See accompanying
notes to the condensed consolidated financial statements.
See accompanying
notes to the condensed consolidated financial statements.
See accompanying
notes to the condensed consolidated financial statements.
See accompanying
notes to the condensed consolidated financial statements.
Notes
to Condensed Consolidated Financial Statements
As
of January 31, 2014
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A)
Basis of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations
(
s-x
) of the Securities and Exchange Commission (the “SEC”) and with
the instructions to Form 10-Q. Accordingly, they do not include all the information necessary for a comprehensive presentation
of financial position and results of operations, in accordance with generally accepted accounting principles.
It
is management’s opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made
which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative
of the results to be expected for the year. The unaudited condensed consolidated financial statements should be read in conjunction
with the consolidated July 31, 2013 financial statements and footnotes thereto included in the Company’s SEC Form 10-K.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp.) (an exploration stage company) was incorporated under the name of
Golf Alliance Corporation and under the laws of the State of Nevada on July 2, 2007. Inception Mining, Inc. is a precious metal
mineral acquisition, exploration and development company, and along with its wholly owned subsidiary, Inception Development, Inc.
is collectively referred to as “the Company” or “Inception” in the following footnotes.. Inception Development,
Inc., was incorporated under the laws of the State of Idaho on January 28, 2013.
The
Company pursued its original business plan to provide opportunities for golfers to play on private golf courses normally closed
to them due to the membership requirements of the private clubs. During the year ended July 31, 2010, it redirected its business
focus toward precious metal mineral acquisition and exploration. The Company is performing exploration and evaluation work on
its property in Salmon, ID.
On
February 25, 2013, Inception and its majority shareholder (the “Majority Shareholder”), and its wholly-owned subsidiary,
Inception Development Inc. (the “Subsidiary”), entered into an Asset Purchase Agreement (the “Asset Purchase
Agreement”) with Inception Resources, LLC, a Utah corporation (“Inception Resources”), pursuant to which Inception
purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock of Inception, the assumption
of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. Inception Resources was an entity owned
by and under the control of a shareholder. This transaction is deemed an asset purchase by entities under common control. The
Asset Purchase Agreement closed on February 25, 2013 (the “Closing”). We were a “shell company” (as such
term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of the
gold mine pursuant to the terms of the Assert Purchase Agreement. As a result of such acquisition, our operations are now focused
on the ownership and operation of the mine acquired from Inception Resources. Consequently, we believe that acquisition has caused
us to cease to be a shell company as we no longer have nominal operations.
The
Company is in the exploration stage in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Topic No. 915 and SEC Industry Guide No. 7 addressing issues in mining operations. As a result,
and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for exploration
stage companies, all expenditures for exploration and evaluation of the Company’s property are expensed as incurred until
mineralized material is classified as proven or probable reserves. Accordingly, substantially all expenditures have been expensed
as incurred. Certain expenditures, such as for equipment, may be capitalized subject to impairment of the asset. As of July 31,
2013, none of the mineralized material at the Company’s Salmon, ID property met the SEC’s definition of proven or
probable reserves. The Company expects to remain an exploration stage company for the foreseeable future. The Company will not
exit the exploration stage unless and until it demonstrates the existence of proven or probable reserves that meet SEC guidelines.
Activities
during the exploration stage include expanding exploration activities, developing the business plan and raising capital.
Our
company is completely dependent on our Chief Executive Officer, our Chief Financial Officer and our Chief Operating Officer, who
are also members of our Board of Directors. As of the date of this report, we only employed these three individuals. Thus, the
loss of these individuals could significantly and adversely affect our business, and certainly the loss of all three individuals
on or about the same time could result in a complete failure of the Company. Currently the Company is dependent on management
to provide the necessary funds required to continue its exploration stage pursuits.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(A)
Basis of Presentation (
Continued)
On
March 5, 2010, the Company amended its articles of incorporation to (1) to change its name to Silver America, Inc. and (2) increased
its authorized common stock from 100,000,000 to 500,000,000. On June 23, 2010 the Company amended its articles of incorporation
to change its name to Gold American Mining Corp.
On
May 1, 2013, the Company filed Articles of Merger with the Secretary of State of the State of Nevada pursuant to which its wholly-owned
subsidiary, Inception Mining Inc., a Nevada Corporation, was merged into the Company effective May 1, 2013. As a result of the
filing of the Articles of Merger, the Company’s corporate name was changed from Gold American Mining Corp. to Inception
Mining Inc.
On
November 21, 2012, the Company implemented a 200 to 1 reverse stock split. Upon effectiveness of the stock split, each shareholder
canceled 200 shares of common stock for every share of common stock owned as of November 21, 2012. This reverse stock split was
effective on February 13, 2013. All share and per share references have been retroactively adjusted to reflect this 200 to 1 reverse
stock split in the financial statements and in the notes to financial statements for all periods presented, to reflect the stock
split as if it occurred on the first day of the first period presented.
On
May 17, 2013, the Company amended its articles of incorporation to change its name to Inception Mining, Inc.
(B)
Going Concern
As
reflected in the accompanying unaudited condensed consolidated financial statements, the Company is in the exploration stage with
minimal operations, has a net loss since inception of $5,184,150 and used cash in operations of $1,864,978 from inception. In
addition, there is a working capital deficiency (excess of current liabilities over current assets) of $730,990 as of January
31, 2014. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
(C)
Principles of Consolidation
The
accompanying condensed consolidated financial statements include the accounts of Inception Mining, Inc. and its wholly owned subsidiary,
Inception Development, Inc. from January 28, 2013. All intercompany accounts have been eliminated upon consolidation.
(D)
Use of Estimates
In
preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and expenses during the reported period. Significant estimates include valuation of stock
based compensation and the valuation of deferred tax assets. Actual results could differ from those estimates.
(E)
Cash and Cash Equivalents
The
Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
(F)
Exploration and Development Costs
Costs
of acquiring mining properties and any exploration and development costs are expensed as incurred unless proven and probable reserves
exist and the property is a commercially mineable property in accordance with FASB Accounting Standards Codification No. 930,
Extractive Activities - Mining. Mine development costs incurred either to develop new gold and silver deposits, expand the capacity
of operating mines, or to develop mine areas substantially in advance of current production are capitalized. Costs incurred to
maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are
charged to operations upon abandonment. The Company evaluates, at least annually, the carrying value of capitalized mining costs
and related property, plant and equipment costs, if any, to determine if these costs are in excess of their net realizable value
and if a permanent impairment needs to be recorded. The periodic evaluation of carrying value of capitalized costs and any related
property, plant and equipment costs are based upon expected future cash flows and/or estimated salvage value.
The
Company capitalizes costs for mining properties by individual property and defers such costs for later amortization only if the
prospects for economic productions are reasonably certain.
Capitalized
costs are expensed in the period when the determination has been made that economic production does not appear reasonably certain.
During
the six months ended January 31, 2014 and 2013, the Company recorded exploration costs of $38,999 and $0, respectively.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(G)
Property and Equipment
The
Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected
useful life. The Company uses a five year life for computer equipment. Upon retirement or disposal, cost and related accumulated
depreciation are removed from the related accounts, and any resulting gain or loss is recognized as a component of income or loss
for the period.
(H)
Impairment
of Long-Lived Assets
The
Company accounts for long-lived assets, other than goodwill and intangible assets not subject to amortization, in accordance with
the provisions of ASC Topic 360-10,
Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
of
, ASC 360-10 requires that when indications of potential impairment of long-lived assets are present, the Company evaluates
the carrying value of these assets. The Company reviews the carrying value of property, mineral rights and equipment for impairment
whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future
cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are
less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair
value of assets. The factors considered by management in performing this assessment include current operating results, trends
and prospects, the manner in which the property is used, the effects of obsolescence, demand, competition, and other economic
factors.
There
were no impairment losses recorded during the three months ended January 31, 2014 and 2013, respectively.
(I)
Loss Per Share
Basic
and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB
Accounting Standards Codification Topic 260, “Earnings Per Share.” As of January 31, 2014 and 2013 there were 241,695
and 4,953, respectively, warrants issued and outstanding that were not included in the computation of earnings per share because
their inclusion is anti-dilutive.
(J)
Income Taxes
The
Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25,
deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
(K)
Stock-Based Compensation
The
Company recognizes stock compensation under FASB Accounting Standards Codification No. 718,
Compensation – Stock Compensation
. Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based
compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period
during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted
share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost
is measured on the date of grant at their fair value, and such compensation amounts, if any, are amortized over the respective
vesting periods of the option grant.
Equity
instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments,
as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505,
Equity Based
Payments to Non-Employees
defines the measurement date and recognition period for such instruments. In general, the measurement
date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance
is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based
on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)
(L)
Business Segments
The
Company operates in one segment and therefore segment information is not presented.
(M)
Fair Value of Financial Instruments
The
Company’s financial instruments are primarily comprised of cash, accounts payable and accrued liabilities, advances, related
party, and notes payable for which the carrying amount approximates fair value because of the short-term nature of these instruments.
Fair
Value of Financial Instruments
The
Company accounts for the fair value of financial instruments pursuant to ASC Topic 820, Fair Value Measurements. ASC 820 establishes
a framework for measuring fair value in generally accepted accounting principles and establishes a hierarchy that categorizes
and prioritizes the sources to be used to estimate fair value as follows:
Level
1 - Defined as observable inputs such as quoted prices in active markets;
Level
2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability
(interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by
correlation or other means (market corroborated inputs); and
Level
3 - Unobservable inputs that reflect the Company’s determination of assumptions that market participants would use in pricing
the asset or liability. These inputs are developed based on the best information available, including the Company’s own
data.
There
are no assets or liabilities measured and recorded at fair value on a recurring basis at January 31, 2014 and 2013.
(N)
Recent Accounting Pronouncements
Management
has considered all recent accounting pronouncements issued since the last audit of the Company’s financial statements. The
Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial
statements.
NOTE
2 PROPERTY AND EQUIPMENT
Property
and equipment were fully depreciated at January 31, 2014 and July 31, 2013, respectively.
Depreciation
expense for the three months ended January 31, 2014 and 2013 and for the period from July 2, 2007 (Inception) to January 31, 2014
was $0, $206 and $12,214 respectively.
Mineral
Property
On
February 25, 2013, the Company acquired certain real property and the associated exploration permits and mineral rights commonly
known as the U.P. and Burlington Gold Mine (“UP & Burlington” or the “Mine”) pursuant to Asset Purchase
Agreement entered between the Company, its majority shareholder (the “Majority Shareholder”), and its wholly-owned
subsidiary, Inception Development Inc. (the “Subsidiary”) on one hand, and Inception Resources LLC on the other hand,
dated February 25, 2013(the “Asset Purchase Agreement”). This asset purchase was accounted for at approximately the
cost basis of the LLC since the entities were under common control. The property was purchased for consideration of 16,000,000
shares of common stock at par valued at $160, assumption of promissory notes in the amount of $800,000 and $150,000 and the assignment
of a 3% net royalty on sales proceeds of smelter output. No value has been given to the royalty and the Company assumed both promissory
notes. We are presently in the exploration stage at UP & Burlington. UP & Burlington contains two Federal patented mining
claims which Inception Resources acquired for the purpose of the exploration and potential development of gold on the 40 acres
which comprises UP & Burlington.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
3 NOTES PAYABLE
On
February 25, 2013, the Company, its majority shareholder, and its wholly-owned subsidiary, Inception Development Inc. (the “Subsidiary”),
entered into an Asset Purchase Agreement with Inception Resources, LLC, a Utah corporation, pursuant to which the Company purchased
the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock valued at $160 (valued at par value of
$0.00001 because of the entities being under common control), the assumption of promissory notes in the amount of $800,000 and
$150,000 and the assignment of a 3% net royalty. The Asset Purchase Agreement closed on February 25, 2013. As of January 31, 2014,
the outstanding balances on these notes were $630,000 and $39,000, respectively (See Note 7). On November 1, 2013, one of the
notes was renegotiated with the note holder. The original note was restructured and treated as an extinguishment and as such is
now convertible into shares of the Company’s common stock at $0.45 per share. All the other points of the note remained
the same. A beneficial conversion feature on the new note was recorded for $630,000. During the three months ended January 31,
2014, $349,157 of the beneficial conversion feature was amortized as interest expense.
NOTE
4 ADVANCES, RELATED PARTY
During
the year ended July 31, 2013 and up through the period ended January 31, 2014, a stockholder loaned or paid expenses on behalf
of the Company including accrued interest amounts totaling $178,831 and $259,758, respectively. Pursuant to the terms of the advances,
the advances are unsecured and due on demand and bear interest at a rate of 15% per annum (See Note 7). During the three and six
months ended January 31, 2014, $9,523 and $18,711, respectively, in interest expense was recognized.
NOTE
5 LOANS PAYABLE – RELATED PARTY
During
the period ended October 31, 2007 the Company received $3,100 from a principal stockholder. Pursuant to the terms of the loan,
the loan bears interest at 8%, is unsecured and matured on July 31, 2008. The Company repaid the $3,100 of a stockholder loan
and $60 of accrued interest on July 31, 2008 (See Note 7).
On
various dates from 2008 through 2010, the Company received $24,283 from a principal stockholder. Pursuant to the terms of the
loan, the loans were non-interest bearing, were unsecured and due on demand. During the year ended July 31, 2010, the principal
stockholder forgave $24,262 and this was recorded by the Company as contributed capital (See Note 6(G) and 7).
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
5 LOANS PAYABLE – RELATED PARTY (CONTINUED)
During
the year ended July 31, 2010, the principal stockholder loaned the Company $41,915 to pay Company expenses and was repaid $39,274
during the year. There was $2,641 owed to the principal stockholder as of July 31, 2010 (See Note 7). Pursuant to the terms of
the loan, the loans are non-interest bearing, unsecured and due on demand. The Company repaid the $2,641 to the principal stockholder
during the year ended July 31, 2011.
During
the year ended July 31, 2011, the principal stockholder loaned the Company $23,484 to pay Company expenses and was repaid $21,240
during the year. Pursuant to the terms of the loan, the loans are non-interest bearing, unsecured and due on demand (See Note
7).
During
the year ended July 31, 2012, the principal stockholder loaned the Company $64,408 to pay Company expenses. Pursuant to the terms
of the loan, the loans are non-interest bearing, unsecured and due on demand (See Note 7).
For
the year ended July 31, 2013, a related party paid expenses of $5,000 on behalf of the Company in exchange for a non-interest
bearing unsecured loan. As of January 31, 2013 the loan was forgiven and recorded as contributed capital (See Note 6(H)).
During
year ended July 31, 2013, the former controlling stockholders (prior to the Purchase Agreement) forgave the two loans payable
listed below of $64,408 and $2,244. This was recorded by the Company as contributed capital (See Notes 6(H) and 7), no gain or
loss was recognized.
NOTE
6 STOCKHOLDERS’ EQUITY (DEFICIT
)
(A)
Common Stock Issued for Cash
On
July 24, 2007, the Company issued 1,250,000 shares of common stock for $50 ($0.00004/share).
For
the year ending July 31, 2008 the Company entered into stock purchase agreements to issue 202,621 shares of common stock for cash
of $80,000 ($0.4000 per share).
On
April 30, 2010, the Company issued 1,667 shares of common stock for $200,000 ($120/share).
On
June 1, 2010, the Company issued 1,364 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 of
a share of common stock (682 warrants) for a total of $300,000 ($220/share). Each warrant is exercisable for a two year period
and has an exercise price of $330 per share. As of July 31, 2012, none of the warrants had been exercised and they are expired.
On
August 16, 2010, the Company issued 1,875 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5
shares of common stock (937 warrants) for a total of $300,000 ($160/share). Each warrant is exercisable for a two year period
and has an exercise price of $240 per share. As of July 31, 2012, none of the warrants had been exercised.
On
September 24, 2010, the Company issued 2,667 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5
shares of common stock (1,334 warrants) for a total of $400,000 ($150/share). Each warrant is exercisable for a two year period
and has an exercise price of $226 per share. As of July 31, 2012, none of the warrants had been exercised.
On
January 25, 2011, the Company issued 4,000 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5
shares of common stock (2,000 warrants) for a total of $200,000 ($50/share). Each warrant is exercisable for a two year period
and has an exercise price of $76 per share. As of July 31, 2012, none of the warrants had been exercised.
On
August 5, 2013, the Company issued 224,500 shares of common stock and 112,250 common stock purchase warrants for an aggregate
consideration of $101,025 in cash. The cash for these shares and warrants was received prior to July 31, 2013 and had been recorded
as common stock subscribed.
During
the six months ended January 31, 2014, the Company issued 257,555 shares of common stock and 129,445 common stock purchase warrants
for an aggregate consideration of $116,500 in cash. 1,332 shares have not yet been issued and $600 remains in common stock subscribed.
(B)
In-Kind Contribution
For
the year ending July 31, 2007 the shareholder of the Company contributed $1,080 of services on behalf of the Company (See Note
7).
For
the year ending July 31, 2008 the shareholder of the Company contributed $5,760 of services on behalf of the Company (See Note
7).
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
6 STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
(B)
In-Kind Contribution
(Continued)
For
the year ended July 31, 2009 the shareholder of the Company contributed $256 of in kind contribution of interest on behalf of
the Company (See Note 7).
For
the year ended July 31, 2009 the shareholder of the Company contributed $5,760 of services on behalf of the Company (See Note
7).
For
the year ended July 31, 2010 the shareholder of the Company contributed $627 of in kind contribution of interest on behalf of
the Company (See Note 7).
For
the year ended July 31, 2010 the shareholder of the Company contributed $4,320 of services on behalf of the Company (See Note
7).
For
the year ended July 31, 2011 the shareholder of the Company contributed $182 of interest on behalf of the Company (See Note 7).
For
the year ended July 31, 2012 the shareholder of the Company contributed $3,359 of interest on behalf of the Company (See Note
7).
For
the year ended July 31, 2012, the Company recorded $900 of legal fees as an in kind contribution.
For
the year ended July 31, 2013, the former shareholder of the Company contributed as capital $4,419 of accrued interest on behalf
of the Company (See Note 7).
(C)
Amendments to Articles of Incorporation
On
July 6, 2007 the Company amended its Articles of Incorporation to decrease the par value to $0.00001 per share from $0.001 par
value.
On
March 5, 2010 the Company amended its Articles of Incorporation to increase its authorized common stock from 100,000,000 to 500,000,000
and changed its name from Golf Alliance Corporation to Silver America Inc.
On
June 23, 2010, the Company amended its Articles of Incorporation to change its name to Gold American Mining Corp.
On
May 17, 2013, the Company amended its articles of incorporation to change its name to Inception Mining, Inc.
(D)
Return of Common Stock
Immediately
prior to the forward split, the Company’s sole member of the board of directors, returned 1,025,000 shares of common stock
out of the total of 250,000,000 held by him as an in-kind contribution.
(E)
Stock Issued for Mining Rights
On
April 28, 2010, the Company issued 2,500 shares of common stock having a fair value of $505,000 ($202/share) in exchange for mining
rights (See Note 8).
On
April 26, 2010, the Company issued 500 shares of common stock having a fair value of $101,000 ($202/share) in exchange for mining
rights (See Note 8).
On
June 30, 2010, the Company issued 500 shares of common stock having a fair value of $52,000 ($104/share) in exchange for mining
rights (See Note 8).
On
October 31, 2010, the Company issued 2,500 shares of common stock having a fair value of $505,000 ($202/share) in exchange for
mining rights (See Note 8).
On
December 31, 2010, the Company issued 500 shares of common stock having a fair value of $101,000 ($202/share) in exchange for
mining rights (See Note 8).
On
April 30, 2011 the Company issued 2,500 shares of common stock having a fair value of $505,000 ($202/share) in exchange for mining
rights (See Note 8).
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
6 STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)
(E)
Stock Issued for Mining Rights (Continued)
On
July 31, 2011 the Company issued 2,500 shares of common stock having a fair value of $505,000 ($202/share) in exchange for mining
rights (See Note 8).
On
February 25, 2013, the Company and its majority shareholder, entered into an Asset Purchase Agreement with Inception Resources,
LLC, a Utah corporation, pursuant to which the Company purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000
shares of common stock valued at $160 (valued at par value of $0.00001 because of the entities being under common control), the
assumption of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. This asset purchase was accounted
for at approximately the cost basis of the LLC since the entities were under common control. The property was purchased for consideration
of 16,000,000 shares of common stock at par valued at $160, assumption of promissory notes in the amount of $800,000 and $150,000
and the assignment of a 3% net royalty on sales proceeds of smelter output. No value has been given to the royalty and the Company
assumed both promissory notes. The Asset Purchase Agreement closed on February 25, 2013 (See Notes 3 and 8).
(F)
Stock Issued for Services
On
May 7, 2010, the Company issued 188 shares of common stock having a fair value of $48,375 ($258/share) in exchange for consulting
services (See Note 8).
On
August 1, 2010, the Company issued 188 shares of common stock having a fair value of $35,250 ($188/share) in exchange for consulting
services (See Note 8).
On
August 23, 2010, the Company issued 50 shares of common stock having a fair value of $8,700 ($174/share) in exchange for consulting
services (See Note 8).
On
November 1, 2010, the Company issued 187 shares of common stock having a fair value of $30,000 ($160/share) in exchange for consulting
services (See Note 8).
On
January 31, 2011 the Company issued 50 shares of common stock having a fair value of $2,500 ($50/share) in exchange for consulting
services (See Note 8).
On
February 1, 2011 the Company issued 188 shares of common stock having a fair value of $9,000 ($48/share) in exchange for consulting
services (See Note 8).
On
February 1, 2011 the Company issued 50 shares of common stock having a fair value of $2,400 ($48/share) in exchange for consulting
services (See Note 8).
On
May 1, 2011 the Company issued 50 shares of common stock having a fair value of $1,100 ($22/share) in exchange for consulting
services (See Note 8).
On
February 25, 2013 the Company issued 600,000 shares of common stock having a fair value of $18,000 ($0.03/share) in exchange for
legal services. This transaction was recorded as a prepaid legal fee and expensed over the ensuing twelve months. (See Note 8).
On
February 25, 2013, the Company entered into two retainer agreements with two law firms in exchange for legal services pursuant
to which the law firms were issued an aggregate of 600,000 shares of common stock of the Company in consideration of legal services.
This transaction was recorded as prepaid legal fees and expensed over the ensuing twelve months.
On
February 25, 2013 the Company issued 765,094 shares of common stock in exchange for various consulting services. These transactions
were expensed upon closing of the asset purchase agreement.
On
February 25, 2013 the Company issued 1,400,000 shares of common stock in exchange for various consulting services. These transactions
were recorded as prepaid consulting fees and will be amortized over the next 12 months.
At
the time of entering into the consulting contracts for stock issued on February 25, 2013, there was no readily determinable market
for the stock. As a result, the values assigned to the contracts were based upon the negotiated value of legal services pursuant
to a retainer agreement that was executed at the same time as these contracts.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
6 STOCKHOLDERS’ DEFICIT (CONTINUED)
(F)
Stock Issued for Services (Continued)
On
October 30, 2013, the Company entered into a retainer agreement with a law firm in exchange for legal services pursuant to which
the law firm was issued an aggregate of 211,111 shares of common stock of the Company in consideration of legal services valued
at $242,778. This transaction satisfied accounts payable of $80,000 with $15,000 recorded as prepaid legal fees and. The prepaid
legal fees were expensed during the first half of the six months ended January 31, 2014 and a loss on settlement of accounts payable
was recognized of $147,778.
On
November 5, 2013 the Company entered into a consulting services agreement with an individual in exchange for 20,000 shares of
common stock. These services were valued at $24,000 based on the quoted market price of the stock on that day. The company has
recorded consulting expenses of $24,000. These shares have yet to be issued.
On
January 31, 2014, the Company entered into a consulting services agreement with an individual in exchange for 50,000 shares of
common stock for services to be rendered over the next 12 months. These services were valued at $25,500 based on the quoted market
price of the stock on that day. These shares have yet to be issued.
(G)
Cash contributed on Company’s behalf
During
the year ended July 31, 2010, the principal stockholder forgave loans of $24,262 and this was recorded by the Company as contributed
capital (See Note 5 and 7).
(H)
Expenses paid on Company’s behalf
During
the year ended July 31, 2010, the principal stockholder paid $60,871 of expenses on the Company’s behalf, which was recorded
as an in kind contribution of capital (See Note 7).
On
February 25, 2013 the Company’s former President converted $25,000 of the note payable owed into 1,000,000 shares of common
stock at $0.025 per share (See Notes 4 and 7).
During
the year ended July 31, 2013, the former controlling stockholders (prior to the Purchase Agreement) paid $18,582 of accounts payable
and forgave a related party note and loan payable of $91,652 and a former director forgave accounts payable of $67,500., The $177,734
was recorded as an in kind contribution of capital (See Notes 4, 5 and 7).
(I
) Stock Split
On
March 5, 2010, the Company implemented a 50 for 1 forward stock split. Upon effectiveness of the stock split, each shareholder
received 50 shares of common stock for every share of common stock owned as of March 5, 2010. All share and per share references
have been retroactively adjusted to reflect this 50 to 1 forward stock split in the financial statements and in the notes to financial
statements for all periods presented, to reflect the stock split as if it occurred on the first day of the first period presented.
On
November 21, 2012, the Company implemented a 200 to 1 reverse stock split. Upon effectiveness of the stock split, each shareholder
canceled 200 shares of common stock for every share of common stock owned as of November 21, 2012. This reverse stock split was
effective on February 13, 2013. All share and per share references have been retroactively adjusted to reflect this 200 to 1 reverse
stock split in the financial statements and in the notes to financial statements for all periods presented, to reflect the stock
split as if it occurred on the first day of the first period presented.
(J)
Warrants Issued for Cash
The
following tables summarize all warrant grants for the six months ended January 31, 2014 and the year ended July 31, 2013 and the
related changes during this period are presented below:
|
|
Number of Options
|
|
|
Weighted Average
Exercise Price
|
|
Stock Warrants
|
|
|
|
|
|
|
|
|
Balance at July 31, 2012
|
|
|
4,271
|
|
|
$
|
182.00
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(4,271
|
)
|
|
|
(182.00
|
)
|
Balance at July 31, 2013
|
|
|
-
|
|
|
|
-
|
|
Granted
|
|
|
241,695
|
|
|
|
0.90
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Balance at January 31, 2014
|
|
|
241,695
|
|
|
$
|
0.90
|
|
2014 Outstanding Warrants
|
|
|
2014 Warrants Exercisable
|
|
Range of
Exercise Price
|
|
|
Number Outstanding at January
31, 2014
|
|
|
Weighted Average Remaining
Contractual Life
|
|
|
Weighted Average Exercise
Price
|
|
|
Number Exercisable at January
31, 2014
|
|
|
Weighted Average Exercise
Price
|
|
$
|
0.90
|
|
|
|
241,695
|
|
|
|
2.76
years
|
|
|
$
|
0.90
|
|
|
|
241,695
|
|
|
$
|
0.90
|
|
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
7 RELATED PARTY TRANSACTIONS
During
the period ended October 31, 2007 the Company received $3,100 from a principal stockholder. Pursuant to the terms of the loan,
the loan bears interest at 8%, is unsecured and matures on July 31, 2008. At October 31, 2007, the Company had recorded $60 of
related accrued interest payable. The Company repaid $3,100 of a stockholder loan and $60 of accrued interest as of July 31, 2008
(See Note 5).
For
the year ending July 31, 2007 the shareholder of the Company contributed $1,080 of services on behalf of the Company (See Note
6(B)).
For
the year ending July 31, 2008 the shareholder of the Company contributed $5,760 of services on behalf of the Company (See Note
6(B)).
For
the year ended July 31, 2009, the shareholder of the Company contributed $256 of in kind contribution of interest on behalf of
the Company (See Note 6(B).
For
the year ended July 31, 2009, the shareholder of the Company contributed $5,760 of services on behalf of the Company (See Note
6(B)).
During
the year ended July 31, 2010, the principal stockholder paid $60,871 of expenses on Company’s behalf, which was recorded
as an in kind contribution of capital (See Note 6(H)).
For
the year ended July 31, 2010, the shareholder of the Company contributed $627 of in kind contribution of interest on behalf of
the Company (See Note 6(B)).
For
the year ended July 31, 2010, the shareholder of the Company contributed $4,320 of services on behalf of the Company (See Note
6(B)).
During
the year ended July 31, 2010, the principal stockholder loaned the Company $41,915 to pay Company expenses and was repaid $ 39,274
during the year. There was $2,641 owed to the principal stockholder as of July 31, 2010 (See Note 5). Pursuant to the terms of
the loan, the loans are non-interest bearing, unsecured and due on demand. The Company repaid the $2,641 to the principal stockholder
during the year ended July 31, 2011.
During
the year ended July 31, 2011, the principal stockholder loaned the Company $23,484 to pay Company expenses and was repaid $21,240
during the year ended July 31, 2011. Pursuant to the terms of the loan, the loans are non-interest bearing, unsecured and due
on demand. As of July 31, 2011 the outstanding balance of the loans was $20,744. The Company has imputed an interest rate of 6%
per annum upon the loans. Accordingly, interest expense and an in-kind contribution to additional paid in capital of $182 was
recorded as of and for the year ended July 31, 2011 (See Note 5 and 6(B)).
On
various dates from 2008 through 2010, the Company received $24,283 from a principal stockholder. Pursuant to the terms of the
loan, the loans were non-interest bearing, were unsecured and due on demand. During the year ended July 31, 2010, the principal
stockholder forgave $24,262 and this was recorded by the Company as contributed capital (See Note 5 and 6(G)).
During
the year ended July 31, 2010, the Company paid $22,500 to its President for consulting services.
During
the year ended July 31, 2011, the Company paid $52,500 and accrued $37,500 to its President for consulting services.
For
the year ended July 31, 2011 a shareholder of the Company contributed $182 of interest on behalf of the Company (See Note 6(B)).
On
October 10, 2011, the Company executed an unsecured, non-interest bearing, due on demand promissory note payable to its principal
stockholder in the amount of $20,000 encompassing the $18,500 loaned to the Company during the year ended July 31, 2011 and an
additional $1,500 loaned on August 22, 2011. Pursuant to the terms of the note, the loans are non-interest bearing, unsecured
and due on demand (See Note 3).
During
the year ended July 31, 2012, the Company paid $0 and accrued an additional $22,500 to its President for consulting services.
The total amount owed to the President for consulting services is $67,500 as of July 31, 2012.
During
the year ended July 31, 2012, the principal stockholder loaned the Company $64,408 to pay Company expenses. Pursuant to the terms
of the loan, the loans are non-interest bearing, unsecured and due on demand (See Note 5).
For
the year ended July 31, 2012 the shareholder of the Company contributed $3,359 of interest on behalf of the Company (See Note
6(B)).
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
7 RELATED PARTY TRANSACTIONS (CONTINUED)
On
February 25, 2013, the Company and its subsidiary, entered into an Asset Purchase Agreement with Inception Resources, LLC, a Utah
corporation, pursuant to which Gold American purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares
of common stock valued at $160 (valued at par value of $0.00001 because of the entities being under common control), the assumption
of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. Inception Resources, LLC was an entity owned
by and under the control of the majority shareholder. This asset purchase was recorded at approximate historical costs of Inception
Resources because it was a transaction between entities under common control. The Asset Purchase Agreement closed on February
25, 2013 (See Notes 3 and 6(E) and 8).
For
the year ended July 31, 2013, the majority shareholder of the Company forgave $4,419 of accrued interest on behalf of the Company,
which was recorded as in kind contributed capital (See Note 6(B)).
During
the year ended July 31, 2013, the principal stockholder loaned the Company $27,447 to pay Company expenses. Pursuant to the terms
of the loan, the loan bore interest of 9%, unsecured and matured on September 25, 2013 (See Note 3). As of January 31, 2013 the
controlling stockholder forgave $2,447 in loans and $798 in accrued interest. This was recorded by the Company as contributed
capital. On February 25, 2013, the remaining $25,000 was converted to 1,000,000 shares of common stock at $0.025 per share, the
value of the loan (See Notes 6(H)).
During
the year ended July 31, 2013, the former controlling stockholders (prior to the Purchase Agreement) paid $18,582 of accounts payable
and forgave a related party note and loan payable of $91,652 and account payable of $67,500 on the Company’s behalf. The
$177,734 was recorded as an in kind contribution of capital (See Notes 4, 5 and 6(H)).
During
the year ended July 31, 2013 and through the period ended January 31, 2014, a stockholder loaned the Company $259,758 to pay Company
expenses. Pursuant to the terms of the loan, the loan bears interest at 15%, unsecured and due on demand (See Note 4). As of January
31, 2014 the outstanding balance was $259,758 and $17,926 in accrued interest.
NOTE
8 AGREEMENTS AND COMMITMENTS
Share
Issuance Agreement
On
May 7, 2010 the Company entered into a share issuance agreement with a non-related party for share subscriptions up to $7,500,000.
The subscriber made available to the Company by way of advances up to $7,500,000 until December 31, 2011. This agreement expired
on December 31, 2011 and it was not extended. Upon receipt of the advances, the Company issued units of the Company at a price
equal to 90% of volume weighted average closing price of the Company (ticket symbol “IMII.OB”) during the 10 previous
trading days according to http://www.nasdaq.com. Each unit consists of one common share of the Company and one half share purchase
warrant. Each whole warrant may be exercised within two years of the date of issuance to the purchaser at a price equal to 150%
of subscription price. On July 31, 2010 the Company issued 1,364 shares of common stock for cash of $300,000 ($220/share) and
682 warrants at $330 per unit. On September 24, 2010, the Company issued 2,667 units, each unit consisted of 1 share of common
stock and a warrant to purchase 0.5 shares of common stock for a total of $400,000 ($150/share).
Each
warrant was exercisable for a two year period and has an exercise price of $226 per share. On August 16, 2010, the Company issued
1,875 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 shares of common stock for a total of
$300,000 ($160/share). Each warrant was exercisable for a two year period and has an exercise price of $240 per share. On January
25, 2011, the Company issued 4,000 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 shares
of common stock (2,000 warrants) for a total of $200,000 ($50/share). Each warrant is exercisable for a two year period and has
an exercise price of $76 per share (See Note 6(A) and 6(J)). None of the aforementioned warrants had been exercised as of January
31, 2013 and the 4,271 warrants expired.
Yale
Resources Ltd.
On
March 5, 2010, the Company and Yale Resources Ltd. (“Yale”) (collectively referred to below as the “Parties”),
entered into a Binding Letter of Intent (“LOI”) whereby the Parties agreed to a transaction in which Yale will grant
the Company an option to acquire a 90% undivided interest in an approximately 282.83 hectare property located in Zacatcas State,
Mexico (the “Property”). The Company entered into a definitive agreement on April 26, 2010. A brief description of
the material terms and conditions of the option contemplated by the agreement is set forth below.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
8 AGREEMENTS AND COMMITMENTS (CONTINUED)
To exercise the option
the Company was to pay cash to Yale, issue restricted common shares of Company stock to Yale, and fund exploration and development
expenditures on the Property. The cash payments contemplated under the agreement totaled $900,000 and are to be distributed in
installments from the date of the LOI through December 30, 2013. The number of Company shares that were to be issued to Yale total
5,000 and to be distributed in installments from the date of the definitive agreement through December 30, 2013. The Company was
also obligated to fund a total of $2,000,000 worth of exploration and development on the Property beginning June 30, 2011 and
continuing through December 30, 2013, according the following schedule:
|
●
|
Upon
signing the letter of intent the Company paid Yale $10,000 in refundable deposit.
|
|
●
|
Upon
signing of a Definite Agreement the Company paid $10,000 and issued 100,000 shares of common stock having a fair value of
$101,000.
|
|
●
|
For
the year ended July 31, 2010 the Company paid $20,000 and issued 100,000 shares of common stock (See Note 5(E)).
|
|
●
|
On
or before December 30, 2010, the Company will pay $30,000 and issue 100,000 shares of common stock. On December 31, 2010,
the Company paid $30,000 and issued 100,000 shares of common stock (See Note 5(E)).
|
|
●
|
On
or before June 30, 2011, the Company was required to pay $50,000 and issue 100,000 shares of common stock. and have minimum
expenditures of $400,000. As of July 31, 2011, Yale issued a waiver regarding the required cash payment and stock issuance.
|
|
●
|
On
or before December 30, 2011, the company was to pay $50,000 and issue 100,000 shares of common stock. The Company did not
pay this required cash payment and stock issuance because effective February 21, 2012, the agreement was terminated and no
additional cash payments and share issuance are due. The agreement is no longer in effect.
|
Upon
the execution and exercise of the option, Yale was to transfer a 90% undivided interest in the property to the Company. Effective
February 21, 2012 the option agreement was terminated and no additional payments are due.
Optionor
Mineral Property Option Agreement - Nevada
On
April 28, 2010, the Company and four individuals collectively referred to as the “Optionor” entered into a mineral
property option agreement. The Company acquired an option to acquire an option to acquire 72% interest in an approximately 245
acres property located in Clark County, Nevada (the “Property’). To exercise the option the Company was to pay cash,
issue common shares of the Company’s stock and fund exploration and development expenditures on the Property. The cash payments
contemplated in the agreement totaled $272,000 and are distributed in installments from the date of the agreement through June
30, 2010. The number of Company’s shares to be issued totaled 10,000 and are to be distributed in installments from the
date of the agreement through January 31, 2012. The Company was also obligated to fund a minimum of $750,000 and at the Company’s
sole discretion up to $1,000,000 worth of exploration and development on the Property beginning April 30, 2011 and continuing
through July 31, 2012. As of July 31, 2011, the Company issued 7,500 shares of common stock having a fair value of $1,515,000
(See Note 6(E)) and paid $272,000 in cash payment. As part of the $750,000 work commitment, the Company was to provide $400,000
on or before April 30, 2011 and $350,000 on or before July 31, 2012. Finally, the Company was to issue 2,500 shares on January
31, 2012.
The
Company incurred $0 in expenditures during the year ended July 31, 2011, therefore the agreement went into default and terminated
as of July 31, 2011. Therefore, the Company issued the final 2,500 shares of common stock having a fair value of $505,000 as of
July 31, 2011 (See Note 6(E)).
May
2010 Consulting Agreement
On
May 7, 2010, the Company entered into a consulting agreement with an unrelated third party to provide consulting services in exchange
for $7,500 per month and 188 share of Common Stock for every three months while the agreement remains in place. Effective February
1, 2011, the consulting services fee was reduced to $1,500 per month. For the year ended July 31, 2010 the Company issued 188
shares of common stock with a fair value of $48,375 and paid $22,500 in consulting fees. For the year ended July 31, 2011, the
Company issued 563 shares of common stock with a fair value of $74,250 and paid $49,500 in consulting fees (See Note 6(F)). This
agreement was terminated in April 2011.
Optionor
Mineral Property Option Agreement – Mexico
On
August 4, 2010, the Company and three individuals collectively referred to as the “Optionor” entered into a mineral
property option agreement. The Company acquired a 100% interest in an approximately 178 acres property located in Opodepe Municipality,
Sonara Sate, Mexico. To exercise the option the Company was to pay cash and fund exploration and development expenditures on the
Property. The cash payments contemplated in the agreement totaled $765,000 and were to be distributed in installments from the
date of the agreement through December 31, 2012.
Upon the execution of the agreement the Company paid $40,000 on August
23, 2010. In addition to the payments the Company was to pay a 1% royalty as a result of the exploitation activities or a $500,000
lump sum payment upon the Company’s discretion. Effective December 22, 2010 the agreement has been terminated and no additional
payments are due.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
8 AGREEMENTS AND COMMITMENTS (CONTINUED)
August
2010 Consulting Agreement
On
August 23, 2010 the Company signed a consulting agreement with an unrelated party in exchange for $1,000 per month and 50 shares
of common stock every three months. For the year ended July 31, 2011 the Company issued 200 shares of common stock with a fair
value of $14,700 and incurred $11,000 in consulting fees (See Note 6(F)). This agreement was terminated as of August 1, 2011.
U.P.
and Burlington Gold Mine Asset Purchase Agreement
On
February 25, 2013, the Company and its majority shareholder, entered into an Asset Purchase Agreement with Inception Resources,
LLC, a Utah corporation, pursuant to which Gold American purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000
shares of common stock valued at $160 (valued at par value of $0.00001 because of the entities being under common control), the
assumption of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. The Asset Purchase Agreement
closed on February 25, 2013 (See Notes 3 and 6(E)).
Employment
Agreements
On
February 25, 2013, the Company entered into an employment agreement with Michael Ahlin pursuant to which he was appointed as the
Chief Executive Officer, President, Treasurer, Secretary and Director of the Company. Under the terms of his employment agreement,
Mr. Ahlin will become eligible to receive an annual salary, bonus and stock option upon the Company achieving positive EBITDA
in two consecutive quarters as reflected in its filings with the Securities and Exchange Commission (“SEC”).
On
February 25, 2013, the Company entered into an employment agreement with Whit Cluff pursuant to which he was appointed as the
Chief Financial Officer and Director of the Company. Under the terms of his employment agreement, Mr. Cluff will become eligible
to receive an annual salary, bonus and stock option upon the Company achieving positive EBITDA in two consecutive quarters as
reflected in its filings with the SEC.
On
February 25, 2013, the Company entered into an employment agreement with Brian Brewer pursuant to which he was appointed as the
Chief Operating Officer and Director of the Company. Under the terms of his employment agreement, Mr. Brewer will become eligible
to receive an annual salary, bonus and stock option upon the Company achieving positive EBITDA in two consecutive quarters as
reflected in its filings with the SEC.
Crawford
Agreement
On
August 30, 2013, the Company entered into an Agreement (the “Crawford Agreement”) with Crawford Cattle Company LLC
(“Crawford”), a Nevada limited liability company, pursuant to which the Company was to acquire from Crawford certain
mineral rights including the right to extract gold, silver and other minerals, but excluding oil, gas and coal (the “Mineral
Rights”) contained in approximately 16,183 acres located in Humboldt and Elko Counties, Nevada (the “Mineral Properties”).
Crawford advised that it owns a portion of the Mineral Properties and was in the process of acquiring the balance of the Mineral
Properties.
Inception
Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An
Exploration Stage Company)
Notes to Condensed Consolidated
Financial Statements
As of January 31, 2014
NOTE
8 AGREEMENTS AND COMMITMENTS (CONTINUED)
Crawford
Agreement (continued)
Under
the terms of the Crawford Agreement, Crawford granted the Company an exclusive, three month evaluation period in order to perform
due diligence on the Mineral Properties. The Crawford Agreement has expired and the parties are presently in discussions to amend
the Crawford Agreement of which there is no guarantee. In the event the Company elects to purchase the Mineral Rights from Crawford
after amending the Crawford Agreement, the Company would purchase the Mineral Rights for a to-be-determined purchase price to
be paid to Crawford in the form of shares of restricted common stock of the Company at a to-be determined per share price.
Barwicki
Investor Relations Agreement
On
September 26, 2013,the Company entered into a Letter of Agreement with Andrew Barwicki Incorporated (“
Barwicki
”),
pursuant to which Barwicki was retained for the purposes of providing investor relations services in consideration of $3,100 per
month and 15,000 shares of common stock of the Company.
Rick
Thurman Consulting Agreement
On
November 5, 2013, the Company entered into an Advisory Agreement with Rick Thurman pursuant to which Mr. Thurman was issued 20,000
shares of common stock of the Company in consideration of corporate advisory services.
David
Rees Agreement
On
January 31, 2014, the Company entered into a Consulting Agreement with David Rees pursuant to which Mr. Rees will receive 50,000
shares of common stock of the Company, which such shares have been registered on a Registration Statement File No. 333-191244
in consideration of providing general corporate advisory and M&A services.
Chienn
Consulting Agreement
On
January 31, 2014, the Company entered into a Consulting Agreement with Chienn Consulting Company, LLC (“Chienn”) pursuant
to which Chienn will receive 100,000 shares of restricted common stock of the Company in consideration of providing marketing,
sales and business development services.
NOTE
9 CONCENTRATION OF RISK
Financial
instruments that potentially subject the Company to credit risk consist principally of cash. The cash balance identified in the
balance sheet is held in an account with a financial institution and insured by the Federal Deposit Insurance Corporation (FDIC)
up to $250,000. At times, cash maintained on deposit may be in excess of FDIC limits. Cash may also be maintained at commercial
financial institutions which are not insured by the FDIC.
NOTE
10 SUBSEQUENT EVENTS
S
ubscription
Agreements
During
February 2014, the Company entered into subscription agreements with various investors (the “2014 Investors”) pursuant
to which the 2014 Investors purchased an aggregate of 71,111 shares of the Company’s common stock (the “2014 Subscription
Shares”) for an aggregate purchase price of $32,000, together with common stock purchase warrants to acquire 35,555 shares
of common stock at $0.90 per share for a period of three years (the “2014 Warrants” and together with the 2014 Subscription
Shares, the “2014 Securities”).
Consulting Agreement
Effective January
1,
2014, the Company entered into a Consulting Agreement with Trent D’Ambrosio pursuant to which Mr. D’Ambrosio receives
fees of $18,000 per month (the “Fees”) in consideration of financial consulting, business development and general
corporate advisory services. The Fees will accrue until the Company closes on a minimum of $250,000 in equity financing (the “Funding”).
After closing the Funding (the “Closing”), the aggregate outstanding accrued Fees shall be paid to Mr. D’Ambrosio
within five (5) days of Closing and the Fees shall be paid to Mr. D’Ambrosio on a monthly basis within five (5) business
days of the end of every month.
ICONIC Note Purchase
Agreement
On
February 18, 2014, the Company entered into a Note Purchase Agreement with Iconic Holdings, LLC (“Iconic”), for the
sale of an 10% convertible promissory note in the principal amount of $220,000 with an original issue discount of $20,000 (the
“Note”). The initial purchase price under the Note was $55,000 (the “Initial Closing Amount”) which closed
on February 28, 2014. $5,000 (the “Fee”) of the Initial Closing Amount was retained by Iconic through an original
issue discount for due diligence and legal bills related to the transaction.
The
Note bears interest at the rate of 10% per annum. All interest and principal must be repaid on February 18, 2015. The Note is
convertible into common stock, at Iconic’s option and will be equal to the lower of $0.45 or 60% of the lowest three daily
VWAPs (Volume Weighted Average Price) of the Company’s common stock during the 20 consecutive trading days prior to the
date on which Iconic elects to convert all or part of the Note. If the Company is placed on “chilled” status with
the Depository Trust Company, the discount will be increased by 10% until such chill is remedied. The Note may not be prepaid
in whole or in part by the Company.
Iconic
has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common
stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued
and outstanding shares of common stock of the Company. Additionally, Iconic may not convert more than $15,000 in principal and/or
accrued interest during any three week period. The total net proceeds the Company received from this Offering was $55,000, less
the Fee.
As of the date of the Note, the Company is obligated on the Note issued to Iconic
in connection with the offering. The Note is a debt obligation arising other than in the ordinary course of business, which constitutes
a direct financial obligation of the Company.
The
Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”)
for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under
since, among other things, the transaction did not involve a public offering, Iconic is an accredited investor, Iconic had access
to information about the Company and their investment, Iconic took the securities for investment and not resale, and the Company
took appropriate measures to restrict the transfer of the securities.
Effective February 25, 2014, the
Company entered into a consulting agreement with Cody Corrubia, pursuant to which he was issued 100,000 shares of restricted common
stock of the Company in consideration of corporate advisory services.
Effective February 25, 2014, the
Company entered into a consulting agreement with Anna Rancher Corp., pursuant to which it was issued 50,000 shares of restricted
common stock of the Company in consideration of corporate advisory services.