Abstract: This invention relates to a submerged fermentation process for producing high biomass levels of mushrooms mycelia in liquid media suitable for semi-continuous or continuous mushroom spawn production. The process provides a sterile, log phase inoculum for a solid substrate that, when based on biomass, exceeds normal inoculation levels by several thousand fold mycelia substrate production. The liquid inoculum so produced can be aseptically transferred to bulk sterilizer to inoculate a sterilizer grain or sawdust substrate for commercial mushroom production. The liquid inoculum may also be inoculated directly onto the mushroom compost. This invention further relates to microcapsules used to enhance the fermentation process and the equipment used to conduct such process.