INCEPTION MINING, INC. Forward Looking Statements
The statements contained in the following MD&A and elsewhere throughout this
Quarterly Report on Form 10-Q, including any documents incorporated by
reference, that are not historical facts, including statements about our beliefs
and expectations, are "forward-looking statements" within the meaning of the
These forward-looking statements, which reflect our management's beliefs,
objectives, and expectations as of the date hereof, are based on the best
judgement of our management. All forward-looking statements speak only as of the
date on which they are made. Such forward-looking statements are subject to
certain risks, uncertainties and assumptions relating to factors that could
cause actual results to differ materially from those anticipated in such
statements, including, without limitation, the following: economic, social and
political conditions, global economic downturns resulting from extraordinary
events such as the COVID-19 pandemic and other securities industry risks;
interest rate risks; liquidity risks; credit risk with clients and
counterparties; risk of liability for errors in clearing functions; systemic
risk; systems failures, delays and capacity constraints; network security risks;
competition; reliance on external service providers; new laws and regulations
affecting our business; net capital requirements; extensive regulation,
regulatory uncertainties and legal matters; failure to maintain relationships
with employees, customers, business partners or governmental entities; the
inability to achieve synergies or to implement integration plans and other
consequences associated with risks and uncertainties detailed in our filings
with the
We caution that the foregoing list of factors is not exclusive, and new factors may emerge, or changes to the foregoing factors may occur, that could impact our business. We undertake no obligation to publicly update or revise these statements, whether as a result of new information, future events or otherwise, except to the extent required by the federal securities laws.
This discussion should be read in conjunction with our financial statements on our 2020 Form 10-K, and our financial statements and the notes thereto contained elsewhere in this Quarterly Report on Form 10-Q.
Introduction to Interim Consolidated Financial Statements.
The interim consolidated financial statements included herein have been prepared
by
In the opinion of management, all adjustments have been made consisting of
normal recurring adjustments and consolidating entries, necessary to present
fairly the consolidated financial position of the Company and subsidiaries as of
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
3
Overview and Plan of Operation
We are a mining company that was formed in
Clavo Rico Mine
On
The Company's primary mine is located on the 200-hectare Clavo Rico Concession,
located in southern
Mining operations begin by crushing extracted material to approximately 3/8-inch
size pebbles, which is then mixed with additional material and loaded on the
recovery pad for processing. The pebble material is sprinkled with a solution
that leaches the gold from the rock, and the solution is collected and processed
on-site at Clavo Rico's own ADR plant. The doré bars that result from this
process are shipped to the
Prior to the expansion, the mine had only been processing approximately less
than 500 tons of extracted material per day. The current recovery operational
increase has been sized to handle from 500 to 750 tons of extracted material per
day on a recovery bed that has the capacity to receive up to 750,000 tons of
material. The Company commenced full operations on
The Company has engaged in preliminary drilling of this area and the resulting assays of samples indicate that the material should have grades in the range of 0-5 grams of gold per ton.
4 Results of Operations
Nine months ended
We had a net loss of
Nine Months Ended September 30, Increase/
2021 2020 (Decrease)
Revenues $ 4,006,115 $ 3,319,783 $ 686,332
Cost of Sales 2,582,987 2,422,670 160,317
Gross Profit 1,423,128 897,113 526,015
General and Administrative 897,283 987,781 (90,498 )
Depreciation and Amortization
Expenses 6,632 6,238 394
Total Operating Expenses 903,915 994,019 (90,104 )
Income (Loss) from Operations 519,213 (96,906 ) 616,119
Other Income (expense) 9,806 19,603 (9,797 )
Gain on Sale of Mine Property - 471,084 (471,084 )
Change in Derivative Liabilities 2,894,387 74,284 2,820,103
Change in Marketable Securities 328,970 541,267 (212,297 )
Loss on Extinguishment of Debt (1,604,727 ) (383,946 ) (1,220,781 )
Interest Expense (2,806,622 ) (3,608,458 ) 801,836
Income (Loss) from Operations Before
Taxes (658,973 ) (2,983,072 ) 2,324,099
Provisions for Income Taxes (158,321 ) - (158,321 )
Net Income (Loss) $ (817,294 ) $ (2,983,072 ) $ 2,165,778 Revenues increased because of the Covid-19 mandated shut-down slowed the production in the second quarter of 2020 with no new material being placed on the leach pads for several weeks during the shutdown period, which slowed production in the third quarter of 2020 also.
Cost of sales decreased slightly in relation to the increase in revenue for the
nine-month period ended
General and administrative expenses decreased for the nine-month period ended
Changes in derivative liabilities was due to the lower valuation of the derivative liabilities in the current year.
Interest expense decreased in 2021 because of the interest expense related to note debt discounts recorded in excess of the note proceeds and the decrease of amortization of existing debt discounts.
5
Three months ended
We had net loss of
Three Months Ended September 30, Increase/
2021 2020 (Decrease)
Revenues $ 1,464,211 $ 1,387,470 $ 76,741
Cost of Sales 905,862 866,595 39,267
Gross Profit 558,349 520,875 37,474
General and Administrative 255,919 343,898 (87,979 )
Depreciation and Amortization
Expenses 2,033 1,811 222
Total Operating Expenses 257,952 345,709 (87,757 )
Income (Loss) from Operations 300,397 175,166 125,231
Other Income (expense) 2,910 1,112 1,798
Change in Derivative Liabilities 405,771 2,772,532 (2,366,761 )
Change in Marketable Securities - 162,325 (162,325 )
Loss on Extinguishment of Debt (113,253 ) (29,384 ) (83,869 )
Interest Expense (630,493 ) (1,181,182 ) 550,689
Income (Loss) from Operations Before
Taxes (34,668 ) 1,900,569 (1,935,237 )
Provisions for Income Taxes (386 ) - (386 )
Net Income (Loss) $ (35,054 ) $ 1,900,569 $ (1,935,623 ) Revenues increased because of the Covid-19 mandated shut-down slowed the production in the second quarter of 2020 with no new material being placed on the leach pads for several weeks during the shutdown period, which slowed production in the third quarter of 2020 also.
Cost of sales were different in the three-month period ended
General and administrative expenses have decreased for the three-month period
ended
Changes in derivative liabilities was because of the lower valuation of the derivative liabilities in the current year.
Interest expense decreased in 2021 because of the interest expense related to note debt discounts recorded in excess of the note proceeds and the decrease of amortization of existing debt discounts.
Liquidity and Capital Resources
Our balance sheet as of
Working Capital
September 30, 2021 December 31, 2020
Current assets $ 638,356 $ 923,424
Current liabilities 28,964,291 28,987,520
Working capital deficit $ (28,325,935 ) $ (28,064,096 )
6
We anticipate generating losses and, therefore, may be unable to continue operations in the future, if we don't acquire additional capital and issue debt or equity or enter into a strategic arrangement with a third party.
Going Concern Consideration
As reflected in the accompanying unaudited condensed consolidated financial
statements, the Company and has an accumulated deficit of
Nine Months Ended September 30,
2021 2020
Net Cash Provided by (Used in) Operating Activities
400,376 620,827
Net Cash Provided by (Used in) Financing Activities (536,391 ) (450,789 )
Effects of Exchange Rate Changes on Cash 196 69
Net Increase (Decrease) in Cash $ 104,941 $ 102,075
Operating Activities
Net cash flow provided by operating activities during the nine months ended
Investing Activities
Investing activities during the nine months ended
Financing Activities
Financing activities during the nine months ended
Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with
generally accepted accounting principles used in
7
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.
Recent Accounting Pronouncements
For recent accounting pronouncements, please refer to the notes to financial statements in Part I, Item 1 of this Quarterly Report.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
© Edgar Online, source
