INCEPTION MINING INC. - Quarter Report: 2014 January (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended January 31, 2014

For the transition period from _____ to _____.

Commission File No. 333-147056

Inception Mining, Inc.

(Exact Name of Registrant as Specified in Its Charter)

801-428-9703

(Registrant’s telephone number, including area code)

Copies to:

Fleming PLLC

49 Front Street, Suite 206

Rockville Centre, New York 11570

Phone: (516) 833-5034

Fax: (516) 977-1209

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 registrant 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 checkmark 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-3 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of March 17, 2014, there were 21,226,237 shares of the registrant’s common stock issued and outstanding.

INCEPTION MINING, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)

(An Exploration Stage Company)

Condensed Consolidated Balance Sheets

See accompanying notes to the condensed consolidated financial statements.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)

(An Exploration Stage Company)

Condensed Consolidated Statements of Operations

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)

(An Exploration Stage Company)

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)

For the period from July 2, 2007 (Inception) to January 31, 2014

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)

(An Exploration Stage Company)

Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) (Continued)

For the period from July 2, 2007 (Inception) to January 31, 2014

See accompanying notes to the condensed consolidated financial statements.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)

(An Exploration Stage Company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See accompanying notes to the condensed consolidated financial statements.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)

(An Exploration Stage Company)

Notes to Condensed Consolidated Financial Statements

As of January 31, 2014

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

(A) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations (s-x) of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all the information necessary for a comprehensive presentation of financial position and results of operations, in accordance with generally accepted accounting principles.

It is management’s opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated July 31, 2013 financial statements and footnotes thereto included in the Company’s SEC Form 10-K.

Inception Mining, Inc. (formerly known as Gold American Mining Corp.) (an exploration stage company) was incorporated under the name of Golf Alliance Corporation and under the laws of the State of Nevada on July 2, 2007. Inception Mining, Inc. is a precious metal mineral acquisition, exploration and development company, and along with its wholly owned subsidiary, Inception Development, Inc. is collectively referred to as “the Company” or “Inception” in the following footnotes.. Inception Development, Inc., was incorporated under the laws of the State of Idaho on January 28, 2013.

The Company pursued its original business plan to provide opportunities for golfers to play on private golf courses normally closed to them due to the membership requirements of the private clubs. During the year ended July 31, 2010, it redirected its business focus toward precious metal mineral acquisition and exploration. The Company is performing exploration and evaluation work on its property in Salmon, ID.

On February 25, 2013, Inception and its majority shareholder (the “Majority Shareholder”), and its wholly-owned subsidiary, Inception Development Inc. (the “Subsidiary”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Inception Resources, LLC, a Utah corporation (“Inception Resources”), pursuant to which Inception purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock of Inception, the assumption of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. Inception Resources was an entity owned by and under the control of a shareholder. This transaction is deemed an asset purchase by entities under common control. The Asset Purchase Agreement closed on February 25, 2013 (the “Closing”). We were a “shell company” (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended) immediately prior to our acquisition of the gold mine pursuant to the terms of the Assert Purchase Agreement. As a result of such acquisition, our operations are now focused on the ownership and operation of the mine acquired from Inception Resources. Consequently, we believe that acquisition has caused us to cease to be a shell company as we no longer have nominal operations.

The Company is in the exploration stage in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic No. 915 and SEC Industry Guide No. 7 addressing issues in mining operations. As a result, and in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for exploration stage companies, all expenditures for exploration and evaluation of the Company’s property are expensed as incurred until mineralized material is classified as proven or probable reserves. Accordingly, substantially all expenditures have been expensed as incurred. Certain expenditures, such as for equipment, may be capitalized subject to impairment of the asset. As of July 31, 2013, none of the mineralized material at the Company’s Salmon, ID property met the SEC’s definition of proven or probable reserves. The Company expects to remain an exploration stage company for the foreseeable future. The Company will not exit the exploration stage unless and until it demonstrates the existence of proven or probable reserves that meet SEC guidelines.

Activities during the exploration stage include expanding exploration activities, developing the business plan and raising capital.

Our company is completely dependent on our Chief Executive Officer, our Chief Financial Officer and our Chief Operating Officer, who are also members of our Board of Directors. As of the date of this report, we only employed these three individuals. Thus, the loss of these individuals could significantly and adversely affect our business, and certainly the loss of all three individuals on or about the same time could result in a complete failure of the Company. Currently the Company is dependent on management to provide the necessary funds required to continue its exploration stage pursuits.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)

(A) Basis of Presentation (Continued)

On March 5, 2010, the Company amended its articles of incorporation to (1) to change its name to Silver America, Inc. and (2) increased its authorized common stock from 100,000,000 to 500,000,000. On June 23, 2010 the Company amended its articles of incorporation to change its name to Gold American Mining Corp.

On May 1, 2013, the Company filed Articles of Merger with the Secretary of State of the State of Nevada pursuant to which its wholly-owned subsidiary, Inception Mining Inc., a Nevada Corporation, was merged into the Company effective May 1, 2013. As a result of the filing of the Articles of Merger, the Company’s corporate name was changed from Gold American Mining Corp. to Inception Mining Inc.

On November 21, 2012, the Company implemented a 200 to 1 reverse stock split. Upon effectiveness of the stock split, each shareholder canceled 200 shares of common stock for every share of common stock owned as of November 21, 2012. This reverse stock split was effective on February 13, 2013. All share and per share references have been retroactively adjusted to reflect this 200 to 1 reverse stock split in the financial statements and in the notes to financial statements for all periods presented, to reflect the stock split as if it occurred on the first day of the first period presented.

On May 17, 2013, the Company amended its articles of incorporation to change its name to Inception Mining, Inc.

(B) Going Concern

As reflected in the accompanying unaudited condensed consolidated financial statements, the Company is in the exploration stage with minimal operations, has a net loss since inception of $5,184,150 and used cash in operations of $1,864,978 from inception. In addition, there is a working capital deficiency (excess of current liabilities over current assets) of $730,990 as of January 31, 2014. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

(C) Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of Inception Mining, Inc. and its wholly owned subsidiary, Inception Development, Inc. from January 28, 2013. All intercompany accounts have been eliminated upon consolidation.

(D) Use of Estimates

In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and expenses during the reported period. Significant estimates include valuation of stock based compensation and the valuation of deferred tax assets. Actual results could differ from those estimates.

(E) Cash and Cash Equivalents

The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.

(F) Exploration and Development Costs

Costs of acquiring mining properties and any exploration and development costs are expensed as incurred unless proven and probable reserves exist and the property is a commercially mineable property in accordance with FASB Accounting Standards Codification No. 930, Extractive Activities - Mining. Mine development costs incurred either to develop new gold and silver deposits, expand the capacity of operating mines, or to develop mine areas substantially in advance of current production are capitalized. Costs incurred to maintain current production or to maintain assets on a standby basis are charged to operations. Costs of abandoned projects are charged to operations upon abandonment. The Company evaluates, at least annually, the carrying value of capitalized mining costs and related property, plant and equipment costs, if any, to determine if these costs are in excess of their net realizable value and if a permanent impairment needs to be recorded. The periodic evaluation of carrying value of capitalized costs and any related property, plant and equipment costs are based upon expected future cash flows and/or estimated salvage value.

The Company capitalizes costs for mining properties by individual property and defers such costs for later amortization only if the prospects for economic productions are reasonably certain.

Capitalized costs are expensed in the period when the determination has been made that economic production does not appear reasonably certain.

During the six months ended January 31, 2014 and 2013, the Company recorded exploration costs of $38,999 and $0, respectively.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)

(G) Property and Equipment

The Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected useful life. The Company uses a five year life for computer equipment. Upon retirement or disposal, cost and related accumulated depreciation are removed from the related accounts, and any resulting gain or loss is recognized as a component of income or loss for the period.

(H) Impairment of Long-Lived Assets

The Company accounts for long-lived assets, other than goodwill and intangible assets not subject to amortization, in accordance with the provisions of ASC Topic 360-10, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of, ASC 360-10 requires that when indications of potential impairment of long-lived assets are present, the Company evaluates the carrying value of these assets. The Company reviews the carrying value of property, mineral rights and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, the effects of obsolescence, demand, competition, and other economic factors.

There were no impairment losses recorded during the three months ended January 31, 2014 and 2013, respectively.

(I) Loss Per Share

Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by FASB Accounting Standards Codification Topic 260, “Earnings Per Share.” As of January 31, 2014 and 2013 there were 241,695 and 4,953, respectively, warrants issued and outstanding that were not included in the computation of earnings per share because their inclusion is anti-dilutive.

(J) Income Taxes

The Company accounts for income taxes under FASB Codification Topic 740-10-25 (“ASC 740-10-25”). Under ASC 740-10-25, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10-25, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(K) Stock-Based Compensation

The Company recognizes stock compensation under FASB Accounting Standards Codification No. 718, Compensation – Stock Compensation . Under FASB Accounting Standards Codification No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their fair value, and such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Equity instruments (“instruments”) issued to other than employees are recorded on the basis of the fair value of the instruments, as required by FASB Accounting Standards Codification No. 718. FASB Accounting Standards Codification No. 505, Equity Based Payments to Non-Employees defines the measurement date and recognition period for such instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION (CONTINUED)

(L) Business Segments

The Company operates in one segment and therefore segment information is not presented.

(M) Fair Value of Financial Instruments

The Company’s financial instruments are primarily comprised of cash, accounts payable and accrued liabilities, advances, related party, and notes payable for which the carrying amount approximates fair value because of the short-term nature of these instruments.

Fair Value of Financial Instruments

The Company accounts for the fair value of financial instruments pursuant to ASC Topic 820, Fair Value Measurements. ASC 820 establishes a framework for measuring fair value in generally accepted accounting principles and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value as follows:

Level 1 - Defined as observable inputs such as quoted prices in active markets;

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs); and

Level 3 - Unobservable inputs that reflect the Company’s determination of assumptions that market participants would use in pricing the asset or liability. These inputs are developed based on the best information available, including the Company’s own data.

There are no assets or liabilities measured and recorded at fair value on a recurring basis at January 31, 2014 and 2013.

(N) Recent Accounting Pronouncements

Management has considered all recent accounting pronouncements issued since the last audit of the Company’s financial statements. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.

NOTE 2 PROPERTY AND EQUIPMENT

Property and equipment were fully depreciated at January 31, 2014 and July 31, 2013, respectively.

Depreciation expense for the three months ended January 31, 2014 and 2013 and for the period from July 2, 2007 (Inception) to January 31, 2014 was $0, $206 and $12,214 respectively.

Mineral Property

On February 25, 2013, the Company acquired certain real property and the associated exploration permits and mineral rights commonly known as the U.P. and Burlington Gold Mine (“UP & Burlington” or the “Mine”) pursuant to Asset Purchase Agreement entered between the Company, its majority shareholder (the “Majority Shareholder”), and its wholly-owned subsidiary, Inception Development Inc. (the “Subsidiary”) on one hand, and Inception Resources LLC on the other hand, dated February 25, 2013(the “Asset Purchase Agreement”). This asset purchase was accounted for at approximately the cost basis of the LLC since the entities were under common control. The property was purchased for consideration of 16,000,000 shares of common stock at par valued at $160, assumption of promissory notes in the amount of $800,000 and $150,000 and the assignment of a 3% net royalty on sales proceeds of smelter output. No value has been given to the royalty and the Company assumed both promissory notes. We are presently in the exploration stage at UP & Burlington. UP & Burlington contains two Federal patented mining claims which Inception Resources acquired for the purpose of the exploration and potential development of gold on the 40 acres which comprises UP & Burlington.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 3 NOTES PAYABLE

On February 25, 2013, the Company, its majority shareholder, and its wholly-owned subsidiary, Inception Development Inc. (the “Subsidiary”), entered into an Asset Purchase Agreement with Inception Resources, LLC, a Utah corporation, pursuant to which the Company purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock valued at $160 (valued at par value of $0.00001 because of the entities being under common control), the assumption of promissory notes in the amount of $800,000 and $150,000 and the assignment of a 3% net royalty. The Asset Purchase Agreement closed on February 25, 2013. As of January 31, 2014, the outstanding balances on these notes were $630,000 and $39,000, respectively (See Note 7). On November 1, 2013, one of the notes was renegotiated with the note holder. The original note was restructured and treated as an extinguishment and as such is now convertible into shares of the Company’s common stock at $0.45 per share. All the other points of the note remained the same. A beneficial conversion feature on the new note was recorded for $630,000. During the three months ended January 31, 2014, $349,157 of the beneficial conversion feature was amortized as interest expense.

NOTE 4 ADVANCES, RELATED PARTY

During the year ended July 31, 2013 and up through the period ended January 31, 2014, a stockholder loaned or paid expenses on behalf of the Company including accrued interest amounts totaling $178,831 and $259,758, respectively. Pursuant to the terms of the advances, the advances are unsecured and due on demand and bear interest at a rate of 15% per annum (See Note 7). During the three and six months ended January 31, 2014, $9,523 and $18,711, respectively, in interest expense was recognized.

NOTE 5 LOANS PAYABLE – RELATED PARTY

During the period ended October 31, 2007 the Company received $3,100 from a principal stockholder. Pursuant to the terms of the loan, the loan bears interest at 8%, is unsecured and matured on July 31, 2008. The Company repaid the $3,100 of a stockholder loan and $60 of accrued interest on July 31, 2008 (See Note 7).

On various dates from 2008 through 2010, the Company received $24,283 from a principal stockholder. Pursuant to the terms of the loan, the loans were non-interest bearing, were unsecured and due on demand. During the year ended July 31, 2010, the principal stockholder forgave $24,262 and this was recorded by the Company as contributed capital (See Note 6(G) and 7).

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 5 LOANS PAYABLE – RELATED PARTY (CONTINUED)

During the year ended July 31, 2010, the principal stockholder loaned the Company $41,915 to pay Company expenses and was repaid $39,274 during the year. There was $2,641 owed to the principal stockholder as of July 31, 2010 (See Note 7). Pursuant to the terms of the loan, the loans are non-interest bearing, unsecured and due on demand. The Company repaid the $2,641 to the principal stockholder during the year ended July 31, 2011.

During the year ended July 31, 2011, the principal stockholder loaned the Company $23,484 to pay Company expenses and was repaid $21,240 during the year. Pursuant to the terms of the loan, the loans are non-interest bearing, unsecured and due on demand (See Note 7).

During the year ended July 31, 2012, the principal stockholder loaned the Company $64,408 to pay Company expenses. Pursuant to the terms of the loan, the loans are non-interest bearing, unsecured and due on demand (See Note 7).

For the year ended July 31, 2013, a related party paid expenses of $5,000 on behalf of the Company in exchange for a non-interest bearing unsecured loan. As of January 31, 2013 the loan was forgiven and recorded as contributed capital (See Note 6(H)).

During year ended July 31, 2013, the former controlling stockholders (prior to the Purchase Agreement) forgave the two loans payable listed below of $64,408 and $2,244. This was recorded by the Company as contributed capital (See Notes 6(H) and 7), no gain or loss was recognized.

NOTE 6 STOCKHOLDERS’ EQUITY (DEFICIT)

(A) Common Stock Issued for Cash

On July 24, 2007, the Company issued 1,250,000 shares of common stock for $50 ($0.00004/share).

For the year ending July 31, 2008 the Company entered into stock purchase agreements to issue 202,621 shares of common stock for cash of $80,000 ($0.4000 per share).

On April 30, 2010, the Company issued 1,667 shares of common stock for $200,000 ($120/share).

On June 1, 2010, the Company issued 1,364 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 of a share of common stock (682 warrants) for a total of $300,000 ($220/share). Each warrant is exercisable for a two year period and has an exercise price of $330 per share. As of July 31, 2012, none of the warrants had been exercised and they are expired.

On August 16, 2010, the Company issued 1,875 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 shares of common stock (937 warrants) for a total of $300,000 ($160/share). Each warrant is exercisable for a two year period and has an exercise price of $240 per share. As of July 31, 2012, none of the warrants had been exercised.

On September 24, 2010, the Company issued 2,667 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 shares of common stock (1,334 warrants) for a total of $400,000 ($150/share). Each warrant is exercisable for a two year period and has an exercise price of $226 per share. As of July 31, 2012, none of the warrants had been exercised.

On January 25, 2011, the Company issued 4,000 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 shares of common stock (2,000 warrants) for a total of $200,000 ($50/share). Each warrant is exercisable for a two year period and has an exercise price of $76 per share. As of July 31, 2012, none of the warrants had been exercised.

On August 5, 2013, the Company issued 224,500 shares of common stock and 112,250 common stock purchase warrants for an aggregate consideration of $101,025 in cash. The cash for these shares and warrants was received prior to July 31, 2013 and had been recorded as common stock subscribed.

During the six months ended January 31, 2014, the Company issued 257,555 shares of common stock and 129,445 common stock purchase warrants for an aggregate consideration of $116,500 in cash. 1,332 shares have not yet been issued and $600 remains in common stock subscribed.

(B) In-Kind Contribution

For the year ending July 31, 2007 the shareholder of the Company contributed $1,080 of services on behalf of the Company (See Note 7).

For the year ending July 31, 2008 the shareholder of the Company contributed $5,760 of services on behalf of the Company (See Note 7).

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 6 STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

(B) In-Kind Contribution (Continued)

For the year ended July 31, 2009 the shareholder of the Company contributed $256 of in kind contribution of interest on behalf of the Company (See Note 7).

For the year ended July 31, 2009 the shareholder of the Company contributed $5,760 of services on behalf of the Company (See Note 7).

For the year ended July 31, 2010 the shareholder of the Company contributed $627 of in kind contribution of interest on behalf of the Company (See Note 7).

For the year ended July 31, 2010 the shareholder of the Company contributed $4,320 of services on behalf of the Company (See Note 7).

For the year ended July 31, 2011 the shareholder of the Company contributed $182 of interest on behalf of the Company (See Note 7).

For the year ended July 31, 2012 the shareholder of the Company contributed $3,359 of interest on behalf of the Company (See Note 7).

For the year ended July 31, 2012, the Company recorded $900 of legal fees as an in kind contribution.

For the year ended July 31, 2013, the former shareholder of the Company contributed as capital $4,419 of accrued interest on behalf of the Company (See Note 7).

(C) Amendments to Articles of Incorporation

On July 6, 2007 the Company amended its Articles of Incorporation to decrease the par value to $0.00001 per share from $0.001 par value.

On March 5, 2010 the Company amended its Articles of Incorporation to increase its authorized common stock from 100,000,000 to 500,000,000 and changed its name from Golf Alliance Corporation to Silver America Inc.

On June 23, 2010, the Company amended its Articles of Incorporation to change its name to Gold American Mining Corp.

On May 17, 2013, the Company amended its articles of incorporation to change its name to Inception Mining, Inc.

(D) Return of Common Stock

Immediately prior to the forward split, the Company’s sole member of the board of directors, returned 1,025,000 shares of common stock out of the total of 250,000,000 held by him as an in-kind contribution.

(E) Stock Issued for Mining Rights

On April 28, 2010, the Company issued 2,500 shares of common stock having a fair value of $505,000 ($202/share) in exchange for mining rights (See Note 8).

On April 26, 2010, the Company issued 500 shares of common stock having a fair value of $101,000 ($202/share) in exchange for mining rights (See Note 8).

On June 30, 2010, the Company issued 500 shares of common stock having a fair value of $52,000 ($104/share) in exchange for mining rights (See Note 8).

On October 31, 2010, the Company issued 2,500 shares of common stock having a fair value of $505,000 ($202/share) in exchange for mining rights (See Note 8).

On December 31, 2010, the Company issued 500 shares of common stock having a fair value of $101,000 ($202/share) in exchange for mining rights (See Note 8).

On April 30, 2011 the Company issued 2,500 shares of common stock having a fair value of $505,000 ($202/share) in exchange for mining rights (See Note 8).

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 6 STOCKHOLDERS’ EQUITY (DEFICIT) (CONTINUED)

(E) Stock Issued for Mining Rights (Continued)

On July 31, 2011 the Company issued 2,500 shares of common stock having a fair value of $505,000 ($202/share) in exchange for mining rights (See Note 8).

On February 25, 2013, the Company and its majority shareholder, entered into an Asset Purchase Agreement with Inception Resources, LLC, a Utah corporation, pursuant to which the Company purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock valued at $160 (valued at par value of $0.00001 because of the entities being under common control), the assumption of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. This asset purchase was accounted for at approximately the cost basis of the LLC since the entities were under common control. The property was purchased for consideration of 16,000,000 shares of common stock at par valued at $160, assumption of promissory notes in the amount of $800,000 and $150,000 and the assignment of a 3% net royalty on sales proceeds of smelter output. No value has been given to the royalty and the Company assumed both promissory notes. The Asset Purchase Agreement closed on February 25, 2013 (See Notes 3 and 8).

(F) Stock Issued for Services

On May 7, 2010, the Company issued 188 shares of common stock having a fair value of $48,375 ($258/share) in exchange for consulting services (See Note 8).

On August 1, 2010, the Company issued 188 shares of common stock having a fair value of $35,250 ($188/share) in exchange for consulting services (See Note 8).

On August 23, 2010, the Company issued 50 shares of common stock having a fair value of $8,700 ($174/share) in exchange for consulting services (See Note 8).

On November 1, 2010, the Company issued 187 shares of common stock having a fair value of $30,000 ($160/share) in exchange for consulting services (See Note 8).

On January 31, 2011 the Company issued 50 shares of common stock having a fair value of $2,500 ($50/share) in exchange for consulting services (See Note 8).

On February 1, 2011 the Company issued 188 shares of common stock having a fair value of $9,000 ($48/share) in exchange for consulting services (See Note 8).

On February 1, 2011 the Company issued 50 shares of common stock having a fair value of $2,400 ($48/share) in exchange for consulting services (See Note 8).

On May 1, 2011 the Company issued 50 shares of common stock having a fair value of $1,100 ($22/share) in exchange for consulting services (See Note 8).

On February 25, 2013 the Company issued 600,000 shares of common stock having a fair value of $18,000 ($0.03/share) in exchange for legal services. This transaction was recorded as a prepaid legal fee and expensed over the ensuing twelve months. (See Note 8).

On February 25, 2013, the Company entered into two retainer agreements with two law firms in exchange for legal services pursuant to which the law firms were issued an aggregate of 600,000 shares of common stock of the Company in consideration of legal services. This transaction was recorded as prepaid legal fees and expensed over the ensuing twelve months.

On February 25, 2013 the Company issued 765,094 shares of common stock in exchange for various consulting services. These transactions were expensed upon closing of the asset purchase agreement.

On February 25, 2013 the Company issued 1,400,000 shares of common stock in exchange for various consulting services. These transactions were recorded as prepaid consulting fees and will be amortized over the next 12 months.

At the time of entering into the consulting contracts for stock issued on February 25, 2013, there was no readily determinable market for the stock. As a result, the values assigned to the contracts were based upon the negotiated value of legal services pursuant to a retainer agreement that was executed at the same time as these contracts.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 6 STOCKHOLDERS’ DEFICIT (CONTINUED)

(F) Stock Issued for Services (Continued)

On October 30, 2013, the Company entered into a retainer agreement with a law firm in exchange for legal services pursuant to which the law firm was issued an aggregate of 211,111 shares of common stock of the Company in consideration of legal services valued at $242,778. This transaction satisfied accounts payable of $80,000 with $15,000 recorded as prepaid legal fees and. The prepaid legal fees were expensed during the first half of the six months ended January 31, 2014 and a loss on settlement of accounts payable was recognized of $147,778.

On November 5, 2013 the Company entered into a consulting services agreement with an individual in exchange for 20,000 shares of common stock. These services were valued at $24,000 based on the quoted market price of the stock on that day. The company has recorded consulting expenses of $24,000. These shares have yet to be issued.

On January 31, 2014, the Company entered into a consulting services agreement with an individual in exchange for 50,000 shares of common stock for services to be rendered over the next 12 months. These services were valued at $25,500 based on the quoted market price of the stock on that day. These shares have yet to be issued.

(G) Cash contributed on Company’s behalf

During the year ended July 31, 2010, the principal stockholder forgave loans of $24,262 and this was recorded by the Company as contributed capital (See Note 5 and 7).

(H) Expenses paid on Company’s behalf

During the year ended July 31, 2010, the principal stockholder paid $60,871 of expenses on the Company’s behalf, which was recorded as an in kind contribution of capital (See Note 7).

On February 25, 2013 the Company’s former President converted $25,000 of the note payable owed into 1,000,000 shares of common stock at $0.025 per share (See Notes 4 and 7).

During the year ended July 31, 2013, the former controlling stockholders (prior to the Purchase Agreement) paid $18,582 of accounts payable and forgave a related party note and loan payable of $91,652 and a former director forgave accounts payable of $67,500., The $177,734 was recorded as an in kind contribution of capital (See Notes 4, 5 and 7).

(I ) Stock Split

On March 5, 2010, the Company implemented a 50 for 1 forward stock split. Upon effectiveness of the stock split, each shareholder received 50 shares of common stock for every share of common stock owned as of March 5, 2010. All share and per share references have been retroactively adjusted to reflect this 50 to 1 forward stock split in the financial statements and in the notes to financial statements for all periods presented, to reflect the stock split as if it occurred on the first day of the first period presented.

On November 21, 2012, the Company implemented a 200 to 1 reverse stock split. Upon effectiveness of the stock split, each shareholder canceled 200 shares of common stock for every share of common stock owned as of November 21, 2012. This reverse stock split was effective on February 13, 2013. All share and per share references have been retroactively adjusted to reflect this 200 to 1 reverse stock split in the financial statements and in the notes to financial statements for all periods presented, to reflect the stock split as if it occurred on the first day of the first period presented.

(J) Warrants Issued for Cash

The following tables summarize all warrant grants for the six months ended January 31, 2014 and the year ended July 31, 2013 and the related changes during this period are presented below:

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 7 RELATED PARTY TRANSACTIONS

During the period ended October 31, 2007 the Company received $3,100 from a principal stockholder. Pursuant to the terms of the loan, the loan bears interest at 8%, is unsecured and matures on July 31, 2008. At October 31, 2007, the Company had recorded $60 of related accrued interest payable. The Company repaid $3,100 of a stockholder loan and $60 of accrued interest as of July 31, 2008 (See Note 5).

For the year ending July 31, 2007 the shareholder of the Company contributed $1,080 of services on behalf of the Company (See Note 6(B)).

For the year ending July 31, 2008 the shareholder of the Company contributed $5,760 of services on behalf of the Company (See Note 6(B)).

For the year ended July 31, 2009, the shareholder of the Company contributed $256 of in kind contribution of interest on behalf of the Company (See Note 6(B).

For the year ended July 31, 2009, the shareholder of the Company contributed $5,760 of services on behalf of the Company (See Note 6(B)).

During the year ended July 31, 2010, the principal stockholder paid $60,871 of expenses on Company’s behalf, which was recorded as an in kind contribution of capital (See Note 6(H)).

For the year ended July 31, 2010, the shareholder of the Company contributed $627 of in kind contribution of interest on behalf of the Company (See Note 6(B)).

For the year ended July 31, 2010, the shareholder of the Company contributed $4,320 of services on behalf of the Company (See Note 6(B)).

During the year ended July 31, 2010, the principal stockholder loaned the Company $41,915 to pay Company expenses and was repaid $ 39,274 during the year. There was $2,641 owed to the principal stockholder as of July 31, 2010 (See Note 5). Pursuant to the terms of the loan, the loans are non-interest bearing, unsecured and due on demand. The Company repaid the $2,641 to the principal stockholder during the year ended July 31, 2011.

During the year ended July 31, 2011, the principal stockholder loaned the Company $23,484 to pay Company expenses and was repaid $21,240 during the year ended July 31, 2011. Pursuant to the terms of the loan, the loans are non-interest bearing, unsecured and due on demand. As of July 31, 2011 the outstanding balance of the loans was $20,744. The Company has imputed an interest rate of 6% per annum upon the loans. Accordingly, interest expense and an in-kind contribution to additional paid in capital of $182 was recorded as of and for the year ended July 31, 2011 (See Note 5 and 6(B)).

On various dates from 2008 through 2010, the Company received $24,283 from a principal stockholder. Pursuant to the terms of the loan, the loans were non-interest bearing, were unsecured and due on demand. During the year ended July 31, 2010, the principal stockholder forgave $24,262 and this was recorded by the Company as contributed capital (See Note 5 and 6(G)).

During the year ended July 31, 2010, the Company paid $22,500 to its President for consulting services.

During the year ended July 31, 2011, the Company paid $52,500 and accrued $37,500 to its President for consulting services.

For the year ended July 31, 2011 a shareholder of the Company contributed $182 of interest on behalf of the Company (See Note 6(B)).

On October 10, 2011, the Company executed an unsecured, non-interest bearing, due on demand promissory note payable to its principal stockholder in the amount of $20,000 encompassing the $18,500 loaned to the Company during the year ended July 31, 2011 and an additional $1,500 loaned on August 22, 2011. Pursuant to the terms of the note, the loans are non-interest bearing, unsecured and due on demand (See Note 3).

During the year ended July 31, 2012, the Company paid $0 and accrued an additional $22,500 to its President for consulting services. The total amount owed to the President for consulting services is $67,500 as of July 31, 2012.

During the year ended July 31, 2012, the principal stockholder loaned the Company $64,408 to pay Company expenses. Pursuant to the terms of the loan, the loans are non-interest bearing, unsecured and due on demand (See Note 5).

For the year ended July 31, 2012 the shareholder of the Company contributed $3,359 of interest on behalf of the Company (See Note 6(B)).

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 7 RELATED PARTY TRANSACTIONS (CONTINUED)

On February 25, 2013, the Company and its subsidiary, entered into an Asset Purchase Agreement with Inception Resources, LLC, a Utah corporation, pursuant to which Gold American purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock valued at $160 (valued at par value of $0.00001 because of the entities being under common control), the assumption of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. Inception Resources, LLC was an entity owned by and under the control of the majority shareholder. This asset purchase was recorded at approximate historical costs of Inception Resources because it was a transaction between entities under common control. The Asset Purchase Agreement closed on February 25, 2013 (See Notes 3 and 6(E) and 8).

For the year ended July 31, 2013, the majority shareholder of the Company forgave $4,419 of accrued interest on behalf of the Company, which was recorded as in kind contributed capital (See Note 6(B)).

During the year ended July 31, 2013, the principal stockholder loaned the Company $27,447 to pay Company expenses. Pursuant to the terms of the loan, the loan bore interest of 9%, unsecured and matured on September 25, 2013 (See Note 3). As of January 31, 2013 the controlling stockholder forgave $2,447 in loans and $798 in accrued interest. This was recorded by the Company as contributed capital. On February 25, 2013, the remaining $25,000 was converted to 1,000,000 shares of common stock at $0.025 per share, the value of the loan (See Notes 6(H)).

During the year ended July 31, 2013, the former controlling stockholders (prior to the Purchase Agreement) paid $18,582 of accounts payable and forgave a related party note and loan payable of $91,652 and account payable of $67,500 on the Company’s behalf. The $177,734 was recorded as an in kind contribution of capital (See Notes 4, 5 and 6(H)).

During the year ended July 31, 2013 and through the period ended January 31, 2014, a stockholder loaned the Company $259,758 to pay Company expenses. Pursuant to the terms of the loan, the loan bears interest at 15%, unsecured and due on demand (See Note 4). As of January 31, 2014 the outstanding balance was $259,758 and $17,926 in accrued interest.

NOTE 8 AGREEMENTS AND COMMITMENTS

Share Issuance Agreement

On May 7, 2010 the Company entered into a share issuance agreement with a non-related party for share subscriptions up to $7,500,000. The subscriber made available to the Company by way of advances up to $7,500,000 until December 31, 2011. This agreement expired on December 31, 2011 and it was not extended. Upon receipt of the advances, the Company issued units of the Company at a price equal to 90% of volume weighted average closing price of the Company (ticket symbol “IMII.OB”) during the 10 previous trading days according to http://www.nasdaq.com. Each unit consists of one common share of the Company and one half share purchase warrant. Each whole warrant may be exercised within two years of the date of issuance to the purchaser at a price equal to 150% of subscription price. On July 31, 2010 the Company issued 1,364 shares of common stock for cash of $300,000 ($220/share) and 682 warrants at $330 per unit. On September 24, 2010, the Company issued 2,667 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 shares of common stock for a total of $400,000 ($150/share).

Each warrant was exercisable for a two year period and has an exercise price of $226 per share. On August 16, 2010, the Company issued 1,875 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 shares of common stock for a total of $300,000 ($160/share). Each warrant was exercisable for a two year period and has an exercise price of $240 per share. On January 25, 2011, the Company issued 4,000 units, each unit consisted of 1 share of common stock and a warrant to purchase 0.5 shares of common stock (2,000 warrants) for a total of $200,000 ($50/share). Each warrant is exercisable for a two year period and has an exercise price of $76 per share (See Note 6(A) and 6(J)). None of the aforementioned warrants had been exercised as of January 31, 2013 and the 4,271 warrants expired.

Yale Resources Ltd.

On March 5, 2010, the Company and Yale Resources Ltd. (“Yale”) (collectively referred to below as the “Parties”), entered into a Binding Letter of Intent (“LOI”) whereby the Parties agreed to a transaction in which Yale will grant the Company an option to acquire a 90% undivided interest in an approximately 282.83 hectare property located in Zacatcas State, Mexico (the “Property”). The Company entered into a definitive agreement on April 26, 2010. A brief description of the material terms and conditions of the option contemplated by the agreement is set forth below.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 8 AGREEMENTS AND COMMITMENTS (CONTINUED)

To exercise the option the Company was to pay cash to Yale, issue restricted common shares of Company stock to Yale, and fund exploration and development expenditures on the Property. The cash payments contemplated under the agreement totaled $900,000 and are to be distributed in installments from the date of the LOI through December 30, 2013. The number of Company shares that were to be issued to Yale total 5,000 and to be distributed in installments from the date of the definitive agreement through December 30, 2013. The Company was also obligated to fund a total of $2,000,000 worth of exploration and development on the Property beginning June 30, 2011 and continuing through December 30, 2013, according the following schedule:

Upon the execution and exercise of the option, Yale was to transfer a 90% undivided interest in the property to the Company. Effective February 21, 2012 the option agreement was terminated and no additional payments are due.

Optionor Mineral Property Option Agreement - Nevada

On April 28, 2010, the Company and four individuals collectively referred to as the “Optionor” entered into a mineral property option agreement. The Company acquired an option to acquire an option to acquire 72% interest in an approximately 245 acres property located in Clark County, Nevada (the “Property’). To exercise the option the Company was to pay cash, issue common shares of the Company’s stock and fund exploration and development expenditures on the Property. The cash payments contemplated in the agreement totaled $272,000 and are distributed in installments from the date of the agreement through June 30, 2010. The number of Company’s shares to be issued totaled 10,000 and are to be distributed in installments from the date of the agreement through January 31, 2012. The Company was also obligated to fund a minimum of $750,000 and at the Company’s sole discretion up to $1,000,000 worth of exploration and development on the Property beginning April 30, 2011 and continuing through July 31, 2012. As of July 31, 2011, the Company issued 7,500 shares of common stock having a fair value of $1,515,000 (See Note 6(E)) and paid $272,000 in cash payment. As part of the $750,000 work commitment, the Company was to provide $400,000 on or before April 30, 2011 and $350,000 on or before July 31, 2012. Finally, the Company was to issue 2,500 shares on January 31, 2012.

The Company incurred $0 in expenditures during the year ended July 31, 2011, therefore the agreement went into default and terminated as of July 31, 2011. Therefore, the Company issued the final 2,500 shares of common stock having a fair value of $505,000 as of July 31, 2011 (See Note 6(E)).

May 2010 Consulting Agreement

On May 7, 2010, the Company entered into a consulting agreement with an unrelated third party to provide consulting services in exchange for $7,500 per month and 188 share of Common Stock for every three months while the agreement remains in place. Effective February 1, 2011, the consulting services fee was reduced to $1,500 per month. For the year ended July 31, 2010 the Company issued 188 shares of common stock with a fair value of $48,375 and paid $22,500 in consulting fees. For the year ended July 31, 2011, the Company issued 563 shares of common stock with a fair value of $74,250 and paid $49,500 in consulting fees (See Note 6(F)). This agreement was terminated in April 2011.

Optionor Mineral Property Option Agreement – Mexico

On August 4, 2010, the Company and three individuals collectively referred to as the “Optionor” entered into a mineral property option agreement. The Company acquired a 100% interest in an approximately 178 acres property located in Opodepe Municipality, Sonara Sate, Mexico. To exercise the option the Company was to pay cash and fund exploration and development expenditures on the Property. The cash payments contemplated in the agreement totaled $765,000 and were to be distributed in installments from the date of the agreement through December 31, 2012. Upon the execution of the agreement the Company paid $40,000 on August 23, 2010. In addition to the payments the Company was to pay a 1% royalty as a result of the exploitation activities or a $500,000 lump sum payment upon the Company’s discretion. Effective December 22, 2010 the agreement has been terminated and no additional payments are due.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 8 AGREEMENTS AND COMMITMENTS (CONTINUED)

August 2010 Consulting Agreement

On August 23, 2010 the Company signed a consulting agreement with an unrelated party in exchange for $1,000 per month and 50 shares of common stock every three months. For the year ended July 31, 2011 the Company issued 200 shares of common stock with a fair value of $14,700 and incurred $11,000 in consulting fees (See Note 6(F)). This agreement was terminated as of August 1, 2011.

U.P. and Burlington Gold Mine Asset Purchase Agreement

On February 25, 2013, the Company and its majority shareholder, entered into an Asset Purchase Agreement with Inception Resources, LLC, a Utah corporation, pursuant to which Gold American purchased the U.P. and Burlington Gold Mine in consideration of 16,000,000 shares of common stock valued at $160 (valued at par value of $0.00001 because of the entities being under common control), the assumption of promissory notes in the amount of $950,000 and the assignment of a 3% net royalty. The Asset Purchase Agreement closed on February 25, 2013 (See Notes 3 and 6(E)).

Employment Agreements

On February 25, 2013, the Company entered into an employment agreement with Michael Ahlin pursuant to which he was appointed as the Chief Executive Officer, President, Treasurer, Secretary and Director of the Company. Under the terms of his employment agreement, Mr. Ahlin will become eligible to receive an annual salary, bonus and stock option upon the Company achieving positive EBITDA in two consecutive quarters as reflected in its filings with the Securities and Exchange Commission (“SEC”).

On February 25, 2013, the Company entered into an employment agreement with Whit Cluff pursuant to which he was appointed as the Chief Financial Officer and Director of the Company. Under the terms of his employment agreement, Mr. Cluff will become eligible to receive an annual salary, bonus and stock option upon the Company achieving positive EBITDA in two consecutive quarters as reflected in its filings with the SEC.

On February 25, 2013, the Company entered into an employment agreement with Brian Brewer pursuant to which he was appointed as the Chief Operating Officer and Director of the Company. Under the terms of his employment agreement, Mr. Brewer will become eligible to receive an annual salary, bonus and stock option upon the Company achieving positive EBITDA in two consecutive quarters as reflected in its filings with the SEC.

Crawford Agreement

On August 30, 2013, the Company entered into an Agreement (the “Crawford Agreement”) with Crawford Cattle Company LLC (“Crawford”), a Nevada limited liability company, pursuant to which the Company was to acquire from Crawford certain mineral rights including the right to extract gold, silver and other minerals, but excluding oil, gas and coal (the “Mineral Rights”) contained in approximately 16,183 acres located in Humboldt and Elko Counties, Nevada (the “Mineral Properties”). Crawford advised that it owns a portion of the Mineral Properties and was in the process of acquiring the balance of the Mineral Properties.

Inception Mining, Inc. (formerly known as Gold American Mining Corp. and Subsidiary)
(An Exploration Stage Company)
Notes to Condensed Consolidated Financial Statements
As of January 31, 2014

NOTE 8 AGREEMENTS AND COMMITMENTS (CONTINUED)

Crawford Agreement (continued)

Under the terms of the Crawford Agreement, Crawford granted the Company an exclusive, three month evaluation period in order to perform due diligence on the Mineral Properties. The Crawford Agreement has expired and the parties are presently in discussions to amend the Crawford Agreement of which there is no guarantee. In the event the Company elects to purchase the Mineral Rights from Crawford after amending the Crawford Agreement, the Company would purchase the Mineral Rights for a to-be-determined purchase price to be paid to Crawford in the form of shares of restricted common stock of the Company at a to-be determined per share price.

Barwicki Investor Relations Agreement

On September 26, 2013,the Company entered into a Letter of Agreement with Andrew Barwicki Incorporated (“Barwicki”), pursuant to which Barwicki was retained for the purposes of providing investor relations services in consideration of $3,100 per month and 15,000 shares of common stock of the Company.

Rick Thurman Consulting Agreement

On November 5, 2013, the Company entered into an Advisory Agreement with Rick Thurman pursuant to which Mr. Thurman was issued 20,000 shares of common stock of the Company in consideration of corporate advisory services.

David Rees Agreement

On January 31, 2014, the Company entered into a Consulting Agreement with David Rees pursuant to which Mr. Rees will receive 50,000 shares of common stock of the Company, which such shares have been registered on a Registration Statement File No. 333-191244 in consideration of providing general corporate advisory and M&A services.

Chienn Consulting Agreement

On January 31, 2014, the Company entered into a Consulting Agreement with Chienn Consulting Company, LLC (“Chienn”) pursuant to which Chienn will receive 100,000 shares of restricted common stock of the Company in consideration of providing marketing, sales and business development services.

NOTE 9 CONCENTRATION OF RISK

Financial instruments that potentially subject the Company to credit risk consist principally of cash. The cash balance identified in the balance sheet is held in an account with a financial institution and insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At times, cash maintained on deposit may be in excess of FDIC limits. Cash may also be maintained at commercial financial institutions which are not insured by the FDIC.

NOTE 10 SUBSEQUENT EVENTS

Subscription Agreements

During February 2014, the Company entered into subscription agreements with various investors (the “2014 Investors”) pursuant to which the 2014 Investors purchased an aggregate of 71,111 shares of the Company’s common stock (the “2014 Subscription Shares”) for an aggregate purchase price of $32,000, together with common stock purchase warrants to acquire 35,555 shares of common stock at $0.90 per share for a period of three years (the “2014 Warrants” and together with the 2014 Subscription Shares, the “2014 Securities”).

Consulting Agreement

Effective January 1, 2014, the Company entered into a Consulting Agreement with Trent D’Ambrosio pursuant to which Mr. D’Ambrosio receives fees of $18,000 per month (the “Fees”) in consideration of financial consulting, business development and general corporate advisory services. The Fees will accrue until the Company closes on a minimum of $250,000 in equity financing (the “Funding”). After closing the Funding (the “Closing”), the aggregate outstanding accrued Fees shall be paid to Mr. D’Ambrosio within five (5) days of Closing and the Fees shall be paid to Mr. D’Ambrosio on a monthly basis within five (5) business days of the end of every month.

ICONIC Note Purchase Agreement

On February 18, 2014, the Company entered into a Note Purchase Agreement with Iconic Holdings, LLC (“Iconic”), for the sale of an 10% convertible promissory note in the principal amount of $220,000 with an original issue discount of $20,000 (the “Note”). The initial purchase price under the Note was $55,000 (the “Initial Closing Amount”) which closed on February 28, 2014. $5,000 (the “Fee”) of the Initial Closing Amount was retained by Iconic through an original issue discount for due diligence and legal bills related to the transaction.

The Note bears interest at the rate of 10% per annum. All interest and principal must be repaid on February 18, 2015. The Note is convertible into common stock, at Iconic’s option and will be equal to the lower of $0.45 or 60% of the lowest three daily VWAPs (Volume Weighted Average Price) of the Company’s common stock during the 20 consecutive trading days prior to the date on which Iconic elects to convert all or part of the Note. If the Company is placed on “chilled” status with the Depository Trust Company, the discount will be increased by 10% until such chill is remedied. The Note may not be prepaid in whole or in part by the Company.

Iconic has agreed to restrict its ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock of the Company. Additionally, Iconic may not convert more than $15,000 in principal and/or accrued interest during any three week period. The total net proceeds the Company received from this Offering was $55,000, less the Fee. As of the date of the Note, the Company is obligated on the Note issued to Iconic in connection with the offering. The Note is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

The Company claims an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Act”) for the private placement of these securities pursuant to Section 4(2) of the Act and/or Regulation D promulgated there under since, among other things, the transaction did not involve a public offering, Iconic is an accredited investor, Iconic had access to information about the Company and their investment, Iconic took the securities for investment and not resale, and the Company took appropriate measures to restrict the transfer of the securities.

Effective February 25, 2014, the Company entered into a consulting agreement with Cody Corrubia, pursuant to which he was issued 100,000 shares of restricted common stock of the Company in consideration of corporate advisory services.

Effective February 25, 2014, the Company entered into a consulting agreement with Anna Rancher Corp., pursuant to which it was issued 50,000 shares of restricted common stock of the Company in consideration of corporate advisory services.

ITEM 2. 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 (Plan of Operation)

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 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 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

Three-months ended January 31, 2014 compared to the three-months ended January 31, 2013

We had a net loss of $525,367 for the three-months ended January 31, 2014, and a net loss of $16,297 for the three-months ended January 31, 2013. This change in our results over the two periods is primarily the result of the new professional and consulting agreements classified as general and administrative expenses entered into during the quarter ended January 31, 2014 as well as the increase in exploration costs, a loss on settlement of accounts payable and the change in the debt discount which is included in other Income/Expense. The following table summarizes key items of comparison and their related increase (decrease) for the three-months ended January 31, 2014 and 2013:

The Company had no revenues in both periods.

Six-months ended January 31, 2014 compared to the six-months ended January 31, 2013

We had a net loss of $755,462 for the six-months ended January 31, 2014, and a net loss of $51,471 for the six-months ended January 31, 2013. This change in our results over the two periods is primarily the result of the new professional and consulting agreements classified as general and administrative expenses entered into during the six months ended January 31, 2014 as well as the increase in exploration costs, a loss on settlement of accounts payable and the change in the debt discount which is included in other Income/Expense. The following table summarizes key items of comparison and their related increase (decrease) for the six-months ended January 31, 2014 and 2013:

The Company had no revenues in both periods.

Liquidity and Capital Resources

Our balance sheet as of January 31, 2014 reflects assets of $958,293. We had cash in the amount of $5,256 and working capital deficit in the amount of $405,833 as of January 31, 2014. Thus, we do not have sufficient working capital to enable us to carry out our stated plan of operation for the next twelve months. We will need to raise approximately $2,000,000 in order to fully implement our business plan.

Working Capital

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 is in the exploration stage with no revenue generating operations and has a net loss since inception of $5,184,150 and used cash in operations of $1,864,977 from inception. In addition, there is working capital deficit of $724,990 as of January 31, 2014. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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.

Operating Activities

Net cash flow used in operating activities during the six-months ended January 31, 2014 was $102,296 an increase of $48,273 from the $54,023 net cash outflow during the six-months ended January 31, 2013. This increase in the cash used in operating activities was primarily due to the change in prepaid and other current assets, accounts payable and accrued expenses and accrued interest.

Financing Activities

Financing activities during the six-months ended January 31, 2014 provided $76,427, an increase of $25,330 from the $51,097 provided by financing activities during the six-months ended January 31, 2013. During the six-months ended January 31, 2014, the company received $80,297 in advances from related parties and $116,500 towards the purchase of common stock. The Company also made $121,000 in payments on notes payable.

We are currently seeking up to $2,000,000 in equity financing in order to fully implement our business plan.

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 January 31, 2014, none of our properties have proven reserves.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to include disclosure under this item.

ITEM 4. 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 January 31, 2014.

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.

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 Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

ITEM 1A. RISK FACTORS

As a smaller reporting company, we are not required to include disclosure under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On August 5, 2013, the Company issued 224,500 shares of common stock and 112,250 common stock purchase warrants for an aggregate consideration of $101,025 in cash. The cash for these shares and warrants was received prior to July 31, 2013 and had been recorded as common stock subscribed.

During January 2014, the Company issued 258,887 shares of common stock and 129,445 common stock purchase warrants for an aggregate consideration of $116,500 in cash.

During February 2014, the Company entered into subscription agreements with various investors (the “2014 Investors”) pursuant to which the 2014 Investors purchased an aggregate of 71,111 shares of the Company’s common stock (the “2014 Subscription Shares”) for an aggregate purchase price of $32,000, together with common stock purchase warrants to acquire 35,555 shares of common stock at $0.90 per share for a period of three years.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

On August 30, 2013, the Company entered into an Agreement (the “Crawford Agreement”) with Crawford Cattle Company LLC (“Crawford”), a Nevada limited liability company, pursuant to which the Company was to acquire from Crawford certain mineral rights including the right to extract gold, silver and other minerals, but excluding oil, gas and coal (the “Mineral Rights”) contained in approximately 16,183 acres located in Humboldt and Elko Counties, Nevada (the “Mineral Properties”). Crawford advised that it owns a portion of the Mineral Properties and was in the process of acquiring the balance of the Mineral Properties.

Under the terms of the Crawford Agreement, Crawford granted the Company an exclusive, three month evaluation period in order to perform due diligence on the Mineral Properties. The Crawford Agreement has expired and the parties are presently in discussions to amend the Crawford Agreement of which there is no guarantee. In the event the Company elects to purchase the Mineral Rights from Crawford after amending the Crawford Agreement, the Company would purchase the Mineral Rights for a to-be-determined purchase price to be paid to Crawford in the form of shares of restricted common stock of the Company at a to-be determined per share price.

ITEM 6. EXHIBITS

SIGNATURES

Pursuant to the requirements 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.