The accompanying notes are an integral part of these financial statements
F-7
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 1 – NATURE OF OPERATIONS
Potash America, Inc. (“the Company” or “PTAM”), was incorporated in the state of Nevada on July 31, 2007. PTAM’s primary focus is the development of fertilizer and agri-business assets. Such assets may include Potash, Montmorillonite, Bentonite and Gypsum. The Company seeks to acquire known deposits whose economic value has recently changed with market pricing levels, and develop these assets into agri-products.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Exploration Stage Company
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to accounting and reporting by exploration stage companies. An exploration stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from.
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars.
Accounting Basis
The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting). The Company has adopted a March 31 fiscal year end.
Reclassifications
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
Financial Instrument
The Company's financial instrument consists of cash, prepaid expenses, deposits, accounts payable and accrued expenses, deferred compensation, accrued interest, convertible line of credit, note payable, and a line of credit due to a related party.
It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where separately disclosed.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Cash and Cash Equivalents
PTAM considers all highly liquid investments with maturities of three months or less to be cash equivalents. At March 31, 2013 and 2012, respectively, the Company had $265 and $69,323 of cash.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
F-8
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Advertising
The Company expenses advertising costs as incurred. As of March 31, 2013 and 2012, respectively, the Company expensed $10,937 and $25,806 in marketing and website development and maintenance of its site.
Mineral Properties Costs
Mineral exploration and development costs are accounted for using the successful efforts method of accounting.
Property acquisition costs - Mineral property acquisition costs are capitalized as mineral exploration properties. Upon achievement of all conditions necessary for reserves to be classified as proved, the associated acquisition costs are reclassified to prove properties
Exploration costs - Geological and geophysical costs and the costs of carrying and retaining undeveloped properties are expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. On April 21, 2011, the Company instituted a Stock Option Plan which allows for the issuance of 3,000,000 shares of common stock to the Company’s management, employees and consultants. As of March 31, 2013, there were 1,375,000 stock options issued.
Recent Accounting Pronouncements
PTAM does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3 – PREPAID EXPENSES
Prepaid expenses consisted of $3,819 of insurance as of March 31, 2013 and will be expensed during the subsequent year. Prepaid expenses of $24,419 consisted of $9,190 of insurance, $15,030 of legal fees and $199 for rent as of March 31, 2012. The amounts were fully expensed during the year ended March 31, 2013.
F-9
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 4 – DEPOSITS
On March 20, 2012, the Company agreed to pay $120,850 for exploration expense requiring a $50,000 deposit upon execution of the contract. Drilling started on June 1, 2012, later than expected, due to the driller’s equipment issues. Drilling ended on June 18, 2012. At that time, the deposit was expensed. The $500 deposit at March 31, 2013 represents a security deposit the Company had paid to rent housing near a mineral property. The deposit will be expensed in the quarter ended June 30, 2013.
NOTE 5 – MINING CLAIMS
On June 6, 2011, the Company entered into and closed a property acquisition agreement with Habitants Minerals Ltd. Pursuant to the terms of the agreement, PTAM acquired an undivided 100% interest in certain unpatented mining claims located in Western Newfoundland, Canada. Pursuant to the terms of the agreement, the Company agreed to provide the following payments to Habitants:
The aggregate consideration of $50,000 consisting of the following:
·
$30,000 which was previously provided to Habitants, and
·
$20,000 which was provided on the closing of the agreement.
An additional payment to continue holding this property was due on June 30, 2013 and the Company decided to abandon this project. The mining claims have been fully impaired as of March 31, 2013.
On August 31, 2011, the Company entered into a purchase and sale agreement with Ms. Kim Diaz and Sonseeahry related to the acquisition of the 100% interest in the Sodaville Claims. Under the terms of the purchase and sale agreement the Company issued a pre-closing advance of $200,000 (paid on August 29, 2011).
As additional consideration the Company will pay compensation as follows:
1.
$200,000 on November 31, 2011 (paid);
2.
$50,000 on July 1, 2012 (paid);
3.
$1,500,000, which will be paid in equal payments of $500,000 on or before January 1st of 2013, 2014 and 2015;
4.
2,500,000 shares of our company’s common stock based on the pro-rata interest in the claims and an additional 500,000 shares to those parties designated by the sellers on or before July 1st of 2012, 2013 and 2014; (1,000,000 shares issued)
The Company also agreed to pay a royalty of $10 per short ton of product produced from the Sodaville Claims and sold by our company.
The Company abandoned this project during the year ended March 31, 2013 and returned all rights back to the seller. As such, the mining claims capitalized as part of this acquisition have been fully impaired as of March 31, 2013.
F-10
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 6 – ACCRUED EXPENSES
Accrued expenses consisted of the following as of March 31, 2013 and 2012:
|
|
|
|
|
2013
|
2012
|
|
Accounting fees
|
$ 2,048
|
$ 0
|
|
Audit fees
|
13,000
|
0
|
|
Legal fees
|
6,536
|
5,588
|
|
Filing fees
|
200
|
173
|
|
Administrative expenses
|
500
|
0
|
|
Total accrued expenses
|
$ 22,284
|
$ 5,761
|
NOTE 7 – CONVERTIBLE LINE OF CREDIT
On April 12, 2012, the Company entered into a $1,000,000 Letter of Credit Agreement dated March 27, 2012. Pursuant to the terms outlined in the Letter of Credit, at any time the Company may require any and all funds outstanding under the Letter of Credit, except for accrued interest which is to be paid in cash, to be converted into units of the Company at a price of $0.80 per unit (the “Unit”). Each Unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at $1.50 for a period of five (5) years. The Company will pay annual interest of 5% until the loan is repaid or converted into Units. The Company will issue up to 1,250,000 Units when the exercise provision is enacted. The Company determined the intrinsic value of the beneficial conversion feature on each draw date by valuing the warrants using the Black-Scholes Option Pricing Model and then allocating the $0.80 conversion price of each unit between the stock and warrants. The warrants were valued using the following assumptions on each draw date: stock price at grant date - $0.23-$0.89, exercise price - $1.50, expected life – 5 years, volatility – 126%-130%, risk-free rate - .70%-.86%. The total intrinsic value of the beneficial conversion feature of the draws was determined to be $302,904 and was amortized in full as of March 31, 2013. The line of credit was drawn to $710,000 as of March 31, 2013. Accrued interest related to the line of credit was $29,179 as of March 31, 2013.
NOTE 8 – NOTE PAYABLE
A former shareholder and director of the Company advanced funds at various times since inception in order to support operations. The loans are unsecured, non-interest bearing and due on demand. The amount due to the former shareholder and director was $35,500 as of March 31, 2013.
NOTE 9 – LINE OF CREDIT – RELATED PARTY
The Company opened a line of credit during the year ended March 31, 2011 in the amount of $200,000. The line of credit is secured by the assets of the company, bears 5% interest and is due on demand.
On June 22, 2011, the Company’s credit line was increased from $200,000 to $1,000,000 under the same terms. The line of credit was drawn to $664,000 as of March 31, 2013. Interest expense related to the line of credit was $51,922 as of March 31, 2013. During the year ended March 31, 2013, control of the Company was acquired by the person who also controls the company that has issued this line of credit.
F-11
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 10 – LINE OF CREDIT
On November 22, 2011, the Company entered into a second Credit Facility Agreement in which the lender agreed to provide the Company with a line of credit in the amount of up to $500,000. Pursuant to the terms of the Credit Facility Agreement, the Company shall pay any outstanding amounts to the lender on demand. The Company may also repay the loan and accrued interest at any time without penalty. Amounts outstanding shall bear interest at the rate of 10% per annum. The line of credit was drawn to $400,000 as of March 31, 2012. During the year ended March 31, 2013, the balance was repaid and the amount due at March 31, 2013 was $0. Accrued interest related to the line of credit was $21,246 as of March 31, 2013 and has not been paid.
NOTE 11 – RELATED PARTY TRANSACTIONS
On November 7, 2011, the Company entered into an employment agreement with Barry Wattenberg, our former president, chief executive officer, chief financial officer, secretary, treasurer and a member of our board of directors. The employment agreement became effective on December 1, 2011.
NOTE 11 – RELATED PARTY TRANSACTIONS (CONTINUED)
Pursuant to the terms of the employment agreement Mr. Wattenberg was receiving a base salary of $10,000 per month, payments of which will accrue, and a key man life insurance policy of $1,000,000 payable half to the Company and half to Mr. Wattenberg’s estate. The Company shall also reimburse all reasonable and necessary business expenses incurred by Mr. Wattenberg in performance of his duties. When established, the company will compensate Mr. Wattenberg with group health insurance benefits and will allow for standard executive benefits such as vacation, holidays, sick leave and the granting of stock options when deemed appropriate by the Company.
The total amounts of $185,500 and $65,500 as of March 31, 2013 and 2012, respectively, have been recorded as deferred compensation.
Barry Wattenberg has concurrently resigned as a director, Chairman, President and Treasurer of the Registrant, effective March 22, 2013.
The Company opened a line of credit during the year ended March 31, 2011 in the amount of $200,000. The line of credit is secured by the assets of the company, bears 5% interest and is due on demand.
On June 22, 2011, the Company’s credit line was increased from $200,000 to $1,000,000 under the same terms. The line of credit was drawn to $664,000 as of March 31, 2013. Interest expense related to the line of credit was $51,922 as of March 31, 2013. During the year ended March 31, 2013, control of the Company was acquired by the person who also controls the company that has issued this line of credit. See Note 9.
NOTE 12 – CAPITAL STOCK
Stock issued
The company has 200,000,000 common shares authorized at a par value of $0.0001 per share.
During the period ended March 31, 2008, the Company issued 80,000,000 common shares to founders for total proceeds of $8,000. Additionally, the Company issued 67,200,000 shares during the period ended March 31, 2008 for total proceeds of $42,000.
On July 9, 2010, a former shareholder and director of the Company agreed to forgive debt in the amount of $14,244. This amount has been recorded as contributed capital.
F-12
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 12 – CAPITAL STOCK (CONTINUED)
Effective September 8, 2010 the Company increased the authorized shares of common stock from 100,000,000 to 200,000,000 and enacted a forward stock split of 80 to 1. All share and per share data has been adjusted to reflect such stock split.
In May 2011 the Company issued 150,000 common shares in lieu of compensation along with stock options.
On November 10, 2011, the Company issued 25,000 shares of common stock as compensation for a finder’s fee related to the Sodaville, Nevada property.
On December 31, 2011, the Company issued an aggregate of 190,000 restricted shares to our directors, advisors and consultants for the Company.
On March 20, 2012, the Company issued an aggregate of 100,000 restricted shares in lieu of compensation along with stock options.
On April 11, 2013, the Company purchased 40,000 shares back from an investor for a total payment of $10,000. The shares were subsequently cancelled and retired on May 2, 2012.
On June 30, 2012, the Company issued 1,000,000 restricted shares of our common stock at a value of $196,000 in connection with the acquisition of mineral properties. (See note 5 for further details).
Stock-based compensation expense related to option grants for the year ended March 31, 2013 was $171,382.
There were 148,625,000 shares of common stock issued and outstanding as of March 31, 2013.
As of March 31, 2013, the Company has no warrants outstanding. There are 1,375,000 stock options outstanding.
Stock options
The Company uses the Black-Scholes Option Pricing Method to value all stock options granted.
In April 2011, the Company issued 600,000 stock options to directors of the Company per the Stock Option Plan with an exercise price of $0.60 per share for a 5 year term.
In May 2011, the Company entered into a consulting agreement which granted a total of 50,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In July 2011, the Company entered into a consulting agreement which granted a total of 75,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In August 2011, the Company entered into a consulting agreement which granted a total of 25,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In October 2011, the Company entered into a consulting agreement which granted a total of 35,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $0.94 per share for a 5 year term.
In November 2011, the Company entered into a consulting agreement which granted a total of 25,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
F-13
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 12 – CAPITAL STOCK (CONTINUED)
In December 2011, the Company granted a total of 115,000 stock options to advisors and consultants. All these stock options are exercisable at $1.00 per share for a 3 year term.
In January 2012, the Company entered into a consulting agreement which granted a total of 35,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $0.92 per share for a 5 year term.
In February 2012, the Company entered into a consulting agreement which granted a total of 25,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In March 2012, the Company entered into two consulting agreements which granted a total of 200,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In April 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
In May 2012, the Company issued 25,000 stock options to consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
In June 2012, the Company issued 25,000 stock options to consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
In July 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.29) per share for a 5 year term.
In October 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.26) per share for a 5 year term.
In January 2013, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.05) per share for a 5 year term.
Stock-based compensation expense for the year ended March 31, 2013 was $171,382.
The following table summarizes information about stock options as of March 31, 2013:
|
|
|
|
|
|
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Outstanding, March 31, 2012
|
|
1,185,000
|
$
|
0.80
|
|
Options granted
|
|
190,000
|
|
0.56
|
|
Options expired
|
|
-
|
|
-
|
|
Options cancelled
|
|
-
|
|
-
|
|
Outstanding, March 31, 2013
|
|
1,375,000
|
$
|
0.76
|
|
Exercisable, March 31, 2013
|
|
1,375,000
|
$
|
0.76
|
F-14
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 12 – CAPITAL STOCK (CONTINUED)
The following table summarizes information about stock options granted to consultants, advisors, investors and board members as of March 31, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options Outstanding
|
|
Stock Options Exercisable
|
|
|
Range of Exercise Prices
|
|
Number Outstanding
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life (in years)
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
.05 to 1.00
|
|
1,375,000
|
$
|
0.76
|
|
3.54
|
|
1,375,000
|
$
|
0.76
|
NOTE 13 – INCOME TAXES
For the year ended March 31, 2013, the Company has incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $3,408,749 at March 31, 2013 and will expire beginning in the year 2028.
The provision for Federal income tax consists of the following for the years ended March 31:
|
|
|
|
|
2013
|
2012
|
|
Federal income tax benefit attributable to:
|
|
|
|
Current operations
|
$ 635,675
|
$ 479,244
|
|
Less: valuation allowance
|
(635,675)
|
(479,244)
|
|
Net provision for Federal income taxes
|
$ 0
|
$ 0
|
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows at March 31:
|
|
|
|
|
2013
|
2012
|
|
Deferred tax asset attributable to:
|
|
|
|
Net operating loss carryover
|
$ 1,158,975
|
$ 523,300
|
|
Less: valuation allowance
|
(1,158,975)
|
(523,300)
|
|
Net deferred tax asset
|
$ 0
|
$ 0
|
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $3,408,749 for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
NOTE 14 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the company will continue as a going concern. The Company has negative working capital, no established source of revenue and significant losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan.
F-15
POTASH AMERICA, INC.
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
MARCH 31, 2013
NOTE 15 – SUBSEQUENT EVENTS
Effective April 22, 2013, Norman Marcus and Alan Brass have each resigned as a director of the Company.
Effective May 15, 2013, Roger Haskins and Peter Shaumberg have each resigned as advisors of the Company. They have both waived their rights for any compensation earned subsequent to March 31, 2013.
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to March 31, 2013 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than those discussed above.
F-16
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
There were no disagreements with our accountants related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and subsequent interim periods.
Item 9A.
Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management evaluated the effectiveness of the design and operation of our disclosure
controls and
procedures as of March 31, 2013.
Our management, with the participation of our president (our principal executive officer, principal financial officer and principal accounting officer), evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on this evaluation, our president has concluded that, as of the end of such period, our disclosure controls and procedures were not effective to ensure that information that is required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our president, as appropriate, to allow timely decisions regarding required disclosure. The reasons for this finding were the weaknesses in our internal control over financial reporting enumerated below.
Management's Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company's principal executive and principal financial officers and effected by the company's board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
·
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
·
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of March 31, 2013, our principal executive officer, principal financial officer and principal accounting officer assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal
15
control over financial reporting established in Internal Control--Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, he concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our principal executive officer and principal financial officer considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our principal executive officer and principal financial officer in connection with the audit of our financial statements as of March 31, 2013.
Our principal executive officer, principal financial officer and principal accounting officer believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, our principal executive officer and principal financial officer believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
This annual report does not include an attestation report of our company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our company's registered public accounting firm pursuant to temporary rules of the SEC that permit our company to provide only the management's report in this annual report.
Management's Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us.
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.
We anticipate that these initiatives will be at least partially, if not fully, implemented by December 31, 2014. Additionally, we plan to test our updated controls and remediate our deficiencies by December 31, 2014.
Changes in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
16
Item 9B.
Other Information
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:
Business Experience
The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our company, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.
Matthew Markin
Matthew Markin has been Chairman, President and a director of our company since March 22, 2013.
Mr. Markin has served as president of The Markin Group of Companies in Los Angeles, California, whereby he consults to large and small businesses in the areas of strategic planning, business development, capital formation, mergers and acquisitions, and related matters. He is currently President, Secretary, Treasurer and Chief Exeuctive Officer of US Tungsten Corp.
Other Directorships
Other than as disclosed above, during the last 5 years, none of our directors held any other directorships in any company with a class of securities registered pursuant to Section 12 of the Exchange Act or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940.
Conflicts of Interest
Our directors are not obligated to commit their full time and attention to our business and, accordingly, they may encounter a conflict of interest in allocating their time between our operations and those of other businesses. In the course of their other business activities, they may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which they owe a fiduciary duty. As a result, they may have conflicts of interest in determining to which entity a particular business opportunity should be presented. They may also in the future become affiliated with entities, engaged in business activities similar to those we intend to conduct.
In general, officers and directors of a corporation are required to present business opportunities to a corporation if:
·
the corporation could financially undertake the opportunity;
17
·
the opportunity is within the corporation’s line of business; and
·
it would not be fair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
1.
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
2.
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
3.
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
4.
been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
5.
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
6.
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
Code of Ethics
Our company's board of directors adopted a Code of Business Conduct and Ethics that applies to, among other persons, members of our board of directors, our company's officers including our president, chief executive officer and chief financial officer, employees, consultants and advisors. As adopted, our Code of Business Conduct and Ethics sets forth written standards that are designed to deter wrongdoing and to promote:
1.
honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
2.
full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the Securities and Exchange Commission and in other public communications made by us;
3.
compliance with applicable governmental laws, rules and regulations;
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4.
the prompt internal reporting of violations of the Code of Business Conduct and Ethics to an appropriate person or persons identified in the Code of Business Conduct and Ethics; and
5.
accountability for adherence to the Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics requires, among other things, that all of our company's Senior Officers commit to timely, accurate and consistent disclosure of information; that they maintain confidential information; and that they act with honesty and integrity.
Our Code of Business Conduct and Ethics was filed with the Securities and Exchange Commission as Exhibit 14.1 to our Current Report on Form 8-K filed on June 17, 2011. We will provide a copy of the Code of Business Conduct and Ethics to any person without charge, upon request. Requests can be sent to: Potash America Inc., 8th Floor, 200 South Virginia Street, Reno, Nevada 89501.
Committees of the Board
All proceedings of our board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the state of Nevada and the bylaws of our company, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
Audit Committee and Charter
Currently our audit committee consists of Matthew Markin, who is not an independent director. We will appoint a two more members to the audit committee when suitable independent directors are appointed to our board of directors.
We have not implemented an audit committee charter. When we do adopt an audit committee charter, we will announce it via the filing of a Current Report on form 8-K.
Nominating Committee and Charter
We currently do not have nominating committee or other committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.
Advisory Board
We have established an advisory board to assist in the exploration, development and commercialization of fertilizer-oriented projects. Our advisory board members are Jeff Adams and James Leonard.
Jeff Adams
: On March 21, 2011, we appointed Jeff Adams as a member of our advisory board. Mr. Adams brings over 30 years experience in the marketing and valuation of mining properties. Canadian-based, Mr. Adams has participated in the company’s prospective acquisition of the Newfoundland Property.
James Leonard
: On March 20, 2012, we appointed James Leonard / Friedman Manger & Co. as a member of our advisory board. James Leonard is currently a consultant to publicly traded companies in the area of legal, accounting and crisis management. Mr. Leonard owned and operated a licensed broker dealership for twenty years and then a venture capital firm for ten years where he had extensive experience in contract negotiations specializing in Chinese and Japanese companies. He served on the Board of Directors of many firms and also held the position of CEO in a public company which he took from Venture Capital to a company with a market valuation in excess of half a billion dollars. As a venture capitalist James Leonard personally financed and oversaw the management of a wide range of enterprises including manufacturing in Asia, injection molding throughout Europe, silver mining in Arizona and gold mining in California.
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Audit Committee and Audit Committee Financial Expert
Our board of directors has determined that none of the members of our audit committee qualifies as an "audit committee financial expert" as defined in Item 407(d)(5)(ii) of Regulation S-K, and is "independent" as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We believe that the members of our audit committee are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or committees performing similar functions nor do we have a written nominating, compensation. Our board of directors does not believe that it is necessary to have such committees because it believes the functions of such committees can be adequately performed by our board of directors.
Item 11.
Executive Compensation
The particulars of the compensation paid to the following persons:
·
our principal executive officer;
·
our principal financial officer;
·
each of our three most highly compensated executive officers who were serving as executive officers at the end of the years ended March 31, 2013 and 2012; and
·
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended March 31, 2013 and 2012,
who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed US$100,000 for the respective fiscal year:
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SUMMARY COMPENSATION TABLE
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|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
|
Option Awards
($)
|
Non-Equity Incentive Plan Compensation
($)
|
Nonqualified Deferred Compensation Earnings
($)
|
All
Other Compensation
($)
|
Total
($)
|
|
Barry Wattenberg
(1)
Former President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director
|
2013
2012
2011
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
u
30,000
23,500
|
Nil
Nil
Nil
|
u
30,000
23,500
|
|
Alan B. Brass
(2)
Former Director
|
2013
2012
2011
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
107,640
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
107,640
|
|
Norman Marcus
(3)
Former Director
|
2012
2011
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
107,640
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
Nil
|
Nil
Nil
107,640
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(1)
Mr. Wattenberg resigned as president, chief executive officer, chief financial officer, secretary, treasurer and director of our company on March 22, 2013.
(2)
Mr. Brass resigned as a director of our company on April 22, 2013.
(3)
Mr. Marcus resigned as a director of our company on April 22, 2013.
Other than as set out below, there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share options may be granted at the discretion of our board of directors.
On November 7, 2011, we entered into an employment agreement with Barry Wattenberg, which became effective on December 1, 2011. Pursuant to the terms of the employment agreement, Mr. Wattenberg was to receive a base salary of $10,000 per month, payments of which will accrue, and a key man life insurance policy of $1,000,000 payable half to our company and half to Mr. Wattenberg’s estate. Our company agreed to reimburse all reasonable and necessary business expenses incurred by Mr. Wattenberg in performance of his duties. This employment agreement terminated upon Mr. Wattenberg’s resignation as a director and officer on March 22
nd
, 2013.
Stock Option Plan
On April 21, 2011, our directors approved the adoption of the 2011 Stock Option Plan which permits our company to issue up to 3,000,000 shares of our common stock to directors, officers, employees and consultants of our company upon the exercise of stock options granted under the 2011 Stock Option Plan.
2011 Grants of Plan-Based Awards
On April 21, 2011, Alan B. Brass and Norman Marcus were granted 300,000 stock options each exercisable at a price of $0.60 per share for a period of five years from the date of grant. The vesting schedule for the stock options is 100,000 options upon execution of the Stock Option Agreement of April 21, 2011; 100,000 options on the first anniversary (April 21, 2012) and 100,000 options on the second anniversary (April 21, 2013). Mr. Brass and Mr. Marcus both resigned as a director of the Company effective April 22, 2013.
Outstanding Equity Awards at Fiscal Year End
The particulars of unexercised options, stock that have not vested and equity incentive plan awards for our named executive officers are set out in the following table:
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Options Awards
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Stock Awards
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Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
Equity
Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration Date
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
|
Market Value
of Shares or
Units of
That Have
Not Vested
($)
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Stock Rights That
Have Not
Vested
(#)
|
Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
($)
|
|
Alan B. Brass
(1)
|
200,000
|
100,000
|
-
|
0.60
|
April 21, 2016
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100,000
|
53,820
|
-
|
-
|
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Norman Marcus
(2)
|
200,000
|
100,000
|
-
|
0.60
|
April 21, 2016
|
100,000
|
53,820
|
-
|
-
|
(1)
Alan B. Brass resigned as a director of our company on April 22, 2013.
(2)
Norman Marcus resigned as a director of our company on April 22, 2013.
Option Exercises and Stock Vested
During our fiscal year ended March 31, 2013, there were no options exercised by our named officers.
Compensation of Directors
Other than as set out below, we do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.
We entered into director association agreements with Mr. Brass and Mr. Marcus on April 21, 2011, pursuant to which Mr. Brass and Mr. Marcus were paid $500 each per board of directors meeting attended they were reimbursed for all reasonable expenses related to their physical attendance at the annual general meeting; in addition to their respective director’s fees. The director association agreements also grant stock options to Mr. Brass and Mr. Marcus as set out above. The term of the agreements was effective April 21, 2011 and terminated upon their resignations as of April 22, 2013.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years, is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
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Family Relationships
There are no family relationships between any of our executive officers or directors.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of June 28, 2013, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
