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 2021 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.
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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.
Results of Operations
Nine months ended
We had a net loss of
Nine Months Ended September, Increase/
2022 2021 (Decrease)
Revenues $ 1,365,387 $ 4,006,115 $ (2,640,728 )
Cost of Sales 1,413,495 2,582,987 (1,169,492 )
Gross Profit (48,108 ) 1,423,128 (1,471,236 )
General and Administrative 791,198 897,283 (106,085 )
Depreciation and Amortization Expenses 3,769 6,632 (2,863 )
Total Operating Expenses 794,967 903,915 (108,948 )
Income (Loss) from Operations (843,075 ) 519,213 (1,362,288 )
Other Income (expense) 8,329 9,806 (1,477 )
Gain on Forgiveness of PPP loan 31,667 - 31,667
Change in Derivative Liabilities 681,557 2,894,387 (2,212,830 )
Change in Marketable Securities - 328,970 (328,970 )
Loss on Extinguishment of Debt (271,511 ) (1,604,727 ) 1,333,216
Interest Expense (2,092,808 ) (2,806,622 ) 713,814
Loss from Operations Before Taxes (2,485,841 ) (658,973 ) (1,826,868 )
Provision for Income Taxes (82,137 ) (158,321 ) 76,184
Net Loss $ (2,567,978 ) $ (817,294 ) $ (1,750,684 )
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Revenues decreased because the Company is not able to export its gold production
until an agreement with the
Cost of sales decreased for the nine-month period ended
General and administrative expenses decreased to
Changes in derivative liabilities was due to the lower valuation of the derivative liabilities in the current year. Loss on extinguishment of debt decreased because of the lower number of conversions in the current period.
Interest expense decreased in 2022 because of the default interest recorded on a senior secured convertible note during 2021.
Three months ended
We had a net loss of
Three Months Ended September, Increase/
2022 2021 (Decrease)
Revenues $ - $ 1,464,211 $ (1,464,211 )
Cost of Sales 173,917 905,862 (731,945 )
Gross Profit (173,917 ) 558,349 (732,266 )
General and Administrative 226,434 255,919 (29,485 )
Depreciation and Amortization
Expenses 1,116 2,033 (917 )
Total Operating Expenses 227,550 257,952 (30,402 )
Income (Loss) from Operations (401,467 ) 300,397 (701,864 )
Other Income (expense) 662 2,910 (2,248 )
Gain on Forgiveness of PPP loan - - -
Change in Derivative Liabilities 35,856 405,771 (369,915 )
Loss on Extinguishment of Debt (14,008 ) (113,253 ) 99,245
Interest Expense (760,122 ) (630,493 ) (129,629 )
Income (Loss) from Operations Before
Taxes (1,139,079 ) (34,668 ) (1,104,411 )
Provision for Income Taxes (54,723 ) (386 ) (54,337 )
Net Income (Loss) $ (1,193,802 ) $ (35,054 ) $ (1,158,748 )
5
Revenues decreased because the Company is not able to export its gold production
until an agreement with the
Cost of sales decreased for the three-month period ended
General and administrative expenses decreased to
Changes in derivative liabilities was due to the lower valuation of the derivative liabilities in the current year. Loss on extinguishment of debt decreased because of the lower number of conversions in the current period.
Interest expense increased in 2022 because of the default interest recorded on a senior secured convertible note during 2022.
Liquidity and Capital Resources
Our balance sheet as of
Working Capital
September 30, 2022 December 31, 2021
Current assets $ 775,640 $ 543,008
Current liabilities 27,976,116 25,279,768
Working capital deficit $ (27,200,476 ) $ (24,736,760 ) 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,
2022 2021
Net Cash Provided by (Used in) Operating Activities
(49,777 ) 400,376
Net Cash Provided by (Used in) Financing Activities 361,711 (536,391 )
Effects of Exchange Rate Changes on Cash (106 ) 196
Net Increase (Decrease) in Cash $ (52,785 ) $ 104,941
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Operating Activities
Net cash flow used in 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
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.
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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.
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