Stock Based Compensation

September

15,

2010,

the Company’s Board of Directors (the “Board”) adopted the Contango ORE, Inc. Equity Compensation Plan (the

“2010

Plan”), which was approved by shareholders on

December 8, 2011.

Under the

2010

Plan, the Board

may

issue up to

1,000,000

shares of common stock and options to officers, directors, employees or consultants of the Company. The maximum aggregate number of shares of common stock of the Company with respect to which grants

may

be made to any individual is

100,000

shares during any calendar year. Awards made under the

2010

Plan are subject to such restrictions, terms and conditions, including forfeitures, if any, as

may

be determined by the Board. Stock-based compensation expense for the years ended

June 30, 2018

and

June 30, 2017

was

$2,468,645

and

$1,787,558,

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 GAAP.

Under the

2010

Plan, options granted must have an exercise price equal to or greater than the market price of the Company’s common stock on the date of grant. The Company

may

grant key employees both incentive stock options intended to qualify under Section

422

of the Internal Revenue Code of

1986,

as amended, and stock options that are

not

qualified as incentive stock options. Stock option grants to non-employees, such as directors and consultants,

may

only be stock options that are

not

qualified as incentive stock options. Options generally expire after

five

years

. Upon option exercise, the Company's policy is to issue new shares to option holders.

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

—“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. Expected volatilities are based on the historical weekly volatility of the Company's stock with a look back period equal to the expected term of the options. The expected dividend yield is

zero

as the Company has never declared and to does

not

anticipate declaring dividends on its common stock. The expected term of the options granted represent the period of time that the options are expected to be outstanding. The simplified method is used for estimating the expected term, due to the lack of historical stock option exercise activity. The risk-free interest rate is based on U.S. Treasury bills with a duration equal to or close to the expected term of the options at the time of grant. The total fair value of stock options vested in fiscal year

2018

and

2017

was approximately

As of

June 30, 2018,

the total unrecognized compensation cost related to nonvested stock options was

. As of

June 30, 2018

the stock options had a weighted average remaining life of

0.2

years.

A summary of the status of stock options granted under the

2010

Plan as of

June 30, 2018

and

2017,

and changes during the fiscal years then ended, is presented in the table below:

	Year Ended June 30,
	2018				2017
			Weighted				Weighted
	Shares		Average		Shares		Average
	Under		Exercise		Under		Exercise
	Options		Price		Options		Price
Outstanding, beginning of year		265,000	$	10.00		405,000	$	10.24
Granted		—	$	—		—	$	—
Exercised		(229,375)	$	10.00		(140,000)	$	10.69
Forfeited		—	$	—		—	$	—
Cancelled		—	$	—		—	$	—
Outstanding, end of year		35,625	$	10.01		265,000	$	10.00
Aggregate intrinsic value	$	454,937			$	2,232,848

Exercisable, end of year		35,625	$	10.01		265,000	$	10.00
Aggregate intrinsic value	$	454,937			$	2.232,848

Available for grant, end of year		384,094				39,094

Weighted average fair value of options granted during the year (1)	$	—			$	—

_______________

(

) There were

options granted during the years ended

June 30, 2018

and

2017.

The following table summarizes information regarding stock options granted under the Company's

2010

Plan that were outstanding at

June 30, 2018:

Options Outstanding

Options Exercisable

Number of

Weighted

Number of

Weighted

Average

Weighted

Average

Weighted

Under

Remaining

Average

Under

Remaining

Average

Range of Exercise

Outstanding

Contractual

Exercise

Outstanding

Contractual

Exercise

Price

Options

Life

Price

Options

Life

Price

$10.00

$10.99

35,625

0.2

10.01

35,625

0.2

10.01

Restricted Stock.

November 2010,

the Company granted

70,429

restricted shares of common stock to its executives and directors and an additional

23,477

restricted shares to its former technical consultant, the owner of Avalon. In

December 2013,

the Company's directors, executives and technical consultant were granted an aggregate of

95,000

shares of restricted stock. All of the restricted stock from both of those grants are fully vested. In

November 2014,

the Company granted

27,000

restricted shares of common stock to its executives. In

January 2015,

the Company granted an aggregate of

30,000

restricted shares of common stock to

two

of its non-executive directors. In addition, the Company granted

10,000

restricted shares of common stock to a former technical consultant. In

September 2015,

the Company granted

85,000

shares to its executives, and in

December 2015

the Company granted

40,000

shares to its non-executive directors.

August 2016,

the Company granted

100,000

restricted shares of common stock to its executives. In

November 2016,

the Company granted

75,000

restricted shares of common stock to its non-executive directors, and in

November 2017

the Company granted

155,000

restricted shares to its executives and non-executive directors.

As of

June 30, 2018,

there were

298,998

shares of such restricted stock that remained unvested. 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.

A summary of the Company

’s restricted stock as of

June

30,

2018

and

June 30, 2017

and the change during the years then ended, is as follows:

	Number of Shares			Weighted Average Fair Value Per Share
Nonvested balance at June 30, 2016		102,332		$	4.54
Granted		175,000		$	21.29
Vested		(78,335	)	$	10.22
Forfeited		—		$	—
Nonvested balance at June 30, 2017		198,997		$	17.03
Granted		155,000		$	19.50
Vested		(54,999	)	$	11.72
Forfeited		—		$	—
Nonvested balance at June 30, 2018		298,998		$	19.12

As of

June

30,

2018

, the total compensation cost related to nonvested restricted share awards

not

yet recognized was

$2,771,361

. The remaining costs are expected to be recognized over the remaining vesting period of the awards.