UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

December 31, 2012

or

[  ]

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

to

Commission File Number

333-150775

POTASH AMERICA, INC.

(Exact name of registrant as specified in its charter)

Nevada

41-2247537

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

8th Floor – 200 South Virginia Street, Reno, Nevada

89501

(Address of principal executive offices)

(Zip Code)

775.398.3019

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

[X]

YES

[  ]

NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-K (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

[X]

YES

[  ]

NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act

Large accelerated filer

[  ]

Accelerated filer

[   ]

Non-accelerated filer

[  ]

(Do not check if a smaller reporting company)

Smaller reporting company

[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act

[  ]

YES

[X]

NO

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.

[  ]

YES

[  ]

NO

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

148,665,000 common shares issued and outstanding as of February 12, 2013.

 

 

PART 1 – FINANCIAL INFORMATION

Item 1. Financial Statements

 

Our unaudited interim financial statements for the three and nine months ended December 31, 2012 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with United States generally accepted accounting principles.

 

 

 

 

 

 

 

-2-

 

 

 

 

 

 

 

 

 

 

 

 

POTASH AMERICA, INC.

 

(AN EXPLORATION STAGE COMPANY)

 

FINANCIAL STATEMENTS

 

DECEMBER 31, 2012

 

 

 

 

 

 

 

 

 

 

 

POTASH AMERICA, INC.

 

(AN EXPLORATION STAGE COMPANY)

 

TABLE OF CONTENTS

 

DECEMBER 31, 2012

 

 

 

Balance Sheets (Unaudited) as of
December 31, 2012 and March 31, 2012	F-1
Statements of Operations (Unaudited) for the three and nine months ended
December 31, 2012 and 2011 and for the period from
July 31, 2007 (Date of Inception) to December 31, 2012	F-2
Statements of Cash Flows (Unaudited) for the nine months ended
December 31, 2012 and 2011 and for the period from
July 31, 2007 (Date of Inception) to December 31, 2012	F-3
Notes to the Financial Statements	F-4 - F-14

 

 

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

BALANCE SHEETS (UNAUDITED)

AS OF DECEMBER 31, 2012 AND MARCH 31, 2012

 

ASSETS
	December 31,	March 31,
	2012	2012
Current Assets
Cash and cash equivalents	$ 8,270	$ 69,323
Prepaid expenses	111,736	132,058
Deposits	500	50,000
Total Current Assets	120,506	251,381
Fixed Assets
Mining claim	50,000	515,645
Total Fixed Assets	50,000	515,645
Other Assets
Prepaid expenses	-	107,639
Total Other Assets	-	107,639
Total Assets	$ 170,506	$ 874,665
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities
Accrued expenses	$ 2,381	$ 5,761
Deferred compensation	155,500	65,500
Accrued interest	85,407	28,327
Notes payable – related parties	35,500	35,500
Convertible line of credit, net of debt discount	493,425	-
Derivative liability	912,386	-
Line of credit	664,000	1,030,000
Total Liabilities	2,348,599	1,165,088
Stockholders’ Deficit
Common stock, par value $0.0001; 200,000,000 shares authorized, 148,665,000 and 147,665,000 shares issued and outstanding	14,867	14,767
Treasury stock	(10,000)	-
Additional paid in capital	1,488,078	1,233,927
Deficit accumulated during the exploration stage	(3,671,038)	(1,539,117)
Total Stockholders’ Deficit	(2,178,093)	(290,423)
Total Liabilities and Stockholders’ Deficit	$ 170,506	$ 874,665

 

 

The accompanying notes are an integral part of these financial statements

 

F-1

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2012 AND 2011

FOR THE PERIOD FROM JULY 31, 2007 (INCEPTION) TO DECEMBER 31, 2012

 

		Three Months Ended								Nine Months Ended								Period from July 31, 2007 (Inception)
		December 31,								December 31,								to December 31,
		2012				2011				2012				2011				2012
REVENUE		$	—			$	—			$	—			$	—			$	—
OPERATING EXPENSES
Impairment of mining interest			710,885				—				710,885								710,885
Professional fees			39,295				20,315				159,540				59,169				329,343
Transfer agent and filing fees			854				1,926				7,724				14,164				46,733
Consulting			8,800				60,296				80,797				110,446				252,223
Web development			1,047				1,226				3,618				20,740				31,726
Stock compensation (note 11)			8,137				256,257				165,891				654,788				1,135,062
Exploration costs			2,525				2,500				176,856				26,700				215,116
General and administrative			23,110				37,384				73,719				66,088				168,592
TOTAL OPERATING EXPENSES			794,653				379,904				1,379,030				952,095				2,889,680
LOSS FROM OPERATIONS			(794,653	)			(379,904	)			(1,379,030	)			(952,095	)			(2,889,680	)
OTHER INCOME (EXPENSES)
Interest expense			(17,110	)			(8,161	)			(57,080	)			(13,068	)			(85,547	)
Derivative expense			—				—				(184,044	)			—				(184,044	)
Change in derivative			(7,818	)			—				(30,109	)			—				(30,109	)
Amortization of debt discount			(223,777	)			—				(481,658	)			—				(481,658	)
TOTAL OTHER INCOME (EXPENSES)			(248,705	)			(8,161	)			(752,891	)			(13,068	)			(781,358	)
NET LOSS PRIOR TO INCOME TAXES			(1,043,358	)			(388,065	)			(2,131,921	)			(965,163	)			(3,671,038	)
PROVISION FOR INCOME TAXES			—				—				—				—				—
NET LOSS		$	(1,043,358	)		$	(388,065	)		$	(2,131,921	)		$	(965,163	)		$	(3,671,038	)
NET LOSS PER SHARE: BASIC AND DILUTED		$	(0.01	)		$	(0.00	)		$	(0.01	)		$	(0.01	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING			148,665,000				147,323,266				148,340,912				147,323,266

 

 

The accompanying notes are an integral part of these financial statements

 

F-2

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED DECEMBER 31, 2012 AND 2011

FOR THE PERIOD FROM JULY 31, 2007 (INCEPTION) TO DECEMBER 31, 2012

 

	Nine Months Ended		Period from July 31, 2007 (Inception) to
	December 31,		December 31,
	2012	2011	2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period	$    (2,131,921)	$    (965,163)	$    (3,671,038)
Stock-based compensation (note 11)	165,891	654,788	1,135,062
Derivative expense	184,044	-	184,044
Change in derivative	30,109	-	30,109
Amortization of debt discount	481,658	-	481,658
Changes in assets and liabilities:
(Increase) in prepaid expenses	127,962	220	(111,736)
(Increase) in deposit	49,500	30,000	(500)
Increase (decrease) in accrued expenses	(3,381)	(7,264)	2,380
Increase in accrued interest	57,080	13,068	85,407
Increase in deferred compensation	90,000	21,400	155,500
Net Cash Used in Operating Activities	(949,058)	(252,951)	(1,709,114)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of mineral properties	465,645	(514,865)	253,640
Net Cash Used in Investing Activities	465,645	(514,865)	253,640
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable – related parties	-	-	49,744
Proceeds from (payments on) line of credit	(366,000)	790,000	664,000
Proceeds from line of credit - convertible	710,000	-	710,000
Proceeds from sale of stock	88,360	-	50,000
Purchase of treasury stock	(10,000)	-	(10,000)
Net Cash Provided by Financing Activities	422,360	790,000	1,463,744
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(61,053)	22,184	8,270
Cash and cash equivalents, beginning balance	69,323	7,814	-
Cash and cash equivalents, ending balance	$           8,270	$      29,998	$           8,270
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$                   -	$                -	$                   -
Cash paid for income taxes	$                   -	$                -	$                   -
SUPPLEMENTAL NON-CASH INVESTING AND FINANCING INFORMATION:
Forgiveness of debt from former shareholder converted to capital	$                   -	$                -	$         14,244
Stock option issues as prepaid expense	$       107,639	$                -	$       215,777
Issuance of common stock to acquire mineral properties	$       196,000	$                -	$       196,000

The accompanying notes are an integral part of these financial statements

 

F-3

 

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 1 – NATURE OF OPERATIONS

 

Potash America, Inc. (formerly Adtomize Inc.) (“the Company” or “PTAM”), was incorporated in the state of Nevada on July 31, 2007. PTAM’s primary focus is the development of fertilizer and agri-business assets. Such assets may include Potash, Montmorillonite, Bentonite and Gypsum. The Company seeks to acquire known deposits whose economic value has recently changed with market pricing levels, and develop these assets into agri-products.

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

Exploration Stage Company

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to accounting and reporting by exploration stage companies.  An exploration stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues.

 

Basis of Presentation

The accompanying interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, stockholders’ deficit or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.  The interim unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, which contains the annual audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended March 31, 2012. The interim results for the period ended December 31, 2012 are not necessarily indicative of the results for the full fiscal year. The interim unaudited financial statements are presented in USD.

 

Accounting Basis

The Company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).  The Company has adopted a March 31 fiscal year end.

 

Financial Instrument

The Company's financial instrument consists of cash, prepaid expenses, deposits, accrued expenses, deferred compensation, amounts due to stockholders and a line of credit.

 

The amounts due to stockholders are non-interest bearing. It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where separately disclosed.

 

Cash and Cash Equivalents

PTAM considers all highly liquid investments with maturities of three months or less to be cash equivalents. At December 31, 2012 and March 31, 2012, respectively, the Company had $8,270 and $69,323 of cash.

 

F-4

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Mineral rights, property and acquisition costs

Since March 31, 2011, the Company is primarily engaged in the acquisition and exploration of mining properties. The Company has not yet realized any revenues from its planned operations.

 

The Company capitalizes acquisition and option costs of mineral rights as tangible assets. Upon commencement of commercial production, the mineral rights will be amortized using the unit-of-production method over the life of the mineral rights. If the Company does not continue with exploration after the completion of the feasibility study, the mineral rights will be expensed at that time.

 

The costs of acquiring mining properties are capitalized upon acquisition.  Mine development costs incurred to develop and expand the capacity of mines, or to develop mine areas in advance of production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current exploration or to maintain assets on a standby basis are charged to operations.  Costs of abandoned projects are charged to operations upon abandonment.  The Company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.  Evaluation of the carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.

 

Impairment of long-lived assets

The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17, Measurement of an Impairment Loss, if events or circumstances indicate that their carrying amount might not be recoverable.  As of December 31, 2012, the Company has determined not to continue exploring on the Sodaville Claims, based on scientific results and the value of the property will not be recoverable and has been impaired. The Company will continue exploring Newfoundland Property and no events or circumstances have happened to indicate that the related carrying values of the property may not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

 

Advertising

The Company expenses advertising costs as incurred. The Company has had no advertising activity since inception.

 

Revenue Recognition

The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

F-5

 

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.

 

Basic Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of December 31, 2012.

 

During the year ended March 31, 2011, the Company enacted an 80 to 1 forward stock split. All share and per share data has been adjusted to reflect such stock split.

 

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. On March 31, 2011, the Company instituted a Stock Option Plan which allows for the issuance of 3,000,000 shares of common stock to the Company’s management, employees and consultants. As of December 31, 2012, in lieu of compensation the Company issued 465,000 common stock shares and 1,340,000 in stock options.

 

Income Taxes

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

 

Recent Accounting Pronouncements

PTAM does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

NOTE 3 – MINING PROPERTY

 

On June 6, 2011, we entered into and closed a property acquisition agreement with Habitants Minerals Ltd. Pursuant to the terms of the agreement; we acquired an undivided 100% interest in certain unpatented mining claims located in Western Newfoundland, Canada which we refer to as the

 

F-6

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 3 – MINING PROPERTY (CONTINUED)

 

“Newfoundland Property”. Pursuant to the terms of the agreement, we agreed to provide the following payments to Habitants:

 

The aggregate consideration of $50,000 consisting of the following:

 

·         $30,000 which was previously provided to Habitants, and

·         the balance of $20,000 which was provided on the closing of the agreement.

 

If we identify any material defect in Habitant’s title to the Newfoundland Property, we shall give Habitants notice of such defect. If the defect has not been cured within 30 days of receipt of such notice, we shall be entitled to take such curative action as is reasonably necessary, and shall be entitled to deduct the costs and expenses incurred in taking such action from the payments then otherwise due or accruing due to Habitants. If there are no such payments, we shall be entitled to a refund in the amount of said costs and expenses.

 

If any third party asserts any right or claim to the Newfoundland Property or to any amounts payable to Habitants, we may deposit any amounts otherwise due to Habitants in escrow with a suitable agent until the validity of such right or claim has been finally resolved. If we deposit said amounts in escrow, we shall be deemed not in default under this agreement for failure to pay such amounts to Habitants.

 

On August 31, 2011, we entered into a purchase and sale agreement with Ms. Kim Diaz and Sonseeahray related to the acquisition of the 100% interest in the Sodaville Claims. Under the terms of the purchase and sale agreement our company issued a pre-closing advance of $200,000 (paid on August 29, 2011).

 

As additional consideration our company will pay compensation as follows:

 

1.

$200,000 on November 31, 2011 (paid);

2.

$50,000 on July 1, 2012 (paid);

3.

$1,500,000, which will be paid in equal payments of $500,000 on or before January 1st of 2013, 2014 and 2015;

4.

2,500,000 shares of our company’s common stock based on the pro-rata interest in the claims and a total of 500,000 shares to those parties designated by the sellers on or before July 1st of 2012, 2013 and 2014 (1,000,000 shares were issued to the Sellers effective June 30, 2012);

 

We have also agreed to pay a royalty of $10 per short ton of product produced from the Sodaville Claims and sold by our company.

 

Our company has also located an additional 48 unpatented lode mining claims in the area in which the Sodaville Claims are located. As part of the consideration our company will also pay the sellers a royalty of $10 per short ton of product produced from the Additional Claims and sold by our company. In addition to granting the royalty in the Additional Claims our company will issue 50,000 shares of restricted stock to the sellers on or before January 1, 2015.

 

 

F-7

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 3 – MINING PROPERTY (CONTINUED)

 

Our company shall also reserve a NSR Royalty on certain metallic products produced from the Sodaville Claims equal to 2% of the net smelter returns. The NSR Royalty shall not apply to and no NSR Royalty payments shall be due for any product produced from the Sodaville Claims sold by our company.

 

Additionally, our company will pay the sellers a guaranteed minimum annual royalty of $50,000 for a period of 5 years with the first payment due on December 31, 2015 and the last payment due on December 31, 2020.

 

On December 31, 2012, Potash America, Inc. (the “Company”) announced that it has completed an exploration and drilling program at the deposit it controls in Sodaville, Nevada. The Company drilled, cored, and assayed the samples at the leading laboratories in the U.S. Based upon these scientific results, the Company has decided not to continue on to the development stage for the Sodaville property. The Company, under the terms of its agreement, will be returning the rights/claims to the original holder.

 

NOTE 4 – PREPAID EXPENSES

 

Prepaid expenses consisted of $2,680 of prepaid insurance, $199 of rent, and $1,218 of marketing and $107,639 of stock compensation as of December 31, 2012.

 

NOTE 5 – DEPOSITS

 

The current deposits of $500 consist of a rent deposit near the mining site.

 

NOTE 6 – ACCRUED EXPENSES

 

Accrued expenses and liabilities consisted of the following as of December 31, 2012 and March 31, 2012:

 

		December 31, 2012				March 31, 2012
Accounting fees		$	2,100			$	—
Legal fees			—				5,588
Filing fees			281				173
Total Accrued Expenses		$	2,381			$	5,761

 

NOTE 7 – NOTES PAYABLE – RELATED PARTIES

 

A shareholder and current director of the Company advanced funds at various times during the year ended March 31, 2011 in order to support operations. The loans are unsecured, non-interest bearing and due on demand. The amount due to the shareholder and director was $35,500 as of December 31, 2012.

 

F-8

 

 

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 8 – LINES OF CREDIT

 

The Company entered into a Credit Facility Agreement during the year ended March 31, 2011 in the amount of $200,000. The line of credit is secured by the assets of the Company, bears 5% interest and is due on demand. On June 22, 2011, the Company’s credit line was increased from $200,000 to $1,000,000 under the same terms. The line of credit was drawn to $664,000 as of December 31, 2012. Accrued interest related to the line of credit was $43,736 as of December 31, 2012.

 

On November 22, 2011, the Company entered into a second Credit Facility Agreement in which the lender agreed to provide the Company with a line of credit in the amount of up to $500,000. Pursuant to the terms of the Credit Facility Agreement, the Company shall pay any outstanding amounts to the lender on demand. The Company may also repay the loan and accrued interest at any time without penalty. Amounts outstanding shall bear interest at the rate of 10% per annum. The line of credit was drawn to $0 as of December 31, 2012. Accrued interest related to the line of credit was $21,246 as of December 31, 2012.

 

NOTE 9 – CONVERTIBLE LINE OF CREDIT

 

On April 12, 2012, the Company entered into a US$1,000,000 Letter of Credit Agreement dated March 27, 2012. Pursuant to the terms outlined in the Letter of Credit, at any time the Company may require any and all funds outstanding under the Letter of Credit, except for accrued interest which is to be paid in cash, to be converted into units of the Company at a price of $0.80 per unit (the “Unit”). Each Unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at $1.50 US for a period of five (5) years. The Company will pay annual interest of 5% until the loan is repaid or converted into Units. The Company will issue 1,250,000 Units when the exercise provision is enacted. In association with conversion feature of the line of credit with warrants the Company had $912,386 in derivative liability as of December 31, 2012. Additional, the Company incurred derivative expense of $184,044, change in derivative expense of $30,109 and amortization of debt discount of $481,658 as of December 31, 2012. The line of credit was drawn to $710,000 which is partial offset by the debt discount $216,575, totaling to $493,425 as of December 31, 2012. Accrued interest related to the line of credit was $20,425 as of December 31, 2012.

 

NOTE 10 – RELATED PARTY TRANSACTIONS

 

On November 7, 2011, the Company entered into an employment agreement with Barry Wattenberg, our president, chief executive officer, chief financial officer, secretary, treasurer and a member of our board of directors.  The employment agreement was effective on December 1, 2011.

 

Pursuant to the terms of the employment agreement Mr. Wattenberg will receive a base salary of $10,000 per month, payments of which will accrue, and a key man life insurance policy of $1,000,000 payable half to the Company and half to Mr. Wattenberg’s estate. The Company shall also reimburse all reasonable and necessary business expenses incurred by Mr. Wattenberg in performance of his duties. When established, the Company will compensate Mr. Wattenberg with group health insurance benefits and will allow for standard executive benefits such as vacation, holidays, sick leave and the granting of stock options when deemed appropriate by the Company.

 

F-9

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 10 – RELATED PARTY TRANSACTIONS (CONTINUED)

 

The total amounts of $155,500 and $65,500 as of December 31, 2012 and March 31, 2012, respectively, have been recorded as deferred compensation.

 

NOTE 11 – CAPITAL STOCK

 

The Company has 200,000,000 common shares authorized at a par value of $0.0001 per share.

 

During the period ended March 31, 2008, the Company issued 80,000,000 common shares to founders for total proceeds of $8,000. Additionally, the Company issued 67,200,000 shares during the period ended March 31, 2008 for total proceeds of $42,000.

 

On July 9, 2010, a former shareholder and director of the Company agreed to forgive debt in the amount of $14,244. This amount has been recorded as contributed capital.

 

Effective September 8, 2010 the Company increased the authorized shares of common stock from 100,000,000 to 200,000,000 and enacted a forward stock split of 80 to 1. All share and per share data has been adjusted to reflect such stock split.

 

In May 2011 the Company issued 150,000 common shares in lieu of compensation along with stock options.

 

On November 10, 2011, the Company issued 25,000 shares of common stock at a value of $0.0001 per share as compensation for a finder’s fee related to the Sodaville, Nevada property.

 

On December 31, 2011, the Company issued an aggregate of 190,000 restricted shares of our common stock at a value of $0.0001 per share to our directors, advisors and consultants to the Company.

 

On June 30, 2012, the Company issued 1,000,000 restricted shares of our common stock at a value of approximately $0.20 per share to Kim Diaz of BLM Claims located in Mineral County Nevada in connection with the acquisition of mineral properties. (See note 3 for further details).

 

The Company purchased back 40,000 shares of common stock for cash totaling $10,000 during the period ended September 30, 2012. The stock is currently being held in treasury.

 

Stock-based compensation expense for the nine month period ending December 31, 2012 was $165,891.

 

There were 148,665,000 shares of common stock issued and outstanding as of December 31, 2012. As December 31, 2012, the Company has no warrants outstanding. There are 1,340,000 stock options outstanding.

 

F-10

 

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 11 – CAPITAL STOCK (CONTINUED)

 

Stock options

 

In April 2011, the Company issued 600,000 stock options to directors of the Company per the Stock Option Plan with an exercise price of $0.60 per share for a 5 year term. In May 2011, the Company entered into two consulting agreements which granted a total of 75,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term. In December 2011, the Company granted a total of 115,000 stock options to advisors and consultants. All these stock options are exercisable at $1.00 per share for a 3 year term.

 

In April 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.

 

In May 2012, the Company issued 25,000 stock options to consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.

 

In June 2012, the Company issued 25,000 stock options to consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.

 

In July 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.29) per share for a 5 year term.

 

In October 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.26) per share for a 5 year term

 

Stock option compensation expense for the period ending December 31, 2012 was $165,891. The expense was calculated using the Black-Scholes pricing model. The following table summarizes information about options as of December 31, 2012:

 

		Number of Shares		Weighted Average Exercise Price
Outstanding, March 31, 2012		1,185,000	$	.84
Options granted		155,000		.63
Options expired		-		-
Options cancelled		-		-
Outstanding, December 31, 2012		1,340,000	$	.74
Exercisable, December 31, 2012		1,340,000	$	.74

 

F-11

 

 

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 11 – CAPITAL STOCK (CONTINUED)

 

The following table summarizes information about stock warrants granted to employees, advisors, investors and board members at September 30, 2012:

 

Stock Options Outstanding									Stock Options Exercisable
	Range of Exercise Prices		Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Number of Options		Weighted Average Exercise Price
$	.26 to 1.00		1,340,000	$	.63		3.79		1,340,000	$	0.74

 

 

As of December 31, 2012, the aggregate intrinsic value of the stock options outstanding and exercisable was $0.  The weighted-average grant-date fair value of stock options granted for the period ending December 31, 2012 was $0.74.  The total fair value of shares vested as of December 31, 2012 was 1,340,000 of stock options at fair market value on December 31, 2012.

 

NOTE 12 – RESTATEMENT

 

The Company has recorded the cost of stock options granted in the 10K ending March 31, 2012. The Company is allocating the cost to the correct quarterly periods in the fiscal year ended March 31, 2012. The corrected balances and the previously stated balances for the nine and three months ended December 31, 2011 are shown below.

 

The following are the previously stated and corrected balances for the nine months ended December 31, 2011:

 

December 31, 2011 Financial Statement	Line Item	Corrected	Previously Stated
Income Statement	Stock-based compensation	654,788	279,037
Income Statement	Operating expenses	952,095	576,344
Income Statement	Net Loss	(965,163)	(589,412)
Cash Flows	Stock-based compensation	654,788	279,037

 

The following are the previously stated and corrected balances for the three months ended December 31, 2011:

 

December 31, 2011 Financial Statement	Line Item	Corrected	Previously Stated
Income Statement	Stock-based compensation	256,257	97,322
Income Statement	Professional fees	20,315	20,315
Income Statement	Operating expenses	379,904	220,969
Income Statement	Net Loss	(388,065)	(229,130)

 

F-12

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 13 – INCOME TAXES

 

The provision for Federal income tax consists of the following for the nine months ended December 31, 2012 and 2011:

 

	2012	2011
Federal income tax benefit attributable to:
Current operations	$    724,853	$    328,155
Less: valuation allowance	(724,853)	(328,155)
Net provision for Federal income taxes	$              -	$              -

 

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of December 31, 2012 and March 31, 2012:

 

	December 31, 2012	March 31, 2012
Deferred tax asset attributable to:
Net operating loss carryover	$    1,248,153	$    523,300
Less: valuation allowance	(1,248,153)	(523,300)
Net deferred tax asset	$                -	$              -

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $3,671,038 for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.

 

NOTE 14 – GOING CONCERN

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company has no established source of revenue, negative working capital and losses since inception.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  Without realization of additional capital, it would be unlikely for the Company to continue as a going concern.  The financial statements do not include any adjustments that might result from this uncertainty.

 

We anticipate that additional funding will be required in the form of debt or equity capital financing from the sale of our common stock.  At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through debt to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.  

 

 

F-13

 

POTASH AMERICA, INC.

(AN EXPLORATION STAGE COMPANY)

NOTES TO THE FINANCIAL STATEMENTS

DECEMBER 31, 2012

 

NOTE 15 – SUBSEQUENT EVENTS

 

In January 2013, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of market price (at date of grant) plus 5% per share for a 5 year term. The exercise price for the options granted on January 1, 2013 was $0.06.

 

In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to December 31, 2012 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.

 

F-14

 

 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "could", "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable laws, including the securities laws of the United States, we do not intend to update any of the forward-looking statements so as to conform these statements to actual results.

 

Our unaudited financial statements are stated in U.S. dollars and are prepared in accordance with generally accepted accounting principles in the United States. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report.

 

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to "common shares" refer to the common shares in our capital stock.

 

As used in this quarterly report and unless otherwise indicated, the terms "we", "us", "our" and "our company" mean Potash America, Inc., a Nevada corporation, unless otherwise indicated.

 

General Overview

 

We were incorporated in the state of Nevada on July 31, 2007 as Adtomize Inc.  On June 29, 2010, we underwent a change of control. On September 8, 2010, we affected a split of our authorized capital and our issued and outstanding common shares on an 80 for 1 basis. On March 3, 2011 we changed our name to Potash America, Inc., and began looking for opportunities to acquire exploration stage mineral properties. We maintain our business offices at 200 South Virginia Street, 8th Floor, Reno, Nevada, 89501 and our telephone number is (775) 398-3019.

 

Before we went through a change of control and business focus, we engaged in the business of developing an online advertising brokerage service to bring together high traffic web site publishers with companies wishing to place ads on them in order to drive traffic to their own internet sites. Since our inception, we had been attempting to raise money to operate our business, but have not been able to secure the funds necessary to do so. The lack of funds and the present economy have prevented that from happening. As we have been unable to raise the capital necessary to develop and market our service, we began a search for other business opportunities which may benefit our shareholders and allow us to raise capital and operate.

 

Current Business

 

Shortly after changing our business focus to exploration stage properties, we identified an opportunity to acquire the Newfoundland Property from Habitants Minerals Ltd. We entered into a letter of intent on March 15, 2011 and subsequently a mining property acquisition agreement on June 6, 2011. We now plan to undertake further evaluation of the Newfoundland Property.

 

-3-

On March 15, 2011 we entered into a credit facility agreement. The lender agreed to provide us with a line of credit in the amount of up to $200,000 wherein, within three business days after receipt of notice from us, the lender will advance amounts requested to our company. On June 22, 2011, the credit facility agreement was amended to increase the size of the line of credit to a total of $1,000,000.  We shall use the advances to fund working capital and general corporate activities.  Pursuant to the terms of the credit facility agreement, our company shall pay any outstanding amounts to the lender on demand. We may also repay the loan and accrued interest at any time without penalty. Amounts outstanding shall bear interest at the rate of 5% per annum.

 

We entered into a letter of intent on March 15, 2011 with Habitants Minerals Ltd with respect to an acquisition of a property in Newfoundland, Canada.

 

On June 6, 2011 we entered into and closed a property acquisition agreement with Habitants.  Pursuant to the terms of the agreement, we acquired an undivided 100% interest in certain unpatented mining claims located in Western Newfoundland, Canada which we refer to as the “Newfoundland Property”. Pursuant to the terms of the agreement, we agreed to provide the following payments to Habitants:

 

The aggregate consideration of $50,000 consisting of the following:

 

-          $30,000 which was previously provided to Habitants, and

-          the balance of $20,000 which was provided on the closing of the agreement.

 

If any third party asserts any right or claim to the Newfoundland Property or to any amounts payable to Habitants, we may deposit any amounts otherwise due to Habitants in escrow with a suitable agent until the validity of such right or claim has been finally resolved.  If we deposit said amounts in escrow, we shall be deemed not in default under this agreement for failure to pay such amounts to Habitants.

 

On May 11, 2011 we entered into a letter of intent to acquire a 100% interest in 39 Bureau of Land Management claims in Mineral County, Nevada (the “BLM Claims”). Pursuant to the terms of the letter of intent our company advanced the following payments to the administrator of the claims, Ms. Kim Diaz:

 

(a)     $20,000.00, of which $5,000.00 was disbursed to Ms. Diaz, contemporaneously with the execution of the letter of intent; and

(b)     $5,000.00, upon the execution of the letter of intent, to enable Ms. Diaz and Elwayne E. Everett to commence the bentonite project on the adjacent property;

 

Under the terms of the letter of intent our company and Ms. Diaz would be required to enter into an option agreement on or before August 31, 2011.  Pursuant to the option agreement our company would be required advance $10,000 to Ms. Diaz to cover reimbursement on the 39 BLM Claims which would be deducted from the required payment of $210,000 to Ms. Diaz upon execution of the option agreement.

 

On August 31, 2011 we entered into a purchase and sale agreement related to the acquisition of the 100% interest in the BLM Claims. Under the terms of the purchase and sale agreement our company issued a pre-closing advance of $200,000 to Ms. Kim Diaz and Sonseeahray Diaz (the “Sellers”).

 

As additional consideration our company will pay compensation to the Sellers as follows:

 

(a)     $200,000 on November 31, 2011 (paid);

(b)     $50,000 on July 1, 2012; (paid on June 30, 2012)

(c)     $1,500,000, which will be paid in equal payments of $500,000 on or before January 1st of 2013, 2014 and 2015;

(d)     2,500,000 shares of our company’s common stock based on the Sellers’ pro-rata interest in the claims and a total of 500,000 shares to those parties designated by the Sellers on or before July 1st of 2012, 2013 and 2014 (1,000,000 shares were issued to the Sellers effective June 30, 2012);

 

We have also agreed to pay a royalty of $10 per short ton of product produced from the BLM Claims and sold by our company.

 

-4-

Our company has also located 48 unpatented lode mining claims (the “Additional Claims”) in the area in which the BLM Claims are located. As part of the consideration our company will also pay the Sellers a royalty of $10 per short ton of product produced from the Additional Claims and sold by our company. In addition to granting the royalty in the Additional Claims our company will issue 50,000 shares of restricted stock to the Sellers on or before January 1, 2015.

 

Our company shall also reserve a net smelter returns royalty (the “NSR Royalty”) on certain metallic products produced from the BLM Claims equal to 2% of the net smelter returns. The NSR Royalty shall not apply to and no NSR Royalty payments shall be due for any product produced from the BLM Claims sold by our company.

 

Additionally, our company will pay the Sellers a guaranteed minimum annual royalty of $50,000 for a period of 5 years with the first payment due on December 31, 2015 and the last payment due on December 31, 2020.

 

On November 22, 2011, we entered a second credit facility agreement in which the lender agreed to provide our company with a line of credit in the amount of up to $500,000. Pursuant to the terms of the credit facility agreement, our company shall pay any outstanding amounts to the lender on demand. Our company may also repay the loan and accrued interest at any time without penalty. Amounts outstanding shall bear interest at the rate of 10% per annum.

 

Effective December 1, 2011 we entered into an employment agreement with our president, Barry Wattenberg, under which Mr. Wattenberg will receive a base salary of $10,000 per month, payments of which will accrue, and a key man life insurance policy of $1,000,000 payable half to our company and half to Mr. Wattenberg’s estate.

 

On April 12, 2012, we entered into a US$1,000,000 letter of credit agreement dated March 27, 2012. Pursuant to the terms outlined in the letter of credit, at any time our company may require any and all funds outstanding under the letter of credit, except for accrued interest which is to be paid in cash, to be converted into units of our company at a price of $0.80 per unit. Each unit consists of one share of common stock and one warrant to purchase one share of common stock at $1.50 US for a period of five years. Our company will pay annual interest of 5% until the loan is repaid or converted into Units.

 

On December 31, 2012, we announced that our company has completed an exploration and drilling program at the deposit it controls in Sodaville, Nevada. Our company drilled, cored, and assayed the samples at the leading laboratories in the U.S. Based upon these scientific results, our company has decided not to continue on to the development stage for the Sodaville property. Our company, under the terms of its agreement, will be returning the rights/claims to the original holder.

 

Purchase of Significant Equipment

 

We do not intend to purchase any significant equipment over the next twelve months.

 

Off-Balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

 

Employees

 

We do not expect any material changes in the number of employees over the next 12 month period (although we may enter into employment or consulting agreements with our officers or directors). We do and will continue to outsource contract employment as needed.  

 

Results of Operations

 

The following unaudited summary of our results of operations should be read in conjunction with our financial statements for the three month periods ended December 31, 2012 and 2011.

 

-5-

We have not generated any revenue since inception and are dependent upon obtaining financing to pursue our business activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

 

Results of Operations for the Three Months Ended December 31, 2012 and 2011

 

Our operating results for the three month periods ended December 31, 2012 and 2011 and the changes between those periods for the respective items are summarized as follows:

 

					Three Month  Period Ended  December 31, 2012								Three Month  Period Ended  December 31, 2011								Change Between Three Month  Periods Ended December 31, 2012 and December 31, 2011
Revenue					$	Nil							$	Nil							$	Nil
Impairment of mining interest					$	710,885							$	Nil							$	710,885
Professional fees					$	39,295							$	20,315							$	18,980
Transfer agent and filing fees					$	854							$	1,926							$	(1,072	)
Consulting fees					$	8,800							$	60,296							$	(51,496	)
Web development					$	1,047							$	1,226							$	(179	)
Stock compensation					$	8,137							$	256,257							$	(248,120	)
Exploration costs					$	2,525							$	2,500							$	25
General and administrative					$	23,110							$	37,384							$	(14,274	)
Interest Expense					$	17,110							$	8,161							$	8,949
Derivative expense					$	Nil							$	Nil							$	Nil
Change in derivative					$	7,818							$	Nil							$	7,818
Amortization of debt discount					$	223,777							$	Nil							$	223,777
Net loss					$	(1,043,358	)						$	(388,065	)						$	(655,293	)

 

Our expenses increased during the three month period ended December 31, 2012 compared to the same period in 2011 primarily as a result of increases in impairment on mining interest, professional fees, exploration costs, interest expenses, and change in derivative expense.

 

Results of Operations for the Nine Months Ended December 31, 2012 and 2011

 

Our operating results for the nine month periods ended December 31, 2012 and 2011 and the changes between those periods for the respective items are summarized as follows:

 

-6-

 

						Nine Month  Period Ended  December 31, 2012								Nine Month  Period Ended  December 31, 2011								Change Between Nine Month  Periods Ended December 31, 2012 and December 31, 2011
Revenue						$	Nil							$	Nil				$			$	Nil
Impairment of mining interest						$	710,885							$	Nil							$	710,885
Professional fees						$	159,540							$	59,169							$	100,371
Transfer agent and filing fees						$	7,724							$	14,164							$	(6,440	)
Consulting fees						$	80,797							$	110,446							$	(29,649	)
Web development						$	3,618							$	20,740							$	(17,122	)
Stock compensation						$	165,891							$	654,788							$	(488,897	)
Exploration costs						$	176,856							$	26,700							$	150,156
General and administrative						$	73,719							$	66,088							$	7,631
Interest Expense						$	57,080							$	13,068							$	44,012
Derivative expense						$	184,044							$	Nil							$	184,044
Change in derivative						$	30,109							$	Nil							$	30,109
Amortization of debt discount						$	481,658							$	Nil							$	481,658
Net loss						$	(2,131,921	)						$	(965,163	)						$	(1,166,758	)

 

Our expenses increased during the nine month period ended December 31, 2012 compared to the same period in 2011 primarily as a result of increases in impairment of mining interest, professional fees, and exploration costs, general and administrative expenses, interest expenses, derivative expense, change in derivative expense and amortization of debt discount.

 

Liquidity and Financial Condition

 

Working Capital

 

		At December 31, 2012				At March 31, 2012				Change Between March 31, 2012 and December 31, 2012
Current Assets		$	120,506			$	251,381			$	(130,875)
Current Liabilities		$	2,348,599			$	1,165,088			$	1,183,511
Working Capital / (Deficit)		$	(2,228,093	)		$	(913,707	)		$	(1,314,386	)

 

-7-

Cash Flows

 

		Nine Months Ended  December 31, 2012				Nine Months Ended December 31, 2011				Period from Inception (July 31, 2007) to December 31, 2012
Cash Flows (used in) Operating Activities		$	(949,058	)		$	(252,951	)		$	(1,709,114	)
Cash Flows (used in) Investing Activities		$	465,645			$	(514,865	)		$	253,640
Cash Flows provided by Financing Activities		$	422,360			$	790,000			$	1,463,744
Net Increase (Decrease) in Cash During Period		$	(61,053	)		$	22,184			$	8,270

 

As of December 31, 2012, our total current assets were $120,506 and our total liabilities were $2,348,599 and we had a working capital deficit of $2,228,093. Our unaudited financial statements report a net loss of $2,131,921 for the nine months ended December 31, 2012 compared to a net loss of $965,163 for the same period in 2011 and a net loss of $3,671,038 for the period from July 31, 2007 (inception) to December 31, 2012.

 

Going Concern

 

The accompanying financial statements have been prepared assuming that our company will continue as a going concern.  Our company has no established source of revenue, negative working capital and losses since inception.  These factors raise substantial doubt about our company’s ability to continue as a going concern.  Without realization of additional capital, it would be unlikely for our company to continue as a going concern.  The financial statements do not include any adjustments that might result from this uncertainty.

 

We anticipate that additional funding will be required in the form of debt or equity capital financing from the sale of our common stock.  At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through debt to meet our obligations over the next twelve months. We do not have any arrangements in place for any future debt or equity financing.  

 

Critical Accounting Policies

 

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States of America.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.  These estimates and assumptions are affected by management’s application of accounting policies.  We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

 

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

 

Exploration Stage Company

 

The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to accounting and reporting by exploration stage companies.  An exploration stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues.

 

-8-

Basis of Presentation

 

The accompanying interim unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the United States Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, stockholders’ deficit or cash flows. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statement presentation.  The interim unaudited financial statements should be read in conjunction with our company’s Annual Report on Form 10-K, which contains the annual audited financial statements and notes thereto, together with the Management’s Discussion and Analysis, for the year ended March 31, 2012. The interim results for the period ended December 31, 2012 are not necessarily indicative of the results for the full fiscal year. The interim unaudited financial statements are presented in USD.

 

Accounting Basis

 

Our company uses the accrual basis of accounting and accounting principles generally accepted in the United States of America (“GAAP” accounting).  Our company has adopted a March 31 fiscal year end.

 

Financial Instruments

 

Our company's financial instrument consists of cash, prepaid expenses, deposits, accrued expenses, deferred compensation, amounts due to stockholders and a line of credit.

 

The amounts due to stockholders are non-interest bearing. It is management's opinion that our company is not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where separately disclosed.

 

Cash and Cash Equivalents

 

Our company considers all highly liquid investments with maturities of three months or less to be cash equivalents. At December 31, 2012 and March 31, 2012, respectively, our company had $8,270 and $69,323 of cash.

 

Mineral Rights, Property and Acquisition Costs

 

Since March 31, 2011, our company is primarily engaged in the acquisition and exploration of mining properties. Our company has not yet realized any revenues from its planned operations.

 

Our company capitalizes acquisition and option costs of mineral rights as tangible assets. Upon commencement of commercial production, the mineral rights will be amortized using the unit-of-production method over the life of the mineral rights. If our company does not continue with exploration after the completion of the feasibility study, the mineral rights will be expensed at that time.

 

The costs of acquiring mining properties are capitalized upon acquisition.  Mine development costs incurred to develop and expand the capacity of mines, or to develop mine areas in advance of production are also capitalized once proven and probable reserves exist and the property is a commercially mineable property. Costs incurred to maintain current exploration or to maintain assets on a standby basis are charged to operations.  Costs of abandoned projects are charged to operations upon abandonment.  Our company evaluates the carrying value of capitalized mining costs and related property and equipment costs, to determine if these costs are in excess of their recoverable amount whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.  Evaluation of the carrying value of capitalized costs and any related property and equipment costs are based upon expected future cash flows and/or estimated salvage value in accordance with Accounting Standards Codification (ASC) 360-10-35-15, Impairment or Disposal of Long-Lived Assets.

 

-9-

Impairment of Long-Lived Assets

 

Our company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17, Measurement of an Impairment Loss, if events or circumstances indicate that their carrying amount might not be recoverable.  As of December 31, 2012, the Company has determined not to continue exploring on the Sodaville Claims, based on scientific results and the value of the property will not be recoverable and has been impaired. The Company will continue exploring Newfoundland Property and no events or circumstances have happened to indicate that the related carrying values of the property may not be recoverable. When our company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35, Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Lived Assets.

 

Advertising

 

Our company expenses advertising costs as incurred. Our company has had no advertising activity since inception.

 

Revenue Recognition

 

Our company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.

 

Basic Income (Loss) Per Share

 

Basic income (loss) per share is calculated by dividing our company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing our company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of December 31, 2012.

 

During the year ended March 31, 2011, our company enacted an 80 to 1 forward stock split. All share and per share data has been adjusted to reflect such stock split.

 

Stock-Based Compensation

 

Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. On March 31, 2011, our company instituted a Stock Option Plan which allows for the issuance of 3,000,000 shares of common stock to our company’s management, employees and consultants. As of December 31, 2012, our company issued 465,000 common stock shares and has issued 1,340,000 in stock options in lieu of compensation.

 

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Income Taxes

 

Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.

 

Recent Accounting Pronouncements

 

Our company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our company’s results of operations, financial position or cash flow.

 

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.

 

Item 4.  Controls and Procedures

 

Management’s Report on Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer and our principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.

 

As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer and our principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer and our principal financial officer and principle accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

 

Changes in Internal Control over Financial Reporting

 

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1.  Legal Proceedings

 

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

 

Item 1A.  Risk Factors

 

As a “smaller reporting company”, we are not required to provide the information required by this Item.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

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Item 3.  Defaults Upon Senior Securities

 

None.

 

Item 4.  Mining Safety Disclosure

 

Not Applicable.

 

Item 5.  Other Information

 

None.

 

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Item 6.  Exhibits

 

Exhibit No.	Description
(3)	Articles of Incorporation and Bylaws
3.1	Articles of Incorporation (incorporated by reference to our Registration Statement on Form S-1 filed on May 9, 2008)
3.2	Certificate of Amendment (incorporated by reference to our Current Report on Form 8-K filed on September 10, 2010).
3.3.	Certificate of Amendment (incorporated by reference to our Current Report on Form 8-K filed on March 7, 2011)
(10)	Material Contracts
10.1	Credit Facility Agreement dated March 2011 (incorporated by reference to our Current Report on Form 8-K filed on March 17, 2011)
10.2	2011 Stock Option Plan (incorporated by reference to our Current Report on Form 8-K filed on April 26, 2011)
10.3	Form of Stock Option Agreement (incorporated by reference to our Current Report on Form 8-K filed on April 26, 2011)
10.4	Director’s Association Agreement between our company and Alan B. Brass (incorporated by reference to our Current Report on Form 8-K filed on April 26, 2011)
10.5	Director’s Association Agreement between our company and Norman Marcus (incorporated by reference to our Current Report on Form 8-K filed on April 26, 2011)
10.6	Stock Option Agreement between our company and Alan B. Brass (incorporated by reference to our Current Report on Form 8-K filed on April 26, 2011)
10.7	Stock Option Agreement between our company and Norman Marcus (incorporated by reference to our Current Report on Form 8-K filed on April 26, 2011)
10.8	Property Acquisition Agreement dated June 6, 2011 between our company and Habitants Minerals Ltd. (incorporated by reference to our Current Report on Form 8-K filed on June 17, 2011)
10.9	Purchase and Sale Agreement dated August 31, 2011 between our company and Kim Diaz and Sonseeahray Diaz (incorporated by reference to our Current Report on Form 8-K filed on September 12, 2011)
(14)	Code of Ethics
14.1	Code of Business Conduct and Ethics (incorporated by reference to our Current Report on Form 8-K filed on June 17, 2011)
(31)	Rule 13a-14(a)/15d-14(a) Certifications
31.1*	Section 302 Certification under the Sarbanes-Oxley Act of 2002 of Barry Wattenberg (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
(32)	Section 1350 Certifications
32.1*	Section 302 Certification under the Sarbanes-Oxley Act of 2002 of Barry Wattenberg (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
101**	Interactive Data File
101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE	XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Label Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document

 

*	Filed herewith.

 

**

Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	POTASH AMERICA, INC.
	(Registrant)
Dated: February 14, 2013	/s/ Barry Wattenberg
	Barry Wattenberg
	President, Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director
	(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)