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Note 12 - Stock Based Compensation

12 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

12. Stock Based Compensation

On September 15, 2010, the Company’s Board of Directors (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 Contango ORE, Inc. Amended and Restated 2010 Equity Compensation Plan (as amended, the “Equity Plan”) which increases 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. As of June 30, 2022, there were 316,334 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 years ended June 30, 2022 and 2021 was $3,993,660 and $3,892,883, 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. 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.

Stock Options. Under the Equity 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 4 - 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 fair value of stock options vested in both fiscal year 2022 and 2021 was approximately $7.42. As of June 30, 2022, the total unrecognized compensation cost related to nonvested stock options was zero. As of June 30, 2022 the stock options had a weighted average remaining life of 2.5 years.

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 vested in two equal installments, half vested on the first anniversary of Mr. Van Nieuwenhuyse’s employment with the Company and half vested on the second anniversary of his employment with the Company.

A summary of the status of stock options granted under the 2010 Plan as of June 30, 2022 and 2021, and changes during the fiscal years then ended, is presented in the table below:

		Year Ended June 30,
		2022								2021
							Weighted							Weighted
			*Shares*				*Average*			*Shares*				*Average*
			*Under*				*Exercise*			*Under*				*Exercise*
			*Options*				*Price*			*Options*				*Price*
Outstanding, beginning of year			100,000			$	14.50				100,000			$	14.50
Granted			—				—				—				—
Exercised			—				—				—				—
Forfeited			—				—				—				—
Cancelled			—				—				—				—
Outstanding, end of year			100,000			$	14.50				100,000			$	14.50
Aggregate intrinsic value		$	811,000							$	595,468

Exercisable, end of year			100,000			$	—				50,000			$	—
Aggregate intrinsic value		$	811,000							$	297,734

Available for grant, end of year			100,427								260,927

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

_______________

⁽¹⁾There were no options granted during the fiscal years ended June 30, 2022 and June 30, 2021.

Restricted Stock. Under the Equity Plan, the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) shall determine to what extent, and under what conditions, the Participant shall have the right to vote shares of Stock Awards and to receive any dividends or other distributions paid on such shares during the restriction period. The terms and applicable voting and dividend rights are outlined in the individual restricted stock agreements. 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. The total grant date fair value of the restricted stock granted in the fiscal years ended June 30, 2022 and 2021 was $3.5 million and $3.7 million, respectively.

In November 2019, the Company granted 158,000 restricted shares of Common Stock to its executives and non-executive directors. All of the restricted stock granted vested in January 2022.

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 vested 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. Half of this restricted stock grant (37,500 shares) vested on January 6, 2021, and the other half vested on January 6, 2022.

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 vested in January 2022. As of June 30, 2022, 165,834 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 June 30, 2022 all 10,000 shares 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 April 2022 and January 2024. As of June 30, 2022, 113,500 shares of such restricted stock granted remained unvested.

In January 2022, Mr. Van Nieuwenhuyse received 15,000 restricted shares of Common Stock, which will vest on January 15, 2023. On February 2, 2022 the Company also granted to four employees a total of 12,000 shares of restricted stock. These restricted shares will vest between January 2023 and January 2025.

As of June 30, 2022, there were 316,334 shares of such restricted stock that remained unvested.

A summary of the Company’s restricted stock as of June 30, 2022 and 2021 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, 2020			534,666			$	16.47
Granted			205,833			$	17.89
Vested			(339,166	)		$	17.58
Nonvested balance at June 30, 2021			401,333			$	16.28
Granted			160,500			$	21.73
Vested			(245,499	)		$	15.39
Nonvested balance at June 30, 2022			316,334			$	19.73

As of June 30, 2022, the total compensation cost related to nonvested restricted share awards not yet recognized was $3,120,996. The remaining costs are expected to be recognized over the remaining vesting period of the awards.