UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
[X] |
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Fiscal Year Ended July 31, 2014
OR
[ ] |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission
File No . 333-147056
INCEPTION
MINING, INC.
(f/k/a
Gold American Mining Corp.)
(Exact
Name of Registrant as Specified in Its Charter)
Nevada |
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35-2302128 |
(State
or Other Jurisdiction |
|
(I.R.S.
Employer |
Of
Incorporation or Organization) |
|
Identification Number) |
|
|
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5320
South 900 East, Suite 260
Murray,
UT |
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84107 |
(Address
of Principal Executive Offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code (801) 312-8113
Securities
registered pursuant to Section 12(b) of the Act:
None.
(Title
of Class)
Securities
registered pursuant to Section 12(g) of the Act:
None.
(Title
of Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ]
No [X]
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [X] No
[ ]
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer [ ] |
Accelerated
filer [ ] |
Non-accelerated
filer [ ] |
Smaller
reporting company [X] |
|
|
(Do
not check if a smaller reporting company) |
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
The
aggregate market value of voting stock held by non-affiliates computed by reference to the price at which the common equity was
last sold as of the last business day of the registrant’s most recently completed second fiscal quarter, January 31, 2013,
was $9,451,695. For purposes of this computation, it has been assumed that the shares beneficially held by directors and officers
of registrant were “held by affiliates”; this assumption is not to be deemed to be an admission by such persons that
they are affiliates of registrant.
The
number of shares of registrant’s common stock outstanding as of November 13, 2014, was 22,793,949.
DOCUMENTS
INCORPORATED BY REFERENCE
No
documents are incorporated by reference.
TABLE
OF CONTENTS
PART
I
ITEM
1. BUSINESS
Description
Of Business
As
used in this Annual Report on Form 10-K, unless otherwise indicated, the terms “we,” “us,” “our”
and “the Company” refer to Inception Mining, Inc., a Nevada corporation.
Forward-Looking
Statements and Associated Risks. This Annual Report on Form 10-K contains forward-looking statements. Such forward-looking statements
include statements regarding, among other things, (1) discussions about mineral resources and mineralized material, (2) our projected
sales and profitability, (3) our growth strategies, (4) anticipated trends in our industry, (5) our future financing plans, (6)
our anticipated needs for working capital, (7) our lack of operational experience and (8) the benefits related to ownership of
our common stock. Forward-looking statements, which involve assumptions and describe our future plans, strategies, and expectations,
are generally identifiable by use of the words “may,” “will,” “should,” “expect,”
“anticipate,” “estimate,” “believe,” “intend,” or “project” or the
negative of these words or other variations on these words or comparable terminology. These statements constitute forward-looking
statements. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results,
performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied
by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” as well as in this filing generally. Actual events or results may differ materially
from those discussed in forward-looking statements as a result of various factors, including, without limitation, the risks outlined
under Item 1A below and other risks and matters described in this filing and in our other SEC filings. In light of these risks
and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur as
projected. We do not undertake any obligation to update any forward-looking statements.
The
Company
Overview
On
February 25, 2013, Inception Mining, Inc. (“Inception” or the “Company”) 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.
We
are a mining exploration stage company engaged in the acquisition, exploration, and development of mineral properties, primarily
for gold, from owned mining properties. Inception Resources has acquired one project, as described below. Our target properties
are those that have been the subject of historical exploration. We have not generated revenue from mining operations.
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 that certain
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 on the
other hand, dated February 25, 2013(the “Asset Purchase Agreement”). 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.
UP
& Burlington is a private gold property which was discovered in 1892 which has been held unused in a family trust for the
past 75 years. UP & Burlington is located in County of Lemhi, Northwest of Salmon, Idaho, at an elevation of 7,994 feet. The
UP & Burlington site is located six miles from the city of Salmon; is 0.6 miles away from the closest major road (Ridge Rd.);
and is 1.56 miles away from the closest major power line. We believe Salmon, along with the surrounding County of Lemhi, provides
an excellent infrastructure for our mine. Salmon has a population of 3,122 and Lemhi County has a population of 7,806. In September
2011, heavy maintenance and right-of-way repair was completed and a new road to UP & Burlington was constructed.
UP
& Burlington’s two gold mining claims were brought to patent in 1900, which covers the Mine’s 40 acres. Subsequently,
in 1989, a U.S. Forest Survey was performed on the UP & Burlington site confirming that the patented claims cover an area
which is six hundred feet by three thousand feet (600’x3000’). The Mine’s patented claims remove the challenges
associated when working on U.S. Forest lands, Bureau of Land Management (“BLM”), state or other property types. With
our purchase of UP & Burlington, we have the benefit of working on private land, which requires only a hauling / road permit
to commence significant operations.
As
part of our initial Plan of Operations, we have compiled a two-phase plan in which we intend to fund underground mining with operating
profits from surface mining, if any. During Phase I, we plan to obtain the necessary permitting, make additional access road and
surface improvements, implement surface mining on a 2,500 foot per day-lighted vein to depths of 40 – 60 feet, and achieve
Confirmatory Core Drilling (NI43-101), Vein Definition and Ore Valuation. In Phase II, we plan to contract an underground mining
and operations plan, expand portal development leveraging existing underground access and implement underground mining to a depth
based on optimizing costs versus processed ore value. There is no guarantee that we will be successful in implementing either
Phase I or Phase II.
Our
Tactical Plan includes obtaining a Lemhi County Conditional Use Permit, an Idaho Department of Lands Surface Reclamation Bond
and permitting for the U.S. Forest Service Access Road, as well as obtaining major contracts such as geotechnical contracts, surface
mining contracts, toll processing contracts and underground mine plan contracts.
The
Company and its independent consultants have developed a detailed exploration drilling program to confirm and expand mineralized
zones in the Mine and collect additional environmental and technical data. The first phase of confirmation and expansion drilling
will begin in 2015 and the Company intends to continue drilling, metallurgical testing, engineering and environmental programs
and studies during 2015 and soon thereafter update the historic feasibility study and environmental permit applications.
We
also plan to review opportunities and acquire additional mineral properties with current or historic precious and base metal mineralization
with meaningful exploration potential.
Competition
and Mineral Prices
We
compete with many companies in the mining business, including larger, more established mining companies with substantial capabilities,
personnel and financial resources. There is a limited supply of desirable mineral lands available for claim-staking, lease or
acquisition in the United States and other areas where we may conduct exploration activities. Because we compete with individuals
and companies that have greater financial resources and larger technical staffs, we may be at a competitive disadvantage in acquiring
desirable mineral properties. From time to time, specific properties or areas that would otherwise be attractive to us for exploration
or acquisition are unavailable due to their previous acquisition by other companies or our lack of financial resources. Competition
in the mining industry is not limited to the acquisition of mineral properties but also extends to the technical expertise to
find, advance, and operate such properties; the labor to operate the properties; and the capital needed to fund the acquisition
and operation of such properties. Competition may result in our company being unable not only to acquire desired properties, but
to recruit or retain qualified employees, to obtain equipment and personnel to assist in our exploration activities or to acquire
the capital necessary to fund our operation and advance our properties. Our inability to compete with other companies for these
resources would have a material adverse effect on our results of operation and business. The mineral exploration industry is highly
fragmented, and we are a very small participant in this sector. Many of our competitors explore for a variety of minerals and
control many different properties around the world. Many of them have been in business longer than we have and have established
strategic partnerships and relationships and have greater financial resources than we do.
There
is significant competition for properties suitable for gold exploration. As a result, we may be unable to continue to acquire
interests in attractive properties on terms that we consider acceptable. We will be subject to competition and unforeseen limited
sources of supplies in the industry in the event spot shortages arise for supplies such as dynamite, and certain equipment such
as drill rigs, bulldozers and excavators that we will need to conduct exploration. If we are unsuccessful in securing the products,
equipment and services we need we may have to suspend our exploration plans until we are able to secure them.
Market
for Gold
In
the event that gold is produced from our property, we believe that wholesale purchasers for the gold would be readily available.
Readily available wholesale purchasers of gold and other precious metals exist in the United States and throughout the world.
Among the largest are Handy & Harman, Engelhard Industries and Johnson Matthey, Ltd. Historically, these markets are liquid
and volatile. Wholesale purchase prices for precious metals can be affected by a number of factors, all of which are beyond our
control, including but not limited to:
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fluctuation
in the supply of, demand and market price for gold; |
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mining
activities of our competitors; |
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sale
or purchase of gold by central banks and for investment purposes by individuals and financial institutions; |
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interest
rates; |
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currency
exchange rates; |
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inflation
or deflation; |
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fluctuation
in the value of the United States dollar and other currencies; and |
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political
and economic conditions of major gold or other mineral-producing countries. |
If
we find gold that is deemed of economic grade and in sufficient quantities to justify removal, we may seek additional capital
through equity or debt financing to build a mine and processing facility, or enter into joint venture or other arrangements with
large and more experienced companies better able to fund ongoing exploration and development work, or find some other entity to
mine our property on our behalf, or sell or lease our rights to mine the gold. Upon mining, the ore would be processed through
a series of steps that produces a rough concentrate. This rough concentrate is then sold to refiners and smelters for the value
of the minerals that it contains, less the cost of further concentrating, refining and smelting. Refiners and smelters then sell
the gold on the open market through brokers who work for wholesalers including the major wholesalers listed above. We have not
found any gold as of today, and there is no assurance that we will find any gold in the future.
Capital
Equipment and R&D Expenditures
We
are not currently conducting any research and development activities other than those relating to the possible acquisition of
new gold and/or silver properties or projects of which there is no guarantee. As we proceed with our exploration programs, we
may need to engage additional contractors and consider the possibility of adding permanent employees, as well as the possible
purchase or lease of equipment.
Mining
Projects
Reference
is made to the previous discussion of the UP & Burlington Gold Mine, and the mining development projects thereon, as disclosed
above.
Employees
As
of the date of this filing, we currently employ three (3) full-time employees. We have contracts with various independent contractors
and consultants to fulfill additional needs, including investor relations, exploration, development, permitting, and other administrative
functions, and may staff further with employees as we expand activities and bring new projects on line.
Patents/Trade
Marks/Licenses/Franchises/Concessions/Royalty Agreements or Labor Contracts
We
do not currently own any patents or trademarks. Also, we are not a party to any license or franchise agreements, concessions,
royalty agreements or labor contracts arising from any patents or trademarks.
Government
Regulations
Mining
Operations . The operation of mines is governed by both federal and state laws. We will be required to comply with
all regulations, rules and directives of governmental authorities and agencies applicable to the exploration of minerals in the
United States generally. Federal laws, such as those governing the purchase, transport or storage of explosives, and those governing
mine safety and health, also apply. The Company plans to obtain a Lemhi County Conditional Use Permit, an Idaho Department of
Lands Surface Reclamation Bond and permitting for the U.S. Forest Service Access Road,
When
the mines come into production we will also be subject to the rules and regulations of the Mine Safety and Health Administration,
a Division of the United States Department of Labor.
Environmental
Laws . Mining activities at the Company’s properties are also subject to various environmental laws, both federal
and state, including but not limited to the federal National Environmental Policy Act, CERCLA (as defined below), the Resource
Recovery and Conservation Act, the Clean Water Act, the Clean Air Act and the Endangered Species Act, and certain Idaho state
laws governing the discharge of pollutants and the use and discharge of water. Various permits from federal and state agencies
are required under many of these laws. Local laws and ordinances may also apply to such activities as construction of facilities,
land use, waste disposal, road use and noise levels.
These
laws and regulations are continually changing and, as a general matter, are becoming more restrictive. The Company’s policy
is to conduct our business in a manner that safeguards public health and mitigates the environmental effects of our business activities.
To comply with these laws and regulations, we have made, and in the future may be required to make, capital and operating expenditures.
The
Comprehensive Environmental Response, Compensation, and Liability Act of 1980 , as amended (CERCLA), imposes strict, joint,
and several liability on parties associated with releases or threats of releases of hazardous substances. Liable parties include,
among others, the current owners and operators of facilities at which hazardous substances were disposed or released into the
environment and past owners and operators of properties who owned such properties at the time of such disposal or release. This
liability could include response costs for removing or remediating the release and damages to natural resources. Our properties,
because of past mining activities, could give rise to potential liability under CERCLA.
Under
the Resource Conservation and Recovery Act (RCRA) and related state laws, mining companies may incur costs for generating,
transporting, treating, storing, or disposing of hazardous or solid wastes associated with certain mining-related activities.
RCRA costs may also include corrective action or clean up costs.
Mining
operations may produce air emissions, including fugitive dust and other air pollutants, from stationary equipment, such as crushers
and storage facilities, and from mobile sources such as trucks and heavy construction equipment. All of these sources are subject
to review, monitoring, permitting, and/or control requirements under the federal Clean Air Act and related state air quality
laws. Air quality permitting rules may impose limitations on our production levels or create additional capital expenditures in
order to comply with the permitting conditions.
Under
the federal Clean Water Act and the delegated Colorado water-quality program, point-source discharges into waters of the
State are regulated by the National Pollution Discharge Elimination System (NPDES) program. Storm water discharges also are regulated
and permitted under that statute. Section 404 of the Clean Water Act regulates the discharge of dredge and fill material
into Waters of the United States, including wetlands. All of those programs may impose permitting and other requirements on our
operations.
The
National Environmental Policy Act (NEPA) requires an assessment of the environmental impacts of major federal actions.
The federal action requirement must be satisfied if the project involves federal land or if the federal government provides financing
or permitting approvals. NEPA does not establish any substantive standards, but requires the analysis of any potential impacts.
The scope of the assessment process depends on the size of the project. An Environmental Assessment (EA) may be adequate for smaller
projects. An Environmental Impact Statement (EIS), which is much more detailed and broader in scope than an EA, is required for
larger projects. NEPA compliance requirements for any of our proposed projects could result in additional costs or delays.
The
Endangered Species Act (ESA) is administered by the U.S. Fish and Wildlife Service of the U.S. Department of Interior.
The purpose of the ESA is to conserve and recover listed endangered and threatened species and their habitat. Under the ESA, endangered
means that a species is in danger of extinction throughout all or a significant portion of its range. The term threatened under
such statute means that a species is likely to become endangered within the foreseeable future. Under the ESA, it is unlawful
to take a listed species, which can include harassing or harming members of such species or significantly modifying their habitat.
Future identification of endangered species or habitat in our project areas may delay or adversely affect our operations.
U.S.
federal and state reclamation requirements often mandate concurrent reclamation and require permitting in addition to the posting
of reclamation bonds, letters of credit or other financial assurance sufficient to guarantee the cost of reclamation. If reclamation
obligations are not met, the designated agency could draw on these bonds or letters of credit to fund expenditures for reclamation
requirements. Reclamation requirements generally include stabilizing, contouring and re-vegetating disturbed lands, controlling
drainage from portals and waste rock dumps, removing roads and structures, neutralizing or removing process solutions, monitoring
groundwater at the mining site, and maintaining visual aesthetics.
Company
Information
The
public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE,
Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC. The address of that site is www.sec.gov.
RISK
FACTORS
High
Degree of Risk
An
investment in our securities involves a high degree of risk. You should consider carefully the following risks, along with all
of the other information included in this report, before deciding to buy our common stock. Additional risks and uncertainties
not currently known to us or that we currently deem to be immaterial may also impair our business operations. If we are unable
to prevent events that have a negative effect from occurring, then our business may suffer.
Risks
Relating to Our Company
We
have incurred losses since our inception in 2007 and may never be profitable which raises doubt about our ability to continue
as a going concern.
Since
our inception in 2007, we have had nominal operations and incurred operating losses. As of July 31, 2014, our accumulated deficit
since inception was approximately $6,083,338. We have substantial current obligations and at July 31, 2014, we had approximately
$1,160,371 of current liabilities as compared to only approximately $140,785 of current assets. Since inception, we have been
able to raise only minimal additional capital, and we have minimal cash on hand. Accordingly, the Company does not have sufficient
cash resources or current assets to pay its current obligations, and we have been meeting many of our obligations through the
issuance of our common stock to our employees, consultants and advisors as payment for the goods and services.
Our
management continues to search for additional financing; however, considering the difficult U.S. and global economic conditions
along with the substantial turmoil in the capital and credit markets, there is a significant possibility that we will be unable
to obtain financing to continue our operations.
As
we are in the beginning stages of our exploration activities on UP & Burlington and such property has not generated revenue
in the recent past, we expect to incur additional losses in the foreseeable future, and such losses may continue to be significant.
To become profitable, we must be successful in raising capital to continue with our mining efforts, exploration activities, meet
the work commitment requirements on UP & Burlington, discover economically feasible mineralization deposits and establish
reserves, successfully develop the properties and finally realize adequate prices on our minerals in the marketplace. It could
be years before we receive any revenues from gold production, if ever. Thus, we may never be profitable.
These
circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph
to our independent registered public accounting firm’s report on our audited financial statements as of and for the year
ended July 31, 2014. If we are unable to continue as a going concern, investors will likely lose all of their investment in our
company.
Since
we have a limited operating history, it is difficult for potential investors to evaluate our business.
Our
limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. Since
our formation, we have not generated any revenues. As an early stage company, which has recently made an acquisition, we are subject
to all the risks inherent in the initial organization, financing, expenditures, complications and delays inherent in a new business.
Investors should evaluate an investment in us in light of the uncertainties encountered by developing companies in a competitive
environment. Our business is dependent upon the implementation of our business plan. There can be no assurance that our efforts
will be successful or that we will ultimately be able to attain profitability.
An
Unsuccessful Material Strategic Transaction Or Relationship Could Result In Operating Difficulties And Other Harmful Consequences
To Our Business.
We
have evaluated, and expect to continue to evaluate, a wide array of potential strategic transactions and relationships with third
parties. From time to time, we may engage in discussions regarding potential acquisitions or joint ventures. Currently, in addition
to our asset owned in Idaho, we have entered into certain mining exploration and development agreements for mining properties
in Nevada. This transaction could be material to our financial condition and results of operations, and the failure of any of
these material relationships and transactions may have a negative financial impact on our business and our results of operations.
The
feasibility of mineral extraction from UP & Burlington has not yet been established; as we have not completed exploration
or other work necessary to determine if it is commercially feasible to develop the properties.
We
are currently a mining exploration stage company.
UP
& Burlington does not have any proven or probable reserves. A “reserve,” as defined by the SEC, is that part of
a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. A reserve
requires a feasibility study demonstrating with reasonable certainty that the deposit can be economically extracted and produced.
We have not yet completed our feasibility study with regard to UP & Burlington. As a result, we currently have no reserves
and there are no assurances that we will be able to prove that there are reserves on UP & Burlington.
On
February 25, 2013, we acquired U.P. & Burlington Gold Mine in part through the delivery of promissory notes in the amount
of $950,000 of which $100,000 was due and payable on or before January 31, 2013, $350,000 was due and payable on or before July
31, 2013 and the remaining balance of $500,000 was due and payable on or before April 15, 2014. We obtained a note extension to
April 15, 2015 of the remaining $500,000 note payable balance. We will be required to obtain debt or equity financing from external
sources in order to fund payment of the outstanding promissory notes.
The
Development And Operation Of Our Mining Projects Involve Numerous Uncertainties.
Mine
development projects, including our planned projects, typically require a number of years and significant expenditures during
the development phase before production is possible.
Development
projects are subject to the completion of successful feasibility studies, issuance of necessary governmental permits and receipt
of adequate financing. The economic feasibility of development projects is based on many factors such as:
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estimation
of reserves; |
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anticipated
metallurgical recoveries; |
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future
gold and silver prices; and |
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anticipated
capital and operating costs of such projects. |
Our mine
development projects may have limited relevant operating history upon which to base estimates of future operating costs and capital
requirements. Estimates of proven and probable reserves and operating costs determined in feasibility studies are based on geologic
and engineering analyses.
Any of the
following events, among others, could affect the profitability or economic feasibility of a project:
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unanticipated
changes in grade and tonnage of material to be mined and processed; |
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unanticipated
adverse geotechnical conditions; |
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incorrect
data on which engineering assumptions are made; |
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costs
of constructing and operating a mine in a specific environment; |
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availability
and cost of processing and refining facilities; |
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availability
of economic sources of power; |
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adequacy
of water supply; |
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adequate
access to the site; |
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unanticipated
transportation costs; |
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government
regulations, domestic and foreign (including regulations relating to prices, royalties, duties, taxes, restrictions on production,
quotas on exportation of minerals, as well as the costs of protection of the environment and agricultural lands); |
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fluctuations
in metal prices; and |
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accidents,
labor actions and force majeure events. |
Any
of the above-referenced events may necessitate significant capital outlays or delays, may materially and adversely affect the
economics of a given property, or may cause material changes or delays in our intended exploration, development and production
activities. Any of these results could force us to curtail or cease our business operations.
We
may never find commercially viable gold or other reserves.
Mineral
exploration and development involve a high degree of risk and few properties that are explored are ultimately developed into producing
mines. We cannot assure you that any future mineral exploration and development activities will result in any discoveries of proven
or probable reserves as defined by the SEC since such discoveries are remote. Nor can we provide any assurance that, even if we
discover commercial quantities of mineralization, a mineral property will be brought into commercial production. Development of
our mineral properties will follow only upon obtaining sufficient funding and satisfactory exploration results.
We
will require significant additional capital to continue our exploration activities, and, if warranted, to develop mining operations.
We
will be required to raise significantly more capital in order to develop UP & Burlington for mining production assuming that
economically viable reserves exist. There is no assurance that our investments in UP & Burlington will be financially productive.
Our ability to obtain necessary funding depends upon a number of factors, including the price of gold and other base metals and
minerals which we are able to mine, the status of the national and worldwide economy and the availability of funds in the capital
markets. If we are unable to obtain the required financing in the near future for these or other purposes, our exploration activities
would be delayed or indefinitely postponed, we would likely lose our lease/options and option to acquire an ownership interest
in UP & Burlington and this would likely, eventually, lead to failure of our Company. Even if financing is available, it may
be on terms that are not favorable to us, in which case, our ability to become profitable or to continue operating would be adversely
affected. If we are unable to raise funds to continue our exploration and feasibility work on UP & Burlington, or if commercially
viable reserves are not present, the market value of our securities will likely decline, and our investors may lose some or all
of their investment.
Our
independent auditors have expressed substantial doubt about our ability to continue as a going concern.
In
their audit opinion issued in connection with our consolidated balance sheets as of July 31, 2014 and our related consolidated
statements of operations, deficiency in stockholders’ equity, and cash flows for the year ended July 31, 2014, our auditors
have expressed substantial doubt about our ability to continue as a going concern given our recurring net losses, negative cash
flows from operations and the limited amount of funds on our balance sheet. We have prepared our financial statements on a going
concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal
course of business. The consolidated financial statements do not include any adjustments that might be necessary should we be
unable to continue in existence. This could make it more difficult to raise capital in the future.
Historical
production of gold at UP & Burlington may not be indicative of the potential for future development or revenue.
Historical
production of gold and minerals from the UP & Burlington cannot be relied upon as an indication that UP & Burlington will
have commercially feasible reserves. Investors in our securities should not rely on historical operations of UP & Burlington
as an indication that we will be able to place UP & Burlington into commercial production again. We expect to incur losses
unless and until such time as the properties enter into commercial production and generate sufficient revenue to fund our continuing
operations.
Fluctuating
gold and mineral prices could negatively impact our business plan.
The
potential for profitability of our gold and mineral mining operations and the value of any mining properties we may acquire will
be directly related to the market price of gold and minerals that we mine. Historically, gold and other mineral prices have widely
fluctuated, and are influenced by a wide variety of factors, including inflation, currency fluctuations, regional and global demand
and political and economic conditions. Fluctuations in the price of gold and other minerals that we mine may have a significant
influence on the market price of our common stock and a prolonged decline in these prices will have a negative effect on our results
of operations and financial condition.
Our
business is subject to extensive environmental regulations which may make exploring for or mining prohibitively expensive, and
which may change at any time.
All
of our operations are subject to extensive environmental regulations which can make exploration expensive or prohibit it altogether.
We may be subject to potential liabilities associated with the pollution of the environment and the disposal of waste products
that may occur as the result of exploring and other related activities on our properties. We may have to pay to remedy environmental
pollution, which may reduce the amount of money that we have available to use for exploration. This may adversely affect our financial
position, which may cause you to lose your investment. If we are unable to fully remedy an environmental problem, we might be
required to suspend operations or to enter into interim compliance measures pending the completion of the required remedy. If
a decision is made to mine our properties and we retain any operational responsibility for doing so, our potential exposure for
remediation may be significant, and this may have a material adverse effect upon our business and financial position. We have
not yet purchased insurance for potential environmental risks (including potential liability for pollution or other hazards associated
with the disposal of waste products from our exploration activities). However, if we mine one or more of our properties and retain
operational responsibility for mining, then such insurance may not be available to us on reasonable terms or at a reasonable price.
All of our exploration and, if warranted, development activities may be subject to regulation under one or more local, state and
federal environmental impact analyses and public review processes. It is possible that future changes in applicable laws, regulations
and permits or changes in their enforcement or regulatory interpretation could have significant impact on some portion of our
business, which may require our business to be economically re-evaluated from time to time. These risks include, but are not limited
to, the risk that regulatory authorities may increase bonding requirements beyond our financial capability. Inasmuch as posting
of bonding in accordance with regulatory determinations is a condition to the right to operate under all material operating permits,
increases in bonding requirements could prevent operations even if we are in full compliance with all substantive environmental
laws.
We
may be denied the government licenses and permits which we need to explore on our properties. In the event that we discover commercially
exploitable deposits, we may be denied the additional government licenses and permits which we will need to mine our properties.
Exploration
activities usually require the granting of permits from various governmental agencies. For example, exploration drilling on unpatented
mineral claims requires a permit to be obtained from the United States Bureau of Land Management, which may take several months
or longer to grant the requested permit. Depending on the size, location and scope of the exploration program, additional permits
may also be required before exploration activities can be undertaken. Prehistoric or Indian grave yards, threatened or endangered
species, archeological sites or the possibility thereof, difficult access, excessive dust and important nearby water resources
may all result in the need for additional permits before exploration activities can commence. As with all permitting processes,
there is the risk that unexpected delays and excessive costs may be experienced in obtaining required permits. The needed permits
may not be granted at all. Delays in or our inability to obtain necessary permits will result in unanticipated costs, which may
result in serious adverse effects upon our business.
The
values of our properties are subject to volatility in the price of gold and any other deposits we may seek or locate.
Our
ability to obtain additional and continuing funding, and our profitability in the unlikely event we ever commence mining operations
or sell our rights to mine, will be significantly affected by changes in the market price of gold. Gold prices fluctuate widely
and are affected by numerous factors, all of which are beyond our control. Some of these factors include the sale or purchase
of gold by central banks and financial institutions; interest rates; currency exchange rates; inflation or deflation; fluctuation
in the value of the United States dollar and other currencies; speculation; global and regional supply and demand, including investment,
industrial and jewelry demand; and the political and economic conditions of major gold or other mineral producing countries throughout
the world, such as Russia and South Africa. The price of gold or other minerals have fluctuated widely in recent years, and a
decline in the price of gold could cause a significant decrease in the value of our properties, limit our ability to raise money,
and render continued exploration and development of our properties impracticable. If that happens, then we could lose our rights
to our properties and be compelled to sell some or all of these rights. Additionally, the future development of our properties
beyond the exploration stage is heavily dependent upon the level of gold prices remaining sufficiently high to make the development
of our properties economically viable. You may lose your investment if the price of gold decreases. The greater the decrease in
the price of gold, the more likely it is that you will lose money.
Our
property titles may be challenged. We are not insured against any challenges, impairments or defects to our mineral claims or
property titles. We have not fully verified title to our properties.
Our
future unpatented claims will be created and maintained in accordance with the federal General Mining Law of 1872. Unpatented
claims are unique U.S. property interests and are generally considered to be subject to greater title risk than other real property
interests because the validity of unpatented claims is often uncertain. This uncertainty arises, in part, out of the complex federal
and state laws and regulations under the General Mining Law. Defending any challenges to our future property titles may be costly,
and may divert funds that could otherwise be used for exploration activities and other purposes. In addition, unpatented claims
are always subject to possible challenges by third parties or contests by the federal government, which, if successful, may prevent
us from exploiting our discovery of commercially extractable gold. Challenges to our title may increase our costs of operation
or limit our ability to explore on certain portions of our properties. We are not insured against challenges, impairments or defects
to our property titles, nor do we intend to carry extensive title insurance in the future. Potential conflicts to our mineral
claims are discussed in detail elsewhere herein.
Possible
amendments to the General Mining Law could make it more difficult or impossible for us to execute our business plan.
The
U.S. Congress has considered proposals to amend the General Mining Law of 1872 that would have, among other things, permanently
banned the sale of public land for mining. The proposed amendment would have expanded the environmental regulations to which we
might be subject and would have given Indian tribes the ability to hinder or prohibit mining operations near tribal lands. The
proposed amendment would also have imposed a royalty of 8% of gross revenue on new mining operations located on federal public
land, which might have applied to our future properties. The proposed amendment would have made it more expensive or perhaps too
expensive to recover any otherwise commercially exploitable gold deposits which we might find on our future properties. While
at this time the proposed amendment is no longer pending, this or similar changes to the law in the future could have a significant
impact on our business model.
Market
forces or unforeseen developments may prevent us from obtaining the supplies and equipment necessary to explore for gold and other
resources.
Gold
exploration, and resource exploration in general, has demands for contractors and unforeseen shortages of supplies and/or equipment
could result in the disruption of our planned exploration activities. Current demand for exploration drilling services, equipment
and supplies is robust and could result in suitable equipment and skilled manpower being unavailable at scheduled times for our
exploration program. Fuel prices are extremely volatile as well. We will attempt to locate suitable equipment, materials, manpower
and fuel if sufficient funds are available. If we cannot find the equipment and supplies needed for our various exploration programs,
we may have to suspend some or all of them until equipment, supplies, funds and/or skilled manpower become available. Any such
disruption in our activities may adversely affect our exploration activities and financial condition.
We
may not be able to maintain the infrastructure necessary to conduct exploration activities.
Our
exploration activities depend upon adequate infrastructure. Reliable roads, bridges, power sources and water supply are important
factors which affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference
in the maintenance or provision of such infrastructure could adversely affect our exploration activities and financial condition.
Our
exploration activities may be adversely affected by the local climates, which could prevent or impair us from exploring our properties
year round.
The
local climate Idaho may impair or prevent us from conducting exploration activities on our properties year round. Because of its
rural location and limited infrastructure in this areas, our property is generally impassible for several days per year as a result
of significant rain or snow events. Earthquakes, heavy rains, snowstorms, and floods could result in serious damage to or the
destruction of facilities, equipment or means of access to our properties, or may otherwise prevent us from conducting exploration
activities on our properties.
We
do not currently carry any property or casualty insurance.
Our
business is subject to a number of risks and hazards generally, including but not limited to adverse environmental conditions,
industrial accidents, unusual or unexpected geological conditions, ground or slope failures, cave-ins, changes in the regulatory
environment and natural phenomena such as inclement weather conditions, floods and earthquakes. Such occurrences could result
in damage to our properties, equipment, infrastructure, personal injury or death, environmental damage, delays, monetary losses
and possible legal liability. You could lose all or part of your investment if any such catastrophic event occurs. We do not carry
any property or casualty insurance at this time (except that we will carry all insurances that we are required to by law, such
as motor vehicle and workers compensation plus other coverage that may be in the best interest of the Company). Even if we do
obtain insurance, it may not cover all of the risks associated with our operations. Insurance against risks such as environmental
pollution or other hazards as a result of exploration and operations are often not available to us or to other companies in our
business on acceptable terms. Should any events against which we are not insured actually occur, we may become subject to substantial
losses, costs and liabilities which will adversely affect our financial condition.
Reclamation
obligations on UP & Burlington could require significant additional expenditures.
We
are responsible for the reclamation obligations related to any exploratory and mining activities located on UP & Burlington.
Since we have only begun exploration activities, we cannot estimate these costs at this time. The satisfaction of current and
future bonding requirements and reclamation obligations will require a significant amount of capital. There is a risk that we
will be unable to fund these additional bonding requirements, and further that increases to our bonding requirements or excessive
actual reclamation costs will negatively affect our financial position and results of operation.
Title
to mineral properties can be uncertain, and we are at risk of loss of ownership of our property.
Our
ability to explore and mine future leased and optioned properties depends on the validity of title to that property. While UP
& Burlington consists of patented mining claims, future unpatented mining claims are effectively only a lease from the federal
government to extract minerals; thus an unpatented mining claim is subject to contest by third parties or the federal government.
These uncertainties relate to such things as the sufficiency of mineral discovery, proper posting and marking of boundaries, failure
to meet statutory guidelines, assessment work and possible conflicts with other claims not determinable from descriptions of record.
Since a substantial portion of all mineral exploration, development and mining in the United States now occurs on unpatented mining
claims, this uncertainty is inherent in the mining industry. Thus, there may be challenges to the title to future properties which,
if successful, could impair development and/or operations.
Our
ongoing operations and past mining activities of others are subject to environmental risks, which could expose us to significant
liability and delay, suspension or termination of our operations.
Mining
exploration and exploitation activities are subject to federal, state and local laws, regulations and policies, including laws
regulating the removal of natural resources from the ground and the discharge of materials into the environment. These regulations
mandate, among other things, the maintenance of air and water quality standards and land reclamation. They also set forth limitations
on the generation, transportation, storage and disposal of solid and hazardous waste. Exploration and exploitation activities
are also subject to federal, state and local laws and regulations which seek to maintain health and safety standards by regulating
the design and use of exploration methods and equipment.
Environmental
and other legal standards imposed by federal, state or local authorities are constantly evolving, and typically in a manner which
will require stricter standards and enforcement, and increased fines and penalties for non-compliance. Such changes may prevent
us from conducting planned activities or increase our costs of doing so, which would have material adverse effects on our business.
Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus
causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages that
we may not be able to or elect not to insure against due to prohibitive premium costs and other reasons. Unknown environmental
hazards may exist on UP & Burlington, or we may acquire properties in the future that have unknown environmental issues caused
by previous owners or operators, or that may have occurred naturally.
UP
& Burlington is subject to royalties on production.
As part
of our purchase of UP & Burlington we granted a Net Smelter Royalty (“NSR”) of 3%. In addition, historical royalties
may be asserted by third-parties which are currently unknown to us.
Our
industry is highly competitive, attractive mineral lands are scarce and we may not be able to obtain quality properties.
We
compete with many companies in the mining industry, including large, established mining companies with capabilities, personnel
and financial resources that far exceed our limited resources. In addition, there is a limited supply of desirable mineral lands
available for claim-staking, lease or acquisition in the United States, and other areas where we may conduct exploration activities.
We are at a competitive disadvantage in acquiring mineral properties, since we compete with these larger individuals and companies,
many of which have greater financial resources and larger technical staffs. Likewise, our competition extends to locating and
employing competent personnel and contractors to prospect, develop and operate mining properties. Many of our competitors can
offer attractive compensation packages that we may not be able to meet. Such competition may result in our company being unable
not only to acquire desired properties, but to recruit or retain qualified employees or to acquire the capital necessary to fund
our operation and advance our properties. Our inability to compete with other companies for these resources would have a material
adverse effect on our results of operation and business.
We
depend on our Chief Executive Officer and Mine Operations Director and the loss of these individuals could adversely affect our
business.
Our
company is completely dependent on our Chief Executive Officer, Michael Ahlin, our Chief Financial Officer, Whit Cluff and our
Chief Operating Officer, Brian Brewer, who are also members of our Board of Directors. As of the date of this report, we only
employed three individual: Messrs. Ahlin, Cluff and Brewer. Thus, the loss of Messrs. Ahlin, Cluff and Brewer 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. We do not carry any life insurance on the life of Messr. Ahlin, Cluff and Brewer.
The
nature of mineral exploration and production activities involves a high degree of risk and the possibility of uninsured losses
that could materially and adversely affect our operations.
Exploration
for minerals is highly speculative and involves greater risk than many other businesses. Many exploration programs do not result
in the discovery of economically feasible mineralization. Few properties that are explored are ultimately advanced to the stage
of producing mines. We are subject to all of the operating hazards and risks normally incident to exploring for and developing
mineral properties such as, but not limited to:
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economically
insufficient mineralized material; |
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fluctuations
in production costs that may make mining uneconomical; |
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labor
disputes; |
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unanticipated
variations in grade and other geologic problems; |
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environmental
hazards; |
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water
conditions; |
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difficult
surface or underground conditions; |
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industrial
accidents; personal injury, fire, flooding, cave-ins and landslides; |
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metallurgical
and other processing problems; |
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mechanical
and equipment performance problems; and |
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decreases
in revenues and reserves due to lower gold and mineral prices. |
Any
of these risks can materially and adversely affect, among other things, the development of properties, production quantities and
rates, costs and expenditures and production commencement dates. We currently have no insurance to guard against any of these
risks. If we determine that capitalized costs associated with any of our mineral interests are not likely to be recovered, we
would incur a write-down of our investment in these interests. All of these factors may result in losses in relation to amounts
spent which are not recoverable.
Our
operations are subject to permitting requirements which could require us to delay, suspend or terminate our operations on our
mining property.
Our
operations and exploration activities on UP & Burlington, require permits from the state and federal governments. We may be
unable to obtain these permits in a timely manner, on reasonable terms or at all. If we cannot obtain or maintain the necessary
permits, or if there is a delay in receiving these permits, our timetable and business plan for exploration of UP & Burlington
will be adversely affected.
Risks
Associated with Our Common Stock in General
Trading
on the Over the Counter markets may be volatile and sporadic, which could depress the market price of our common stock and make
it difficult for our stockholders to resell their shares.
Our
common stock is quoted on the OTCQB Inter-Dealer Quotation System owned and operated by the OTC Markets Group, Inc. and the OTC
Pink Sheet service of the Financial Industry Regulatory Authority (“FINRA”) under the symbol SILA. We intend to change
the name of the company and the symbol in the near future. Trading in stock quoted on over the counter markets is often thin,
volatile, and characterized by wide fluctuations in trading prices due to many factors that may have little to do with our operations
or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance.
Moreover, the over the counter markets are not a stock exchange, and trading of securities on the over the counter markets is
often more sporadic than the trading of securities listed on other stock exchanges such as the NASDAQ Stock Market, New York Stock
Exchange or American Stock Exchange. Accordingly, our shareholders may have difficulty reselling any of their shares.
Our
stock is a penny stock. Trading of our stock may be restricted by the SEC’s penny stock regulations and the FINRA’s
sales practice requirements, which may limit a stockholders ability to buy and sell our stock.
Our
stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines penny stock to be any equity security that has
a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.
Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who
sell to persons other than established customers and accredited investors. The term accredited investor refers generally to institutions
with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000
or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock
not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides
information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer must also provide
the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction and monthly account statements showing the market value of each penny stock held in the customers’ account.
The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally
or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s
confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from
these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability or willingness of broker-dealers to trade our securities. We believe that the penny
stock rules discourage broker-dealer and investor interest in, and limit the marketability of, our common stock.
Our
common stock may be affected by limited trading volume and price fluctuation which could adversely impact the value of our common
stock.
There
has been limited trading in our common stock and there can be no assurance that an active trading market in our common stock will
either develop or be maintained. Our common stock has experienced, and is likely to experience in the future, significant price
and volume fluctuations which could adversely affect the market price of our common stock without regard to our operating performance.
In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy
or the condition of the financial markets could cause the price of our common stock to fluctuate substantially. These fluctuations
may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot
predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock will be
stable or appreciate over time.
FINRA
sales practice requirements may also limit a stockholders ability to buy and sell our stock.
In
addition to the penny stock rules promulgated by the SEC, which are discussed in the immediately preceding risk factor, FINRA
rules require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that
the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax
status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high
probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it
more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit the ability to buy and
sell our stock and have an adverse effect on the market value for our shares.
Because
the SEC imposes additional sales practice requirements on brokers who deal in shares of penny stocks, some brokers may be unwilling
to trade our securities. This means that you may have difficulty reselling your shares, which may cause the value of your investment
to decline.
Our
shares are classified as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934 (the “Exchange
Act”) which imposes additional sales practice requirements on broker-dealers who sell our securities in this offering or
in the aftermarket. For sales of our securities, broker-dealers must make a special suitability determination and receive a written
agreement prior from you to making a sale on your behalf. Because of the imposition of the foregoing additional sales practices,
it is possible that broker-dealers will not want to make a market in our common stock. This could prevent you from reselling your
shares and may cause the value of your investment to decline.
A
decline in the price of our common stock could affect our ability to raise further working capital, it may adversely impact our
ability to continue operations and we may go out of business.
A
prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction
in our ability to raise capital. Because we may attempt to acquire a significant portion of the funds we need in order to conduct
our planned operations through the sale of equity securities, or convertible debt instruments, a decline in the price of our common
stock could be detrimental to our liquidity and our operations because the decline may cause investors to not choose to invest
in our stock. If we are unable to raise the funds we require for all our planned operations, we may be forced to reallocate funds
from other planned uses and may suffer a significant negative effect on our business plan and operations, including our ability
to develop new products and continue our current operations. a result, our business may suffer, and not be successful and we may
go out of business. We also might not be able to meet our financial obligations if we cannot raise enough funds through the sale
of our common stock and we may be forced to go out of business.
Our
stock price may be volatile.
The
stock market in general has experienced volatility that often has been unrelated to the operating performance of any specific
public company. The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response
to various factors, many of which are beyond our control, including the following:
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changes
in our industry; |
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competitive
pricing pressures; |
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our
ability to obtain working capital financing; |
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additions
or departures of key personnel; |
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limited
“public float” in the hands of a small number of persons who sales or lack of sales could result in positive or
negative pricing pressure on the market prices of our common stock; |
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sales
of our common stock; |
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our
ability to execute our business plan; |
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operating
results that fall below expectations; |
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loss
of any strategic relationship; |
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regulatory
developments; |
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economic
and other external factors; and |
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period-to-period
fluctuations in our financial results. |
In
addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated
to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market
price of our common stock.
We
have never paid a cash dividend on our common stock and we do not anticipate paying any in the foreseeable future.
We
have not paid a cash dividend on our common stock to date, and we do not intend to pay cash dividends in the foreseeable future.
Our ability to pay dividends will depend on our ability to successfully develop one or more properties and generate revenue from
operations. Notwithstanding, we will likely elect to retain any earnings, if any, to finance our growth. Future dividends may
also be limited by bank loan agreements or other financing instruments that we may enter into in the future. The declaration and
payment of dividends will be at the discretion of our Board of Directors.
There
is currently no liquid trading market for our common stock and we cannot ensure that one will ever develop or be sustained.
To
date there has been no liquid trading market for our common stock. We cannot predict how liquid the market for our common stock
might become. Since June 26, 2008, our common stock has been quoted for trading on the OTC Bulletin Board under the symbol SILA,
and, as soon as is practicable, we intend to apply for listing of our common stock on either the NYSE Amex, The Nasdaq Capital
Market or other national securities exchange, assuming that we can satisfy the initial listing standards for such exchange. We
currently do not satisfy the initial listing standards, and cannot ensure that we will be able to satisfy such listing standards
or that our common stock will be accepted for listing on any such exchange. Should we fail to satisfy the initial listing standards
of such exchanges, or our common stock is otherwise rejected for listing and remain listed on the OTC Bulletin Board or suspended
from the OTC Bulletin Board, the trading price of our common stock could suffer and the trading market for our common stock may
be less liquid and our common stock price may be subject to increased volatility. Furthermore, for companies whose securities
are traded in the OTC Bulletin Board, it is more difficult (1) to obtain accurate quotations, (2) to obtain coverage for significant
news events because major wire services generally do not publish press releases about such companies, and (3) to obtain needed
capital.
We
have not voluntarily implemented various corporate governance measures, in the absence of which, shareholders may have more limited
protections against interested director transactions, conflicts of interest and similar matters.
Recent
federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures
designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted
in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities
exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures
that are required under the rules of national securities exchanges and NASDAQ are those that address board of directors’
independence, audit committee oversight and the adoption of a code of ethics. While our Board of Directors has adopted a Code
of Ethics and Business Conduct, we have not yet adopted any of these corporate governance measures and, since our securities are
not listed on a national securities exchange or NASDAQ, we are not required to do so. It is possible that if we were to adopt
some or all of these corporate governance measures, shareholders would benefit from somewhat greater assurances that internal
corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct.
For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors,
decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may
be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should
bear in mind our current lack of corporate governance measures in formulating their investment decisions.
Difficulties
we may encounter managing our growth could adversely affect our results of operations.
As
our business needs expand, we may need to hire a significant number of employees. This expansion may place a significant strain
on our managerial and financial resources. To manage the potential growth of our operations and personnel, we will be required
to:
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improve
existing, and implement new, operational, financial and management controls, reporting systems and procedures; |
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install
enhanced management information systems; and |
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train,
motivate and manage our employees. |
We
may not be able to install adequate management information and control systems in an efficient and timely manner, and our current
or planned personnel, systems, procedures and controls may not be adequate to support our future operations. If we are unable
to manage growth effectively, our business would be seriously harmed.
If
we lose key personnel or are unable to attract and retain additional qualified personnel we may not be able to successfully manage
our business and achieve our objectives.
We
believe our future success will depend upon our ability to retain our key management, Mr. Ahlin, our Chief Executive Officer,
Mr. Cluff, our Chief Financial Officer, and Mr. Brewer our Chief Operating Officer. We may not be successful in attracting, assimilating
and retaining our employees in the future.
Offers
or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If
our stockholders sell substantial amounts of our common stock in the public market upon the expiration of any statutory holding
period, under Rule 144, or issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly
referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence
of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional
financing through the sale of equity or equity related securities in the future at a time and price that we deem reasonable or
appropriate.
ITEM
1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM
2. PROPERTIES
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 that certain
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 on the
other hand, dated February 25, 2013(the “Asset Purchase Agreement”). 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.
UP
& Burlington is a private gold property which was discovered in 1892 which has been held unused in a family trust for the
past 75 years. UP & Burlington is located in County of Lemhi, Northwest of Salmon, Idaho, at an elevation of 7,994 feet. The
UP & Burlington site is located six miles from the city of Salmon; is 0.6 miles away from the closest major road (Ridge Rd.);
and is 1.56 miles away from the closest major power line. We believe Salmon, along with the surrounding County of Lemhi, provides
an excellent infrastructure for our mine. Salmon has a population of 3,122 and Lemhi County has a population of 7,806. In September
2011, heavy maintenance and right-of-way repair was completed and a new road to UP & Burlington was constructed. UP &
Burlington’s two gold mining claims were brought to patent in 1900, which covers the Mine’s 40 acres. Subsequently,
in 1989, a U.S. Forest Survey was performed on the UP & Burlington site confirming that the patented claims cover an area
which is six hundred feet by three thousand feet (600’x3000’). The Mine’s patented claims remove the challenges
associated when working on U.S. Forest lands, Bureau of Land Management (“BLM”), state or other property types. With
our purchase of UP & Burlington, we have the benefit of working on private land, which requires only a hauling / road permit
to commence significant operations.
As
part of our initial Plan of Operations, we have compiled a two-phase plan in which we intend to fund underground mining with operating
profits from surface mining, if any. During Phase I, we plan to obtain the necessary permitting, make additional access road and
surface improvements, implement surface mining on a 2,500 foot per day-lighted vein to depths of 40 – 60 feet, and achieve
Confirmatory Core Drilling (NI43-101), Vein Definition and Ore Valuation. In Phase II, we plan to contract an underground mining
and operations plan, expand portal development leveraging existing underground access and implement underground mining to a depth
based on optimizing costs versus processed ore value. There is no guarantee that we will be successful in implementing either
Phase I or Phase II.
Our
Tactical Plan includes obtaining a Lemhi County Conditional Use Permit, an Idaho Department of Lands Surface Reclamation Bond
and permitting for the U.S. Forest Service Access Road, as well as obtaining major contracts such as geotechnical contracts, surface
mining contracts, toll processing contracts and underground mine plan contracts.
The
Company and its independent consultants have developed a detailed exploration drilling program to confirm and expand mineralized
zones in the Mine and collect additional environmental and technical data. The first phase of confirmation and expansion drilling
will begin in 2013 and the Company intends to continue drilling, metallurgical testing, engineering and environmental programs
and studies during 2013 and soon thereafter update the historic feasibility study and environmental permit applications.
We
currently maintain our corporate offices at 5320 South 900 East, Murray, Utah 84107. During the fiscal year ended July 31, 2014,
we paid monthly rent of $400 for use of a corporate office, which we anticipate will be sufficient until we commence full operations.
ITEM
3. LEGAL PROCEEDINGS
We
are not aware of any material pending legal proceedings to which we are a party or of which our property is the subject. We also
know of no proceedings to which any of our directors, officers or affiliates, or any registered or beneficial holders of more
than 5% of any class of our securities, or any associate of any such director, officer, affiliate or security holder are an adverse
party or have a material interest adverse to us.
ITEM
4. MINE SAFETY DISCLOSURES
Not Applicable.
PART
II
ITEM
5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market
Information
Our
common stock is not traded on any exchange. Our common stock is quoted on the OTC Bulletin Board and OTC Markets, under the trading
symbol “IMII” We cannot assure you that there will be a market in the future for our common stock.
OTC
securities are not listed and traded on the floor of an organized national or regional stock exchange. Instead, OTC securities
transactions are conducted through a telephone and computer network connecting dealers. OTC Bulletin Board issuers are traditionally
smaller companies that do not meet the financial and other listing requirements of a national or regional stock exchange.
The
following table reflects the high and low bid information for our common stock and reflects inter-dealer prices, without retail
mark-up, markdown or commission, and may not necessarily represent actual transactions.
The
high and low bid prices of our common stock for the periods indicated below are as follows:
OTC
Bulletin Board | |
Quarter
Ended | | |
High | | |
Low | |
2014 | | |
| | | |
| | |
October
31, 2013 | | |
$ | 1.400 | | |
$ | 1.100 | |
January 31, 2014 | | |
$ | 1.200 | | |
$ | 0.510 | |
April 30, 2014 | | |
$ | 1.230 | | |
$ | 0.510 | |
July 31, 2014 | | |
$ | 1.150 | | |
$ | 0.840 | |
| | |
| | | |
| | |
2013 | | |
| | | |
| | |
October 31, 2012 | | |
$ | 7.000 | | |
$ | 3.200 | |
January 31, 2013 | | |
$ | 3.200 | | |
$ | 1.500 | |
April 30, 2013 | | |
$ | 2.700 | | |
$ | 0.520 | |
July 31, 2013 | | |
$ | 1.980 | | |
$ | 1.010 | |
Holders
As of November
10, 2014 there were sixty-two (62) holders of record of our common stock.
Dividends
To
date, we have not paid dividends on shares of our common stock and we do not expect to declare or pay dividends on shares of our
common stock in the foreseeable future. The payment of any dividends will depend upon our future earnings, if any, our financial
condition, and other factors deemed relevant by our Board of Directors.
Equity
Compensation Plans
Effective August 27, 2013 the Company adopted an incentive stock
plan.
Recent
Sales of Unregistered Securities
The
Company entered into subscription agreements with various accredited investors (the “2013 Accredited Investors”) pursuant
to which the 2013 Accredited Investors purchased an aggregate of 306,722 shares of the Company’s common stock (the “2013
Subscription Shares”) for an aggregate purchase price of $138,025, together with common stock purchase warrants to acquire
153,361 shares of common stock at $0.90 per share for a period of three years (the “2013 Warrants” and together with
the 2013 Subscription Shares, the “2013 Securities”).
|
● |
On
July 31, 2013, the Company sold 224,500 shares of common stock and Warrants to acquire 112,250 shares of common stock for
an aggregate consideration of $101,025. |
|
|
|
|
● |
On
August 30, 2013, the Company sold 82,222 shares of common stock and Warrants to acquire 41,111 shares of common stock for
an aggregate consideration of $37,000. |
|
|
|
|
● |
Effective
August 1, 2013, the Company issued 15,000 shares of common stock for services valued at $6,750. These shares were issued for
the settlement of accounts payable. |
|
|
|
|
● |
On
August 5, 2013, the Company issued 295,611 shares of common stock and 112,250 common stock purchase warrants for 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. |
|
|
|
|
● |
In
January 2014, the Company issued 258,887 shares of common stock and 129,445 common stock purchase warrants for aggregate consideration
of $116,500 in cash. |
|
|
|
|
● |
In
February and March 2014, the Company issued 100,000 shares of common stock and 104,000 common stock purchase warrants for
aggregate consideration of $51,000 in cash. |
|
|
|
|
● |
In
July 2014, the Company issued 44,444 shares of common stock for consideration of $20,000 in cash. |
|
|
|
|
● |
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. The
prepaid legal fees were expensed during the three months ended October 31, 2013 and a loss on settlement of accounts payable
was recognized of $147,778. There shares were issued for the settlement of accounts payable. |
|
|
|
|
● |
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. |
|
|
|
|
● |
In
January 2014, the Company issued 150,000 shares of common stock for services valued at $76,500. The services are being provided
over a 12-month period. |
|
|
|
|
● |
In
March 2014, the Company issued 100,000 shares of common stock for services valued at $102,000. The services are being provided
over a 12-month period. |
|
|
|
|
● |
In
April 2014, the Company issued 40,000 shares of common stock for services valued at $46,000. |
The
2013 Securities were offered and sold in a private placement transaction made in reliance upon exemptions from registration pursuant
to Section 4(2) under the Securities Act of 1933 (the “Securities Act”) and/or Rule 506 promulgated under the Securities
Act. The 2013 Accredited Investors are accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities
Act.
All sales
of unregistered securities sold by the Company during the fiscal year ended July 31, 2014 have been reported on Current Reports
on Form 8-K, as filed with the Commission.
ITEM
6. SELECTED FINANCIAL DATA
This information
is not required because we are a smaller reporting company.
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward
Looking Statements
Except
for historical information, the following Management’s Discussion and Analysis contains forward-looking statements based
upon current expectations that involve certain risks and uncertainties. Such forward-looking statements include statements regarding,
among other things, (a) discussions about mineral resources and mineralized material, (b) our projected sales and profitability,
(c) our growth strategies, (d) anticipated trends in our industry, (e) our future financing plans, (f) our anticipated needs for
working capital, (g) our lack of operational experience and (h) the benefits related to ownership of our common stock. Forward-looking
statements, which involve assumptions and describe our future plans, strategies, and expectations, are generally identifiable
by use of the words “may,” “will,” “should,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” or “project” or the negative of these words or
other variations on these words or comparable terminology. This information may involve known and unknown risks, uncertainties,
and other factors that may cause our actual results, performance, or achievements to be materially different from the future results,
performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Business,” as
well as in this Report generally. Actual events or results may differ materially from those discussed in forward-looking statements
as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters
described in this Report generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking
statements contained in this Report will in fact occur as projected.
Overview
On
February 25, 2013, Inception Mining, Inc. (“Inception” or the “Company”) 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.
We
are a mining exploration stage company engaged in the acquisition, exploration, and development of mineral properties, primarily
for gold, from owned mining properties. Inception Resources has acquired one project, as described below. Our target properties
are those that have been the subject of historical exploration. We have not generated revenue from mining operations.
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 that certain
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 on the
other hand, dated February 25, 2013(the “Asset Purchase Agreement”). 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.
UP
& Burlington is a private gold property which was discovered in 1892 which has been held unused in a family trust for the
past 75 years. UP & Burlington is located in County of Lemhi, Northwest of Salmon, Idaho, at an elevation of 7,994 feet. The
UP & Burlington site is located six miles from the city of Salmon; is 0.6 miles away from the closest major road (Ridge Rd.);
and is 1.56 miles away from the closest major power line. We believe Salmon, along with the surrounding County of Lemhi, provides
an excellent infrastructure for our mine. Salmon has a population of 3,122 and Lemhi County has a population of 7,806. In September
2011, heavy maintenance and right-of-way repair was completed and a new road to UP & Burlington was constructed.
UP
& Burlington’s two gold mining claims were brought to patent in 1900, which covers the Mine’s 40 acres. Subsequently,
in 1989, a U.S. Forest Survey was performed on the UP & Burlington site confirming that the patented claims cover an area
which is six hundred feet by three thousand feet (600’x3000’). The Mine’s patented claims remove the challenges
associated when working on U.S. Forest lands, Bureau of Land Management (“BLM”), state or other property types. With
our purchase of UP & Burlington, we have the benefit of working on private land, which requires only a hauling / road permit
to commence significant operations.
As
part of our initial Plan of Operations, we have compiled a two-phase plan in which we intend to fund underground mining with operating
profits from surface mining, if any. During Phase I, we plan to obtain the necessary permitting, make additional access road and
surface improvements, implement surface mining on a 2,500 foot per day-lighted vein to depths of 40 – 60 feet, and achieve
Confirmatory Core Drilling (NI43-101), Vein Definition and Ore Valuation. In Phase II, we plan to contract an underground mining
and operations plan, expand portal development leveraging existing underground access and implement underground mining to a depth
based on optimizing costs versus processed ore value. There is no guarantee that we will be successful in implementing either
Phase I or Phase II.
Our
Tactical Plan includes obtaining a Lemhi County Conditional Use Permit, an Idaho Department of Lands Surface Reclamation Bond
and permitting for the U.S. Forest Service Access Road, as well as obtaining major contracts such as geotechnical contracts, surface
mining contracts, toll processing contracts and underground mine plan contracts.
The
Company and its independent consultants have developed a detailed exploration drilling program to confirm and expand mineralized
zones in the Mine and collect additional environmental and technical data. The first phase of confirmation and expansion drilling
will begin in 2015 and the Company intends to continue drilling, metallurgical testing, engineering and environmental programs
and studies during 2015 and soon thereafter update the historic feasibility study and environmental permit applications.
We
also plan to review opportunities and acquire additional mineral properties with current or historic precious and base metal mineralization
with meaningful exploration potential.
Results
of Operations
Year
ended July 31, 2014 compared to the year ended July 31, 2013
We
had a net loss of $1,654,650 for the year ended July 31, 2014, which was $1,384,043 more than the net loss of $270,607 for the
year ended July 31, 2013. This change in our results over the two periods is primarily the result of an increase of $772,044 in
interest expenses due to beneficial conversion features, and $447,326 in general and administrative expenses primarily due to
consulting expenses. The following table summarizes key items of comparison and their related increase (decrease) for the years
ended July 31, 2014 and 2013:
| |
Year
Ended July 31, | | |
Increase/ | |
| |
2014 | | |
2013 | | |
(Decrease) | |
Revenues | |
$ | - | | |
$ | - | | |
$ | - | |
Operating Expenses | |
| | | |
| | | |
| | |
Professional Fees | |
| - | | |
| - | | |
| - | |
Consulting Expenses | |
| - | | |
| - | | |
| - | |
Exploration Costs | |
| 34,494 | | |
| 6,641 | | |
| 27,853 | |
General and Administrative | |
| 701,167 | | |
| 253,841 | | |
| 447,326 | |
Total Operating Expenses | |
| 735,661 | | |
| 260,482 | | |
| 475,179 | |
(Loss) from Operations | |
| (735,661 | ) | |
| (260,482 | ) | |
| (475,179 | ) |
Change in Derivative Liability | |
| 12,020 | | |
| - | | |
| 12,020 | |
Gain on Forgiveness of Debt | |
| (147,778 | ) | |
| 1,062 | | |
| (148,840 | ) |
Net Interest Income (Expense) | |
| (783,231 | ) | |
| (11,187 | ) | |
| (772,044 | ) |
Loss from Operations Before Taxes | |
| (1,654,650 | ) | |
| (270,607 | ) | |
| (1,384,043 | ) |
Net Loss | |
$ | (1,654,650 | ) | |
$ | (270,607 | ) | |
$ | (1,384,043 | ) |
Liquidity
and Capital Resources
Our
balance sheet as of July 31, 2014, reflects assets of $1,090,945. As we had cash in the amount of $5,695 and a working capital
deficit in the amount of $1,019,586 as of July 31, 2014, we do not have sufficient working capital to enable us to carry out our
stated plan of operation for the next twelve months.
Working
Capital
| |
Year
Ended July 31, | |
| |
2013 | | |
2012 | |
| |
| | |
| |
Current assets | |
$ | 140,785 | | |
$ | 65,959 | |
Current liabilities | |
| 1,160,371 | | |
| 1,054,765 | |
Working capital | |
$ | (1,019,586 | ) | |
$ | (988,806 | ) |
We
anticipate generating losses and, therefore, may be unable to continue operations in the future. If we require additional capital,
we would have to issue debt or equity or enter into a strategic arrangement with a third party.
Going
Concern Consideration
As
reflected in the accompanying financial statements, the Company is in the exploration stage with no revenue generating operations
and has a net loss since inception of $6,083,338. In addition, there is a working capital deficiency of $1,019,586 and a stockholder’s
deficiency of $69,426 as of July 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.
From
March 5, 2010, the Company changed its intended business purpose to that of precious metals mineral exploration, development and
production. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans
provide the opportunity for the Company to continue as a going concern.
| |
Year
Ended July 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Net Cash Used in Operating Activities | |
$ | (342,045 | ) | |
$ | (142,333 | ) |
Net Cash Used in Investing Activities | |
| - | | |
| - | |
Net Cash Provided by Financing Activities | |
| 316,615 | | |
| 170,532 | |
Net
Increase (Decrease) in Cash | |
$ | (25,430 | ) | |
$ | 28,199 | |
Operating
Activities
Net cash
flow used in operating activities during the year ended July 31, 2014 was $342,045 – an increase of $199,714 from the $142,333
net cash outflow during the year ended July 31, 2013.
Investing
Activities
Cash used
in investing activities during the year ended July 31, 2014 was $0 – no change from the $0 net cash outflow during the year
ended July 31, 2013.
Financing
Activities
Financing
activities during the year ended July 31, 2014, provided $316,615 to us, an increase of $146,083 from the $170,532 provided by
financing activities during the year ended July 31, 2013. During the year ended July 31, 2014, the company received $182,500 from
notes payable, $107,615 in advances from related parties and received stock subscriptions for $168,500 in cash.
Critical
Accounting Policies
Our
financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the
United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application
of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the
following aspects of our financial statements is critical to an understanding of our financials.
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. 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 quarterly, 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. As of July 31, 2014, none of our properties have proven
reserves.
Recent
Accounting Pronouncements
For
recent accounting pronouncements, please refer to the notes to the financial statements section of this annual report.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements.
ITEM
7(A). QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We
are not required to provide disclosure under this item because we are a smaller reporting company.
ITEM
8. FINANCIAL STATEMENTS
Our
financial statements appear beginning at page F-1.
ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
On
June 7, 2013 (the “Dismissal Date”), the Company advised Liggett, Vogt & Webb, P.A. (the “Former Auditor”)
that it was dismissed as the Company’s independent registered public accounting firm. The decision to dismiss the Former
Auditor as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors
on May 21, 2013. The report of the Former Auditor on the Company’s financial statements for the years ended July 31, 2012
and 2011 and did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to
uncertainty, audit scope, or accounting principle except that such report contained an explanatory paragraph in respect to our
uncertainty as to the Company’s ability to continue as a going concern.
During
the years ended July 31, 2012 and 2011 and through the Dismissal Date, the Company has not had any disagreements with the Former
Auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the Former Auditor’s satisfaction, would have caused them to make reference thereto in
their reports on the Company’s financial statements for such years.
During
the years ended July 31, 2012 and 2011 and through the Dismissal Date, there were no reportable events, as defined in Item 304(a)(1)(v)
of Regulation S-K.
On
June 3, 2013 (the “Engagement Date”), the Company engaged Fiondella Milone & LaSarcina LLP (“New Auditor”)
as its independent registered public accounting firm for the Company’s fiscal year ended July 31, 2013. The decision to
engage the New Auditor as the Company’s independent registered public accounting firm was approved by the Company’s
Board of Directors.
During
the two most recent fiscal years and through the Engagement Date, the Company has not consulted with the New Auditor regarding
either:
|
1. |
application
of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might
be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral
advice was provided that the New Auditor concluded was an important factor considered by the Company in reaching a decision
as to the accounting, auditing or financial reporting issue; or |
|
|
|
|
2. |
any
matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1)(iv) and the related instructions)
or reportable event (as defined in Regulation S-K, Item 304(a)(1)(v)). |
ITEM
9A. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in
our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized,
and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated
and communicated to our management, including our chief executive officer and chief financial officer as appropriate, to allow
timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation
of our management, including the principal executive officer and the principal financial officer (principal financial officer),
of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under
the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, because of the Company’s limited
resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as
of July 31, 2014.
Management’s
Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s
internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial
reporting and the preparation of the financial statements of the Company in accordance with U.S. generally accepted accounting
principles, or GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
With
the participation of our Chief Executive Officer and Chief Financial Officer (principal financial officer), our management conducted
an evaluation of the effectiveness of our internal control over financial reporting as of July 31, 2014 based on the framework
in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(“COSO”). Based on our evaluation and the material weaknesses described below, management concluded that the Company
did not maintain effective internal control over financial reporting as of July 31, 2014 based on the COSO framework criteria.
Management has identified control deficiencies regarding the lack of segregation of duties, tax compliance issues and the need
for a stronger internal control environment. Management of the Company believes that these material weaknesses are due to the
small size of the Company’s accounting staff and reliance on outside consultants for external reporting. The small size
of the Company’s accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the
cost/benefit of such remediation.
To
mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions,
along with the use of legal and outside accounting consultants. As we grow, we expect to increase our number of employees, which
will enable us to implement adequate segregation of duties within the internal control framework.
These
control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a material
misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. Accordingly, we have
determined that these control deficiencies as described above together constitute a material weakness.
In
light of this material weakness, we performed additional analyses and procedures in order to conclude that our consolidated financial
statements for the year ended July 31, 2014 included in this Annual Report on Form 10-K were fairly stated in accordance with
US GAAP. Accordingly, management believes that despite our material weaknesses, our consolidated financial statements for the
year ended July 31, 2013 are fairly stated, in all material respects, in accordance with US GAAP.
This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this
Annual Report on Form 10-K.
Limitations
on Effectiveness of Controls and Procedures
Our
management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), does not expect that
our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of
controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been
detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty
and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of
controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that
any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate
because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes
in Internal Controls
During
the fiscal quarter ended July 31, 2014, there have been no changes in our internal control over financial reporting that have
materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
ITEM
9B. OTHER INFORMATION
On
July 15, 2014, the Company released information by way of an internet interview on www.stocktraderstalk.com relating to the Company’s
U.P. and Burlington patented mining claims and the initiation of the Company’s bulk sampling program and expanded resource
confirmation program. A transcript of the interview can be found at the following link www.stocktraderstalk.com.
PART
III
ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors
and Executive Officers
Our
Bylaws state that our authorized number of directors shall be one or more and shall be set by resolution of our Board of Directors.
Our Board of Directors has fixed the number of directors at one, and we currently have one director.
Our
current director and officers are as follows:
Name |
|
Age |
|
Position |
|
|
|
|
|
Michael Ahlin |
|
64 |
|
Chief Executive
Officer, President, Secretary and Director |
|
|
|
|
|
Whit Cluff |
|
62 |
|
Chief Financial
Officer and Director |
|
|
|
|
|
Brian Brewer |
|
43 |
|
Chief Operating
Officer and Director |
|
|
|
|
|
Trent D’Ambrosio |
|
48 |
|
Director |
Our
Directors will serve in that capacity until our next annual shareholder meeting or until a successor is elected and qualified.
Officers hold their positions at the will of our Board of Directors. There are no arrangements, agreements or understandings between
non-management security holders and management under which non-management security holders may directly or indirectly participate
in or influence the management of our affairs.
Michael
Ahlin, Chief Executive Officer, President, Treasurer, Secretary and Director
Mr.
Ahlin is a seasoned executive with several decades of experience who has founded numerous startups and has held executive management
positions in public and private companies in various industries. From 1985 through the present, Mr. Ahlin has served as the founder
and President of WetCor, Inc., a multi-disciplined Engineering Construction Firm licensed in numerous states and performing both
bid and design / build projects including minerals processing, mining, water treatment, energy, Medical ( 5 MRE centers), geothermal
power, and renewable energy and commercial buildings. In addition, from 2004 through the present, Mr. Ahlin has served as a Managing
Partner of Cactus Management Services LLC. Mr. Ahlin has served as Inception Resources’ CEO since inception. Mr. Ahlin was
appointed as CEO, President, Treasurer, Secretary and Director of the Company on February 25, 2013. Mr. Ahlin received a Bachelors
of Science Degree in Mechanical Engineering and a Masters Degree in Business Administration from the University of Utah in 1971
and 1977, respectively.
Whit
Cluff, Chief Financial Officer and Director
Mr.
Cluff has over 35 years of experience in the commercial real estate industry. Mr. Cluff has been involved in all disciplines of
real estate land development, mixed use development, retail tenant representation, developer representation, industrial property
procurement and asset management. Mr. Cluff has an extensive background in public and private businesses giving him strong analytical,
planning, and organization ability with effective negotiation skills. From 2003 through the present, Mr. Cluff has served as Vice
President and Associate Broker at Coldwell Banker Commercial, NRT in Salt Lake City, Utah. Mr. Cluff attended the University of
Utah and served in the United States Army.
Brian
Brewer, Chief Operating Officer and Director
Mr.
Brewer is a seasoned geologist with nearly two decades of mining experience in all phases of mineral exploration and mine pre-developement.
Mr. Brewer has worked throughout the Western United States, Alaska, Mexico, Haiti, South America, and the Dominican Republic and
has worked for numerous major and junior mining and exploration companies including Newmont, Pegasus, Great Basin Gold, Hecla,
Mine finders, Estrella Gold Corp. and Eurasian Minerals. From 2006 through 2008, Mr. Brewer served as the Senior Exploration Geologist
for Hecla Ventures / Great Basin Gold in Winnemucca, Nevada. From 2008 through 2010, Mr. Brewer served as the Regional Exploration
Manager for Eurasian Minerals / Newmont JV Partnership in norther Haiti. From 2010 through 2012, Mr. Brewer served as the Senior
Geologist for Estrella Gold Corp. in Peru, and from 2012 through the present, Mr. Brewer has served as the Project Manager for
Lemhi Gold Trust in Salmon, Idaho. Mr. Brewer earned a Bachelor of Science degree in geology from the University of Idaho. Mr.
Brewer is a Certified Professional Geologist, a Qualified Person as defined by NI 43-101 and a Fellow Member of the Society of
Economic Geologists.
Trent
D’Ambrosio, Director
From
October 2011 through the present, Mr. D’Ambrosio has held the positions of Interim Chief Executive Officer and Chief Financial
Officer of Nations Energy LLC., an Oil and Gas exploration company, and is the responsible for the overall strategic direction
for the organization. From 2003 through the present, Mr. D’Ambrosio has held the position of Managing Member of MDL Ventures
LLC (“MDL”), which is a natural resources development company. MDL owns numerous mineral leases, royalty interests,
and working interests. Mr. D’Ambrosio’s professional record includes 25 years of management and financial services
experience with companies ranging from Fortune 500 companies to start ups. Mr. D’Ambrosio holds the following licenses or
certifications: Charter Hedge Fund Professional (CHP), A Chartered Alternative Investment Analyst 1 (CAIA), Commodities Trading
Advisor (CTA) Series 3 and 65, and he previously held the Series 7, 24, 27 and 4 licenses. From February 2008 until December of
2012, Mr. D’Ambrosio was consulting to a Fund of Hedge Funds and Private Equity. Prior to this, from September 2002 to September
2007, Mr. D’Ambrosio was the CFO for the D’Ambrosio Auto Group, which owned and operated in the western US. Mr. D’Ambrosio
has held leadership positions with MCI, World Com, and Montana Power.
Other
Directorships
Other
than as set forth above, none of our directors hold any other directorships in any company with a class of securities registered
pursuant to section 12 of the Exchange Act or subject to the requirements of section 15(d) of such Act or any company registered
as an investment company under the Investment Company Act of 1940.
Board
of Directors and Director Nominees
Since
our Board of Directors does not include a majority of independent directors, the decisions of the Board regarding director nominees
are made by persons who have an interest in the outcome of the determination. The Board will consider candidates for directors
proposed by security holders, although no formal procedures for submitting candidates have been adopted. Unless otherwise determined,
at any time not less than 90 days prior to the next annual Board meeting at which a slate of director nominees is adopted, the
Board will accept written submissions from proposed nominees that include the name, address and telephone number of the proposed
nominee; a brief statement of the nominee’s qualifications to serve as a director; and a statement as to why the security
holder submitting the proposed nominee believes that the nomination would be in the best interests of our security holders. If
the proposed nominee is not the same person as the security holder submitting the name of the nominee, a letter from the nominee
agreeing to the submission of his or her name for consideration should be provided at the time of submission. The letter should
be accompanied by a résumé supporting the nominee’s qualifications to serve on the Board, as well as a list
of references.
The
Board identifies director nominees through a combination of referrals from different people, including management, existing Board
members and security holders. Once a candidate has been identified, the Board reviews the individual’s experience and background
and may discuss the proposed nominee with the source of the recommendation. If the Board believes it to be appropriate, Board
members may meet with the proposed nominee before making a final determination whether to include the proposed nominee as a member
of the slate of director nominees submitted to security holders for election to the Board.
Some
of the factors, which the Board considers when evaluating proposed nominees, include their knowledge of and experience in business
matters, finance, capital markets and mergers and acquisitions. The Board may request additional information from each candidate
prior to reaching a determination, and it is under no obligation to formally respond to all recommendations, although as a matter
of practice, it will endeavor to do so.
Conflicts
of Interest
Our
directors are not obligated to commit their full time and attention to our business and, accordingly, they may encounter a conflict
of interest in allocating their time between our operations and those of other businesses. In the course of their other business
activities, they may become aware of investment and business opportunities which may be appropriate for presentation to us as
well as other entities to which they owe a fiduciary duty. As a result, they may have conflicts of interest in determining to
which entity a particular business opportunity should be presented. They may also in the future become affiliated with entities
that are engaged in business activities similar to those we intend to conduct.
In
general, officers and directors of a corporation are required to present business opportunities to the corporation if:
|
● |
the
corporation could financially undertake the opportunity; |
|
|
|
|
● |
the
opportunity is within the corporation’s line of business; and |
|
|
|
|
● |
it
would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation. |
We
plan to adopt a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest
and prohibits those persons from engaging in such transactions without our consent.
Significant
Employees
Other
than as described above, we do not expect any other individuals to make a significant contribution to our business.
Legal
Proceedings
None
of our directors, executive officers or control persons has been involved in any of the following events during the past five
years:
|
● |
any
bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time; |
|
|
|
|
● |
any
conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other
minor offences); |
|
|
|
|
● |
being
subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities
or banking activities; or |
|
|
|
|
● |
being
found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, where the judgment has not been reversed, suspended, or vacated. |
No
Audit Committee or Financial Expert
The
Company does not have an audit committee or a financial expert serving on the Board of Directors. The Company plans to form and
implement an audit committee and hire a Chief Financial Officer who also may serve on the Board of Directors.
Family
Relationships
There
are no family relationships among our officers, directors, or persons nominated for such positions.
Code
of Ethics
Due
to our recent change in business strategy and objectives and our small size and limited resources, we have not yet adopted a code
of ethics that applies to our principal executive officer and principal accounting officer, but intend to do so this year.
Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Exchange Act, all executive officers, directors, and each person who is the beneficial owner of more than
10% of the common stock of a company that files reports pursuant to Section 12 of the Exchange Act of 1934, are required to report
the ownership of such common stock, options, and stock appreciation rights (other than certain cash only rights) and any changes
in that ownership with the Securities and Exchange Commission. The Company has not registered as a public company under Section
12 of the Securities Exchange Act of 1934, and therefore no reports have been filed under Section 16(a) thereunder.
ITEM
11. EXECUTIVE COMPENSATION
Our
Board of Directors has not established a separate compensation committee. Instead, the Board of Directors reviews and approves
executive compensation policies and practices, reviews, salaries and bonuses for our officer(s), decides on benefit plans, and
considers other matters as may, from time to time, be referred to it. We do not currently have a Compensation Committee Charter.
Our Board continues to emphasize the important link between our performance, which ultimately benefits all shareholders, and the
compensation of our executives. Therefore, the primary goal of our executive compensation policy is to closely align the interests
of the shareholders with the interests of the executive officer(s). In order to achieve this goal, we attempt to (i) offer compensation
opportunities that attract and retain executives whose abilities and skills are critical to our long-term success and reward them
for their efforts in ensuring our success and (ii) encourage executives to manage from the perspective of owners with an equity
stake in us.
SUMMARY
COMPENSATION TABLE
Name and Principal | |
| | |
Salary | | |
Bonus | | |
Stock
Awards | | |
Option
Awards | | |
Non-Equity
Incentive Plan Compensation | | |
Non-Qualified
Deferred Compensation
Earnings | | |
All
Other Compensation | | |
Totals | |
Position | |
Year | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | | |
($) | |
Johannes Petersen | |
| 2013 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
(Former President, CEO, CFO, Secretary and Director) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Michael Ahlin | |
| 2014 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Chief Executive Officer, President, Secretary and Director | |
| 2013 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Whit Cluff | |
| 2014 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Chief Financial Officer and Director | |
| 2013 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Brian Brewer | |
| 2014 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
Chief Operating Officer and Director | |
| 2013 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | |
None
of our named executive officers received any compensation from us during the fiscal years ended July 31, 2014, and July 31, 2013.
Option
Grants
As of July
31, 2014 we had not granted any options or stock appreciation rights to our named executive officers or directors.
Management
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.
We
previously entered into a consulting arrangement with Johannes Petersen, our former sole executive officer, pursuant to which,
we previously paid Mr. Petersen $2,500 per month for providing consulting services in his capacity as Chief Executive Officer
and Chief Financial Officer, however, such consulting arrangement is not pursuant to any written agreement.
Compensation
of Directors
On
March 28 2013, Trent D’Ambrosio was elected as a member of the Board of Directors of the Company.
Our
directors did not receive any compensation for their services as directors from our inception to July 31, 2014. We have no formal
plan for compensating our directors for their services in the future in their capacity as directors, although such directors are
expected in the future to receive options to purchase shares of our common stock as awarded by our Board of Directors or by any
compensation committee that may be established.
Pension,
Retirement or Similar Benefit Plans
There
are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers.
We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors
or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.
Compensation
Committee
We
do not currently have a compensation committee of the Board of Directors or a committee performing similar functions. The Board
of Directors as a whole participates in the consideration of executive officer and director compensation.
ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The
following table sets forth the ownership, as of November 13, 2014, of our common stock by each of our directors, by all of our
executive officers and directors as a group and by each person known to us who is the beneficial owner of more than 5% of any
class of our securities. As of November 13, 2014, there were 22,793,949 shares of our common stock issued and outstanding. All
persons named have sole or shared voting and investment control with respect to the shares, except as otherwise noted. The number
of shares described below includes shares which the beneficial owner described has the right to acquire within 60 days of the
date of this Form 10-K.
Title of Class | |
Name and Address of
Beneficial Owner | |
Amount and
Nature of
eneficial Ownership | | |
Percent of Class | |
| |
| |
| | |
| |
Common Stock | |
Trent D’ambrosio (1) | |
| 3,800,000 | (2) | |
| 16.67 | % |
| |
c/o Inception Mining, Inc. | |
| | | |
| | |
| |
5320 South 900 East, Suite 260 | |
| | | |
| | |
| |
Murray, UT 84107 | |
| | | |
| | |
| |
| |
| | | |
| | |
Common Stock | |
Michael Ahlin (1) | |
| 2,000,000 | | |
| 8.77 | % |
| |
c/o Inception Mining, Inc. | |
| | | |
| | |
| |
5320 South 900 East, Suite 260 | |
| | | |
| | |
| |
Murray, UT 84107 | |
| | | |
| | |
| |
| |
| | | |
| | |
Common Stock | |
Whit Cluff (1) | |
| 1,038,000 | | |
| 4.55 | % |
| |
c/o Inception Mining, Inc. | |
| | | |
| | |
| |
5320 South 900 East, Suite 260 | |
| | | |
| | |
| |
Murray, UT 84107 | |
| | | |
| | |
| |
| |
| | | |
| | |
Common Stock | |
Brian Brewer (1) | |
| 500,000 | | |
| 2.19 | % |
| |
c/o Inception Mining, Inc. | |
| | | |
| | |
| |
5320 South 900 East, Suite 260 | |
| | | |
| | |
| |
Murray, UT 84107 | |
| | | |
| | |
| |
| |
| | | |
| | |
Common Stock | |
Agratronics, LLC | |
| 3,760,000 | | |
| 16.49 | % |
| |
c/o Inception Mining, Inc. | |
| | | |
| | |
| |
5320 South 900 East, Suite 260 | |
| | | |
| | |
| |
Murray, UT 84107 | |
| | | |
| | |
| |
| |
| | | |
| | |
Common Stock | |
BMC Highland Investment, LLC | |
| 3,760,000 | | |
| 16.49 | % |
| |
c/o Inception Mining, Inc. | |
| | | |
| | |
| |
5320 South 900 East, Suite 260 | |
| | | |
| | |
| |
Murray, UT 84107 | |
| | | |
| | |
| |
| |
| | | |
| | |
All Officers and Directors as a Group | |
| |
| 14,858,000 | | |
| 65.18 | % |
(1) |
Executive officer and/or director of
the Company. |
|
|
(2) |
Includes 2,600,000
shares of common stock held by Mr. D’Ambrosio personally; 600,000 shares of common stock held by D’Ambrosio Trust
which Mr. D’Ambrosio is a beneficiary of but does not have dispositive control over; and 600,000 shares of common stock
held by MDL Ventures LLC. |
Changes
in Control
As
of July 31, 2014, we had no pension plans or compensatory plans or other arrangements which provide compensation in the event
of termination of employment or a change in our control.
Securities
authorized for issuance under equity compensation plans.
As
of July 31, 2014, we did not have any equity compensation plans in effect.
ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related
Party Transactions
There
have been no transactions since the beginning of our last fiscal year or any currently proposed transactions in which we are,
or plan to be, a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct
or indirect material interest.
Director
Independence
Our
securities are quoted on the OTC Bulletin Board and OTC Markets, which does not have any director independence requirements. Once
we engage further directors and officers, we plan to develop a definition of independence and scrutinize our Board of Directors
with regard to this definition.
ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit
Fees. The aggregate fees paid for the annual audit of financial statements included in our Annual Report for the year ended
July 31, 2014, and the review of our quarterly reports for such years amounted to $32,500. The aggregate fees paid for the annual
audit of financial statements included in our Annual Report for the year ended July 31, 2013, and the review of our quarterly
reports for such year, amounted to $37,518.
Audit
Related Fees. For the years ended July 31, 2014, and July 31, 2013, there were no fees billed for other audit related fees.
Tax
Fees. For the years ended July 31, 2014, and July 31, 2013, we paid $0 and $0, respectively, for tax fees.
All
Other Fees. For the years ended July 31, 2014, and July 31, 2013, there were no fees billed for services other than services
described above.
Our
Board of Directors serves as the Audit Committee and has unanimously approved all audit and non-audit services provided by the
independent auditors. The independent accountants and management are required to periodically report to the Board of Directors
regarding the extent of services provided by the independent accountants, and the fees for the services performed to date.
There
have been no non-audit services provided by our independent accountant for the years ended July 31, 2014 and 2013.
PART
IV
ITEM
15. EXHIBITS
(a)(1)(2) Financial Statements: See index to financial statements
and supporting schedules.
(a)(3) Exhibits.
Exhibit
No. |
|
Description |
|
|
|
3.1 |
|
Articles
of Incorporation(1) |
3.2 |
|
Certificate
of Amendment, effective March 5, 2010(2) |
3.3 |
|
Certificate
of Amendment, effective June 23, 2010(3) |
3.4 |
|
Articles
of Merger, effective May 17, 2013 (4) |
3.5 |
|
Bylaws(1) |
4.1 |
|
Form
of Subscription Agreement entered by and between Inception Mining Inc. and Accredited Investors (5) |
4.2 |
|
Letter
Amendment dated November 1, 2013 to Promissory Note dated January 17, 2013 between Inception Resources, LLC and U.P and Burlington
Development, LLC (8) |
4.3 |
|
Note
Purchase Agreement by and among the Company and the Iconic Holdings, LLC, dated February 18, 2014 (9) |
4.4 |
|
Convertible
Promissory Note issued to Iconic Holdings, LLC (9) |
4.5 |
|
Securities Purchase
Agreement by and among the Company and Typenex Co-Investment, LLC, dated Sepember 24, 2014 (10) |
4.6 |
|
Convertible
Promissory Note issued to Typenex Co-Investment, LLC (10) |
4.7 |
|
Warrant
to Purchase Shares of Common Stock issued to Typenex Co-Investment, LLC (10) |
10.1 |
|
Asset
Purchase Agreement dated February 25, 2013, by and between Gold American, its majority shareholder Brett Bertolami, and its
wholly-owned subsidiary, Inception Development Inc. on one hand, and Inception Resources, LLC on the other hand (6) |
10.2 |
|
Employment
Agreement by and between the Company and Michael Ahlin dated February 25, 2013 (6) |
10.3 |
|
Employment
Agreement by and between the Company and Whit Cluff dated February 25, 2013 (6) |
10.4 |
|
Employment
Agreement by and between the Company and Brian Brewer dated February 25, 2013 (6) |
10.5 |
|
Consulting
Agreement by and between the Company and Jeff Pike dated February 25, 2013 (6) |
10.6 |
|
Consulting
Agreement by and between the Company and First Trust Management Inc. dated February 25, 2013 (6) |
10.7 |
|
Consulting
Agreement by and between the Company and Danzig Ltd. dated February 25, 2013 (6) |
10.8 |
|
Consulting
Agreement by and between the Company and BKBK Holding LLC dated February 25, 2013 (6) |
10.9 |
|
Consulting
Agreement by and between the Company and Highland Ventures LLC dated February 25, 2013 (6) |
10.10 |
|
Consulting
Agreement by and between the Company and Monte Carlo LLC dated February 25, 2013 (6) |
10.11 |
|
Consulting
Agreement by and between the Company and Powder Moon Corporation dated February 25, 2013 (6) |
10.12 |
|
Consulting
Agreement by and between the Company and Lee Kimball dated February 25, 2013 (6) |
10.13 |
|
Consulting
Agreement by and between the Company and Mitch Cohen dated February 25, 2013 (6) |
10.14 |
|
Debt
Exchange Agreement by and between Gold American Mining Corp. and Brett Bertolami dated February 25, 2013 (6) |
10.15 |
|
Agreement
by and between Crawford Cattle Company LLC, as seller, and, Inception Mining Inc., as Buyer dated as of August 30, 2013 (7) |
21.1 |
|
List
of Subsidiaries |
31.1* |
|
Certification
of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* |
|
Certification
of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32 * |
|
Certification
of Chief Executive and Chief Financial Officers pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
* |
Filed herewith. |
(1) |
Incorporated by
reference from Form SB-2 filed with the SEC on October 31, 2007. |
(2) |
Incorporated by
reference from Form 8-K filed with the SEC on March 10, 2010. |
(3) |
Incorporated by
reference from Form 8-K filed with the SEC on June 28, 2010. |
(4) |
Incorporated by
reference from Form 10-Q filed with the SEC on May 20, 2013. |
(5) |
Incorporated by
reference from Form 8-K filed with the SEC on August 5, 2013. |
(6) |
Incorporated by
reference from Form 8-K filed with the SEC on March 1, 2013. |
(7) |
Incorporated by
reference from Form 8-K filed with the SEC on September 6, 2013. |
(8) |
Incorporated by
reference from Form 10-Q filed with the SEC on June 20, 2014. |
(9) |
Incorporated by
reference from Form 8-K filed with the SEC on March 12, 2014. |
(10) |
Incorporated by
reference from Form 8-K filed with the SEC on October 7, 2014. |
SIGNATURES
Pursuant
to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
|
INCEPTION
MINING, INC. |
|
|
|
Date:
November 13, 2014 |
By: |
/s/
Michael Ahlin |
|
Name: |
Michael Ahlin |
|
Title: |
Chief Executive Officer |
|
|
(Principal Executive
Officer) |
|
|
|
Date:
November 13, 2014 |
By: |
/s/
Whit Cluff |
|
Name: |
Whit Cluff |
|
Title: |
Chief Financial Officer |
|
|
(Principal Financial
and Accounting Officer) |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
SIGNATURE |
|
TITLE |
|
DATE |
|
|
|
|
|
/s/
Trent D’ambrosio |
|
|
|
|
Trent D’ambrosio |
|
Director |
|
November 13, 2014 |
|
|
|
|
|
/s/
Michael Ahlin |
|
|
|
|
Michael Ahlin |
|
Director |
|
November 13, 2014 |
|
|
|
|
|
/s/
Whit Cluff |
|
|
|
|
Whit Cluff |
|
Director |
|
November 13, 2014 |
|
|
|
|
|
/s/
Brian Brewer |
|
|
|
|
Brian Brewer |
|
Director |
|
November 13, 2014 |
INCEPTION
MINING, INC.
(Formerly
known as Gold American Mining Corp.)
CONTENTS
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board
of Directors and Shareholders of
Inception Mining, Inc.
We
have audited the accompanying consolidated balance sheets of Inception Mining, Inc. and Subsidiary (the “Company”)
as of July 31, 2014, and, 2013, and the related consolidated statements of operations, changes in stockholders’ deficit
and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial
statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Inception Mining, Inc. as of July 31, 2014 and 2013, and the results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United States of America.
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
As discussed in Note 1 to the consolidated financial statements, the Company is in the exploration stage with minimal operations,
has a net loss of $1,654,650 and used cash in operations of $342,045 for the year ended July 31, 2014 . In addition, there is
a stockholders’ deficiency of $69,426 as of July 31, 2014. This raises substantial doubt about the Company’s ability
to continue as a going concern. Management’s plans concerning this matter are also described in Note 1. The accompanying
consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Fiondella, Milone
& Lasaracina, LLP |
|
Glastonbury, CT |
|
November 13, 2014 |
|
Inception
Mining, Inc. and Subsidiary
(Formerly
known as Gold American Mining Corp.)
Consolidated
Balance Sheets
| |
July 31, 2014 | | |
July 31, 2013 | |
ASSETS | |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash | |
$ | 5,695 | | |
$ | 31,125 | |
Prepaid expenses and other assets | |
| 135,090 | | |
| 34,834 | |
Total Current Assets | |
| 140,785 | | |
| 65,959 | |
| |
| | | |
| | |
Land and mineral rights | |
| 950,160 | | |
| 950,160 | |
Total Assets | |
$ | 1,090,945 | | |
$ | 1,016,119 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 158,499 | | |
$ | 76,719 | |
Accrued interest payable | |
| 26,178 | | |
| 9,215 | |
Advances, related party | |
| 286,446 | | |
| 178,831 | |
Notes payable | |
| 18,000 | | |
| 110,000 | |
Convertible notes payable, net of debt discount of 124,103 and $0 as of July
31, 2014 and 2013, respectively | |
| 558,397 | | |
| 680,000 | |
Derivative liability | |
| 112,851 | | |
| - | |
Total Liabilities | |
| 1,160,371 | | |
| 1,054,765 | |
| |
| | | |
| | |
Commitments and Contingencies (See Note 8) | |
| | | |
| | |
| |
| | | |
| | |
Stockholders’ Deficit | |
| | | |
| | |
Preferred stock, $0.00001 par value; 10,000,000 shares authorized, none issued
and outstanding | |
| - | | |
| - | |
Common stock, $0.00001 par value; 500,000,000 shares authorized, 21,770,681
and 20,216,739 shares issued and outstanding as of July 31, 2014 and 2013, respectively | |
| 218 | | |
| 202 | |
Additional paid-in capital | |
| 5,968,852 | | |
| 4,288,815 | |
Common stock subscribed | |
| 44,842 | | |
| 101,025 | |
Accumulated deficit | |
| (6,083,338 | ) | |
| (4,428,688 | ) |
Total Stockholders’ Deficit | |
| (69,426 | ) | |
| (38,646 | ) |
| |
| | | |
| | |
Total Liabilities and Stockholders’ Deficit | |
$ | 1,090,945 | | |
$ | 1,016,119 | |
See
accompanying notes to the consolidated financial statements.
Inception
Mining, Inc. and Subsidiary
(Formerly
known as Gold American Mining Corp.)
Consolidated
Statements of Operations
| |
For the Year Ended | |
| |
July 31, 2014 | | |
July 31, 2013 | |
Revenues | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Operating Expenses | |
| | | |
| | |
Exploration costs | |
| 34,494 | | |
| 6,641 | |
General and administrative | |
| 701,167 | | |
| 253,841 | |
Total Operating Expenses | |
| 735,661 | | |
| 260,482 | |
| |
| | | |
| | |
Loss from Operations | |
| (735,661 | ) | |
| (260,482 | ) |
| |
| | | |
| | |
Other Income/(Expenses) | |
| | | |
| | |
Interest income | |
| - | | |
| - | |
Change in derivative liability | |
| 12,020 | | |
| - | |
Gain (loss) on forgiveness of debt | |
| (147,778 | ) | |
| 1,062 | |
Interest expense | |
| (783,231 | ) | |
| (11,187 | ) |
Total Other Income/(Expenses) | |
| (918,989 | ) | |
| (10,125 | ) |
| |
| | | |
| | |
Loss from Operations before Income Taxes | |
| (1,654,650 | ) | |
| (270,607 | ) |
| |
| | | |
| | |
Provision for Income Taxes | |
| - | | |
| - | |
| |
| | | |
| | |
NET LOSS | |
$ | (1,654,650 | ) | |
$ | (270,607 | ) |
| |
| | | |
| | |
Net loss per share - Basic and Diluted | |
$ | (0.08 | ) | |
$ | (0.03 | ) |
| |
| | | |
| | |
Weighted average number of shares outstanding during the period - Basic
and Diluted | |
| 21,097,744 | | |
| 8,899,192 | |
See
accompanying notes to the consolidated financial statements.
Inception
Mining, Inc. and Subsidiary
(Formerly
known as Gold American Mining Corp.)
Consolidated
Statement of Changes in Stockholders’ Equity (Deficit)
| |
Preferred
stock | | |
Common
stock | | |
Additional | | |
Common | | |
| | |
Total | |
| |
($0.00001
Par) | | |
($0.00001
Par) | | |
Paid-in | | |
Stock | | |
Accumulated | | |
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Subscribed | | |
Deficit | | |
Deficiency | |
Balance, July 31, 2012 | |
| - | | |
$ | - | | |
| 451,645 | | |
$ | 4 | | |
$ | 3,998,748 | | |
$ | - | | |
$ | (4,158,081 | ) | |
$ | (159,329 | ) |
Forgiveness of debts by principal stockholder | |
| - | | |
| - | | |
| - | | |
| - | | |
| 159,152 | | |
| - | | |
| - | | |
| 159,152 | |
Expenses paid by stockholder on Company’s
behalf | |
| - | | |
| - | | |
| - | | |
| - | | |
| 18,582 | | |
| - | | |
| - | | |
| 18,582 | |
In kind contribution of interest | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,419 | | |
| - | | |
| - | | |
| 4,419 | |
Shares issued for conversion of debt | |
| - | | |
| - | | |
| 1,000,000 | | |
| 10 | | |
| 24,990 | | |
| - | | |
| - | | |
| 25,000 | |
Shares issued for services | |
| - | | |
| - | | |
| 2,765,094 | | |
| 28 | | |
| 82,924 | | |
| - | | |
| - | | |
| 82,952 | |
Shares issued in exchange for mining claim | |
| - | | |
| - | | |
| 16,000,000 | | |
| 160 | | |
| - | | |
| - | | |
| - | | |
| 160 | |
Shares issued for cash | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 101,025 | | |
| - | | |
| 101,025 | |
Net loss for the
year | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (270,607 | ) | |
| (270,607 | ) |
Balance, July 31, 2013 | |
| - | | |
| - | | |
| 20,216,739 | | |
| 202 | | |
| 4,288,815 | | |
| 101,025 | | |
| (4,428,688 | ) | |
| (38,646 | ) |
Shares issued for services | |
| - | | |
| - | | |
| 440,000 | | |
| 4 | | |
| 300,996 | | |
| - | | |
| - | | |
| 301,000 | |
Shares issued for cash | |
| - | | |
| - | | |
| 598,942 | | |
| 6 | | |
| 269,520 | | |
| (101,025 | ) | |
| - | | |
| 168,501 | |
Shares issued for conversion of debt | |
| - | | |
| - | | |
| 288,889 | | |
| 3 | | |
| 129,997 | | |
| - | | |
| - | | |
| 130,000 | |
Shares issued for settlement of accounts
payable | |
| - | | |
| - | | |
| 226,111 | | |
| 3 | | |
| 249,524 | | |
| - | | |
| - | | |
| 249,527 | |
Shares to be issued for services rendered | |
| - | | |
| - | | |
| - | | |
| - | | |
| | | |
| 44,842 | | |
| - | | |
| 44,842 | |
Debt discount on convertible notes due
to beneficial conversion feature | |
| - | | |
| - | | |
| - | | |
| - | | |
| 730,000 | | |
| - | | |
| - | | |
| 730,000 | |
Net loss for the
year | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,654,650 | ) | |
| (1,654,650 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance, July
31, 2014 | |
| - | | |
$ | - | | |
| 21,770,681 | | |
$ | 218 | | |
$ | 5,968,852 | | |
$ | 44,842 | | |
$ | (6,083,338 | ) | |
$ | (69,426 | ) |
See
accompanying notes to the consolidated financial statements.
Inception
Mining, Inc. and Subsidiary
(Formerly
known as Gold American Mining Corp.)
Consolidated
Statements of Cash Flows
| |
For the Year Ended | |
| |
July 31, 2014 | | |
July 31, 2013 | |
Cash Flows From Operating Activities: | |
| | | |
| | |
Net Loss | |
$ | (1,654,650 | ) | |
$ | (270,607 | ) |
Adjustments to reconcile net loss to net cash used in operations | |
| | | |
| | |
Depreciation expense | |
| - | | |
| 207 | |
Stock issued for services | |
| 365,092 | | |
| 82,953 | |
In-kind contribution of services | |
| - | | |
| 67,500 | |
In-kind contribution of interest | |
| - | | |
| 4,419 | |
Change in derivative liability | |
| 112,851 | | |
| - | |
Amortization of BCF debt discount | |
| 688,397 | | |
| - | |
Loss on settlement of accounts payable | |
| 147,778 | | |
| - | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Prepaid expenses and other current assets | |
| (100,256 | ) | |
| (34,834 | ) |
Accounts payable and accrued expenses | |
| 81,780 | | |
| 66,314 | |
Accounts payable, related party | |
| - | | |
| (67,500 | ) |
Accrued interest | |
| 16,963 | | |
| 9,215 | |
Net Cash Used In Operating Activities | |
| (342,045 | ) | |
| (142,333 | ) |
| |
| | | |
| | |
Cash Flows From Financing Activities: | |
| | | |
| | |
Repayment of note payable | |
| (142,000 | ) | |
| (160,000 | ) |
Expenses paid by shareholder on Company’s behalf | |
| - | | |
| 18,582 | |
Proceeds from notes payable | |
| 182,500 | | |
| - | |
Proceeds from notes payable-related party | |
| 107,615 | | |
| 210,925 | |
Proceeds from issuance of common stock | |
| 168,500 | | |
| 101,025 | |
Net Cash Provided by Financing Activities | |
| 316,615 | | |
| 170,532 | |
| |
| | | |
| | |
Net Increase / (Decrease) in Cash | |
| (25,430 | ) | |
| 28,199 | |
Cash at Beginning of Period | |
| 31,125 | | |
| 2,926 | |
Cash at End of Period | |
$ | 5,695 | | |
$ | 31,125 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | |
Cash paid for interest | |
$ | - | | |
$ | - | |
Cash paid for taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Supplemental disclosure of non-cash investing and financing activities: | |
| | | |
| | |
Notes payable assumed and stock issued for land and mineral rights | |
$ | - | | |
$ | 950,160 | |
Forgiveness of debt by stockholder | |
$ | - | | |
$ | 120,709 | |
Fixed asset distributed to stockholder | |
$ | - | | |
$ | 2,095 | |
Conversion of debt to common stock | |
$ | 130,000 | | |
$ | 25,000 | |
See
accompanying notes to the consolidated financial statements.
Inception
Mining, Inc. and Subsidiary
(formerly
known as Gold American Mining Corp.)
Notes
to Consolidated Financial Statements
As
of July 31, 2014
NOTE
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION
(A)
Organization
Inception
Mining, Inc. (formerly known as Gold American Mining Corp.) 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. Inception Development, Inc., its wholly owned subsidiary was incorporated under the laws of the State of
Idaho on January 28, 2013.
Golf
Alliance Corporation 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, the Company decided
to redirect its business focus toward precious metal mineral acquisition and exploration. The Company is currently performing
exploration and evaluation work on its property in Salmon, ID.
On
February 25, 2013, Inception Mining, Inc. (“Inception” or the “Company”) 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 the majority shareholder. This transaction
is deemed an asset purchase by entities under common control. The Asset Purchase Agreement closed on February 25, 2013 (the “Closing”).
Inception was 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 Asset Purchase Agreement. As a
result of such acquisition, the Company’s operations are now focused on the ownership and operation of the mine acquired
from Inception Resources. Consequently, the Company believes that acquisition has caused us to cease to be a shell company as
it no longer has nominal operations.
The
Company is in the exploration stage in accordance with 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,
2014, 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 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.
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
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
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying consolidated financial
statements during year ended July 31, 2014, the Company incurred net losses of $1,654,650 and used $342,045 in cash for operating
activities. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable
period of time.
The
Company’s existence is dependent upon management’s ability to develop profitable operations and to obtain additional
funding sources. There can be no assurance that the Company’s financing efforts will result in profitable operations or
the resolution of the Company’s liquidity problems. The accompanying statements do not include any adjustments that might
result should the Company be unable to continue as a going concern.
(C)
Principles of Consolidation
The
accompanying 2014 consolidated financial statements include the accounts of Inception Mining, Inc. and its wholly owned subsidiary,
Inception Development, Inc. (collectively, the “Company”) from January 28, 2013. All intercompany accounts have been
eliminated upon consolidation.
(D)
Basis of Presentation
The
Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of
America.
(E)
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 in
kind contribution of interest and services, inputs into the determination of the derivative liabilities and the valuation of deferred
tax assets. While management believes the estimates and assumptions used in the preparation of the financial statements are appropriate,
actual results could differ from those estimates.
(F)
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.
At July 31, 2014 and July 31, 2013, the Company had no cash equivalents.
(G)
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 ASC 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 quarterly, 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 years ended July 31, 2014 and 2013, the Company recorded exploration costs of $34,494 and $6,641, respectively.
(H)
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.
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 years ended July 31, 2014 and 2013, respectively.
(I)
Derivative Instrument Liability
The
Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging, which establishes accounting
and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in
other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless
of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the
derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At July
31, 2014 and 2013, the Company did not have any derivative instruments that were designated as hedges.
(J)
Net Loss per Common Share, basic and diluted
The
Company has adopted ASC subtopic 718-10, Compensation, specifying the computation, presentation and disclosure requirements
of earnings per share information. Basic loss per share has been calculated based upon the weighted average number of common shares
outstanding. Warrants for the purchases of stock have been excluded as common stock equivalents in the diluted loss per share
because their effect is anti-dilutive on the computation. Fully diluted shares outstanding were 22,979,053 for the year ended
July 31, 2014.
(K)
Stock-Based Compensation
In
December 2004, the FASB issued FASB ASC Topic No. 718, Compensation – Stock Compensation. Under FASB ASC 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.
Such
compensation amounts, if any, are amortized over the respective vesting periods of the option grant. The Company applies this
statement prospectively.
Equity
instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments,
as required by FASB ASC No. 718. FASB ASC Topic 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.
(L)
Business Segments
The
Company operates in one segment and therefore segment information is not presented.
(M)
Financial Instruments
The
Company adopted the provisions of ASC subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008.
ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets
and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market
in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such
as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC
825-10 establishes three levels of inputs that may be used to measure fair value:
Level
1 – Quoted prices in active markets for identical assets or liabilities.
Level
2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in
markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant
inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full
term of the assets or liabilities.
Level
3 – Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or
liabilities.
To
the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of
the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair
value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
The
carrying value of the Company’s cash,, accounts payable, short-term borrowings (including convertible notes payable), and
other current assets and liabilities approximate fair value because of their short-term maturity.
As
of July 31, 2014 or July 31, 2013, the Company did not have any items that would be classified as level 1 or 2 disclosures.
All
items required to be recorded or measured on a recurring basis are based upon level 3 inputs.
The
Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed below. While the
Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that
the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in
a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values
using the methods discussed below are that of volatility and market price of the underlying common stock of the Company.
The
derivative liability as of July 31, 2014, in the amount of $112,851 has a level 3 classification.
The
following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of July 31,
2014:
| |
Warrant Liability | |
Balance, July 31, 2013 | |
$ | - | |
Initial fair value of debt | |
$ | 124,871 | |
Mark-to-market at July 31, 2014: | |
| (12,020 | ) |
Balance, July 31, 2014 | |
$ | 112,851 | |
Net Gain for the year included in earnings relating to the liabilities held at July 31, 2014 | |
$ | (12,020 | ) |
The
fair value of the embedded derivatives at July 31, 2014, in the amount of $112,851, was determined using the Binomial Option Pricing
Model based on the following assumptions: (1) dividend yield of 0%; (2) expected volatility of 131.64% to 156.78%, (3) weighted
average risk-free interest rate of 0.05% to 0.12%, (4) expected life of 0.56 to 0.97 years, and (5) estimated fair value of the
Company’s common stock of $0.90 to $0.94 per share. The Company recorded a gain on change in derivative liabilities of $12,020
during the year ended July 31, 2014.
Liabilities
measured at fair value on a recurring basis are summarized as follows:-
| | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| | |
| | | |
| | | |
| | | |
| | |
Fair value of derivatives at July 31,
2014 | | |
$ | - | | |
$ | - | | |
$ | 112,851 | | |
$ | 112,851 | |
Fluctuations
in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period.
The Company’s stock price decreased approximately 11% from July 31, 2013 to July 31, 2014. As the stock price decreases
for each of the related derivative instruments, the value to the holder of the instrument generally decreases, therefore decreasing
the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable
inputs used in the fair value measurement of each of the Company’s derivative instruments. The simulated fair value of these
liabilities is sensitive to changes in the Company’s expected volatility. Decreases in expected volatility would generally
result in a lower fair value measurement.
(N)
Recent Accounting Pronouncements
Recently
Adopted Accounting Pronouncements
In
October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, “Technical
Corrections and Improvements”. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification.
These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments
related to fairvalue measurements. The amendments in this update will be effective for fiscal periods beginning after December
15, 2012. The adoption of ASU 2012-04 did not have a material impact on our financial position or results of operations.
In
January 2013, the FASB issued ASU 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting
Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements
originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under
ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement
users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable
and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant
presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under International
Financial Reporting Standards. Like ASU 2011-11, the amendments in this update were effective for fiscal periods beginning on,
or after January 1, 2013. The adoption of ASU 2013-01 did not have a material impact on the Company’s financial position
or results of operations.
In
February 2013, the FASB issued ASU 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated
Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes
gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified
out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements
for reporting net income or other comprehensive income in financial statements. The amendments apply to all public and private
companies that report items of other comprehensive income. The amendments are effective for reporting periods beginning after
December 15, 2012, for public companies. The adoption of ASU 2013-02 did not have a material impact on our financial position
or results of operations as the Company maintains no items of comprehensive income.
The
Company has adopted ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements,
Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove
all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic
915, Development Stage Entities, from the FASB Accounting Standards Codification™. A development stage entity is
one that devotes substantially all of its efforts to establishing a new business and for which: (a) planned principal operations
have not commenced; or (b) planned principal operations have commenced, but have produced no significant revenue. For public business
entities, the presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning
after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December
15, 2015. Early adoption is permitted. The Company elected early adoption of ASU 2014-10 beginning with the reporting period ended
July 31, 2014. As a result of the Company’s early adoption, all references to the Company as a development stage entity
or exploration stage entity have been removed. The adoption of this pronouncement has no impact on the Company’s financial
position, results of operations or liquidity.
Recently
Issued Accounting Pronouncements
On
May 28, 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The standard
outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and
supersedes most current revenue recognition guidance. The accounting standard is effective for annual reporting periods (including
interim reporting periods within those periods) beginning after December 15, 2016. Early adoption is not permitted. The impact
on the Company’s financial statements of adopting ASU 2014-09 is being assessed by management.
In
June 2014, the FASB issued the FASB ASU2014-12 “Compensation—Stock Compensation (Topic 718): Accounting
for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service
Period” (“ASU 2014-12”). The amendments clarify the proper method of accounting for share-based payments
when the terms of an award provide that a performance target could be achieved after the requisite service period. The update
requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated
as a performance condition. The performance target should not be reflected in estimating the grant-date fair value of the award.
Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved
and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.
The amendments in this update are effective for annual periods and interim periods within those annual periods beginning after
December 15, 2015. Earlier adoption is permitted. The adoption of ASU 2014-12 is not expected to have a material impact on the
Company’s financial statements.
In
August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40).
“ The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about
an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation
should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements
are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December
15, 2016. Early adoption is permitted. The Company does not expect to early adopt this guidance and is still assessing the impact
on the financial statements.
NOTE
2 PROPERTY AND EQUIPMENT
Property
and Equipment
At
July 31, 2014 and July 31, 2013, respectively, the Company held no depreciable property.
Depreciation/expense
for the years ended July 31, 2014 and 2013 was $0 and $207, 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 that certain
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 on the
other hand, dated February 25, 2013 (the “Asset Purchase Agreement”). 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. The property
was recorded at cost and there have been no impairment charges on the property as of July 31, 2014. At July 31, 2014 and 2013
the value of the property was $950,160 (See Note 8(A).
NOTE
3 ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts
payable and accrued liabilities consisted of the following
| |
July 31, 2014 | | |
July 31, 2013 | |
Related party consulting fees (see Note 8) | |
$ | 126,000 | | |
$ | - | |
Professional Fees | |
| 28,500 | | |
| 76,500 | |
Other | |
| 3,999 | | |
| 219 | |
| |
$ | 158,499 | | |
$ | 76,719 | |
NOTE
4 CONVERTIBLE NOTES PAYABLE
Convertible
notes payable were comprised of the following as of July 31, 2014 and 2013:
| |
2014 | | |
2013 | |
UP and Burlington convertible note payable | |
$ | 500,000 | | |
$ | 680,000 | |
Iconic Holdings Convertible note payable | |
| 82,500 | | |
| - | |
Dave Waverek Convertible note payable | |
| 100,000 | | |
| - | |
Total Convertible notes payable | |
| 682,500 | | |
| 680,000 | |
Less unamortized discount | |
| (124,103 | ) | |
| - | |
Total notes payable net of unamortized debt discount | |
$ | 558,397 | | |
$ | 680,000 | |
UP and
Burlington Gold Mine
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. 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. On February 11, 2014, the Company
converted $130,000 of principal into 288,889 shares of common stock. As of July 31, 2014 and 2013, the outstanding balances on
these notes were $500,000 and $18,000, respectively.
Iconic
Holdings
On
February 18, 2014, the Company entered into an unsecured Note Purchase Agreement for the sale of an 10% convertible promissory
note in which the Company will receive advances up to the principal amount of $220,000 with an original issue discount of 10%
of loaned funds. Through July 31, 2014, the Company has received funds totaling $75,000 and recorded additional principal due
to the original issue discount totaling $7,500. The note bears interest at the rate of 10% per annum and all interest and principal
must be repaid on February 18, 2015. The note is convertible into common stock, at the holder’s option, at the lower of
$0.45 or 60% of the lowest three daily volume weighted average price of the Company’s common stock during the 20 consecutive
trading days prior to the date of conversion. 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. The Company has identified the embedded derivatives related to the note. The embedded derivatives include relate
to conversion features.
The
accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of
the inception date of the notes and to fair value as of each subsequent reporting date which at July 31, 2014 was $112,851. At
the inception of the notes, the Company determined the aggregate fair value of $124,871 of the embedded derivatives.
The
fair value of the embedded derivatives were determined using the Binomial Option Pricing Model based on the following assumptions:
(1) dividend yield of 0%; (2) expected volatility of 131.64% to 156.78%, (3) weighted average risk-free interest rate of 0.05%
to 0.12%, (4) expected lives of 0.56 to 0.97 years, and (5) estimated fair value of the Company’s common stock from $0.80
to $0.94 per share. The initial fair value of the embedded debt derivatives of $124,871 were allocated as a debt discount up to
the proceeds of the notes ($82,500) with the remainder ($42,371) charged to current period operations as interest expense. For
the year ended July 31, 2014, the Company amortized $50,190 of debt discount to current period operations as interest expense.
As of July 31, 2014 the gross balance of the notes was $82,500.
Dave
Waverek
On
June 7, 2014, the Company entered into an unsecured Note Purchase Agreement for the sale of a 20% convertible promissory note
in which the Company will receive the principal amount of $100,000. The note bears interest at the rate of 20% per annum and all
interest and principal must be repaid on June 7, 2016. The note is convertible, at the holder’s option into shares of the
Company’s common stock at $0.45 per share,. A beneficial conversion feature on the new note was recorded for $100,000.
During the years ended July 31, 2014 and 2013, respectively, the Company recorded interest expense of $26,087 and $0 for accretion
of the discount on the note. As of July 31, 2014, accrued interest on the note was $2,416.
During
the year ended July 31, 2014 $688,397 of debt discount was amortized and recorded as expense for the above notes.
NOTE
5 ADVANCES, RELATED PARTY
During
the year ended July 31, 2014 and 2013, a stockholder and member of MDL Ventures, LLC, provided unsecured advances in the aggregate
of $286,446 and $178,831, respectively, for working capital purposes. Pursuant to the terms of the advances, the advances are
unsecured, due on demand, and accrue interest at 15% per annum. As of July 31, 2014 and 2013 the outstanding balance was $286,446
and $178,831 with $20,612 and $9,215 in accrued interest, respectively. For the year ended July 31, 2014 and 2013, $39,397 and
$11,187, respectively, was recognized in interest expense related to the related party advances.
NOTE
6 LOANS PAYABLE – RELATED PARTY
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 a contributed capital.
During
year ended July 31, 2013, the former controlling stockholders (prior to the Purchase Agreement) forgave the two loans payable
$64,408 and $2,244. This was recorded by the Company as contributed capital, no gain or loss was recognized.
NOTE
7 STOCKHOLDERS’ DEFICIT
(A)
Common Stock Issuances
Effective
August 1, 2013, the Company issued 15,000 shares of common stock for services valued at $6,750. These shares were issued for the
settlement of accounts payable.
On
August 5, 2013, the Company issued 295,611 shares of common stock and 112,250 common stock purchase warrants for 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.
In
January 2014, the Company issued 258,887 shares of common stock and 129,445 common stock purchase warrants for aggregate consideration
of $116,500 in cash.
In February 2014, the Company issued 71,111
shares of common stock and 63,999 common stock purchase warrants for aggregate consideration of $32,000.
In
July 2014, the Company issued 44,444 shares of common stock for consideration of $20,000 in cash.
(B)
In-Kind Contribution
For
the year ended July 31, 2013, the former shareholder of the Company contributed $4,419 of accrued interest on behalf of the Company.
(C)
Amendments to Articles of Incorporation
On
May 17, 2013, the Company amended its articles of incorporation to change its name to Inception Mining, Inc.
(D)
Stock Issued for Mining Rights
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. The Asset Purchase Agreement
closed on February 25, 2013.
(E)
Stock Issued for Services
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 in the current period.
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 during the current period.
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 term of the services rendered..
At
the time of entering into these consulting contracts 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.
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. The prepaid legal
fees were expensed during the three months ended October 31, 2013 and a loss on settlement of accounts payable was recognized
of $147,778. There shares were issued for the settlement of accounts payable.
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.
In
January 2014, the Company issued 150,000 shares of common stock for services valued at $76,500. The number of shares issued was
based on quoted market price. The services are being provided over a 12-month period.
In
February 2014, the Company issued 100,000 shares for services valued at $51,000. The number of shares issued was based on quoted
market price. These services were provided over a three month period.
In
March 2014, the Company issued 100,000 shares of common stock for services valued at $102,000. The services are being provided
over a 12-month period.
In
April 2014, the Company issued 40,000 shares of common stock for services valued at $46,000.
(F)
Expenses paid on Company’s behalf
On
February 25, 2013 the former principal stockholder converted $25,000 of the note payable owed into 1,000,000 shares of common
stock at $0.025 per share.
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.
(G)
Stock Split
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.
(H)
Warrants Issued for Cash
The
following tables summarize the warrant activity during the year ended July 31, 2014:
| |
Number of Warrants | | |
Weighted Average
Exercise Price | |
Stock Warrants | |
| | | |
| | |
Balance at July 31, 2013 | |
| - | | |
$ | - | |
Granted | |
| 345,695 | | |
| 0.90 | |
Exercised | |
| - | | |
| - | |
Forfeited | |
| - | | |
$ | - | |
Balance at July 31, 2014 | |
| 345,695 | | |
$ | 0.90 | |
2014 Outstanding Warrants | | |
Warrants Exercisable | |
Range of Exercise Price | | |
Number Outstanding at July
31, 2014 | | |
Weighted Average Remaining
Contractual Life | | |
Weighted Average Exercise
Price | | |
Number Exercisable at July
31, 2014 | | |
Weighted Average
Exercise Price | |
$ | 0.90 | | |
| 345,695 | | |
| 2.37
years | | |
$ | 0.90 | | |
| 345,695 | | |
$ | 0.90 | |
NOTE
8 RELATED PARTY TRANSACTIONS
(A)
Acquisition of Mining Rights
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 (see Note 2). The Asset Purchase Agreement closed on February 25, 2013. As of
July 31, 2014, the outstanding balances on these notes were $500,000 and $18,000, respectively. 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 year ended July 31, 2014, $630,000
of the beneficial conversion feature was accreted as interest expense.
(B)
Advances
Through
July 31, 2014, a stockholder/director provided advances for working capital purposes. The advances are unsecured, due on demand,
and bear interest at a rate of 15% per annum. As of July 31, 2014, the Company owes $286,446 for loans and payments, plus an additional
$20,612 in accrued interest. During the years ended July 31, 2014 and 2013, the Company recorded interest expense on the advances
of $39,397 and $11,187, respectively.
(C)
Consulting Agreement
In
February 2014, the Company entered into a consulting agreement with a stockholder/director. The Company agreed to pay $18,000
per month for twelve months. As of July 31, 2014, the Company owed $126,000 to the stockholder/director in accrued consulting
fees.
(D)
Lease
The
Company leases office space from a related affiliate, MDL Ventures, LLC, which includes month to month terms. Rent expense for
the year ended July 31, 2014 amounted to $5,852.
(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 earnings
before interest, taxes, depreciation, and amortization (“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.
NOTE
9 COMMITMENTS AND CONTINGENCIES
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, for 3 month, in consideration
of $3,600 per month.
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. The Agreement with Mr. Thurman was 45-days,
originally, but extended through April 1, 2014.
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, in consideration of providing general corporate advisory and M&A services. The term
of the Agreement is for 1 year. The value of the shares is based on quoted market price and is currently being amortized over
the term of the Consulting Agreement. At July 31, 2014 a balance of $12,855 is included in prepaid expenses. During the year ended
July 31, 2014 $12,645 was recorded as consulting expense.
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 for a period of one year. The value of the shares is based on quoted market price and
is currently being amortized over the term of the Consulting Agreement. At July 31, 2014 a balance of $25,710 is included in prepaid
expenses. During the year ended July 31, 2014 $25,290 was recorded as consulting expense.
Elliott
Foxcroft Agreement
On
March 27, 2014, the Company entered into an Advisory Agreement with Elliott Foxcroft (“Forcroft”) pursuant to which
Foxcroft will receive 300,000 shares of restricted common stock of the Company, of which 100,000 shares have been issued, in consideration
for providing/assist the Company with general legal, corporate advisory and M&A matters. Mr. Foxcroft will help the Company
source, identify and evaluate potential acquisition targets (the “Target Acquisitions”) for a one year period. The
value of the shares is based on quoted market price and is currently being amortized over the term of the Consulting Agreement.
At July 31, 2014 a balance of $66,789 is included in prepaid expenses. During the year ended July 31, 2014 $35,211 was recorded
as consulting expense.
Litigation
The
Company at times is subject to other legal proceedings that arise in the ordinary course of business. In the opinion of management,
as of July 31, 2014, the amount of ultimate liability with respect to such matters, if any, is not likely to have a material impact
on the Company’s business, financial position, results of operations or liquidity. However, as the outcome of litigation
and other claims is difficult to predict significant changes in the estimated exposures could exist.
NOTE
10 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.
The provision
for income tax expense (recovery) is comprised the following amounts:
| |
2014 | | |
2013 | |
Expected income tax (recovery) expense at the statutory rate of 34% | |
$ | (562,581 | ) | |
$ | (92,006 | ) |
State Taxes | |
| - | | |
| 4,281 | |
Tax effect of expenses that are not deductible for tax purposes (net of other amounts deductible
for tax purposes) | |
| 179 | | |
| 6,980 | |
IRC Section 382 Limited NOLs | |
| - | | |
| 468,663 | |
Change in valuation allowance | |
| 562,402 | | |
| (387,918 | ) |
Provision for income taxes | |
$ | -
| | |
$ | -
| |
The components
of deferred income tax in the accompanying balance sheets are as follows:
| |
2014 | | |
2013 | |
Deferred income tax asset: | |
| | | |
| | |
Net operating loss carry-forwards | |
$ | 134,465 | | |
$ | 116,628 | |
Section 195 Start up Costs | |
| 381,344 | | |
| 81,152 | |
Other | |
| 70 | | |
| 70 | |
Debt Discount | |
| (42,195 | ) | |
| - | |
Derivative Liability | |
| 38,369 | | |
| - | |
Valuation allowance | |
| (512,053 | ) | |
| (197,851 | ) |
Deferred income taxes | |
$ | - | | |
$ | - | |
As
of July 31, 2014 and July 31, 2013, the Company had net operating loss carryforwards for U.S. federal income tax purposes of approximately
$1,774,000 and $1,721,000 million, respectively. A portion of the federal amount, $1,710,000, is subject to an annual limitation
of approximately $17,000 as a result of a change in the Company’s ownership through February 2013, as defined by Federal
Internal Revenue Code Section 382 and the related income tax regulations. As a result of the 20 year federal carryforward period
and the limitation, approximately, $1,400,000 of the net operating loss will expire unutilized. These net operating loss carry-forwards
will expire through the year ending 2033.
The
valuation allowance was established to reduce the deferred tax asset to the amount that will more likely than not be realized. This
is necessary due to the Company’s continued operating losses and the uncertainty of the Company’s ability to utilize
all of the net operating loss carry-forwards before they will expire through the year 2033.
The
net change in the valuation allowance for the year ended July 31, 2014 was an approximate increase of $562,402.
The
components of income tax expense related to continuing operations are as follows:
| |
| 2013 | | |
| 2012 | |
Federal | |
$ | - | | |
$ | - | |
Current | |
$ | - | | |
$ | - | |
Deferred | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
State and Local | |
$ | - | | |
$ | - | |
Current | |
$ | - | | |
$ | - | |
Deferred | |
$ | - | | |
$ | - | |
The
Company’s federal income tax returns for the years ended June 30, 2010 through June 31, 2013 remains subject to examination
by the Internal Revenue Service as of July 31, 2014.
NOTE
11 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
12 SUBSEQUENT EVENTS
The
Company entered into an unsecured convertible note payable (the Convertible Note) agreement with a stockholder/director effective
October 1, 2014. Principal on the Convertible Note amounts to $358,742. The Convertible Note bears interest at 15% per annum and
all interest and principal is due and payable on October 1, 2015. The Convertible Note is convertible into common stock, at the
holder’s option, at the lower of $0.45 or 60% of the lowest three daily volume weighted average prices of the Company’s
common stock during the 20 consecutive days prior to the date of conversion.
The Company
completed access and onsite roads at its U.P. and Burlington Mining Property.
On
September 24, 2014 (the “Effective Date”), the Company entered into a Securities Purchase Agreement with Typenex
Co-Investment, LLC (“Typenex”), for the sale of a 10% convertible promissory note (the “Note”) in the
principal amount of $115,000 (the “Closing Amount”) convertible into shares of common stock of the Company. The Note
has an original issue discount of $10,000. Typenex retained $5,000 of the Closing Amount for due diligence and legal bills related
to the transaction (the “Fee”). The financing closed on October 1, 2014 (the “Closing Date”).
In
addition, the Company issued to Typenex a warrant to purchase 105,427 shares of the Company’s common stock, subject to adjustment
in the event of a cashless exercise, as defined in the warrant. The warrant is exercisable
at $1.40 per share (the “Exercise Price”) for a period of five years on a cash or cashless basis. If the
Company at any time while the warrant is outstanding sells or otherwise disposes of any securities, including any common stock
issued under the Note, at an effective price per share less than the Exercise Price then the Exercise Price will be reduced to
such price provided that the number of shares of common stock issuable under the warrant may not exceed a number of shares equal
to three (3) times the number of shares of common stock issuable under the warrant as of the Effective Date.
The Note bears interest at
the rate of 10% per annum. All interest and principal must be repaid nine (9) months after the Closing Date (the “Maturity
Date”). The Note is convertible into common stock, at Typenex’s option, at $1.40 per share (the “Optional Conversion”).
Beginning
on the date that is six (6) months after the Closing Date and on the same day of each month thereafter until the Maturity Date,
the Company must pay to Typenex the greater of (i) $28,750, plus the sum of any accrued and unpaid interest, or (ii) the then
outstanding balance under the Note divided by the number of installment dates remaining prior to the Maturity Date. Payments of
each installment amount may be made in cash or by converting such installment amount into common stock. The conversion price for
each installment conversion will be the lesser of (i) the $1.40, and (ii) 60% (the “Conversion Factor”) of the average
of the three lowest closing bid prices in the 20 trading days immediately preceding the applicable conversion (the “Market
Price”), provided that if at any time the average of the three lowest closing bid prices in the 20 trading days immediately
preceding any date of measurement is below $0.60, then in such even the then-current Conversion Factor will be reduced to 55%
for all future conversions. Additionally, if at any time after the Effective Date, the shares of common stock in accordance with
the Note are not DTC eligible, then the then-current Conversion Factor will automatically be reduced for all future conversions
by an additional 5% for all future conversions. Typenex may, in its discretion, apply an Optional Conversion to an installment
conversion.
On
a date that is 20 trading days from each date that the Company delivers conversion shares to Typenex, there is a true-up date
in which the Company will deliver additional shares if the installment conversion price on that date is less than the installment
conversion price used in the applicable installment notice. These additional shares will be equal to the difference between the
number of shares that would be delivered to Typenex at the time of the true-up date and the amount originally delivered.
The
Company may prepay an outstanding balance under the Note by paying to Typenex an amount equal to the installment amount due
on such installment date. Notwithstanding the foregoing, so long as the Company has not received a Conversion Notice or an installment
notice from Typenex and no Event of Default (as defined in the Note) has occurred since the Effective Date, then the Company has
the right upon providing five trading (5) days prior written notice to Typenex to prepay the outstanding balance of the Note in
full. If the Company exercises its right to prepay the Note then the Company is required to make payment in an amount in cash
equal to 125% multiplied by the then outstanding balance of the Note.
The
total net proceeds the Company received from this offering was $115,000, less the Fee and the original issue discount of $10,000. As
of the date of the Note, the Company is obligated on the Note issued to Typenex 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.
EXHIBIT
31.1
OFFICER’S
CERTIFICATE
PURSUANT
TO SECTION 302
I, Michael
Ahlin, certify that:
1. |
I
have reviewed this Annual Report on Form 10-K of Inception Mining, Inc.; |
|
|
2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
|
|
3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
I
am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have: |
|
(a) |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
me by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
(b) |
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
(c) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and |
|
|
|
|
(d) |
Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and |
5. |
I
have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
|
|
|
|
(b) |
Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date:
November 13, 2014 |
By: |
/s/
Michael Ahlin |
|
Name: |
Michael
Ahlin |
|
Title: |
Chief
Executive Officer (Principal Executive Officer) |
EXHIBIT
31.2
OFFICER’S
CERTIFICATE
PURSUANT
TO SECTION 302
I, Whit
Cluff, certify that:
1. |
I
have reviewed this Annual Report on Form 10-K of Inception Mining, Inc.; |
|
|
2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
|
|
3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
I
am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have: |
|
(a) |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
me by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
(b) |
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
(c) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and |
|
|
|
|
(d) |
Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and |
5. |
I
have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
(a) |
All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
|
|
|
|
(b) |
Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date:
November 13, 2014 |
By: |
/s/
Whit Cluff |
|
Name: |
Whit
Cluff |
|
Title: |
Chief
Financial Officer (Principal Accounting Officer) |
EXHIBIT
32
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report on Form 10-K of Inception Mining, Inc. (the “Company”) for the period ended July
31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael Ahlin,
Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:
1. |
The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and |
|
|
2. |
The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Date:
November 13, 2014 |
By: |
/s/
Michael Ahlin |
|
Name: |
Michael
Ahlin |
|
Title: |
Chief
Executive Officer (Principal Executive Officer) |
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Annual Report on Form 10-K of Inception Mining, Inc. (the “Company”) for the period ended July
31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Whit Cluff, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley
Act of 2002, that, to my knowledge:
1. |
The
Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;
and |
|
|
2. |
The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Date:
November 13, 2014 |
By: |
/s/
Whit Cluff |
|
Name: |
Whit
Cluff |
|
Title: |
Chief
Financial Officer (Principal Accounting Officer) |
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