PGRX Prospect Global Resources Inc. (MM)

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As filed with the Securities and Exchange Commission on April 8, 2014

No. 333-191918

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 5 TO

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

1401 17th Street, Suite 1550

Denver, Colorado 80202

(303) 990-8444

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Damon G. Barber

President and Chief Executive Officer

Prospect Global Resources Inc.

1401 17th Street, Suite 1550

Denver, Colorado 80202

Fax:  (303) 990-8444

Email: dbarber@prospectgri.com

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including communications sent to agent for service, should be sent to:

Jeffrey M. Knetsch

Brownstein Hyatt Farber Schreck, LLP

410 Seventeenth Street, Suite 2200

Denver, Colorado 80202

(303) 223-1100

Fax: (303) 223-1111

Email: jknetsch@bhfs.com

Approximate date of commencement of proposed sale to the public:  From time to time after the effectiveness of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

Indicate by check mark 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-2 of the Exchange Act.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

PROSPECTUS

Subject to completion, dated April 8, 2014.

PROSPECT GLOBAL RESOURCES INC.

11,231,654 Shares of Common Stock

This prospectus relates to (a) the issuance by us of up to 109,500 shares of our common stock to the holders of outstanding Series A Warrants issued in a public offering upon exercise of the Series A Warrants, (b) the resale by the selling stockholders of 8,547,658 shares of our common stock issuable to the holders of outstanding Series A Warrants issued in private placements and (c) the resale of 2,574,496 outstanding shares of our common stock that are owned by the selling stockholders identified herein and were acquired in transactions completed prior to the filing of the registration statement of which this prospectus is a part.  The shares underlying all of our outstanding Series A Warrants are being offered by this prospectus.  The Series A Warrants are currently exercisable at $1.50 per share.

The selling stockholders may sell all or a portion of their shares through public or private transactions at prevailing market prices or at privately negotiated prices. Information regarding the selling stockholders and the times and manner in which they may offer and sell the shares under this prospectus is provided under “Selling Stockholders” and “Plan of Distribution” in this prospectus. We have agreed to pay all the costs and expenses of this registration.

We will not receive any proceeds from the resale by the selling stockholders of the 1,832,198 shares of outstanding stock owned by them or the 8,547,658 shares issuable to them upon exercise of their unregistered Series A Warrants.  We may receive proceeds upon exercise of outstanding Series A Warrants, and any proceeds we receive will be used as described under “Use of Proceeds”.

An investment in our securities involves serious risks, including the risk that we are unable to raise sufficient capital to continue funding our operations, service our debt and complete the exploration, development and build out of our Holbrook potash project and continue our listing on The Nasdaq Capital Market. You should read carefully the “Risk Factors” beginning on page 7 of this prospectus.

Trading in our common stock is reported on the OTCQB market under the symbol “PGRX.” On April   , 2014, the last reported sale price of our common stock was $      per share.

Our principal offices are located at 1401 17th Street, Suite 1550, Denver CO 80202 and our telephone number is 303-990-8444.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of the prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is April [    ], 2014

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Forward-looking statements are inherently subject to known and unknown business, economic and other risks and uncertainties that may cause actual results to be materially different from those expressed or implied by our forward-looking statements, including without limitation risks related to:

·             our history of operating losses and expectation of future losses;

·             our ability to develop a mine that is able to commercially produce potash;

·             our ability to obtain sufficient additional capital to satisfy our significant funding requirements;

·             our ability to pay the amounts due on our indebtedness to The Karlsson Group, Inc. and affiliates of Apollo Global Management, LLC;

·             our ability to obtain all necessary permits and other approvals;

·             our ability to complete a definitive feasibility study and achieve our estimated timetables for production at the Holbrook Basin;

·             the accuracy of our mineral resource estimates;

·             our ability to attract and retain key personnel;

·             competition in the mining industry;

·             acquiring additional properties;

·             our potash supply agreement with Sichuan Chemical;

·             the exploration, development and operation of a mine or mine property;

·             title defects on our mineral properties and our ability to obtain additional property rights;

·             our technical report, preliminary economic assessment and interim engineering study being prepared in accordance with foreign standards that differ from the standards generally permitted in reports filed with the SEC;

·             governmental policies and regulation affecting the agricultural industry;

·             increased costs and restrictions on operations due to compliance with environmental legislation and other governmental regulations;

·             the global supply of, and demand for, potash and potash products;

·             the cyclicality of the crop nutrient markets; and

·             global economic conditions.

This list is not exhaustive of the factors that may affect any of our forward-looking statements. Investors are urged to carefully review and consider the various risks and uncertainties and other factors referred to under the heading “Risk Factors” beginning on page 4 of this prospectus. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected. In addition, although we have attempted to identify important risk factors that could cause actual achievements, events or conditions to differ materially from those identified in the forward looking statements, there may be other factors we have not considered, or that we currently deem to be immaterial, that cause achievements, events or conditions not to be as anticipated, estimated or intended.

These forward-looking statements are based on the beliefs, expectation and opinions of management on the date the statements are made. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise

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after the date made, other than as may be required by applicable law or regulation. For the reasons set out above, investors should not place undue reliance on forward-looking statements.

CAUTIONARY NOTE TO INVESTORS REGARDING MINERAL DISCLOSURES

We commissioned a technical report in accordance with the Canadian Securities Administrator’s National Instrument 43-101 “Standards of Disclosure for Mineral Projects,” commonly known as NI 43-101, as well as a preliminary economic assessment, or PEA, an interim engineering study and a pre-feasibility study. The Canadian standards are different from the standards generally permitted in reports filed with the SEC. In accordance with NI 43-101, we historically have reported measured, indicated and inferred resources, measurements which are recognized terms under NI 43-101 but are not recognized by the SEC and are generally not permitted in filings made with the SEC. The term “resource” does not equate to the term “reserve.” Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted. Investors are cautioned not to assume that any part of our resources will ever be converted into economically mineable reserves. In addition, the estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “inferred resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC subject to certain exceptions. The PEA, interim engineering study and pre-feasibility study contain estimates based on our measured, indicated and inferred resources. However, in accordance with both U.S. standards and NI 43-101, estimates of inferred mineral resources cannot form the basis of a feasibility study. We provided the disclosure of resources to provide a means of comparing our projects to those of other companies in the mining industry, many of which are Canadian and report pursuant to NI 43-101. Accordingly, our previously disclosed descriptions of our mineral deposits may not be comparable to similar information made public by other U.S. domestic companies subject to reporting and disclosure requirements under the U.S. federal securities laws and the rules and regulations thereunder. Further, investors should be aware that the issuer has no “reserves” as defined by SEC Industry Guide 7 and are cautioned not to assume that any part or all of the estimated mineral resources will ever be confirmed or converted into SEC Industry Guide 7 compliant “reserves.”

Our Current Report on Form 8-K filed on October 18, 2012 refers to our interim engineering study as a “cost feasibility study.” It is important to note that the interim engineering study is not a preliminary feasibility study or a final definitive or “bankable” feasibility study within the meaning of SEC Industry Guide 7 or NI 43-101. Among other things, the interim engineering study is a preliminary interim study that contains estimates based on inferred resources. As noted above, in accordance with both U.S. standards and NI 43-101, estimates of inferred resources cannot form the basis of a feasibility study. Investors are cautioned not to assume the interim engineering report constitutes a bankable feasibility study.

PROSPECTUS SUMMARY

This summary contains basic information about us and this offering. This summary is not complete and does not contain all the information you should consider before investing in the securities offered hereby. You should read this summary in conjunction with, and the summary is qualified in its entirety by, the more detailed information contained elsewhere in this prospectus, including the information under “Risk Factors” beginning on page 7 of this prospectus and the financial statements and related notes included in this prospectus.

Company Overview

We are engaged in the exploration and development of a potash mine in the Holbrook Basin of eastern Arizona, which we refer to as the Holbrook Project. Potash is primarily used as an agricultural fertilizer due to its high potassium content. Potassium, nitrogen and phosphate are the three primary nutrients essential for plant growth. The Holbrook Project consists of permits and leases on 143 mineral estate sections spanning approximately 88,175 acres in the Holbrook Basin of eastern Arizona, along the southern edge of the Colorado Plateau.

We completed a pre-feasibility study, or PFS, for the Holbrook Project in July 2013. We are currently working toward a definitive feasibility study, or DFS, for the Holbrook Project. We commenced our phase 4 drilling program in August 2013 and completed the program in October 2013.  We believe this drilling program completes the drilling necessary to complete a DFS.

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Recent Developments

Recent Financings

In September 2013 we raised $3.0 million of gross proceeds when the holder of 5,000 of our Series B Warrants exercised those warrants and subsequently holders of 737,000 of our Series B Warrants issued in the June 2013 public offering exchanged their Series B Warrants for Series B-1 Warrants and thereafter exercised their Series B-1 Warrants. The Series B-1 Warrants were identical to the Series B Warrants except that the exercise price was reduced from $6.00 to $4.05 per share and each Series B-1 Warrant was exercisable for one share of common stock and a Series A Warrant to purchase 1.75 shares of common stock (compared to one share of common stock and a Series A Warrant to purchase one share of common stock in the original Series B Warrants). We issued 1,294,750 Series A Warrants upon exercise of the Series B-1 Warrants, 868,461 Series A Warrants pursuant to the full ratchet anti-dilution protection provisions in the Series B-1 Warrants and 781,887 additional five year warrants pursuant to the anti-dilution protection contained in other outstanding warrants.  The exercise price of all warrants issued pursuant to this transaction was $4.05 per share.

In February 2014 raised $1.1 million of gross proceeds when we and each of the holders of 747,298 of our Series A Warrants issued in our June 26, 2013 public offering agreed that we would reduce the exercise price from $4.05 to $1.50 in exchange for these warrants being exercised immediately and the issuance of a new Series A Warrant for each warrant exercised with an exercise price of $1.50, exercisable for five years only upon stockholder approval of the exercise. Each of the participating warrant holders entered into a separate Series A Warrant exercise agreement. Pursuant to the full ratchet anti-dilution terms in the Series A Warrants, the exercise price of our remaining outstanding Series A Warrants was adjusted to $1.50 and we issued an additional 5,467,779 Series A Warrants with an exercise price of $1.50.  As a result of the reduction of the exercise price of the Series A Warrants, the exercise price on the 1,787,171 warrants held by Buffalo Management was reduced from $4.05 to $3.50 and we issued Buffalo Management 280,841 additional warrants with an exercise price of $3.50.

Restructuring of Senior Secured Debt

On April 3, 2014, we entered into a debt restructuring and extension agreement, or Extension Agreement, with The Karlsson Group which further restructured the senior first priority secured promissory note, as amended, that we originally issued to Karlsson on August 1, 2012 in connection with our purchase of Karlsson’s 50% interest in our subsidiary American West Potash LLC. Under the terms of the Extension Agreement, we have agreed to use our best efforts to raise a sufficient aggregate amount to prepay the entire Karlsson Note for an aggregate payment of $15 million, which we refer to as the Discounted Payoff Amount, on or before April 23, 2014.  The current amount we would owe if we do not pay the Discounted Payment Amount by April 23, 2014 is approximately $153.1 million.  In connection with the Extension Agreement:

·                   upon payment of the Discounted Payoff Amount, the Karlsson Note will be deemed paid in full, and the Karlsson Group will release its first priority lien over our assets;

·                   The Karlsson Group will retain its 2% royalty interest in us following payment of the Discounted Payoff Amount and will receive an additional 1% royalty interest increasing their royalty interest to 3%;

·                   our first tax gross up payment is due on April 23, 2014 and such payment will count towards the aggregate $15 million Discounted Payoff Amount;

·                   if we do not pay the Discounted Payoff Amount on or before April 23, 2014, we will be in default under the pre-Extension Agreement Karlsson Note without the contractual right to cure such default, which would allow the Karlsson Group to foreclose on all of our assets;

·                   the 172,117 warrants currently held by the Karlsson Group (of which 60,000 have an exercise price of $6.00 per share and 112,117 have an exercise price of $12.50 per share) will be exchanged promptly following the conclusion of our special meeting of stockholders scheduled for April 9, 2014 for a number of shares of our common stock, which we refer to as the Karlsson Exchange Shares, equal to 4.99% of (i) the number of shares of our common stock that would be outstanding on April 9, 2014, after giving effect to the issuance of the Karlsson Exchange Shares and the issuance of all shares of our common stock issuable upon exercise or in exchange for Series A Warrants and warrants held by Buffalo Management, insofar as any of proposals 2, 3, and 4 are approved at the stockholders meeting or (ii) the number of shares of our common stock outstanding on April 9, 2014 after giving effect to the issuance of the Karlsson Exchange Shares if none of proposals 2, 3, or 4 is approved at the stockholders meeting (see “—Special Meeting of Stockholders”);

·                   upon payment of the Discounted Payment Amount we will issue The Karlsson Group a new warrant to purchase a number of shares of our common stock equal to the excess of (x) 4.99% of the sum of the number of shares to be outstanding after giving effect to the issuance of shares sold in conjunction with the capital raised to pay the Discounted Payment Amount plus exercise or conversion of all then outstanding rights to acquire or securities convertible into common stock, plus the number of shares subject to the new warrant over (y) the number of shares owned by Karlsson on the date the warrant is issued.  The new warrant will have a term of five years from the issuance date, a cashless exercise option and a strike price equal to the price per share of our common stock sold in conjunction with the capital raised to pay the Discounted Payment Amount;

·                   we have agreed to pay Karlsson’s legal fees in connection with the preparation and negotiation of the Extension Agreement and a recent waiver, with $50,000 having been paid on December 13, 2013 and $100,000 on February 2, 2014 and with the balance being payable no later than April 23, 2014; Amounts paid for legal fees do not count toward the $15 million Discounted Payoff Amount;

·                   we agreed to amend the additional consideration agreement to cover all of our and our affiliates’ current and future land holdings pursuant to royalty agreements, and to record all royalty agreements in the real estate records in Arizona; and

·                   we agreed to amend the supplemental payment agreement to provide that Karlsson is entitled to a one-time payment of 10% of the net proceeds in excess of $200 million received by us upon a sale of Prospect consummated on or before February 1, 2018.  As of April 7, 2014, we are not contemplating a sale of Prospect.

If we are not able to raise the money to pay off the Karlsson Group debt on or before April 23, 2014 we may decide to file bankruptcy.

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Restructuring of Senior Unsecured Debt

On January 10, 2014 we entered into an agreement with the holders of our Apollo debt pursuant to which we owe an aggregate amount of approximately $7.4 million in principal and interest as of April 4, 2014.  The agreement (as amended) provides that upon repayment or extinguishment of our senior secured debt owing to The Karlsson Group, Inc. on or before April 23, 2014 in accordance with the terms of the Extension Agreement and in any event for consideration with aggregate value less than or equal to 17% of the aggregate amount outstanding thereunder (including in respect of accrued interest and tax gross-up obligations) we may repay the notes by issuance of a number of shares of our common stock with an aggregate value of 17% of all amounts owing under the notes (including accrued interest).  If we are not able to raise the money to pay off the Karlsson Group debt on or before April 23, 2014 we may decide to file bankruptcy.

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Restatement of Financial Statements

We recently restated our financial statements for the fiscal years ended March 31, 2013 and 2012 and the quarterly periods ending June 30, September 30 and December 31, 2012 and June 30 and September 30, 2013 to (i) reverse stock compensation related to unvested stock option awards for former employees and board members, (ii) expense certain costs that had been previously capitalized and (iii) remove references to us being a development stage company. The restated financial statements are included in this prospectus and have been filed in amendments to our annual report on Form 10-K for the year ended March 31, 2013 and quarterly reports on Form 10-Q for the quarters ended June 30, 2013, September 30, 2013 and December 31, 2013. This restatement does not change our reported cash or business plan.

Special Meeting of Stockholders

We have filed with the SEC a definitive proxy statement for a special meeting of stockholders to be held on April 9, 2014.  The four proposals to be voted on at the meeting are:

We are asking our stockholders to approve the warrant exchanges because we believe, based upon the advice of the potential underwriters of our previously announced proposed public offering of up to $25 million of common stock, that the warrant exchange will enhance the likelihood of a successful public offering by eliminating the “market overhang” of such a large number of warrants.

Nasdaq Delisting

Our common stock was suspended from trading on The NASDAQ Stock Market effective at the open of business on April 7, 2014 because we did not achieved compliance with a NASDAQ listing rule that requires a minimum market value of listed common stock of $35 million.  Our common stock is eligible for trading and quotation on the OTCQB market, under the symbol “PGRX”.   We intend to pursue listing on a national exchange upon extinguishment of our senior secured debt to The Karlsson Group.

Summary of the Offering

The following is a brief summary of certain terms of this offering and is not intended to be complete. It does not contain all of the information that will be important to a holder of shares of our common stock and warrants to purchase our common stock.

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Although we have negotiated waivers and extensions under our debt agreements allowing us to avoid defaults, we may not be able to secure future waivers or extensions.

We have successfully negotiated multiple extensions, amendments and waiver with The Karlsson Group and Apollo since March 2013 in order to avoid a default and bankruptcy. We can provide no assurance that we will be able to negotiate extensions, amendments or waivers in the future that will allow us to avoid defaults.

Most of our outstanding warrants contain full ratchet anti-dilution protection and have an exercise price above the recent trading price of our common stock as of April 4, 2014, which makes it highly likely that issuances of our common stock, at least in the short term, will trigger these highly dilutive provisions.

We have issued warrants to purchase an aggregate of approximately 11.9 million shares of our common stock, of which approximately 9.4 million are Series A Warrants containing full-ratchet anti-dilution protection for issuances below $1.50 per share. Under the Series A Warrants, any issuances of common stock (or securities exercisable or convertible into common stock) at a price below the exercise price of the warrants results in a reduction in the exercise price of the warrants to the new issuance price and a corresponding increase in the number of warrants issued.  For example, if an investor held 300 warrants with an exercise price of $4.00 and we issued new shares of common stock at $3.00 per share, the strike price on the warrants would be reduced to $3.00 and the investor would receive an additional 100 warrants with a $3.00 exercise price. The sale of common stock by existing holders and the exercise of the Series A Warrants at $1.50 per share will not trigger the full ratchet anti-dilution protection.

The current exercise price of the Series A Warrants is $1.50, which is above the recent trading price of our common stock as of April 4, 2014.  We require significant additional capital to continue development of the Holbrook facility which, based on the trading price of our common stock as of April 4, 2014, will most likely trigger these anti-dilution provisions.  The sale of the securities offered by this prospectus will not trigger these anti-dilution protections.

Approval by our stockholders of proposed warrant exchanges will have a significantly dilutive effect on our outstanding common stock.

We have filed with the SEC a definitive proxy statement for a special meeting of stockholders to be held on April 9, 2014.  Two of the proposals to be voted on at the meeting are an exchange of all 9,404,456 of our outstanding Series A Warrants for an equal number of shares of common stock where no additional consideration will be paid by the Series A Warrant holders and an exchange of 2,068,012 of other warrants held by Buffalo Management, an affiliate of ours, for 868,566 shares of common stock where no additional consideration will be paid by Buffalo .  See “Prospectus Summary—Recent Events—Special Meeting of Stockholders.”  The issuance of these shares will nearly triple our outstanding number of shares of common stock and will have a significant dilutive effect on our 5,004,578 shares of common stock currently outstanding.

A claim for rescission of a $10.0 million investment in our November 2012 public offering could require that we raise additional capital.

We have received correspondence from a stockholder who purchased $10.0 million of shares in our November 2012 public offering asserting a right to rescind the purchase based on violation of securities laws in connection with that offering. While we believe the claim is without merit and no litigation has been commenced, the costs of defending the claim and paying any judgment resulting from the litigation could require that we raise additional capital. There can be no assurance that other investors will not bring claims against us based on federal or state securities laws alleging that our prior offerings or our filings under the Exchange Act contain defective disclosure or that our insurance carrier will provide coverage for any claims if alleged. Further, even if coverage is available, we would be liable for our retention under our policy and it is possible that any liability we ultimately incur could exceed our coverage limits. Even if we are successful in defending any such claims, securities litigation is distracting to our management, may cause harm to our reputation and could adversely affect our stock price and our ability to raise capital in the future.

Our September 2013 and February 2014 warrant exercise transactions may have been conducted in violation of federal and state securities laws.

We may have inadvertently violated federal and state securities laws in connection with our September 2013 and February 2014 warrant exercise transactions described under “Prospectus Summary—Recent Developments—Recent Financings.”  We conducted the September 2013 transaction as a private placement under the exemption from registration under the Securities Act provided by Section 4(2) thereof.  The exemption may not have been available from the registration requirements of Section 5 for the issuance of the securities upon exercise of our Series B-1 Warrants because the initial issuance of our Series B Warrants was pursuant to a registered public offering and the subsequent exchange for Series B-1 Warrants and their exercise might have been required to have been conducted pursuant to a post-amendment to the original registration statement.  Participants in the September 2013 warrant transaction may be entitled to bring suit against us for recission of the transaction, which means that we would repurchase the securities issued upon exercise of the Series B-1 Warrants for the exercise price paid.  If it is determined that every former holder of Series B-1 Warrants was entitled to recission rights, we could be obligated to repay up to an aggregate of approximately $3.0 million plus statutory interest.   Also, the SEC and relevant state regulators could impose monetary fines or other sanctions on us as provided under relevant federal and state securities laws. In addition, the September 2013 and February 2014 transactions may have constituted tender offers that were conducted in violation of Section 14 of the Securities Exchange Act of 1934, which could subject us to additional fines or other sanctions. Payment of significant recission obligations or fines would have a material, adverse effect on our cash flow, financial condition or prospects. If we are unable to raise funds necessary to satisfy these claims we may decide to file bankruptcy.  As of April 4, 2014, we are not aware of any pending or threatened claims that the warrant exercise violated any federal or state securities laws.  Based upon facts known to us at this time, we do not believe that assertion of such claims by any of our former Series B-1 Warrant holders or our Series A Warrant holders is likely; however, there can be no assurance that any such claim will not be asserted in the future or that the claimant in any such action will not prevail. The possibility that such claims may be asserted in the future will continue until the expiration of the applicable federal and state statutes of limitations, which generally vary from one to three years from the date of sale. Claims under the anti-fraud provisions of the federal securities laws, if relevant, would generally have to be brought within two years of discovery, but not more than five years after occurrence.  Even if we are successful in defending any such claims, securities litigation is distracting to our management, may cause harm to our reputation and could adversely affect our stock price and our ability to raise capital in the future.

We have no current revenue source and a history of operating losses, and we expect to generate operating losses for the foreseeable future. We may not achieve profitability for some time, if at all.

We have incurred losses each year since our inception. We expect to continue incurring operating losses until several months after production occurs, if ever. As of December 31, 2013, our accumulated losses were $198.2 million, which included derivative losses of $54.5 million that relate to the change in the fair value of the compound embedded derivatives of our convertible notes and warrants (see “Management’s Discussion and Analysis” included elsewhere in this prospectus). The process of exploring, developing and bringing into production a producing mine is time-consuming and requires significant up-front and ongoing capital. We have not defined or delineated any proven or probable reserves at any of our properties. The development of the Holbrook Project into a producing mine will require further studies that demonstrate the economic viability of the project, necessary permits obtained, production decisions to be made and the arrangement of financing for construction and development. Our engineering work to date has been based on estimates of mineral resources, which are not mineral reserves and do not have demonstrated economic viability. There can be no assurance that a DFS will be completed on schedule or at all or that if completed the economic feasibility of the Holbrook Project will be confirmed by a DFS.  Few properties that are explored are ultimately developed into producing mines. We expect that we will continue to incur operating losses for the foreseeable future.

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We have no history of commercially producing potash and there can be no assurance that we will ever make it to the production stage or profitably produce potash.

We have no history of commercially producing potash and no ongoing mining operations or revenue from mining operations. Many early stage mining companies never make it to the production stage. As a result, we are subject to all of the risks associated with establishing new mining operations and business enterprises, including:

·             the timing and cost, which can be considerable, of the construction of mining and processing facilities and related infrastructure;

·             the availability and cost of skilled labor and mining equipment;

·             the need to obtain necessary environmental and other governmental approvals and permits, and the timing of those approvals and permits;

·             the availability of funds to finance construction and development activities;

·             potential opposition from non-governmental organizations, environmental groups or local groups which may delay or prevent development activities; and

·             potential increases in construction and operating costs due to changes in the cost of fuel, power, labor, materials and supplies and foreign exchange rates.

We currently are working toward the completion of a DFS; however, there is no guarantee that such a study will be completed on schedule, or at all, or that a completed study will confirm the economic feasibility of the Holbrook Project.  Cost estimates may increase significantly as more detailed engineering work and studies are completed on a project. It is common in new mining operations to experience unexpected costs, problems and delays during development, construction and mine start-up. Accordingly, there are no assurances that our activities will result in profitable mining operations or that we will successfully establish mining operations or enter into commercial production. Our failure to enter successfully into commercial production would materially and adversely affect our business, prospects, financial condition and results of operations. In addition, there can be no assurance that our activities will produce natural resources in commercially viable quantities. There can be no assurance that sales of our natural resources production will ever generate sufficient revenues or that we will be able to sustain profitability in any future period.

Our potash supply agreement with Sichuan Chemical is subject to risks that may prevent us from realizing the benefit of the agreement or that may have a material adverse effect on our business, results of operations and financial condition.

Our agreement with Sichuan Chemical for its purchase of potash over a 10-year period may be terminated if the Holbrook Project has not achieved production by December 31, 2015. We will not achieve production by that date, and there can be no assurance that Sichuan Chemical will extend the December 31, 2015 deadline or that we will be able to commence production at all. In the event that Sichuan Chemical terminates its agreement with us, there is no guarantee that we will be able to enter into a similar agreement with another entity to purchase our potash and such an event could have a material adverse effect on our results of operations and financial condition.

In addition, the selling price of our potash to Sichuan Chemical is subject to factors beyond our control including the market price for potash in the People’s Republic of China. There can be no assurance that this selling price will be profitable to us and could have a material adverse effect on our results of operations and financial condition.

Furthermore, our agreement with Sichuan Chemical limits our ability to sell potash in the People’s Republic of China. This may make it more difficult for us to enter into supply agreements with other parties in the future, which could have a material adverse effect on our business, financial condition and results of operations.

Our ability to attract and retain qualified contractors and staff is critical to our success. The departure of key personnel or loss of key contractors could adversely affect our business and financial condition.

We are dependent on the services of key executives including Damon Barber, our president and chief executive officer, and several key contractors. The construction and operation of a mine and mill of the size we have planned for the Holbrook Project is expected to require hundreds of workers during the construction phase and once the mine is in production. We will require many of the same skill sets sought by other natural resource companies and we will be competing with these other natural resource companies in finding qualified contractors, consultants and staffing. Since many of these skills sets are highly specialized, the market for and availability of individuals possessing these skills will be impacted by the overall health of the natural resource sector. Due to our relatively small size, the loss of these persons or the inability to attract and retain additional highly skilled employees required for the development of our activities may have a material adverse effect on our business or future operations.

Title and other rights to our mineral properties cannot be guaranteed, and we may be at risk of loss of ownership of one or more of our properties.

We cannot guarantee that legal title to our properties or mineral interests will not be challenged and, if challenged, that we would be the prevailing party with respect to such challenge. Certain of the private leases and permits we have obtained are subject to uncertain

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title, or title which may, in the past, have not been assigned properly. We may not have, or may not be able to obtain, all necessary property rights to develop a property. Certain of our mineral properties are, or may be, subject to prior agreements, transfers or claims, and title may be affected by, among other things, undetected defects. We have not conducted surveys of all of the claims in which we hold a direct or indirect interest. Title insurance is generally not available for mineral properties and our ability to ensure that we have obtained secure claims to individual leases or permits may be constrained. A successful challenge to the precise area and location of these claims could result in us being unable to explore on our properties as permitted or being unable to enforce our rights with respect to our properties. This may result in us not being compensated for our prior expenditure relating to the property or may impact our ability to develop the Holbrook Project.

We do not currently have the right to mine our properties. We are pursuing permits for the right to mine our properties but we may ultimately be unable to secure these rights. Failure to secure these rights would have a material adverse effect on our business, financial condition or results of operation.

We commissioned a technical report and an updated report in accordance with NI 43-101, which differs from the standards generally permitted in reports filed with the SEC.

We have prepared a technical report and an updated report in accordance with NI 43-101, which differs from the standards generally permitted in reports filed with the SEC. Under the first resource estimate completed in 2011, we reported indicated and inferred resources and under the updated resource estimate completed in 2012, we reported measured, indicated and inferred resources, measurements which are generally not permitted in filings made with the SEC. The estimation of measured or indicated resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. Investors should be aware that we have no “reserves” as defined by SEC Industry Guide 7 and much or all of the potential target mineral resources may never be confirmed or converted into SEC Industry Guide 7 compliant “reserves.” The PEA, Interim Report and PFS contain estimates based on our inferred resources. However, in accordance with both Canadian statutes and NI 43-101, estimates of inferred mineral resources cannot form the basis of a feasibility study. See “Cautionary Note to Investors Regarding Mineral Disclosures” elsewhere in this prospectus.

We recently restated our financial statements and have concluded that our disclosure controls and procedures were not effective as of March 31, 2013.

We recently restated our financial statements for the fiscal years ended March 31, 2013 and 2012 and the quarterly periods ending June 30, September 30 and December 31, 2012 and June 30 and September 30, 2013 to (i) reverse stock compensation related to unvested stock option awards for former employees and board members, (ii) expense certain costs that had been previously capitalized and (iii) remove references to us being a development stage company. As a result of this restatement, our management has re-evaluated and amended its conclusions regarding the effectiveness of disclosure controls and procedures and internal control over financial reporting and concluded that our disclosure controls and procedures and internal control over financial reporting was not effective as of March 31, 2013.

Risk Related to this Offering

We are currently exploring and will continue to explore additional equity financing alternatives which could result in significant future dilution.

We need to raise additional capital to repay our senior debt, fund our operations, and develop the Holbrook Project and we are currently exploring alternatives that could involve issuing additional equity on terms substantially less favorable to us than the terms of previous offerings. To such extent, you will experience significant dilution.

Risks Related to the Mining Industry

Potash is a commodity whose selling price is highly dependent on and fluctuates with the business and economic conditions and governmental policies affecting the agricultural industry. These factors are outside of our control and may significantly affect our profitability.

Our future revenues, operating results, profitability and rate of growth will depend primarily upon business and economic conditions and governmental policies affecting the agricultural industry, which we cannot control. The agricultural products business can be affected by a number of factors. The most important of these factors, for U.S. markets, are:

·             weather patterns and field conditions (particularly during periods of traditionally high crop nutrients consumption);

·             quantities of crop nutrients imported to and exported from North America;

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·             current and projected grain inventories and prices, both of which are heavily influenced by U.S. exports and world-wide grain markets; and

·             U.S. governmental policies, including farm and bio-fuel policies and subsidies, which may directly or indirectly influence the number of acres planted, the level of grain inventories, the mix of crops planted or crop prices.

International market conditions, which are also outside of our control, may also significantly influence our future operating results. The international market for crop nutrients is influenced by such factors as the relative value of the U.S. dollar and its impact upon the cost of importing crop nutrients, foreign agricultural policies, the existence of, or changes in, import barriers, or foreign currency fluctuations in certain foreign markets, changes in the hard currency demands of certain countries and other regulatory policies of foreign governments, as well as the laws and policies of the United States affecting foreign trade and investment.

In addition, as noted above, our agreement with Sichuan Chemical for the sale of potash is valued based on factors beyond our control including the then market price for potash in the People’s Republic of China. If that market price would be materially lower than current prices, it could have a material adverse effect on our results and operations and financial condition.  Also, Sichuan may terminate the agreement if we have not produced and sold an aggregate of 100,000 tonnes of potash from the Holbrook Basin in a 45 consecutive day period by December 31, 2015. We will not meet this condition by December 31, 2015.

Government regulation may adversely affect our business and results of operations.

Our operations and exploration and development activities are subject to extensive federal, state and local government laws and regulations, which may be changed from time to time. These laws and regulations primarily govern matters relating to:

·             protection of human health and the environment;

·             handling, storage, transportation and disposal of natural resources, including potash, or its by-products and other substances and materials produced or used in connection with mining operations;

·             handling, processing, storage, transportation and disposal of hazardous materials;

·             management of tailings and other waste generated by our operations;

·             price controls;

·             taxation and mining royalties;

·             labor standards and occupational health and safety, including mine safety; and

·             historic and cultural preservation.

We may incur substantial additional costs to comply with environmental, health and safety law requirements related to these activities. Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining, curtailing or closing operations or requiring corrective measures, the installation of additional equipment or remedial actions, any of which could result in us incurring significant expenditures. We may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws or regulations. It is also possible that future laws and regulations, or a more stringent enforcement of current laws and regulations by governmental authorities, could cause additional expense, capital expenditures, restrictions on or suspensions of our operations and delays in the exploration or development of our properties.

Our activities are subject to environmental laws and regulations that may increase our costs of doing business and restrict our operations.

All of our exploration and potential development and production activities are subject to regulation by governmental agencies under various environmental laws. Under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, or CERCLA, we could be held jointly and severally responsible for the removal or remediation of any hazardous substance contamination at future facilities, at neighboring properties to which such contamination may have migrated and at third-party waste disposal sites to which we have sent waste. We could also be held liable for natural resource damages. Liabilities under these and other environmental health and safety laws involve inherent uncertainties. Violations of environmental, health and safety laws are subject to civil, and, in some cases, criminal sanctions. As a result of liabilities under and violations of environmental, health and safety laws and related uncertainties, we may incur unexpected interruptions to operations, fines, penalties or other reductions in income, third-party claims for property damage or personal injury or remedial or other costs that may negatively impact our financial condition and operating results. Finally, we may discover currently unknown environmental problems or conditions that have been caused by previous owners or operators or that may have occurred naturally. The discovery of currently unknown environmental problems may subject us to material capital expenditures or liabilities in the future.

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Environmental legislation in the United States is evolving and the trend has been toward stricter standards of enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and increasing responsibly for companies and their officers, directors and employees. There can be no assurance that future changes in environmental laws and regulations will not adversely affect our business.

Continued government and public emphasis on environmental issues can be expected to result in increased future investments in environmental controls at ongoing operations, which may lead to increased expenses. Permit renewals and compliance with present and future environmental laws and regulations applicable to our operations may require substantial capital expenditures and may have a material adverse effect on our business, financial condition and operating results.

Our current and anticipated future operations are dependent on receiving the required permits and approvals from governmental authorities. Denial or delay by a government agency in issuing any of our permits and approvals, imposition of restrictive conditions on us with respect to these permits and approvals or a failure to comply with the terms of any such permits that we have obtained may have a material effect on our business and operations.

We must obtain numerous environmental, mining and other permits and approvals from various United States federal, state and local government authorities authorizing our future operations, including further exploration and development activities and commencement of production on our properties. There can be no assurance that all permits that we require for the construction of mining facilities and to conduct mining operations will be obtainable on reasonable terms, or at all. A decision by a government agency to delay or deny a permit or approval, or a failure to comply with the terms of any such permits or approval that we have obtained, may delay the completion of a DFS on the Holbrook Project or may interfere with our planned development of this property and have a material adverse effect on our business, financial condition or results of operations.

Our properties may not yield resources in commercially viable quantities or revenues that are sufficient to cover our cost of operations.

Resource figures presented in our filings with the SEC, press releases and other public statements that may be made from time to time are based upon estimates made by independent technical experts. These estimates are imprecise and depend upon geologic interpretation and statistical inferences drawn from drilling and sampling analysis, which may prove to be unreliable. Even the use of geological data and other technologies and the study of producing mines in the same area will not enable us to know conclusively prior to mining whether resources will be present or, if present, whether in the quantities and grades expected. There can be no assurance that our estimates will be accurate or that any of our properties will yield resources in sufficient grades or quantities to recover our mining and development costs.

Resource estimates for our properties may require adjustments or downward revisions based upon further exploration or development work or actual production experience. There can be no assurance that recovery of minerals in small scale tests will be duplicated in large scale tests under on-site conditions or in production scale.

The resource estimates contained in our public filings have been determined and valued based on assumed future prices, cut-off grades, recovery rates, extraction rates and operating costs that may prove to be inaccurate. Extended declines in market prices for potash may render portions of our mineralization and resource estimates uneconomic and result in reduced reported mineralization or adversely affect the commercial viability of one or more of our properties. Any material reductions in estimates of mineralization, or of our ability to extract this mineralization, could have a material adverse effect on our results of operations or financial condition.

We are subject to the risks of doing business internationally as we attempt to enter into contracts with international companies.

Our business operations are primarily conducted in the United States. However, we plan to do business with companies outside of the United States. The laws, regulations and policies in these countries may be different from those typically found in the United States. For example, our current potash supply agreement with Sichuan Chemical is governed by the laws of Hong Kong. Our international business relationships are subject to the financial and operating risks of conducting business internationally, including, but not limited to: unexpected changes in or impositions of legislative or regulatory requirements; potential hostilities and changes in diplomatic and trade relationships; local economic and political conditions; and political instability. The risks inherent in doing business internationally may have a material adverse effect on our business, operating results, and financial condition.

We face competition from larger companies having access to substantially more resources than we possess.

Our competitors include other mining companies and fertilizer producers in the United States and globally, including state-owned and government-subsidized entities. Many of these competitors are large, well-established companies having substantially larger operating staffs and greater capital resources than we do. We may not be able to conduct our operations successfully, evaluate and select

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suitable properties and consummate transactions in this highly competitive environment. Specifically, these larger competitors may be able to pay more for exploratory prospects and productive mineral properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. We may also encounter increasing competition from other mining companies in our efforts to hire the experienced mining professionals necessary to conduct our operations and advance our properties. In addition, such companies may be able to expend greater resources on the existing and changing technologies that we believe are and will be increasingly important to attaining success in the industry. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operations, financial condition and cash flows.

Our business is inherently dangerous and involves many operating risks that are beyond our control, which may have a material adverse effect on our business.

Our operations are subject to hazards and risks associated with the exploration, development and mining of natural resources and related fertilizer materials and products, such as:

·             fires;

·             flooding;

·             power outages;

·             explosions;

·             inclement weather and natural disasters;

·             mechanical failures;

·             rock failures and mine roof collapses;

·             unscheduled downtime;

·             industrial accidents;

·             environmental hazards such as chemical spills, discharges or release of toxic or hazardous substances, storage tank leaks; and

·             availability of needed equipment at acceptable prices.

Any of these risks can cause substantial losses resulting from:

·             injury or loss of life;

·             damage to and destruction of property, natural resources and equipment;

·             pollution and other environmental damage;

·             regulatory investigations and penalties;

·             revocation or denial of our permits;

·             suspension of our operations; and

·             repair and remediation costs.

We do not currently maintain insurance against all of the risks described above. In the future we may not be able to obtain insurance at premium levels that justify its purchase, if at all. Insurance against certain environmental risks, including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from production, is not generally available to us or other companies within the mining industry. We may also experience losses in amounts in excess of the insurance coverage carried. We may suffer a material adverse impact on our business if we incur losses in excess of our insurance coverage carried or losses related to any significant events that are not covered by our insurance policies.

The mining industry is capital intensive and the ability of a mining company to raise the necessary capital can be impacted by factors beyond its control.

The upfront cost incurred for the acquisition, exploration and development of a mining project can be substantial, and the ability of a mining company to raise that capital can be influenced by a number of factors beyond the company’s control including but not limited to general economic conditions, political turmoil, market demand, commodity prices and expectations for commodity prices, debt and equity market conditions and government policies and regulations.

Once in production, mining companies require annual maintenance capital in order to sustain their operations. This sustaining capital can also be substantial and may have to be secured from external sources to the extent cash flows from operations are insufficient.

Future cash flow from operations is subject to a number of variables, including:

·             the quality of the resource base and the grade of those resources;

·             the quantity of materials mined:

·             the cost to mine the materials; and

·             the prices at which the mined materials can be sold.

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Any one of these variables can materially affect a mining company’s ability to fund its sustaining capital needs.

If our future revenues are adversely affected as a result of lower potash prices, including those related to sales pursuant to our agreement with Sichuan Chemical, operating difficulties, declines in reserves or for any other reason, we may have limited ability to obtain the capital necessary to undertake or complete future mining projects. We may, from time to time, seek additional financing, either in the form of bank borrowings, sales of debt or equity securities or other forms of financing or consider selling non-core assets to raise operating capital. However, we may not be able to obtain additional financing or make sales of non-core assets upon terms acceptable to us.

New sources of supply can create structural market imbalances, which could negatively affect our operating results and financial performance.

Potash supply and demand has been volatile. If production increases to the point where the market is over supplied, the price at which we are able to sell and the volumes we are able to sell could be impacted, which may materially and adversely affect our projected business, operating results and financial condition.

Variations in crop nutrient application rates may exacerbate the nature of the prices and demand for our products.

Farmers are able to maximize their economic return by applying optimum amounts of crop nutrients. Farmers’ decisions about the application rate for each crop nutrient, or to forego application of a crop nutrient, particularly phosphate and potash, vary from year to year depending on a number of factors, including among others, crop prices, crop nutrient and other crop input costs or the level of the crop nutrient remaining in the soil following the previous harvest. Farmers are more likely to increase application rates when crop prices are relatively high, crop nutrient and other crop input costs are relatively low and the level of the crop nutrient remaining in the soil is relatively low. Conversely, farmers are likely to reduce or forego application when farm economics are weak or declining or the level of the crop nutrients remaining in the soil is relatively high. This variability in application rates can materially aggravate the cyclicality of prices for our future products and our sales volumes.

Risks Relating to our Common Stock

Our common stock is no longer traded on The NASDAQ Stock Market and we may never qualify for listing on a national securities exchange.

Our common stock was suspended from trading on The NASDAQ Stock Market effective at the open of business on April 7, 2014 because we did not achieved compliance with a NASDAQ listing rule that requires a minimum market value of listed common stock of $35 million.  While we intend to pursue listing on a national exchange upon extinguishment of our senior secured debt to The Karlsson Group, there can be no assurance that we will be successful in doing so.  Failure to be listed on a national securities exchange may reduce the liquidity of an investment in our common stock relative to when the common stock was listed on The NASDAQ Stock Market.

The market price and trading volume of our common stock has been volatile, and you may lose all or part of your investment.

On September 4, 2013 we effected a 1-for-50 reverse stock split. The high and low sale prices of our common stock Capital Market since public trading commenced, adjusted for the stock split, has been $230.00 and $1.16, respectively.

The price of our common stock has fluctuated and may fluctuate in the future in response to many factors, including:

·             the perceived prospects for natural resources in general;

·             differences between our actual financial and operating results and those expected by investors;

·             changes in the share price of public companies with which we compete;

·             news about our industry and our competitors;

·             changes in general economic or market conditions including broad market fluctuations;

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·             the public’s reaction to press releases and other public announcements and filings with the SEC;

·             arrival or departure of key personnel;

·             acquisitions, strategic alliances or joint ventures involving us or our competitors;

·             adverse regulatory actions; and

·             other events or factors, many of which are beyond our control.

Our shares may trade at prices significantly below current levels, in which case holders of the shares may experience difficulty in reselling, or an inability to sell, the shares. In addition, when the market price of a company’s common equity drops significantly, stockholders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources away from the day-to-day operations of our business.

Our articles of incorporation permit us to issue debt securities with voting rights which would dilute the voting power of the holders of our common stock.

Our articles of incorporation permit us to issue debt securities with voting rights as permitted by Nevada corporate law. We do not have any debt securities with voting rights outstanding as of April 4, 2014. Holders of voting debt securities may have different interests than stockholders and may vote in accordance with those interests. Issuances of debt securities with voting rights could also have an anti-takeover effect, in that it could make a change in control or takeover of us more difficult. For example, we could grant voting rights to debt holders so as to dilute the voting rights of persons seeking to obtain control of us. Similarly, voting rights could be granted to debt holders allied with our management and could have the effect of making it more difficult to remove our current management by diluting the voting rights of persons seeking to cause such removal.

Future sales or issuances of shares of common stock or the exercise of our outstanding warrants may decrease the value of our existing common stock, dilute existing shareholders and depress the market price of our common stock. The substantial majority of our outstanding warrants contain full ratchet anti-dilution protection which can be highly dilutive to stockholders. We may also issue additional shares of our common stock or securities convertible into our common stock in the future.

We have issued warrants to purchase an aggregate of approximately 11.9 million shares of our common stock, of which approximately 9.4 million have full-ratchet anti-dilution protection. See “Risk Factors—Risks Related to our Financial Condition and Business”. All of these warrants having anti-dilution protection have an exercise price above the recent trading price of our common stock as of April 4, 2014, which makes it highly likely that issuances of our securities, at least in the short term, will trigger these highly dilutive provisions.

We recently filed with the SEC a definitive proxy statement for a special meeting of stockholders to be held on April 9, 2014.  Two of the proposals to be voted on at the meeting are (i) an exchange of all 9,404,456 of our outstanding Series A Warrants for an equal number of shares of common stock where no additional consideration will be paid by the Series A Warrant holders and (ii) an exchange of 2,068,012 of other warrants held by an affiliate of ours for 868,566 shares of common stock where no additional consideration will be paid by the affiliate.   The issuance of these shares will more than triple our outstanding number of shares of common stock and will have a significant dilutive effect on our 5,004,578 shares of common stock currently outstanding.

As described under “Prospectus Summary — Restructuring of Senior Unsecured Debt” we have recently agreed with the holders of our $7.4 million (principal and accrued interest) of senior unsecured notes to issue them shares of common stock with an aggregate value equal to 17% of the amounts owed under their notes as full extinguishment of such debt, provided we are able to retire our Karlsson Group senior secured debt on or prior to April 23, 2014.

We may also sell additional common stock in subsequent offerings and may issue additional warrants and shares of our common stock in the future, which may lower the market price of our common stock. We could also issue preferred stock in the future, which could be convertible into shares of our common stock and/or have voting rights equivalent to those of a common stock holder.  Some of our advisors are compensated based on periodic issuances of shares of common stock or warrants to purchase common stock. We cannot predict the size of future sales and issuances of common stock or securities convertible into common stock or the effect, if any, that future sales and issuances of common stock or securities convertible into common stock will have on the market price of our shares of common stock. Sales or issuances of a substantial number of common stock or securities convertible into common stock, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. With any additional sale or issuance of common stock or securities convertible into our common stock, investors will suffer dilution of their voting power and we may experience dilution in our earnings per share.

We incur increased costs as a result of being an operating public company, specifically as a result of Section 404 of the Sarbanes-Oxley Act of 2002.

As a public company, we incur increased legal, accounting and financial compliance costs that we would not incur as a private company. For example, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, and are subject to the rules and regulations of The Nasdaq Stock Market. Such requirements increase our costs, make some activities more difficult, time-consuming and costly and may also place undue strain on our personnel, systems and resources.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expense and expend significant management efforts. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, the market price of our common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our

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operating results or cause us to fail to meet our reporting obligations. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports filed with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures or internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock.

Our common stock could be considered a “penny stock” making it difficult to sell.

The SEC has adopted regulations which generally define a “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. Our common stock currently trades and since its initial listing on The Nasdaq Capital Market has traded below $5.00 per share on an adjusted pre-reverse stock split basis. The SEC’s penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that before a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s agreement to the transaction. These rules may restrict the ability of brokers-dealers to sell our common stock and may affect the ability of investors to sell their shares, until our common stock no longer is considered a penny stock.

Securities analysts may not provide coverage of our shares or may issue negative reports, which may adversely affect the trading price and trading volume of the shares.

Our common stock is covered by a limited number of securities analysts and we cannot assure you those securities analysts will cover our company going forward. If securities analysts do not cover our company, this lack of coverage may adversely affect the trading price of the shares. The trading market for the shares of our common stock will rely in part on the research and reports that securities analysts publish about us and our business. If one or more of the analysts who cover our company downgrades our common stock or cease coverage, the trading price and volume of the shares of our common stock may decline. Further, because of our small market capitalization, it may be difficult for us to attract additional securities analysts to cover our company, which could significantly and adversely affect the trading price and volume of our stock.

We do not intend to pay any cash dividends in the foreseeable future.

We have never declared or paid dividends on our common stock nor do we anticipate paying any cash dividends on our common stock within the foreseeable future. Our board of directors has the ability and may so choose to declare cash dividends on our common stock, at their discretion, in the future. In their determination to declare dividends, the board will consider, among other factors, the company’s financial position, results of operations, cash requirements, and any applicable outstanding covenants. Holders of our common stock will be entitled to receive dividends when and, if declared by our board, out of funds legally available for their payment, subject to the rights of holders of any preferred stock that we may issue.

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As of April 4, 2014, there were 45 holders of record of our common stock based upon information provided by our transfer agent.

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·                   5,004,578 shares of outstanding common stock

·                   $15 million of liquidation value redeemable preferred stock.  The preferred stock is non-convertible and non-voting and carries an 8% annual cumulative dividend

·                   9,404,456 Series A Warrants having an exercise price of $1.50 per share and expiration dates in 2018 and 2019. All Series A Warrants contain full ratchet anti-dilution protection provisions. If approved at our special meeting of stockholders to be held on April, 9, 2014, all 9,404,456 Series A Warrants could be exchanged for shares of our common stock on a one-for-one basis and for no additional consideration from the warrant holder.  See “Prospectus Summary—Recent Events—Special Meeting of Stockholders.”

·                   2,472,962 other warrants comprised of the following:

Note 1: If approved at the special meeting of stockholders to be held on April, 9, 2014, all 2,068,012 of these warrants held by an affiliate could be exchanged for 868,566 shares of our common stock for no additional consideration from the affiliate.  See “Prospectus Summary—Recent Events—Special Meeting of Stockholders.”

Note 2: We have agreed to exchange 172,117 of these warrants currently held by the Karlsson Group for shares of our common stock for no additional cash consideration pursuant to the Karlsson Group Extension Agreement.  See “Prospectus Summary—Recent Events—Restructuring of Senior Secured Debt.”

·                   Upon payment of the discounted payoff amount of $15 million on or before April 23, 2014, we have agreed to grant the Karlsson Group a new warrant to purchase a number of shares of our common stock equal to the excess of (x) 4.99% of the sum of the number of shares to be outstanding after giving effect to the issuance of shares sold in conjunction with the capital raised to pay the $15 million discounted payment amount plus exercise or conversion of all then outstanding rights to acquire or securities convertible into common stock, plus the number of shares subject to the new warrant over (y) the number of shares owned by Karlsson on the date the warrant is issued.  The new warrant will have a term of five years from the issuance date, a cashless exercise option and a strike price equal to the price per share of our common stock sold in conjunction with the capital raised to pay the $15 million discounted payment amount.

·                   161,300 stock options with exercise prices ranging from $130.00 to 212.50 and expiration dates between 2021 and 2023

·                   685,000 stock options with exercise prices ranging from $2.25 to $2.36 and expiration dates in 2023.

·       On January 10, 2014 we entered into an agreement (as subsequently amended) with two affiliates of Apollo Global Management who own two senior promissory notes pursuant to which we owe an aggregate amount of approximately $7.4 million in principal and interest.  The agreement provides that upon repayment or extinguishment of our senior secured debt owing to The Karlsson Group on or before April 23, 2014 in accordance with the terms of the Extension Agreement and in any event for consideration with aggregate value less than or equal to 17% of the aggregate amount outstanding thereunder (including in respect of accrued interest and tax gross-up obligations) we may repay the notes by issuance of a number of shares of our common stock with an aggregate value of 17% of all amounts owing under the notes (including accrued interest).

·                   Total indebtedness as of March 31, 2014 of $159.8 million, all of which will become due and payable on April 23, 2014 if we are unable to retire all amounts owing under the Karlsson Group debt for the discounted payment amount of $15 million on or before April 23, 2014.

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(1)    Other expenses include the following significant non-cash items:

a.          For the nine months ended December 31, 2013: derivative gains of $2,162, assets impairments of $1,224 and interest expense of $25,970;

b.          For the year ended March 31, 2013:  derivative losses of $1,900 and interest expense of $7,241;

c.           For the cumulative period through December 31, 2013: derivative losses of $54,504, asset impairments of $1,224, a loss on debt extinguishments of $2,049 and interest expense of $35,270.

(2)   All per share amounts have been adjusted for the 1-for-50 reverse stock split that became effective on September 4, 2013.

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On May 30, 2012, we entered into an agreement with The Karlsson Group to acquire the 50% of AWP that we did not already own for an aggregate purchase price of $150.0 million plus warrants to purchase 112,117 shares of our common stock for $212.50 per share. The agreement provided for the grant of a 1% royalty and other potential contingent payments.

On August 1, 2012, we closed The Karlsson Group Acquisition, at which time we became the sole owner of AWP.

Strategy

Our strategy is to increase stockholder value through our focus on the exploration, development and production of potash from our Holbrook Project. Since 2011, we have conducted drilling, geological work and various other technical and preliminary economic assessments to advance and expand our mineralized material base in the Holbrook Project. We completed a PFS for the Holbrook Project in July 2013 and are now working towards completing a DFS.

Major Influences on Results of Operations and Factors Affecting Comparability

We are an exploration stage company and generate no revenues. Therefore, our operating and project related expenses are funded entirely by cash raised through our financing activities. Due to the sporadic nature of financing transactions, our spending and results can vary significantly between periods.

Our historical financing activities have included the issuances of significant amount of warrants and options. In accordance with GAAP, we estimate the value of these derivatives and recognize the associated non-cash expenses and gains.  Non-cash warrant and stock option expenses comprise a significant amount of our general and administrative expenses.

Financing

During the June 30, 2013 quarter, our financings activities provided cash of $8.3 million consisting of the $5.0 million in proceeds received in May in exchange for the Very Hungry Notes and the $3.3 million in net proceeds received from our June public offering.  The June public offering generated gross proceeds of $5.0 million from the sale of 833,334 shares of our common stock and 856,798 Series A Warrants and 856,798 Series B Warrants.  After offering related expenses, we netted $3.3 million from the offering.

In September 2013 we raised $3.0 million through the issuance of 742,000 shares and 2,945,098 Series A Warrants with each warrant having full ratchet anti-dilution protection and an exercise price of $4.05. The issued warrants were comprised of 1,294,750 warrants issued in conjunction with the shares and 1,650,348 warrants issued in connection with the full ratchet anti-dilution protection provisions in already outstanding warrants. This raise was achieved by reducing the exercise price on the outstanding Series B Warrants from $6.00 to $4.05 and increasing the number of Series A Warrants received for each Series B Warrant exchanged from 1.0 to 1.75. These funds were used for our drilling program, continued development of a DFS, mandatory debt payments and ongoing operating expenses.

In February 2014 we raised $1.1 million of gross proceeds when we and each of the holders of 747,298 of our Series A Warrants issued in our June 26, 2013 public offering agreed that we would reduce the exercise price from $4.05 to $1.50 in exchange for these warrants being exercised immediately and the issuance of a new Series A Warrant for each warrant exercised with an exercise price of $1.50, exercisable for five years only upon stockholder approval of the exercise. Each of the participating warrant holders entered into a separate Series A Warrant exercise agreement. Pursuant to the full ratchet anti-dilution terms in the Series A Warrants, the exercise price of our remaining outstanding Series A Warrants was adjusted to $1.50 and we issued an additional 5,467,779 Series A Warrants with an exercise price of $1.50.  As a result of the reduction of the exercise price of the Series A Warrants, the exercise price on the 1,787,171 warrants held by Buffalo Management was reduced from $4.05 to $3.50 and we issued Buffalo Management 280,841 additional warrants with an exercise price of $3.50.

Reverse Stock Split

At our annual meeting on August 30, 2013 our shareholders approved up to an one-for-50 reverse stock split.  Following Board approval, an one-for-50 reverse stock went into effect on September 4, 2013.  This reverse stock split brought us into compliance with Nasdaq’s minimum share price requirement.

As indicated in our definitive proxy statement filed March 31, 2014, the board is seeking stockholder approval to grant the board discretionary authority to effect a reverse split with respect to the issued and outstanding shares of our common stock. If this proposal is approved by our stockholders, the board may subsequently effect, in its sole discretion, a reverse stock split of up to an one-for-20 exchange ratio. If approved, the board’s discretion to effect the reverse stock split would last until December 31, 2014, when such discretion would terminate if not exercised by the board.

Operating Results for the Nine Months Ended December 31, 2013 compared to Nine Months Ended December 31, 2013.

Revenue

For the nine months ended December 31, 2013 and 2012, the Company had no revenues.

Exploration Expense

Exploration expense for the nine months ended December 31, 2013 and 2012 was comprised of the following:

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For the nine months ended December 31, 2013, our exploration activities encompassed the drilling of 17 holes at a significant cost reduction over prior drilling programs as well as additional permitting and pre-feasibility study activities.  For the nine months ended December 31, 2012, our activities included the drilling of 14 holes and the work associated with our permitting and engineering activities.

General and Administrative Expense (“G&A”)

General and administrative expenses for the nine months ended December 31, 2013 and 2012 were comprised of the following:

Salaries and benefits expense decreased by approximately $1.2 million over the prior period due primarily to reductions in employee head count.

Office, travel and other expenses decreased by approximately $3.2 million over the prior period due mainly to the higher expenses incurred during the 2012 period related to third party investment activities. The balance of the decrease was primarily due to our lower spending on travel, marketing, market research and public relations expenditures during the 2013 period as we attempted to conserve cash.

Tax compensation related to the Karlsson Group debt decreased by approximately $4.7 million over the prior period due to a $6.2 million tax compensation charge taken during the December 2012 period as compared to a $1.5 million tax compensation charge during the December 2013 period.

Legal, accounting and insurance expenses decreased by approximately $2.6 million over the prior period as the prior period included the expenses associated with our acquisition of the Karlsson Group’s interest in AWP.

Management fees, consulting fees and board compensation expenses decreased by approximately $1.1 million over the prior period primarily due to fees paid for the termination of a consulting contract in August of 2012.

Equity compensation expenses decreased by approximately $7.4 million over the prior period as most of the stock options from our July 1, 2012 grants had fully vested by the end of July 2013 and therefore the expense in the current period was primarily related to the new stock options granted in November 2013.

Included within G&A expense above are rental expenses of approximately $0.2 million each for each of the nine months ended December 31, 2013 and 2012.

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Off-take Fees

On October 18, 2012, we entered into an agreement with Sichuan Chemical Industry Holding (Group) Co, Ltd, a Chinese limited liability company (“Sichuan”), under which Sichuan agreed to purchase a minimum of 500,000 tonnes (on a take-or-pay basis, backed by a letter of credit) of potash from us per year for a period of ten years starting with the commencement of production from our Holbrook Project.

Upon execution of the Sichuan agreement, we owed a one-time arrangement fee to a third party of $7.8 million. In July 2013, we entered into a letter agreement reducing the fees to be paid to the third party by $0.4 million and recognized a gain by the same amount. We expensed this arrangement fee when incurred.

Warrant Expense

Warrant expense for the nine months ended December 31, 2013 was a negative $0.9 million primarily to a change in the fair value measurement of our outstanding warrants at December 31, 2013. Prior to our June 26, 2013 capital raise, which included the issuance of warrants having full ratchet anti-dilution protection, we accounted for our warrants under the equity method and as such at December 31, 2012 we had no similar “mark-to-market” adjustment.  With the anti-dilution protection afforded these newer warrants, we no longer met the criteria for equity accounting for our warrants and therefore began accounting for all warrants as liabilities.  We now re-measure this liability at the end of each quarter using a binomial lattice valuation model with a corresponding adjustment to warrant expense.  The reduction in the fair value of our warrants at December 31, 2013 was primarily related to the decrease in our stock price from $4.61 at June 26, 2013 to $1.74 at December 31, 2013.

For the nine months ended December 31, 2012, warrant expense totaled approximately $5.9 million and related primarily to the warrants that were issued to Buffalo Management in connection with the termination of the management services agreement between the Company and Buffalo Management in August 2012.

Derivative Gains/Losses

For the nine months ended December 31, 2013, we realized a net derivative gain of $2.2 million.  This net gain was comprised of a $2.9 million gain associated with the embedded conversion options in the Very Hungry and Reiman Trust convertible notes offset by derivative losses of $0.7 million associated with the warrants exchanged in connection with our June 26, 2013 offering.

During the December 31, 2012 period, we had a derivative loss of $1.9 million.  During the acquisition of the Karlsson Group interest in August of 2012, a derivative asset was created representing our option to prepay the Karlsson Group note for a reduced amount if the prepayment was made in December of 2012.  This option was forfeited as of December 31, 2012 and consequently the derivative asset was written off to expense.

Loss on Extinguishments (net)

For the nine months ended December 31, 2013, our extinguishment gains and losses netted to approximately $0.0.  These gains and losses included the following:

·                   a gain of $13.0 million associated with the restructurings of the Karlsson Group debt on April 15, 2013, June 26, 2013 and September 16, 2013;.

·                   a loss of $11.4 million associated with the December 10, 2013 Extension Agreement to restructure the Karlsson Group debt;

·                   a $2.1 million loss associated with the write off of the remaining debt discount recorded in connection with the issuance of the $5.5 million convertible notes to Very Hungry and the Scott Reiman Trust;

·                   a gain of $0.5 million associated with the change in the fair value of the warrants issued to Buffalo Management in the exchange of Buffalo’s 1% royalty interest for shares of our redeemable preferred stock and warrants.

For the nine months ended December 31, 2012, we had no such extinguishment gains or losses.

Asset Impairments

For the nine months ended December 31, 2013, we recorded impairments of $1.2 million comprised primarily of (i) $0.5 million related to our write-down of the land option on 5,080 acres acquired in connection with the Karlsson Group Acquisition and (ii) $0.6 million stemming from our decision not to renew the leases on four of our exploration permits. No such impairments were incurred during the nine months ended December 31, 2012.

Interest Expense

Net interest expense for the nine months ended December 31, 2013 totaled $26.0 million, the majority of which related to interest on our Karlsson and Apollo debt, the Very Hungry and Reiman Trust convertible notes and amortization the Karlsson note discount. Net interest expense for the nine months ended December 31, 2012 totaled approximately $4.6 million and related to the Karlsson Note. For the nine months ended December 31, 2013 and 2012, we paid cash interest of approximately $12,000 and nil.

Off-Balance Sheet Arrangements

None.

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*      Reflects gross proceeds of $107.4 million net of (i) $34.8 million of payments to The Karlsson Group towards the acquisition of their 50% interest in AWP, (ii) $2.1 million in other debt related payments and (iii) $6.3 million of financing related fees.

Cash flows used in operating activities

For the nine months ended December 31, 2013, the cash used in operating activities totaled approximately $12.8 million including:

·                   $3.5 million for G&A spending on such items as salaries and benefits and public company compliance activities;

Cash flows used in investing activities

During the nine months ended December 31, 2013, the cash used in investing activities of approximately $43,000 was consumed primarily in the acquisition of land rights and equipment.

Cash flows provided by financing activities

Our financings activities provided cash of $11.9 million during the nine months ended December 31, 2013 consisting of the $5.0 million in proceeds received in May in exchange for the notes held by Very Hungry LLC and the Scott Reiman 1991 Trust, the $4.1 million in proceeds received from our June 2013 public offering and the $3.0 million from the exercise of Series B warrants in September 2013 partially offset by the $0.2 million in debt service payments made on our Karlsson Group and Apollo debt during October 2013.

Operating Results for the Years Ended March 31, 2013 and 2012

Revenue

For the years ended March 31, 2013 and 2012 and from August 5, 2010 (Inception) to March 31, 2013, we had no revenues.

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During the twelve months ending March 31, 2013, we drilled 14 holes and completed work associated with our permitting and pre-feasibility study activities.  During the twelve months ending March 31, 2012, we drilled a total of 12 holes and incurred costs associated with completion of the Resource Report and PEA.

From inception through March 31, 2013 our activities have encompassed the drilling of 28 holes and work associated with our permitting and pre-feasibility study activities.

General and Administrative Expense (“G&A”)

Salaries and benefits expenses increased by approximately $4.0 million over the prior period due to increased headcount and bonuses for employees. Headcount increased from 5 employees to 12 as of March 31, 2012 compared to March 31, 2013.

Equity compensation expenses increased by approximately $0.6 million over the prior period due to the timing of awards and their respective service periods.  Equity compensation is recognized ratably over the vesting period, in most cases one year.

Management fees, consulting fees and board compensation expenses increased by approximately $6.4 million over the prior period primarily due to approximately $5.2 million related to a one-time termination fee to Buffalo Management.  The remaining change was due to additional consultation fees with the public offering.

Legal, accounting and insurance expenses increased by approximately $2.3 million over the prior period primarily due to the legal fees that we incurred in connection with (i) the negotiation and closing of The Karlsson Group Acquisition and the restructuring of our Karlsson debt and (ii) the additional SEC filings in connection with our two common stock public offerings.

Karlsson Note Tax Gross Up expenses were for tax compensation payments due to The Karlsson Group for increases in federal and state taxes and other tax related matters as part of The Karlsson Group Acquisition.

Apollo termination fee expenses were for the termination agreement entered into with Apollo for the break-up and release of the convertible note financing for $100.0 million.

Office, travel and other expenses increased by approximately $2.1 million over the prior period due to lower increased spending on travel, marketing, market research and public relations expenditures for the public offering in July 2012.

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Included within total G&A are rental expenses of $0.2 million and nil for 2013 and 2012, respectively. The increase in 2013 rent expense was due to our move to a larger office space beginning in October 2012 and the addition of leased office space in Los Angeles beginning in June 2012.

Cumulative Period

Our general and administrative expenditures since inception were comprised of the following:

Included within total G&A are rental expenses of $0.3 million since inception.

Derivative Losses

Years Ended March 31, 2013 and 2012

Our derivatives losses for the years ended March 31, 2013 and 2012 totaled $1.9 million and $39.8 million, respectively.  For 2013, all $1.9 million was associated with the Karlsson Note Prepayment Option as described more fully in Note 8—Debt of the accompanying consolidated financial statements. Our derivative losses in 2012 stemmed from a combination of (i) the change in the fair value of the compound embedded derivatives of our convertible notes and warrants and (ii) the derivative losses we incurred upon issuance of the convertible notes as described more fully in Note 10—Derivative Financial Instruments of the accompanying consolidated financial statements.

Cumulative Period

Our derivative losses since inception totaled $56.7 million, of which $1.9 million was associated with the Karlsson Note Prepayment Option as described above while the remainder stemmed from (i) the change in the fair value of the compound embedded derivatives of our convertible notes and warrants and (ii) the derivative losses we incurred on issuance of the convertible notes.

Loss on Debt Extinguishment

Years Ended March 31, 2013 and 2012 and Cumulative Period

We incurred a $2.0 million loss on the extinguishment of the $2.0 million Merkin convertible note during 2012.  No such loss was incurred during 2013.

Interest Expense

Years Ended March 31, 2013 and 2012

Our net interest expense for the years ended March 31, 2013 and 2012 totaled $7.2 million and $1.9 million, respectively.  For 2013, this amount represents the interest expense accrued on The Karlsson Note and the Apollo Notes, all of which were entered into during 2013.  An amount equal to this is included in accrued liabilities at March 31, 2013.  Our net interest expense for 2012 was related to the convertible notes then outstanding and was comprised of $0.4 million for interest and $1.5 million for the amortization of related discounts and financing costs.

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Cumulative Period

Net interest expense for the Cumulative Period totaled $9.3 million and consisted of the (i) $7.2 million related to interest on the Karlsson and Apollo Notes and (ii) $2.1 million associated with the convertible secured notes.

Off-Balance Sheet Arrangements

None.

Cash used in operating activities for each of the comparative periods presented above was primarily related to our exploration activities in the Holbrook Basin and other corporate general and administrative expenses. Likewise, the cash consumed by our investing activities was primarily related to the acquisition of adjacent and complementary acreage within the Holbrook Basin.

During 2013, we completed two public offerings that resulted in net financing cash proceeds to us of $61.9 million.  From these proceeds, we made payments to The Karlsson Group totaling $34.7 million comprised of the $25.0 million upfront payment due in connection with our purchase of the 50% interest in AWP that we did not already own and another $9.7 million following the completion of the second public offering in November 2012.  The $9.7 million, which represented 40% of the net proceeds raised in the November offering, reduced the outstanding balance due under The Karlsson Note from $125.0 million to $115.3 million.

Prior to 2013, the cash provided by our financing activities came almost exclusively through the issuance of convertible notes and sales of our common stock in private placements.

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The Karlsson Note is also mandatorily pre-payable within five business days of a sale of at least 50% of AWP or a merger of AWP with or into an unaffiliated entity.

Apollo Notes

On March 7, 2013, we entered into a Termination and Release Agreement with certain affiliates of certain investment funds managed by Apollo Global Management, LLC (which we refer to collectively as the Apollo Parties) that terminated the agreements we entered into with the Apollo Parties in November 2012 (as amended in December 2012). In connection with the Termination and Release Agreement, we issued the Apollo Parties two promissory notes (“the Apollo Notes”) totaling approximately $6.8 million as partial consideration for the break-up and release. The Apollo Notes, which were subsequently amended on April 15, 2013 and January 10, 2014, are unsecured and bear interest at the rate of 11% per annum and mature on the earlier of i) July 1, 2015; ii) 12 months following completion of our Definitive Feasibility Study; or iii) the date the Karlsson Note is paid in full.  The final maturity date of the Apollo notes is now effectively April 23, 2014 under the terms of the agreement described in the next paragraph.

On January 10, 2014 we entered into an agreement (as amended) with Apollo.  This agreement provides that upon repayment or extinguishment of our senior secured debt owing to The Karlsson Group on or before April 23, 2014 in accordance with the terms of the April 3, 2014 Extension Agreement, and in any event for consideration having an aggregate value less than or equal to 17.0% of the aggregate amount owed under the Karlsson Group debt (including in respect of accrued interest and tax gross-up obligations), we may repay the Apollo notes by issuance of a number of shares of our common stock with an aggregate value of 17% of all amounts owing under the Apollo notes (including accrued interest). To the extent we have not repaid or extinguished the Karlsson debt on or before April 23, 2014, the entire aggregate amount of approximately $7.4 million due under the Apollo Notes as of April 23, 2014 would be immediately due and payable.

If we are unable to raise the money to pay off the Karlsson Group debt on or before April 23 , 2014 we may decide to file bankruptcy.

As of December 31, 2013 we owed a total of $7.3 million, of which $0.6 million was for accrued interest.  This entire balance, principal and interest, is included in current liabilities at December 31, 2013 as a result of the March 10, 2014 due date (subsequently extended to April 23, 2014) for the Karlsson Note.

Commitments and Contingencies

The Karlsson Group Acquisition

In conjunction with The Karlsson Group Acquisition, we have the following commitments and contingencies:

·                   we are required to pay The Karlsson Group 3% of gross potash sales from any of our current or future acquired leases, licenses and permits (perpetual in nature),

·                   in the event of a sale, directly or indirectly, of at least 50% of AWP or a merger of AWP with or into an unaffiliated entity on or prior to February 1, 2018, The Karlsson Group is entitled to10% of the net proceeds received from the transaction in excess of $200 million.

·                   in the event of any equity or debt offering completed by us while the Karlsson Note remains outstanding, we must place 50% of the net proceeds of the next $18.8 million of capital raised into escrow (for a total of $9.4 million), which funds may be released solely to fund specified expenses for the Holbrook Project.

·                   in the event of any equity or debt offering completed by us while the Karlsson Note remain outstanding, we must pay the Karlsson Group 10% of the gross proceeds raised as a prepayment of the outstanding balance.

·                   we have agreed to compensate the Karlsson Group for any incremental income tax liabilities attributable to an increase in federal or state income tax rates over the tax rates that were in effect for 2012, such that they are made whole with respect to any such increase in tax liabilities. We also agreed to compensate the Karlsson Group for certain interest charges imposed on the deferred tax liabilities as a result of the application the “installment sale” rules of the Internal Revenue Code.

Grandhaven Royalty Interest

Grandhaven holds a 1% overriding royalty interest in the gross proceeds received by our subsidiary AWP from the extraction of potash from lands and state exploration permits held by AWP on November 22, 2011. Grandhaven also holds an option (the “Grandhaven Option”), that just became effective on December 31, 2013 and is now exercisable at any time, to receive shares of our common stock valued at $212.50 per share in exchange for the fair market value of any royalty interest surrendered.

In addition, if;

(i) the Arizona State Land Department declines to issue any lease to us with respect to any state exploration permit, or

(ii) the Arizona State Land Department terminates any state exploration permit, or

(iii) the Arizona State Land Department refuses to consent to the assignment of any royalty interests in any Arizona state lease, or requires any reduction of or imposes any condition on such royalty interests as a condition of approving an assignment of such royalty interests or approving any royalty reduction or other action with respect to a state lease,

then Grandhaven has the option to receive substitute royalty interests from us in the same number of acres in portions of our private mineral leases, in a percentage sufficient to compensate Grandhaven for the reduced royalty interests in the affected state leases.

If we have not been issued any Arizona state leases as of the date that we convey the assignment of the royalty interest in our private mineral leases, Grandhaven may elect to exchange their royalty in our Arizona state leases for a 1.388% royalty interest in all of our private mineral leases.

On February 7, 2014 we received notice from Grandhaven regarding the closing of the conveyance of their royalty interests in the fee and state mineral rights owned by AWP. As of April 4, 2014 the assignment of their royalty interest had not been completed.

*Assumes the Company’s prepayment of the Karlsson Note on April 23, 2014 for the discounted payment amount of $15.0 million and the simultaneous extinguishment of the Apollo Notes for shares of our common stock. If we are unable to pay the $15.0 million discounted amount on the Karlsson Note by April 23, 2014, or extend the due date of this payment, the entire undiscounted amount then owing under the Karlsson Note as well as the amounts then owing under the Apollo Notes would become immediately due and payable, totaling $160.5 million as of that date.

**Amounts may change in the future as mineral leases are converted to mining leases.

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The Apollo Notes

In the event of any equity or debt offering completed by the Company while the Apollo Notes remain outstanding, we have agreed to pay Apollo 10% of the gross proceeds raised as a prepayment of the outstanding principal.

Common Stock and Warrant Commitments

As of April 4, 2014, the Company had remaining commitments to issue an additional 157,744 shares of our common in exchange for services under an investor relations consulting agreement with COR Advisors LLC. We do not pay a cash fee under this agreement. The 157,744 shares of common stock are due in the following increments:

·       1,500 shares quarterly from April 5, 2014 to July 5, 2015;

·       15,061 shares monthly from April 17, 2014 to July 17, 2014; and

·       15,000 shares monthly from April 5, 2014 to September 5, 2014.

As of April 4, 2014, we had 9,404,456 outstanding Series A Warrants having full ratchet anti-dilution protection rights. The exercise price for all of these warrants is $1.50 and all have expiration dates in 2018 and 2019. If approved at our special meeting of stockholders to be held on April, 9, 2014, all 9,404,456 Series A Warrants could be exchanged for shares of our common stock on a one-for-one basis and for no additional consideration from the warrant holder.  See “Prospectus Summary—Recent Events—Special Meeting of Stockholders.”

For warrants with full ratchet anti-dilution protection, any issuances of common stock (or securities exercisable into common stock) at a price below the exercise price of the warrants results in a reduction in the exercise price of the warrants to the new issuance or strike price and a corresponding increase in the number of warrants issued. For example, if an investor held 300 warrants with an exercise price of $4.00 and we issued new shares of common stock at $3.00 per share, the strike price on the warrants would be reduced to $3.00 and the investor would receive an additional 100 warrants with a $3.00 exercise price.

We have agreed to exchange 172,117 warrants currently held by the Karlsson Group (of which 60,000 have an exercise price of $6.00 and 112,117 have an exercise price of $12.50 per share) promptly following the conclusion of our special meeting of stockholders scheduled for April 9, 2014 for a number of shares of our common stock, which we refer to as the Karlsson Exchange Shares, equal to 4.99% of (i) the number of shares of our common stock that would be outstanding on April 9, 2014, after giving effect to the issuance of the Karlsson Exchange Shares and the issuance of all shares of our common stock issuable upon exercise or in exchange for Series A Warrants and warrants held by Buffalo Management, insofar as any of proposals 2, 3, and 4 are approved at the stockholders meeting or (ii) the number of shares of our common stock outstanding on April 9, 2014 after giving effect to the issuance of the Karlsson Exchange Shares if none of proposals 2, 3, or 4 is approved at the stockholders meeting (see “Prospectus Summary—Recent Events—Special Meeting of Stockholders”).

Upon payment of the discounted payoff amount of $15.0 million on or before April 23, 2014, we have agreed to grant the Karlsson Group a new warrant to purchase shares of our common stock equal to the excess of (x) 4.99% of the sum of the number of shares to be outstanding after giving effect to the issuance of shares sold in conjunction with the capital raised to pay the $15 million discounted payment amount plus exercise or conversion of all then outstanding rights to acquire or securities convertible into common stock, plus the number of shares subject to the new warrant over (y) the number of shares owned by Karlsson on the date the warrant is issued.  The new warrant will have a term of five years from the issuance date, a cashless exercise option and a strike price equal to the price per share of our common stock sold in conjunction with the capital raised to pay the $15 million discounted payment amount.

Potential Securities Laws Violations

As described under “Risk Factors—Our September 2013 warrant exercise transaction may have been conducted in violation of Section 5 of the Securities Act” we may in the future be subject to as much as $3.0 million in payment obligations for recission claims, which as of April 4, 2014 we would be unable to pay.  While we believe that the possibility of being subject to such claims is unlikely, in the event that we are unable to raise the necessary funds to satisfy such claims we may decide to file bankruptcy.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. The results of these assumptions form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A summary of significant accounting policies is included in Note 2—Summary of Significant Accounting Principles in the accompanying consolidated financial statements. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.

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We do not use derivative financial instruments to hedge exposures to cash flow, market or foreign-currency risks. However, we have entered into certain other financial instruments and contracts, such as our convertible note financing arrangements and the Karlsson and Very Hungry Notes that contain embedded derivative features. The convertible note financing arrangements were carried as derivative liabilities, at fair value, in our financial statements until their conversion or the conversion option was no longer available.

Equity-Based Compensation

We recognize compensation costs for share-based awards based on the estimated fair value of the employee awards on their grant date with estimated fair values determined through a Black-Scholes option pricing model. Compensation costs are recognized on a straight-line basis over each issuance’s respective vesting period.

From time to time, we will issue share-based awards, including options and warrants, to non-employees. The fair value of these awards issued to non-employees (typically consultants) is measured on the earlier of the date the performance is complete or the date the consultant is committed to perform. In the event that the measurement date occurs after an interim reporting date, the awards are measured at their then-current fair value at each interim reporting date, estimated using the Black-Scholes pricing model. The fair value of awards is expensed on a straight-line basis over the associated performance period.

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Warrants

We classify our issued and outstanding warrants as liabilities or equity in its financial statements, depending upon the criteria met and specific circumstances at a given point in time. Refer to Note 11—Equity Based Compensation and Note 12—Shareholders’ Equity of the accompanying audited annual financial statements for additional information.

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beds in the Holbrook Basin are hosted within the Permian Supai Salt Formation.  The mineralized zones are located at relatively shallow depths, generally less than 1,600 feet.

Our Holbrook Project currently consists of permits and leases on 143 mineral estate sections spanning approximately 88,175 acres in the Holbrook Basin of eastern Arizona.

We hold the mineral rights to 101 sections covering approximately 61,661 acres that were privately owned by third parties, own mineral rights in fee on 8 sections covering approximately 5,107 acres and hold exploration permits from the Arizona State Land Department, or ASLD, on 34 sections covering approximately 21,406 acres.

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Privately Leased Sections

We obtained our mineral rights to the 101 privately owned sections in July 2011 by entering into a Potash Sharing Agreement, or PSA, with the private parties that own the mineral interests and/or royalties on these sections.  We were required to make a lump sum payment following completion of our initial resource report and a lump sum payment following the submission of our application for a mineral lease from the State of Arizona, and have made both payments.  We are required to make annual rent payments of $30,000 on January 1 st  of each year.

Once in production, we will be required to make royalty payments based on gross sales of potash extracted from these sections. The royalty payments will be on a sliding scale based on the average potash prices received and in no event shall the royalties, as a percentage of gross sales, be less than the rates we pay to the State of Arizona for potash mined on state lands.  The term of this agreement is indefinite so long as mineral operations are conducted on a continuous basis from these sections.

Mineral operations shall be deemed “conducted on a continuous basis” unless and until the earlier of: (i) a period of 180 consecutive days elapses in which no development, mining or processing operations are conducted or (ii) when we, in our sole discretion, decide to abandon the development of any facilities necessary for the extraction, processing, and sales of potash.

Our counter parties have the right to terminate the PSA if (i) we fail to make any payments under the PSA but only after written notice and providing a 10-day cure period, (ii) production of potash has not commenced by July 27, 2018 or (iii) there has been a bankruptcy filing by or against us.

Fee Sections

We own the mineral rights in fee on 8 sections covering approximately 5,107 acres.

Arizona State Land Sections

We hold exploration permits from the ASLD on 34 sections covering approximately 21,406 acres.  These exploration permits are renewable for one year terms for up to five years in total. We are required to make minimum exploration expenditures or annual leasehold payments of $20 per acre to the Arizona State Land Department. We have 14 exploration permits that were originally acquired in 2009 and whose five year term ends in 2014 and 20 exploration permits that were originally acquired in 2010 and whose five year term ends in 2015.

In February 2013 we submitted our application to the ASLD to convert our exploration permits into mineral leases and are progressing the conversion process. We expect this process to be completed before the expiration of any of our exploration permits.  If not completed, we will reapply for any exploration permits that expire. As part of the granting of a mineral lease the State of Arizona will impose a royalty regime on any potash mined from state lands. We expect our royalty rates to be consistent with other mining royalty rates in Arizona.

Surface Agreements

We have surface use agreements with various parties requiring annual payments of approximately $85,535.

Other Royalties or Burdens

In addition to the royalties described above (i) under the PSA for privately held sections and (ii) to be determined by the State of Arizona in conjunction with the issuance of our mineral lease, we have (iii) royalties for 3% of the gross potash sales received by AWP and (iv) 1% of all gross revenues received by Prospect Global Resources, Inc.

Grandhaven Royalty Interest

Grandhaven holds a 1% overriding royalty interest in the gross proceeds received by our subsidiary AWP from the extraction of potash from lands and state exploration permits held by AWP on November 22, 2011. Grandhaven also holds an option (the “Grandhaven Option”), that just became effective on December 31, 2013 and is now exercisable at any time, to receive shares of our common stock valued at $212.50 per share in exchange for the fair market value of any royalty interest surrendered.

In addition, if;

(i) the Arizona State Land Department declines to issue any lease to us with respect to any state exploration permit, or

(ii) the Arizona State Land Department terminates any state exploration permit, or

(iii) the Arizona State Land Department refuses to consent to the assignment of any royalty interests in any Arizona state lease, or requires any reduction of or imposes any condition on such royalty interests as a condition of approving an assignment of such royalty interests or approving any royalty reduction or other action with respect to a state lease,

then Grandhaven has the option to receive substitute royalty interests from us in the same number of acres in portions of our private mineral leases, in a percentage sufficient to compensate Grandhaven for the reduced royalty interests in the affected state leases.

If we have not been issued any Arizona state leases as of the date that we convey the assignment of the royalty interest in our private mineral leases, Grandhaven may elect to exchange their royalty in our Arizona state leases for a 1.388% royalty interest in all of our private mineral leases.

On February 7, 2014 we received notice from Grandhaven regarding the closing of the conveyance of their royalty interests in the fee and state mineral rights owned by AWP. As of April 4, 2014 the assignment of their royalty interest had not been completed.

Infrastructure

The nearby towns of Holbrook, St. Johns, and Show Low provide locations for personnel, supplies, equipment and accommodation. Electricity is provided to the area by three coal-fired power stations, the Cholla, Coronado and Springerville Plants.

Proposed Mining and Processing

Due to the relatively shallow depth of the potash, year-round warm weather, relatively dry climate and consistent quality of the mineralization in our acreage, we intend to construct a conventional underground mine and process our ore on-site through surface floatation. The majority of current potash produced in North America use conventional mining techniques.

Exploration

During calendar year 2011, we completed approximately 70 miles of 2D seismic testing and the drilling and coring of 12 holes. This was combined with the historic information from approximately 58 holes in our project area, the results of which were used to delineate the potash potential on our acreage. During calendar year 2012, we completed the drilling of an additional 16 holes. During calendar year 2013 we completed the drilling of 17 holes. As part of our project exploration work, in 2011 we engaged third party technical consultants (i) to complete a NI 43-101 mineral resource estimate, which was updated in August 2012, and (ii) to prepare a

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PEA. In 2013, we engaged a third party technical consultant to prepare a pre-feasibility study on the Holbrook Project. We believe we have completed the drilling necessary to complete a DFS and no further drilling is currently planned.

Our resource estimate, PEA and pre-feasibility study are preliminary in nature and mineral resources are not mineral reserves and have not demonstrated economic viability. The resource estimate, as updated, has not estimated any mineral reserves for the Holbrook Project and there is no certainty that the estimates in the resource estimate, as updated, will be realized. As defined by SEC Industry Guide 7, our resource currently does not meet the definition of proven or probable reserves and further studies that demonstrate the economic viability of the project must be completed, and necessary permits and additional property rights must be obtained. See “Cautionary Note to Investors Regarding Mineral Disclosures” and “Risk Factors” contained in elsewhere herein this prospectus.

Off-take Agreement

In October 2012, we signed a 10-year potash supply agreement with Sichuan Chemical, a large state owned Chinese chemical company, pursuant to which Sichuan will purchase at least 500,000 tonnes of potash from us per year on a take or pay basis. Other key terms of this agreement include:

·                   Sichuan holds an option to purchase up to an additional 500,000 tonnes of potash per annum during each year of the agreement;

·                   Sichuan has the exclusive rights to sell and distribute potash in the People’s Republic of China on our behalf; and

·                   Sichuan may terminate the agreement if we have not produced and sold an aggregate of 100,000 tonnes of potash from the Holbrook Basin in a 45 consecutive day period by December 31, 2015. We will not meet this condition by December 31, 2015.

Permitting, Governmental Regulation and Environmental, Health and Safety

Our activities subject us to an evolving set of federal, state and local health, safety and environmental, or HSE, laws that regulate or propose to regulate surface disturbance, air and water quality impacts and safety procedures followed by our employees. Upon commencement of potash production, we will also need to comply with laws that regulate or propose to regulate our mining activities, including the management and handling of raw materials, disposal, storage and management of hazardous and solid waste, the safety of our employees and post-mining land reclamation. The Holbrook Project is located entirely on state or private land, therefore, we must obtain numerous governmental, environmental, mining, access and other licenses, permits and approvals authorizing our operations from instrumentalities within the State of Arizona. Because our activities are contemplated to occur within state jurisdiction, we do not anticipate needing federal authorizations, from agencies such as the National Forest Service or the Bureau of Land Management.

The three most critical permits for the Project are:

(i)                                      Air Quality Control Permit (received)

(ii)                                   Conversion of our exploration permits into mineral leases (application submitted)

(iii)                                Aquifer Protection Permit (expected to complete in 2014).

In February 2013, we submitted our application for the Air Quality Control permit to the Arizona Department of Environmental Quality (“ADEQ”). In September 2013, we received an Air Quality Control Permit to construct and operate a 2.2 million ton per year potash mine, however, because we currently contemplate moving forward with a mine that is substantially smaller than 2.2 million tons, this permit will likely need to be amended to reflect the reduced operational capacity and annual activity.  If an amendment is required we anticipate that it would take several months to process.

We have submitted our application to convert our exploration permits into a mineral development lease to the Arizona State Land Department (“ASLD”). The ASLD is currently reviewing the application, including certain revisions that we submitted in the first quarter of 2014 and we expect to receive our mineral lease in 2014.  We do not expect the processing of the amended application will cause any delays in the development of the Holbrook Project.

Our existing state exploration permits require us to post reclamation bonding of $65,000 in order to drill on state lands and make minimum exploration expenditures or annual leasehold payments of $20 per acre to the ASLD. If we commence production on these leases, we will then be required to make royalty payments based on the revenue generated by the potash we produce from the leased land.  The State of Arizona will determine the royalty prior to issuing the mineral lease based upon its appraisal conducted during the processing of the Draft Mineral Development Report.  The royalty contained within the lease may be a fixed royalty rate subject to adjustment or a sliding scale.  We expect our royalty rates to be consistent with other mining royalty rates in Arizona.

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In addition, we hold mineral rights for land that is within the expanded boundaries of the Petrified Forest National Park. We have no plans to drill or develop these holdings at the present time. Future development of these mineral rights will require working closely with both the State of Arizona and park officials and would likely require additional specific Federal authorizations at that time.

We cannot predict the impact of new or changed laws, regulations or permitting requirements, or changes in the ways that such laws, regulations or permitting requirements are enforced, interpreted or administered. HSE laws and regulations are complex, are subject to change and have become more stringent over time. It is possible that greater than anticipated HSE capital expenditures or reclamation and closure expenditures will be required in the future. We expect continued government and public emphasis on environmental issues will result in increased future investments for environmental controls at our operations.

Market Conditions and Trends

Fertilizers serve a fundamental role in global agriculture by providing essential crop nutrients that help sustain both the yield and the quality of crops. The three primary nutrients required for plant growth are nitrogen, phosphate, and potassium, and there are no known substitutes for these nutrients. A proper balance of each of the three nutrients is necessary to maximize their effectiveness.

Potash is primarily used as an agricultural fertilizer due to its high potassium content. Potassium helps regulate plants’ physiological functions and improves plant durability, providing crops with protection from drought, disease, parasites, and cold weather. Unlike nitrogen and phosphate, the potassium contained in naturally-occurring potash does not require additional chemical conversion to be used as a plant nutrient.

Potash demand depends primarily on the demand for fertilizer, which is based on the total planted acreage, crop mix, soil characteristics, fertilizer application rates, crop yields and farm income. Each of these factors is affected by current and projected grain stocks and prices, agricultural policies, improvements in agronomic efficiency, fertilizer application rates and weather.

The estimated worldwide annual capacity of potash production is now in excess of recent annual demand and it is expected that this supply surplus will continue for the next few years; although this excess capacity is generally held by larger, more well-established producers that have a history of managing production levels to more closely meet worldwide demand.

We believe the long-term demand for potash remains positive and will be driven by the continued growth in emerging economies, a growing global population and the upgrading of diets worldwide amongst the growing middle class. Specifically, we believe that as the emerging markets grow and the members of their middle classes increase, the diet of this increasingly affluent population will change and drive demand for more agricultural products. This incremental demand on the agricultural industry will translate, in our opinion, into a sustained increase in demand for potash and fertilizer generally.

Competitive Business Conditions

Once we have production, we will sell into commodity markets and compete based on the delivered price of potash, timely service, reliability of supply, and product quality. Products must maintain particle size and potassium oxide (“K 2 O”) content benchmarks in order to compete effectively.

We will compete primarily with much larger potash producers, principally Canadian producers and, to a lesser extent, producers located in Russia, Chile, Germany, and Israel. As a smaller producer, we will seek to maintain an advantage through customized and timely service for our customers, and a focus on the markets in which we have a transportation cost advantage.

Within the Holbrook Basin, we know of at least two other companies currently engaged in the exploration of potash.  To the best of our knowledge, neither of these companies has yet made a decision to move forward with a plan to construct a potash mine.

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this matter, subject to their determination that counsel is satisfactory, or, alternatively, we may authorize the underwriters to employ counsel at our expense.  No further correspondence has been received from this stockholder.

Directors hold office for a period of one year from their election at the annual meeting of stockholders and until a particular director’s successor is duly elected and qualified. Officers are elected by, and serve at the discretion of, our board of directors. None of the above individuals has any family relationship with any other. It is expected that our board of directors will elect officers annually following each annual meeting of Stockholders.

We do not expect or intend that each director will have the same background, skills and experience; we expect that board members will have a diverse portfolio of backgrounds, skills and experiences. One goal of this diversity is to assist the board of directors as a whole in its oversight and advice concerning our business and operations. The directors’ biographies note each director’s relevant experience, qualifications, and skills that led to the conclusion that such individual should serve as a director of our company.

·                   Senior Leadership Experience. Directors who have served in senior leadership positions are important to us, as they bring experience and perspective in analyzing, shaping, and overseeing the execution of important operational and policy issues at a senior level. These directors’ insights and guidance, and their ability to assess and respond to situations encountered in serving on our board, may be enhanced if their leadership experience has been developed at start-up businesses or organizations that experienced rapid growth, faced significant competition, and/or involved rapidly evolving business models.

·                   Industry Experience. Directors who have worked at a senior level or have invested substantially in mining or other natural resources businesses bring valuable knowledge, experience and perspective that can help our board and management make strategic development and operations decisions.

·                   Business Development Experience. Directors who have a background in business development and in acquisitions can provide insight into developing and implementing strategies for growing our business through combination with other organizations. Useful experience in this area includes consideration of “make versus buy” and “analysis of the fit” of a proposed acquisition with a company’s strategy, the valuation of transactions, and management’s plans for integration with existing operations.

·                   Financial Expertise. Knowledge of financial markets, financing and funding operations, and accounting and financial reporting processes is important because it assists our directors in understanding, advising, and overseeing our capital structure, financing and investing activities, financial reporting, and internal control over such activities.

Dr. Barry Munitz: Chairman of the board of directors.   Dr. Munitz joined our board of directors as chairman in February 2011. From August 2010 to February 2011, Dr. Munitz served as chairman of the board of directors of Old Prospect Global Resources, Inc., our wholly owned subsidiary. Dr. Munitz has been Trustee Professor at the California State University, Los Angeles campus since 2006. Between 2005 and 2010, Dr. Munitz chaired California’s P-16 Council, an organization that develops strategies to improve education in the State of California. Dr. Munitz served as President and CEO of the J. Paul Getty Trust from 1997 to 2006 where he was responsible for the two museums (Brentwood and Malibu), the Conservation and Research Institutes, the philanthropic foundation, the investment portfolio, and all education outreach programs. From 1991 to 1997, he served as Chancellor of the California State University (CSU)—a twenty-three campus system which is the largest senior university in the United States. Prior to that role, Dr. Munitz was vice chairman of the publicly held company MAXXAM and president of the private company which was its major stockholder (Federated Development) where he was involved for a decade in their natural resources activity, as well as timber, banking, energy and real estate. During the past decades, he served as a Trustee of Princeton University, the Seattle Art Museum, and the Courtauld Institute in London, as well as a corporate director at SunAmerica and Kaufman & Broad. Dr. Munitz is the immediate past chair and current vice chair of the

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board of Sierra Nevada College, is president of the Cotsen Foundation for the Art of Teaching and for Academic Research, is a governor of the three Eli and Edythe Broad Family Foundations and a corporate director at SallieMae. Dr. Munitz received a Bachelor’s degree in Classics and Comparative Literature from Brooklyn College, and received a Masters and a Ph.D. from Princeton University. Dr. Munitz is a fellow of the American Academy of Arts and Sciences and holds honorary degrees from Whittier College, Claremont University, the California State University, the University of Southern California, Notre Dame and the University of Edinburgh.

The board believes that Mr. Munitz brings to the board significant senior leadership and industry experience from his past business experience in senior management roles and his expertise in analyzing investments in the natural resources industry.

Chad Brownstein: Executive Vice Chairman of the board of directors.   Mr. Brownstein, one of our co-founders joined our board of directors as non-executive vice-chairman in August 2011 and became executive vice chairman in August 2012. Mr. Brownstein was an advisor to Crescent Capital Group (formerly Trust Company of the West Leveraged Finance Group) where he focuses on investing in Special Situations. Mr. Brownstein was a Member of Crescent Capital Group from January 2011 to July 2012 and was Senior Vice President at Trust Company of the West from February 2009 to December 2010. Previously, he was a Senior Advisor at Knowledge Universe Ltd., where he focused on turnaround operations and private equity investing. Prior to that, he was a Partner at ITU Ventures making venture and growth investments with a specialization in corporate strategy. Earlier in his career, Mr. Brownstein worked at Donaldson Lufkin & Jenrette in the Merchant and Investment Banking divisions. Mr. Brownstein is a member of the Cedars Sinai Board of Governors, California Competes Council, and serves on the board of directors for Los Angeles Conservation Corps and First PacTrust Bancorp (a Nasdaq listed company). Mr. Brownstein attended Columbia Business School and received a BA from Tulane University.

The board believes that Mr. Brownstein brings to the board significant senior leadership, industry, and business development experience and financial expertise from his past business experience in senior management roles, working with venture stage companies at ITU Ventures, his experience with Donaldson Lufkin & Jenrette and his expertise in analyzing investments in the natural resources industry.

J. Ari Swiller: Director.   Mr. Swiller joined our board of directors in February, 2011. From October 2010 to February 2011, Mr. Swiller served as a director of Old Prospect Global Resources, Inc., our wholly owned subsidiary. Mr. Swiller co-founded the Renewable Resources Group (RRG) in 2003. RRG has developed two million acre-feet (AF) of water projects, over a gigawatt of renewable energy and marketed hundreds of water rights in nine states. Currently the firm owns and/or manages more than 100,000 acres of farmland for the purpose of water, renewable energy, and/or carbon development. Mr. Swiller’s responsibilities include managing all aspects of the business. Prior to founding RRG, Mr. Swiller was a Principal in The Yucaipa Companies; he served as Vice President of External Affairs at Ralphs Grocery Company and Executive Director of The Ralphs/Food4Less Foundation. He serves on the board of rfXcel Corporation, which develops supply chain performance improvement software. Mr. Swiller also serves on the Board of the Los Angeles Conservation Corps, the Miguel Contreras Educational Foundation and Falcon Waterfree Technologies. Mr. Swiller earned a B.A. from Cornell University.

The board believes that Mr. Swiller brings to the board significant senior leadership, industry and business development experience and financial expertise from his past business experience in senior management roles, particularly his experience as founder and principal of RRG.

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Reed Dickens: Director.   Mr. Dickens joined our board of directors in October 2013.He has been the founder and principal of Dickens Capital Group, a corporate advisory business platform, since August 2009. From August 2009 to December 2011, Mr. Dickens served as the Chairman and CEO of Marucci Sports, which Forbes Magazine recognized as one of the most promising growth brands in America. Mr. Dickens continues to serve on the board of directors of Marucci Sports. From 2005 to 2009, Mr. Dickens served as the CEO of Outside Eyes, a firm that he founded. Outside Eyes creates crisis management and branding strategies for a diverse and high-profile client list. Mr. Dickens continues to serve as Outside Eyes’ senior strategist. In addition, Mr. Dickens currently serves as a senior advisor to TPG Capital, L.P.’s portfolio of growth companies. Between 2001 and 2003 Mr. Dickens served as assistant press secretary for President George W. Bush, where he assisted in managing the relationship between the White House Press Corps and the West Wing Press Office. Since 2005, Mr. Dickens has traveled the country as a corporate speaker and frequently contributed on CNN, Fox News, and MSNBC. Mr. Dickens received a Bachelor’s degree in Communications from Louisiana State University of Shreveport.

The board believes that Mr. Dickens brings to the board significant senior leadership, industry and business development experience and financial expertise from his past business experience in senior management roles, his experience managing portfolio investments at BlackRock and his expertise in analyzing natural resources investments.

Daniel J. Neumann: Director.   Mr. Neumann joined our board of directors in October 2013.  He is currently a Managing Director and Portfolio Manager with GRT Capital Partners, LLC, a Boston-based asset management firm, where he and several former BlackRock, Inc. colleagues are helping to launch a new energy sector investment platform. From 2005 until joining GRT Capital Partners in May 2013, Mr. Neumann was a Managing Director and Portfolio Manager at BlackRock, Inc. While at Blackrock, Mr. Neumann managed The BlackRock Energy and Resources Trust (NYSE Ticker: BGR), an $800 million publically traded closed-end equity energy fund with the capability to invest globally and across all company sizes, including private equity. During this time, Mr. Neumann also assisted with the following portfolios: The BlackRock Resources and Commodities Strategy Trust (NYSE: BCX), The BlackRock All Cap Energy Fund (BACAX), and The BlackRock Small Cap Energy Fund (SSGRX). Prior to his career at BlackRock, Mr. Neumann served as Vice President at State Street Research & Management, where he was a research analyst, generating investment ideas in the energy and related sectors. Prior to his work at State Street Research, Mr. Neumann worked an associate analyst with the Equity Research Department of Bank of America Securities, LLC and as an analyst in the Investment Banking and Financial Institutions Group for PaineWebber, Inc. Mr. Neumann, a CFA Charterholder, received his Bachelor’s degree in Economics and English from Boston College.

The board believes that Mr. Neumann brings to the board significant senior leadership, industry and business development experience and financial expertise from his past business experience in senior management roles and his expertise in analyzing natural resources investments.

Damon Barber: President, CEO and Secretary.   Mr. Barber became our president and chief executive officer on March 7, 2013.  Mr. Barber served as our chief financial officer from December 2012 to March 2013. Prior to joining Prospect Global, Mr. Barber was the chief executive officer and an executive director of CST Mining Group Limited from April 2010 to September 2011. While at CST, Mr. Barber led a $600 million public equity raise to acquire two copper mine development projects and subsequently directed the development of one project into production and directed the development of the second project to where it was sold for $505 million and returned CST approximately two times its total investment in the project. From June 2010 to September 2011, Mr. Barber also served as chairman of Marcobre S.A.C., a joint venture between CST and Korea Resources Corporation and LS Nikko. From October 2011 to December 2012, Mr. Barber worked as a consultant in the natural resources industry and managed his personal investments. Prior to joining CST, Mr. Barber was a managing director at Deutsche Bank from October 2007 to January 2010 and also served as head of Deutsche Bank’s metals and mining investment banking practice in Asia-Pacific from January 2009 until January 2010. From February to March 2010, Mr. Barber provided consulting services. Mr. Barber has over 20 years of experience in the natural resources industry in both management and advisory roles, including over 12 years advising and assisting natural resource companies on mergers & acquisitions, debt and equity capital raisings, leveraged buy-outs and project financings during his time with Deutsche Bank and from 1998 to 2007 as a member of Credit Suisse’s energy group. Prior to this, Mr. Barber was a bond trader at Credit Suisse First Boston from 1996 to 1998 and was also a section foreman at CONSOL Energy Inc.’s Loveridge Mine from 1990 to 1994. Mr. Barber holds a Bachelor of Science degree in Mining Engineering, cum laude, from the University of Kentucky and a Master of Business Administration degree, with distinction, from the Wharton School of Business.

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Gregory M. Dangler: Interim CFO. Mr. Dangler has a broad background in private equity investing, development of large-scale technical infrastructure projects, and the financing and management of international growth companies. Mr. Dangler served as our vice president of finance from March 2012 until March 2013 when he became our interim chief financial officer. From October 2011 to March 2012, Mr. Dangler managed his investments. Prior to that, Mr. Dangler served as chief executive officer of a technology and telecommunications company from October 2008 to October 2011. As the founding executive, he helped the company raise capital and establish its global presence with operating interests in Africa and South America.  Prior to that, Mr. Dangler was an associate with ITU Ventures, a leading private equity and venture capital firm focused on growth stage technology investments. While with ITU, Mr. Dangler executed private and public equity transactions, directed activity for mergers and acquisitions, and provided strategic support to portfolio companies. Mr. Dangler began his professional career as an Air Force officer managing complex and large-scale infrastructure projects. Mr. Dangler received a Meritorious Service Medal for outstanding achievement in delivering a large-scale technology program, which directly supported over 20 national security space launch missions. Mr. Dangler received a BS in Mechanical Engineering from the United States Air Force Academy and an MBA in Finance from the University of Southern California’s Marshall School of Business.

Wayne Rich: Senior Vice President, Accounting and Treasury and Treasurer.   Mr. Rich served as chief financial officer and vice president of finance from September 6, 2011 until December 13, 2012.  Since December 13, 2012, Mr. Rich has served as our Senior Vice President Accounting and Treasury. Mr. Rich served as treasurer and director of corporate finance at Thompson Creek Metals Inc., a publicly traded metals and mining company, from October 2008 until September 2011. Prior to that he served in several capacities at The Doe Run Resources Corporation, an integrated mining and metals manufacturing company, from August 1998 to October 2008, including as treasurer from April 2007 to October 2008 and assistant treasurer from July 2004 to April 2007. Mr. Rich holds a master’s in business administration from Illinois State University and a bachelor’s of science in accountancy from Eastern Illinois University.

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