The accompanying notes are an integral part of these financial statements
F-3
NOTE 1 – NATURE OF OPERATIONS
Potash America, Inc. (“the Company” or “PTAM”), was incorporated in the state of Nevada on July 31, 2007. PTAM’s primary focus is the development of fertilizer and agri-business assets. Such assets may include Potash, Montmorillonite, Bentonite and Gypsum. The Company seeks to acquire known deposits whose economic value has recently changed with market pricing levels, and develop these assets into agri-products.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
Exploration Stage Company
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles related to accounting and reporting by exploration stage companies. An exploration stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues.
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, 2013. The interim results for the period ended June 30, 2013 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.
Reclassifications
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements.
Financial Instrument
The Company's financial instrument consists of cash, prepaid expenses, deposits, accounts payable and accrued expenses, deferred compensation, accrued interest, convertible line of credit, note payable, and a line of credit due to a related party.
It is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from its other financial instruments and that their fair values approximate their carrying values except where separately disclosed.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial
F-4
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Cash and Cash Equivalents
PTAM considers all highly liquid investments with maturities of three months or less to be cash equivalents. At June 30, 2013 and March 31, 2013, respectively, the Company had $142 and $265 of cash.
Revenue Recognition
The Company recognizes revenue when products are fully delivered or services have been provided and collection is reasonably assured.
Advertising
The Company expenses advertising costs as incurred. As of June 30, 2013 and 2012, respectively, the Company expensed $0 and $3,075 in marketing and website development and maintenance of its site.
Mineral Properties Costs
Mineral exploration and development costs are accounted for using the successful efforts method of accounting.
Property acquisition costs - Mineral property acquisition costs are capitalized as mineral exploration properties. Upon achievement of all conditions necessary for reserves to be classified as proved, the associated acquisition costs are reclassified to prove properties
Exploration costs - Geological and geophysical costs and the costs of carrying and retaining undeveloped properties are expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles of the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
Basic Income (Loss) Per Share
Basic income (loss) per share is calculated by dividing the Company’s net loss applicable to common shareholders by the weighted average number of common shares during the period. Diluted earnings per share is calculated by dividing the Company’s net income available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity.
F-5
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Stock-Based Compensation
Stock-based compensation is accounted for at fair value in accordance with ASC Topic 718. On April 21, 2011, the Company instituted a Stock Option Plan which allows for the issuance of 3,000,000 shares of common stock to the Company’s management, employees and consultants. As of June 30, 2013, there were 1,375,000 stock options issued.
Recent Accounting Pronouncements
PTAM does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3 – MINING CLAIMS
On June 6, 2011, the Company entered into and closed a property acquisition agreement with Habitants Minerals Ltd. Pursuant to the terms of the agreement, PTAM acquired an undivided 100% interest in certain unpatented mining claims located in Western Newfoundland, Canada. Pursuant to the terms of the agreement, the Company agreed to provide the following payments to Habitants:
The aggregate consideration of $50,000 consisting of the following:
·
$30,000 which was previously provided to Habitants, and
·
$20,000 which was provided on the closing of the agreement.
An additional payment to continue holding this property was due on June 30, 2013 and the Company decided to abandon this project. The mining claims have been fully impaired as of March 31, 2013.
On August 31, 2011, the Company entered into a purchase and sale agreement with Ms. Kim Diaz and Sonseeahry related to the acquisition of the 100% interest in the Sodaville Claims. Under the terms of the purchase and sale agreement the Company issued a pre-closing advance of $200,000 (paid on August 29, 2011).
As additional consideration the Company will pay compensation as follows:
1.
$200,000 on November 31, 2011 (paid);
2.
$50,000 on July 1, 2012 (paid);
3.
$1,500,000, which will be paid in equal payments of $500,000 on or before January 1st of 2013, 2014 and 2015;
4.
2,500,000 shares of our company’s common stock based on the pro-rata interest in the claims and an additional 500,000 shares to those parties designated by the sellers on or before July 1st of 2012, 2013 and 2014; (1,000,000 shares issued)
The Company also agreed to pay a royalty of $10 per short ton of product produced from the Sodaville Claims and sold by our company.
The Company abandoned this project during the year ended March 31, 2013 and returned all rights back to the seller. As such, the mining claims capitalized as part of this acquisition have been fully impaired as of March 31, 2013.
F-6
NOTE 4 – PREPAID EXPENSES
Prepaid expenses consisted of $1,910 of prepaid insurance.
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 June 30, 2013 and March 31, 2013:
|
|
|
|
|
June 30, 2013
|
March 31, 2013
|
|
Accounting fees
|
$ 3,345
|
$ 2,048
|
|
Audit fees
|
-
|
13,000
|
|
Legal fees
|
7,698
|
6,536
|
|
Filing fees
|
96
|
200
|
|
Administrative expense
|
-
|
500
|
|
Total accrued expenses
|
$ 11,139
|
$ 22,284
|
NOTE 7 – NOTES PAYABLE
A former shareholder and director of the Company advanced funds at various times since inception in order to support operations. The loans are unsecured, non-interest bearing and due on demand. The amount due to the former shareholder and director was $35,500 as of June 30, 2013.
NOTE 9 – NOTES PAYABLE – RELATED PARTY
The current shareholder and director of the Company advanced funds at various times to support operations. The loans are unsecured, non-interest bearing and due on demand. The amount due to the shareholder and director was $16,121 as of June 30, 2013.
NOTE 10 – LINE OF CREDIT – RELATED PARTY
The Company opened a line of credit during the year ended March 31, 2011 in the amount of $200,000. The line of credit is secured by the assets of the company, bears 5% interest and is due on demand.
On June 22, 2011, the Company’s credit line was increased from $200,000 to $1,000,000 under the same terms. The line of credit was drawn to $664,000 as of March 31, 2013. Interest expense related to the line of credit was $60,200 as of June 30, 2013. During the year ended March 31, 2013, control of the Company was acquired by the person who also controls the company that has issued this line of credit.
F-7
NOTE 11 – LINE OF CREDIT
On November 22, 2011, the Company entered into a second Credit Facility Agreement in which the lender agreed to provide the Company with a line of credit in the amount of up to $500,000. Pursuant to the terms of the Credit Facility Agreement, the Company shall pay any outstanding amounts to the lender on demand. The Company may also repay the loan and accrued interest at any time without penalty. Amounts outstanding shall bear interest at the rate of 10% per annum. The line of credit was drawn to $400,000 as of March 31, 2012. During the year ended March 31, 2013, the balance was repaid and the amount due at March 31, 2013 was $0. Accrued interest related to the line of credit was $21,246 as of June 30, 2013 and has not been paid.
NOTE 12 – CONVERTIBLE LINE OF CREDIT
On April 12, 2012, the Company entered into a $1,000,000 Letter of Credit Agreement dated March 27, 2012. Pursuant to the terms outlined in the Letter of Credit, at any time the Company may require any and all funds outstanding under the Letter of Credit, except for accrued interest which is to be paid in cash, to be converted into units of the Company at a price of $0.80 per unit (the “Unit”). Each Unit consists of one (1) share of common stock and one (1) warrant to purchase one (1) share of common stock at $1.50 for a period of five (5) years. The Company will pay annual interest of 5% until the loan is repaid or converted into Units. The Company will issue up to 1,250,000 Units when the exercise provision is enacted. The Company determined the intrinsic value of the beneficial conversion feature on each draw date by valuing the warrants using the Black-Scholes Option Pricing Model and then allocating the $0.80 conversion price of each unit between the stock and warrants. The warrants were valued using the following assumptions on each draw date: stock price at grant date - $0.23-$0.89, exercise price - $1.50, expected life – 5 years, volatility – 126%-130%, risk-free rate - .70%-.86%. The total intrinsic value of the beneficial conversion feature of the draws was determined to be $302,904 and was amortized in full as of March 31, 2013. The line of credit was drawn to $710,000 as of March 31, 2013. Accrued interest related to the line of credit was $38,029 as of June 30, 2013.
NOTE 13 – RELATED PARTY TRANSACTIONS
On November 7, 2011, the Company entered into an employment agreement with Barry Wattenberg, our former president, chief executive officer, chief financial officer, secretary, treasurer and a member of our board of directors. The employment agreement became effective on December 1, 2011.
Pursuant to the terms of the employment agreement Mr. Wattenberg was receiving a base salary of $10,000 per month, payments of which will accrue, and a key man life insurance policy of $1,000,000 payable half to the Company and half to Mr. Wattenberg’s estate. The Company shall also reimburse all reasonable and necessary business expenses incurred by Mr. Wattenberg in performance of his duties. When established, the company will compensate Mr. Wattenberg with group health insurance benefits and will allow for standard executive benefits such as vacation, holidays, sick leave and the granting of stock options when deemed appropriate by the Company.
The total amount of $185,500 as of June 30, 2013 and March 31, 2013, respectively, have been recorded as deferred compensation.
Barry Wattenberg resigned as a director, Chairman, President and Treasurer of the Registrant, effective March 22, 2013.
F-8
NOTE 14 – CAPITAL STOCK
Stock issued
The company has 200,000,000 common shares authorized at a par value of $0.0001 per share.
During the period ended March 31, 2008, the Company issued 80,000,000 common shares to founders for total proceeds of $8,000. Additionally, the Company issued 67,200,000 shares during the period ended March 31, 2008 for total proceeds of $42,000.
On July 9, 2010, a former shareholder and director of the Company agreed to forgive debt in the amount of $14,244. This amount has been recorded as contributed capital.
Effective September 8, 2010 the Company increased the authorized shares of common stock from 100,000,000 to 200,000,000 and enacted a forward stock split of 80 to 1. All share and per share data has been adjusted to reflect such stock split.
In May 2011 the Company issued 150,000 common shares in lieu of compensation along with stock options.
On November 10, 2011, the Company issued 25,000 shares of common stock as compensation for a finder’s fee related to the Sodaville, Nevada property.
On December 31, 2011, the Company issued an aggregate of 190,000 restricted shares to our directors, advisors and consultants for the Company.
On March 20, 2012, the Company issued an aggregate of 100,000 restricted shares in lieu of compensation along with stock options.
On April 11, 2012, the Company purchased 40,000 shares back from an investor for a total payment of $10,000. The shares were subsequently cancelled and retired on May 2, 2012.
On June 30, 2012, the Company issued 1,000,000 restricted shares of our common stock at a value of $196,000 in connection with the acquisition of mineral properties. (See note 5 for further details).
Stock-based compensation expense related to option grants for the period ended June 30, 2013 was $171,382.
There were 148,625,000 shares of common stock issued and outstanding as of June 30, 2013.
As of June 30, 2013, the Company has no warrants outstanding. There are 1,375,000 stock options outstanding.
Stock options
The Company uses the Black-Scholes Option Pricing Method to value all stock options granted.
F-9
NOTE 14 – CAPITAL STOCK (CONTINUED)
In April 2011, the Company issued 600,000 stock options to directors of the Company per the Stock Option Plan with an exercise price of $0.60 per share for a 5 year term.
In May 2011, the Company entered into a consulting agreement which granted a total of 50,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In July 2011, the Company entered into a consulting agreement which granted a total of 75,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In August 2011, the Company entered into a consulting agreement which granted a total of 25,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In October 2011, the Company entered into a consulting agreement which granted a total of 35,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $0.94 per share for a 5 year term.
In November 2011, the Company entered into a consulting agreement which granted a total of 25,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In December 2011, the Company granted a total of 115,000 stock options to advisors and consultants. All these stock options are exercisable at $1.00 per share for a 3 year term.
In January 2012, the Company entered into a consulting agreement which granted a total of 35,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $0.92 per share for a 5 year term.
In February 2012, the Company entered into a consulting agreement which granted a total of 25,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In March 2012, the Company entered into two consulting agreements which granted a total of 200,000 stock options per the Company’s Stock Option Plan. All these stock options are exercisable at $1.00 per share for a 5 year term.
In April 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
In May 2012, the Company issued 25,000 stock options to consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
In June 2012, the Company issued 25,000 stock options to consultants of the Company per the Stock Option Plan with an exercise price of $1.00 per share for a 5 year term.
F-10
NOTE 14 – CAPITAL STOCK (CONTINUED)
In July 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.29) per share for a 5 year term.
In October 2012, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.26) per share for a 5 year term.
In January 2013, the Company issued 35,000 stock options to advisors and consultants of the Company per the Stock Option Plan with an exercise price of 5% above market price ($0.05) per share for a 5 year term.
The following table summarizes information about stock options as of June 30, 2013:
|
|
|
|
|
|
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Outstanding, March 31, 2013
|
|
1,375,000
|
$
|
0.76
|
|
Options granted
|
|
-
|
|
-
|
|
Options expired
|
|
-
|
|
-
|
|
Options cancelled
|
|
-
|
|
-
|
|
Outstanding, June 30, 2013
|
|
1,375,000
|
$
|
0.76
|
|
Exercisable, June 30, 2013
|
|
1,375,000
|
$
|
0.76
|
The following table summarizes information about stock options granted to consultants, advisors, investors and board members as of June 30, 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options Outstanding
|
|
Stock Options Exercisable
|
|
|
Range of Exercise Prices
|
|
Number Outstanding
|
|
Weighted Average Exercise Price
|
|
Weighted Average Remaining Contractual Life (in years)
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
.05 to 1.00
|
|
1,375,000
|
$
|
0.76
|
|
3.29
|
|
1,375,000
|
$
|
0.76
|
NOTE 15 – RESTATEMENT
The Company has recorded the intrinsic value of the convertible note payable in the 10K ending March 31, 2013. The Company is allocating the cost to the correct quarterly periods in the fiscal year ended March 31, 2013. The corrected balances and the previously stated balances for the three months ended June 30, 2012 is shown below.
F-11
NOTE 15 – RESTATEMENT (CONTINUED)
The following are the previously stated and corrected balances for the three months ended June 30, 2012:
|
|
|
|
|
June 30,2012 Financial Statement
|
Line Item
|
Corrected
|
Previously Stated
|
|
Income Statement
|
Derivative expense
|
(108,624)
|
0
|
|
Income Statement
|
Change in derivative
|
(14,208)
|
0
|
|
Income Statement
|
Amortization of debt discount
|
(160,898)
|
0
|
|
Income Statement
|
Total Other Income (Expenses)
|
(306,040)
|
(22,310)
|
|
Income Statement
|
Net Loss
|
(677,218)
|
(393,488)
|
|
Cash Flows
|
Net Loss
|
(677,218)
|
(393,488)
|
|
Cash Flows
|
Derivative expense
|
108,624
|
0
|
|
Cash Flows
|
Change in derivative
|
14,208
|
0
|
|
Cash Flows
|
Amortization of debt discount
|
160,898
|
0
|
NOTE 16 – INCOME TAXES
The provision for Federal income tax consists of the following for the three months ended June 30, 2013 and March 31, 2013:
|
|
|
|
|
June 30,
2013
|
June 30,
2012
|
|
Federal income tax benefit attributable to:
|
|
|
|
Current operations
|
$ 8,206
|
$ 230,254
|
|
Less: valuation allowance
|
(8,206)
|
(230,254)
|
|
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 June 30, 2013 and March 31, 2013:
|
|
|
|
|
June 30, 2013
|
March 31, 2013
|
|
Deferred tax asset attributable to:
|
|
|
|
Net operating loss carryover
|
$ 1,167,181
|
$ 1,158,975
|
|
Less: valuation allowance
|
(1,167,181)
|
(1,158,975)
|
|
Net deferred tax asset
|
$ -
|
$ -
|
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $3,432,885 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.
F-12
NOTE 17 – GOING CONCERN
The accompanying financial statements have been prepared assuming that the company will continue as a going concern. The Company has negative working capital, no established source of revenue and significant losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Without realization of additional capital, it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from this uncertainty. Management continues to seek funding from its shareholders and other qualified investors to pursue its business plan.
NOTE 18 – SUBSEQUENT EVENTS
In accordance with ASC Topic 855-10, the Company has analyzed its operations subsequent to June 30, 2013 to the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these financial statements other than the events described above.
F-13
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
Newfoundland Mineral Property
Shortly after changing our business focus to exploration stage properties, we identified an opportunity to acquire a Newfoundland mineral property from Habitants Minerals Ltd. We entered into a letter of intent on March 15, 2011 with Habitants Minerals Ltd. (“Habitants”) with respect to an acquisition of an undivided 100% interest in certain unpatented mineral claims located in Western Newfoundland, Canada (the “Newfoundland Property”).
On June 6, 2011, we entered into and closed a property acquisition agreement with Habitants. Pursuant to the terms of the agreement, we acquired 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:
4
·
$30,000, which was previously provided to Habitants, and
·
the balance of $20,000, which was provided on the closing of the agreement.
An additional payment to continue holding this property was due on June 30, 2013 and we decided to abandon this project. The mining claims have been fully impaired as of March 31, 2013.
Sodaville, Nevada Claims
On May 11, 2011, we entered into a letter of intent to acquire a 100% interest in 39 Bureau of Land Management claims in Sodaville, Mineral County, Nevada (the “Sodaville 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:
1.
$20,000, of which $5,000 was disbursed to Ms. Diaz, contemporaneously with the execution of the letter of intent; and
2.
$5,000, which was provided 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 were 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 Sodaville 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 with Ms. Kim Diaz and Sonseeahry related to the acquisition of the 100% interest in the Sodaville Claims. Under the terms of the purchase and sale agreement 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 ($465,645 paid as of March 31, 2012, which includes the $200,000 pre-closing advance and $65,645 in related pre-payment fees);
2.
$50,000 on July 1, 2012 (paid);
3.
$1,500,000, to 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 issued);
We also agreed to pay a royalty of $10 per short ton of product produced from the Sodaville Claims and sold by our company.
We abandoned this project during the year ended March 31, 2013 and returned all rights back to the seller. As such, the mining claims capitalized as part of this acquisition have been fully impaired as of March 31, 2013.
Our company has also located 48 unpatented lode mining claims (the “Additional 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.
Credit Facility Agreements
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 would 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
5
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.
On November 22, 2011, we entered into 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.
On April 12, 2012, we entered into a $1,000,000 letter of credit agreement dated March 27, 2012. Pursuant to the terms outlined in the letter of credit, at any time 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. Our company will issue 1,250,000 units when the exercise provision is enacted.
Trace Elements Clay
On May 8, 2012, we announced the acquisition of intellectual property and establishment of a new division. Our company has acquired eight domain names in conjunction with the formation of a new division focusing on the use of our calcium-montmorillonite as an animal supplement. In forming this wholly owned division to be called “Trace Elements Clay”, our company intends to focus on the probiotic nature of the clay as well as the toxin flushing benefit that the negatively ion-charged montmorillonite provides.
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 June 30, 2013 and 2012.
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 June 30, 2013 and 2012
Our operating results for the three month periods ended June 30, 2013 and 2012 and the changes between those periods for the respective items are summarized as follows:
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