company's treasury account. The shares of the Common Stock were sold at a price of $13.25 per share, resulting in gross proceeds to the Company of approximately $3.3 million and net proceeds to the Company of approximately $3.2 million. The Company’s President and Chief Executive Officer, Rick Van Nieuwenhuyse, purchased 75,472 of shares of Common Stock in the 2020 Private Placement, for total consideration of $1.0 million, on the same terms and conditions as all other purchasers. As a result of Mr. Van Nieuwenhuyse’s purchase, as of September 23, 2020, his ownership interest in the Company was 2.2%. Petrie acted as the sole placement agent in connection with the 2020 Private Placement and received a placement agent fee equal to 3.25% of the gross proceeds raised from the subscribers whom they solicited, or a total of approximately $0.05 million in placement agent fees. Petrie has provided to the Company in the past and may provide from time to time in the future certain securities offering, financial advisory, investment banking and other services for which it has received and may continue to receive customary fees and commissions. The Audit Committee of the Company has reviewed and approved all agreements and arrangements relating to Mr. Van Nieuwenhuyse’s participation in the 2020 Private Placement. On September 30, 2020, in a series of related transactions, Kinross, through its wholly owned subsidiary, acquired all of the interest in the Joint Venture Company held by Royal Gold and an additional 30.0% membership interest in the Joint Venture Company held by the Company. The Company, through its wholly owned subsidiary, retained a 30.0% membership interest in the Joint Venture Company, with Kinross acquiring a 70.0% membership interest in the Joint Venture Company and becoming the manager and operator of the Joint Venture Company. Prior to and in connection with the Kinross Transactions, on September 29, 2020, Contango Minerals entered into an Omnibus Second Amendment and Restatement of Royalty Deeds (the “Contango Minerals Royalty Agreement”) with Royal Gold. Under the terms of the Contango Minerals Royalty Agreement, in addition to certain existing 2.0% royalties (the “2% Royalties”) and 3.0% royalties in favor of Royal Gold on the Alaska State mining claims, Contango Minerals granted an additional 1% net smelter returns royalty on those Alaska State mining claims that were already subject to the 2% Royalties, increasing the royalty rate on those Alaska State mining claims to 3.0%. These Alaska state mining claims were transferred to Contango Minerals as part of the transactions with Kinross, with Royal Gold retaining the 3.0% royalty. As a result of the Contango Minerals Royalty Agreement, Contango Minerals will be obligated to pay Royal Gold a 3.0% net smelter returns royalty on all properties subject to the Contango Minerals Royalty Agreement, subject to the terms and conditions of that agreement. In addition, on September 29, 2020, the Joint Venture Company entered into an Omnibus Second Amendment and Restatement of Royalty Deeds and Grant of Additional Royalty (the “JV Royalty Agreement”) with Royal Gold. Pursuant to the JV Royalty Agreement, the Joint Venture Company (i) granted to Royal Gold a 28.0% net smelter returns royalty interest on all silver produced from a defined area within the Tetlin Lease and (ii) transferred to Royal Gold the additional 1.0% net smelter returns royalty that it had retained on the Alaska State mining properties which were contributed to Contango Minerals, all subject to the terms of the JV Royalty Agreement. The Company will be required to fund any royalty payments the Joint Venture Company is obligated to make to Royal Gold under the JV Royalty Agreement in proportion to its membership interests in the Joint Venture Company. The Company’s proportionate share of the additional royalty granted to Royal Gold pursuant to the JV Royalty Agreement has been partially offset by a cash payment of $1.2 million to the Company, designated as a reimbursement prepayment by Kinross for the Company’s estimated proportionate share of the additional silver royalty, in proportion to Company’s membership interest in the Joint Venture Company after the consummation of the transactions described above. On April 16, 2018, Royal Gold filed a Schedule 13D with the Securities and Exchange Commission to reflect Royal Gold’s acquisition from an existing stockholder of 13.6% of the Company’s outstanding Common Stock at a price of $26 per share, subject to certain adjustments. Royal Gold also filed amendments to its Schedule 13D on June 29, 2018, October 4, 2018, January 22, 2019, August 2, 2019, and September 30, 2020. Immediately prior to the consummation of the Kinross Transactions, Royal Gold held 809,744 shares of Common Stock, representing approximately 11.9% of the issued and outstanding shares of Common Stock immediately prior to the Kinross Transactions. On September 30, 2020, Royal Gold reported beneficial ownership of approximately 0.0% of the Company’s outstanding Common Stock. Royal Gold sold all of the Common Stock it owned to KG Mining as a part of the Royal Gold Transactions described in Note 1. Royal Gold is the parent company of Royal Alaska, CORE’s former joint venture partner in the Joint Venture Company. 14 10. Stock-Based Compensation On September 15, 2010, the Board adopted the Contango ORE, Inc. Equity Compensation Plan (the “2010 Plan”). On November 14, 2017, the Stockholders of the Company approved and adopted the Contango ORE, Inc. Amended and Restated 2010 Equity Compensation Plan (the “Amended Equity Plan”). The amendments to the 2010 Plan included (a) increasing the number of shares of Common Stock that the Company may issue under the plan by 500,000 shares; (b) extending the term of the plan until September 15, 2027; and (c) allowing the Company to withhold shares to satisfy the Company ’s tax withholding obligations with respect to grants paid in Company Stock. On November 13, 2019, the Stockholders of the Company approved and adopted the First Amendment (the “Amendment”) to the Amended Equity Plan (as amended, the “Equity Plan”) which increased the number of shares of Common Stock that the Company may issue under the Equity Plan by 500,000 shares. Under the Equity Plan, the Board may issue up to 2,000,000 shares of Common Stock and options to officers, directors, employees or consultants of the Company. Awards made under the Equity Plan are subject to such restrictions, terms and conditions, including forfeitures, if any, as may be determined by the Board. On December 11, 2020, the Board, upon recommendation of the Compensation Committee of the Board (the “Compensation Committee”), adopted the Second Amendment to the Equity Plan to increase the maximum aggregate number of shares of Common Stock of the Company with respect to which award grants may be made under the Equity Plan to any individual during a calendar year from 100,000 shares to 300,000 shares. As of March 31, 2021, there were 401,333 shares of unvested restricted Common Stock outstanding and 100,000 options to purchase shares of Common Stock outstanding issued under the Equity Plan. Stock-based compensation expense for the three and nine months ended March 31, 2021 was $983,988 and $2,886,046, respectively. Stock-based compensation expense for the three and nine months ended March 31, 2020 was $862,125 and $2,485,448, 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. In November 2019, the Company granted 158,000 restricted shares of Common Stock to its executives and non-executive directors. The restricted stock granted vests in January 2022. As of March 31, 2021, there were 158,000 shares of such restricted stock that remained unvested. In connection with the appointment of Rick Van Nieuwenhuyse as the President and Chief Executive Officer of the Company, on January 9, 2020, the Company issued 75,000 shares of restricted stock to Mr. Van Nieuwenhuyse. The shares of restricted stock will vest in two equal installments, half on the first anniversary of Mr. Van Nieuwenhuyse’s employment with the Company and half on the second anniversary of his employment with the Company, subject to acceleration upon a change of control of the Company. As of March 31, 2021, there were 37,500 shares of restricted stock from this grant that remained unvested. 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. On December 11, 2020, the Company granted 162,500 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 2022 and January 2023. On December 11, 2020 the Company also granted Mr. Van Nieuwenhuyse 23,333 shares of restricted stock in conjunction with his short-term incentive plan, and such shares will vest in January 2022. As of March 31, 2021, all 205,833 shares of restricted stock granted in December 2020 remained unvested. As of March 31, 2021 , the total compensation cost related to unvested awards not yet recognized was $4,349,404. The remaining costs will be recognized over the remaining vesting period of the awards. 15 Stock options. In connection with the appointment of Rick Van Nieuwenhuyse as the President and Chief Executive Officer of the Company, on January 6, 2020, the Company granted to Mr. Van Nieuwenhuyse options to purchase 100,000 shares of Common Stock of the Company, with an exercise price of $14.50 per share, which is equal to the closing price on January 6, 2020, the day on which he began employment with the Company. The options vest in two equal installments, half vested on the first anniversary of Mr. Van Nieuwenhuyse’s employment with the Company and half will vest on the second anniversary of his employment with the Company, subject to acceleration upon a change of control of the Company. There were no stock option exercises during the three and nine months ended March 31, 2021 . There were also no stock option exercises during the three and nine months ended March 31, 2020. 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. See Note 3 – Summary of Significant Accounting Policies. 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. As of March 31, 2021, the stock options had a weighted-average remaining life of 3.77 years. The total compensation cost related to nonvested options not yet recognized as of March 31, 2021 was $284,839. A summary of the status of stock options granted under the Equity Plan as of March 31, 2021 and changes during the nine months then ended, is presented in the table below: Nine Months Ended March 31, 2021 Shares Under Options Weighted Average Exercise Price Outstanding as of June 30, 2020 100,000 $ 14.50 Granted — Exercised — Forfeited — Outstanding at the end of the period 100,000 $ 14.50 Aggregate intrinsic value $ 443,000 Exercisable, end of the period 50,000 Aggregate intrinsic value $ 221,500 Available for grant, end of period 260,927 Weighted average fair value per share of options granted during the period $ — 11. Commitments and Contingencies Tetlin Lease . The Tetlin Lease had an initial ten- year term beginning July 2008 which was extended for an additional ten years to July 15, 2028, and for so long thereafter as the Joint Venture Company initiates and continues to conduct mining operations on the Tetlin Lease. Pursuant to the terms of the Tetlin Lease, the Joint Venture Company was required to spend $350,000 per year until July 15, 2018 in exploration costs. The Company’s exploration expenditures through the 2011 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 Joint Venture Company derive revenues from the properties covered under the Tetlin Lease, the Joint Venture Company 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. The Company previously paid the Tetlin Tribal Council $225,000 in exchange for reducing the production royalty payable to them by 0.75%. These payments lowered the production royalty to a range of 2 .25% to 4.25%. The Tetlin Tribal Council had the option to increase their production royalty by (i) 0.25% by payment to the Joint Venture Company of $150,000, (ii) 0.50% by payment to the Joint Venture Company of $300,000, or (iii) 0.75% by payment to the Joint Venture Company of $450,000. The Tetlin Tribal Council exercised the option to increase its production royalty by 0.75% by payment to the Joint Venture Company of $450,000 on December 30, 2020. In lieu of a cash payment, the $450,000 will be credited against future production royalty and advance minimum royalty payments due by the Joint Venture Company to the Tetlin Tribal Council under the lease once production begins. The exercise of this option by the tribe did not have an accounting impact to the Company. Until such time as production royalties begin, the Joint Venture Company must pay the Tetlin Tribal Council an advance minimum royalty of $50,000 per year. On July 15, 2012, the advance minimum royalty increased to $75,000 per year, and subsequent years are escalated by an inflation adjustment. Gold Exploration. The Company’s Triple Z, Tok/Tetlin, Eagle, Bush, West Fork, Shamrock and Noah claims are all located on state of Alaska lands. The Company released the Bush and West Fork claims in November 2020. 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 2020 - 2021 assessment year totaled $349,955. The Company paid the current year claim rentals in November 2020 and recorded the payment within prepaid assets. The associated rental expense is amortized over the rental claim period, September 1 - August 31 of each year. As of March 31, 2021, the Joint Venture Company had met the annual labor requirements for the state of Alaska acreage for the next four years, which is the maximum time allowable by Alaska law. The Company obtained 100% ownership of these claims in conjunction with the Separation Agreement. Royal Gold Royalties . Initially, the Joint Venture Company was obligated to pay Royal Gold (i) an overriding royalty of 3.0% should the Joint Venture Company derive revenues from the Tetlin Lease, the Additional Properties and certain other properties and (ii) an overriding royalty of 2.0% should the Joint Venture Company derive revenues from certain other properties. In conjunction with the Separation Agreement (described in Note 1), the Joint Venture Company granted a new 28.0% net smelter returns silver royalty on all silver produced from a defined area within the Tetlin Lease and transferred an additional 1.0% net smelter returns royalty on the state mining claims to Royal Gold. Therefore, Royal Gold currently holds a 3.0% overriding royalty on the Tetlin Lease and the state mining claims that were transferred to the Company in conjunction with the Separation Agreement. 16 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. 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 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. 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 will establish performance goals each year and evaluate 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 will be payable 50.0% in cash and 50.0% in the form of restricted stock granted under the 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 Equity Plan. In addition, in the event of a Change of Control (as defined in the 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 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 STIP plan, in December 2020, Mr. Van Nieuwenhuyse received a $350,000 cash bonus and 23,333 restricted shares of Common Stock, which vest on January 1, 2022. 12. Income Taxes The Company recognized a full valuation allowance on its deferred tax asset as of March 31, 2021 and June 30, 2020 and has recognized $0.2 million income tax benefit and $1.6 million in income tax expense for the three and nine months ended March 31, 2021. The Company recognized income tax expense of zero for the three and nine months ended March 31, 2020. The current income tax expense for the nine months ended March 31, 2021 of $1.6 million consists of $1.3 million of federal income tax expense and $0.3 million of Alaskan state income tax expense. The effective tax rate was 5.85% and 0% for the nine months ending March 31, 2021 and March 31, 2020, respectively. 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. Although the Company is forecasting book and taxable income for June 30, 2021, this income is driven by the gain on the sale of the CORE JV Interest in connection with the Kinross Transactions. This gain does not represent a source of continual income to the Company. As such, insufficient positive evidence exists to support removing the valuation allowance from the net deferred tax asset. The Company will continue to consider positive and negative evidence of the recoverability of the deferred tax assets and will continue to place a valuation allowance on the net deferred tax asset at this time. The Company reviews its tax positions quarterly for tax uncertainties. The Company did not have any uncertain tax positions as of March 31, 2021 or June 30, 2020. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted. Further guidance and clarifications continue to be issued regarding the regulations and provisions of the Act. Among other things, the Act reduces the top U.S. corporate income tax rate from 35.0% to 21.0%, and makes changes to certain other business-related exclusions, deductions and credits. The Company has assessed the impact of the tax bill on the financial statements as of March 31, 2021. The Company will continue to monitor these new regulations and analyze their applicability and impact on the Company. On March 27, 2020, the CARES Act was enacted which is aimed at providing emergency assistance due to the impact of the COVID-19 pandemic. The CARES Act includes several tax incentives. Among them are an increase to the IRC Section 163(j) limitation, temporary relief from the 80% limitation on net operating losses (“NOLs”), an ability to carry back NOLs, as well as some technical corrections related to the Act. 17 Available Information General information about the Company can be found on the Company’s website at www.contangoore.com. Our annual reports on Form 10 -K, quarterly reports on Form 10 -Q and current reports on Form 8 -K, as well as any amendments and exhibits to those reports, are available free of charge through our website as soon as reasonably practicable after the Company files or furnishes them to the Securities and Exchange Commission (“SEC”).