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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 1

For the fiscal year ended March 31, 2013

or

For the transition period from                 to                 

Commission file number: 001-35590

Prospect Global Resources Inc.

(Exact name of registrant as specified in its charter)

1401 17th Street Suite 1550 Denver, CO 80202

(Address of principal executive offices, including zip code)

Registrant’s telephone number including area code:

(303) 990-8444

Securities registered pursuant to Section 12(b) of the Act:

Securities registered under Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes o  No x

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.  Yes x  No o

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-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

As of September 28, 2012, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the voting and non-voting common equity held by non-affiliates was approximately $55.1 million, based on the closing price of the registrant’s common stock on such date as reported on the NASDAQ OMX.  For purposes of this calculation, shares of common stock held by executive officers, directors and holders of greater than 10% of the registrant’s outstanding common stock are assumed to be affiliates of the registrant.  This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of July 26, 2013, 115,194,415 shares of the registrant’s common stock were issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

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Prospect Global Resources Inc.

(A Development Stage Company)

INDEX TO FORM 10-K/A

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EXPLANATORY NOTE

We are filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to amend our Annual Report on Form 10-K for the year ended March 31, 2013 (our “Form 10-K” and, together with this Amendment, the “Annual Report”), originally filed with the Securities and Exchange Commission (the “SEC”) on July 1, 2013, to include the information required by Items 10 through 14 of Part III of our Form 10-K. This information was previously omitted from our Form 10-K in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items to be incorporated in our Form 10-K by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year-end. We are filing this Amendment to include Part III information in our Form 10-K because a definitive proxy statement containing such information will not be filed by July 29, 2013.

In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), new Exhibits 31.1 and 31.2 are filed, and new Exhibit 32.1 is furnished herewith. This Amendment does not amend or otherwise update any other information in our Form 10-K.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements. This Annual Report includes statements regarding our plans, goals, strategies, intent, beliefs or current expectations. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished. These forward looking statements can be identified by the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.). Items contemplating or making assumptions about, actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward- looking statements.

Although forward-looking statements in this report reflect the good faith judgment of management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

CAUTIONARY NOTE TO INVESTORS REGARDING MINERAL DISCLOSURES

We commissioned a technical report in accordance with the Canadian Securities Administrator’s National Instrument 43-101 “Standards of Disclosure for Mineral Projects,” commonly known as NI 43-101, a preliminary economic assessment, or PEA, as well as a recent interim engineering study. The Canadian standards are different from the standards generally permitted in reports filed with the SEC. In accordance with Canadian standards, we report measured, indicated and inferred resources, measurements which are recognized terms under Canadian standards but are not recognized by the SEC and are generally not permitted in filings made with the SEC. The term “resource” does not equate to the term “reserve.” Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted. Investors are cautioned not to assume that any part of indicated resources will ever be converted into economically mineable reserves. The estimation of inferred resources involves far greater uncertainty as to their existence and economic viability than the estimation of other categories of resources. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “inferred resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. The PEA and the interim engineering study contain estimates based on our indicated and inferred resources. However, in accordance with both U.S. standards and NI 43-101, estimates of inferred mineral resources cannot form the basis of a feasibility study. Investors should be aware that the issuer has no “reserves” as defined by SEC Industry Guide 7 and are cautioned not to assume that any part or all of the estimated mineral resources will ever be confirmed or converted into SEC Industry Guide 7 compliant “reserves.”

In this Annual Report, unless the context otherwise requires:

(a)                      all references to “Prospect” or “Prospect Global” refer to Prospect Global Resources Inc. f/k/a Triangle Castings, Inc., a Nevada corporation, incorporated on July 22, 2008.

(b)                      all references to “old Prospect Global” refer to our wholly owned subsidiary Prospect Global Resources Inc., a Delaware corporation.

(c)                       all references to “we,” “us,” “our” and “the Company” refer collectively to Prospect and its subsidiaries old Prospect Global and American West Potash LLC or “AWP”.

(d)                      all references to “Triangle” refer to Prospect Global prior to the merger, at which time its name was Triangle Castings, Inc.

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(e)                       all references to “Karlsson” or “The Karlsson Group” refer to the independent third party that owned the 50% of AWP that we did not own prior to our acquisition of The Karlsson Group’s interest on August 1, 2012 and all references to “The Karlsson Group Acquisition” refer to the August 1, 2012 acquisition.

(f)                        all references to “Extension Agreement” refer to the agreements we entered into with The Karlsson Group on April 15, 2013 and June 26, 2013 to restructure the $125.0 million senior secured promissory note (the “Karlsson Note”) and related agreements associated with The Karlsson Group Acquisition.

(g)                       all references to “2013” mean the fiscal year ended March 31, 2013, “2012” to the fiscal year ended March 31, 2012 and “2011” to the fiscal year ended March 31, 2011.

Items 1. & 2. Business and Properties

Overview

We are engaged in the exploration and development of a potash deposit located in the Holbrook Basin of eastern Arizona, which we refer to as the Holbrook Project. Potash is primarily used as an agricultural fertilizer due to its high potassium content. Potassium, nitrogen and phosphate are the three primary nutrients essential for plant growth. The Holbrook Project consists of permits and leases on 147 mineral estate sections spanning approximately 90,000 acres in the Holbrook Basin of eastern Arizona, along the southern edge of the Colorado Plateau.

We completed a preliminary economic assessment for the Holbrook Project in December 2011 and are now nearing completion of a pre-feasibility study, of PFS, for the Holbrook Project. We expect to release the results of the PFS in July 2013. As is common for natural resources development projects, through our ongoing engineering work and analysis, we are continually evaluating multiple methods to increase stockholder value while decreasing development and operating risks through alternative development scenarios. These ongoing efforts could lead to (i) changes in capital expenditures required to build the mine, (ii) projected production levels, (iii) operating costs and (iv) mine life. We will announce any significant changes to our business plan resulting from our ongoing optimization analyses and will continue to make such evaluations.

Upon completion of the PFS, we will continue working toward a definitive feasibility study, or DFS, for the Holbrook Project. We estimate that we will need approximately $30 to $35 million of new financing to meet the funding milestones required under the restructured Karlsson Note and to fund our operations (including satisfaction of existing payables to various vendors) through completion of a DFS. We estimate that the cost of completing a DFS will be approximately $5 to $8 million and the cost of the additional drilling during the completion period will be approximately $3 to $5 million.

Business and Operating Strategy

Our strategy is to increase stockholder value through our focus on the exploration, development and production of potash from our Holbrook Project.  Key elements of our strategy include the following:

·                  Continue exploration and development of the resource and produce a definitive feasibility study to establish proven and probable reserves;

·                  Through our ongoing engineering work and analysis, continually evaluate various methods to increase shareholder returns while decreasing development and operating risks;

·                  Work with state and local agencies to permit a potash mine;

·                  Strengthen our leasehold position through acquiring bolt-on acreage and additional property interests within and around the Holbrook Project area;

·                  Leverage our geographic advantages such as close proximity to sales markets and access to transportation and other infrastructure to achieve lower cost of sales;

·                  Build early partnerships and sales arrangements with key customers such as the potash supply agreement we entered into with Sichuan Chemical during the latter part of 2012; and

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The realization of our investment in the Holbrook Project is dependent upon various factors, including but not limited to, our ability to obtain the necessary financing to continue the development of the Holbrook Project in order to meet the development milestones in the timeframes required pursuant to our recently restructured senior debt with The Karlsson Group completed on June 26, 2013. To the extent we are unable to raise sufficient funds to allow for completion of these development milestones within the timeframes required under the restructured Karlsson debt, The Karlsson Group could declare us to be in default, causing all of our then outstanding debt to be immediately due and payable and allowing The Karlsson Group to foreclose on their collateral. The terms of the restructured Karlsson debt also limit the amount and terms of new debt we can incur, all of which must be subordinated to The Karlsson debt.  These debt restrictions will make raising capital to meet the development milestones and to fund our operations more difficult.  Refer to Note 18 — Subsequent Events of the accompanying consolidated financial statements.

Our current cash situation has slowed the development of our Holbrook Project. Our forecasted cash requirements for the next 12 months include meeting the Karlsson senior debt development milestones which requires significant expenditures for the further development of the Holbrook Project. This indicates the existence of a material uncertainty that has raised substantial doubt about the Company’s ability to continue as a going concern as the Company’s ability to continue and meet its obligations is dependent on the Company raising additional equity or debt financing. If we cannot raise the capital required for further development of the Holbrook Project, this will result in the delay or indefinite postponement of further development work and the potential loss of our interests in the Holbrook Project.

We have not yet generated any operating revenue and we anticipate that we will continue to incur significant operating and development costs without realizing any revenues for the foreseeable future. We incurred a net loss of $51.9 million for the 12 months ended March 31, 2013 and had a working capital deficit of $144.7 million as of March 31, 2013.

History

Between January and November 2011, we invested $11.0 million dollars in AWP while The Karlsson Group contributed to AWP its ownership of mineral rights on eight private sections and potash exploration permits on 42 Arizona state sections, comprising a total of approximately 31,000 gross acres in the Holbrook Basin, each for a 50% ownership interest in AWP.

In July 2011, AWP entered into a Potash Sharing Agreement (“Sharing Agreement”) covering 101 private mineral estate sections and related mineral leases on approximately 63,000 acres adjacent to or in close proximity to AWP’s existing mineral rights in the Holbrook Basin.

On May 30, 2012, we entered into an agreement with The Karlsson Group to acquire the 50% of AWP that we did not already own for an aggregate purchase price of $150.0 million, or the equivalent of approximately $2.52 per share, before consideration of the warrants and other potential contingent payments.

On August 1, 2012, we closed The Karlsson Group Acquisition, at which time we assumed full ownership of AWP.

The Holbrook Project

Our Holbrook Project currently consists of permits and leases on 147 mineral estate sections spanning approximately 90,000 acres in the Holbrook Basin of eastern Arizona.

Location    The Holbrook Project area is located within the Holbrook Basin and is situated entirely within Apache County in northeastern Arizona. Automobile access to the area is provided via Interstate Route 40 (I-40) to Navajo, Arizona, and then heading

south on County Road 7230. The Holbrook Project is surrounded by the Navajo Reservation to the north and north-east, some Apache and Hopi Reservation grounds to the south, and the Petrified Forest National Park to the west.

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Infrastructure    The nearby towns of Holbrook, St. Johns, and Show Low provide locations for personnel, supplies, equipment and accommodation. These centers can serve as shipping locations, and also as the sources of gas and water. Electricity is provided to the area by three coal-fired power stations, the Cholla, Coronado and Springerville Plants. In addition, water for drilling can be obtained from range tanks, wells, and the Little Colorado River. Drilling mud, diesel and other resources can be obtained locally or from Silver City, New Mexico, which is approximately 231 miles from the Project, or from the Farmington, New Mexico area, which is a similar distance away.

The Holbrook Project has good access to highways and other transportation. It is bounded on the north by Interstate Route 40 (I-40). Secondary and ranch roads allow all-weather access to most locations in the area. All locations not accessible via existing roads can be accessed by either four-wheel drive or all-terrain vehicles. The BNSF Railway transects the northern part of the Holbrook Project area.

Climate    The Holbrook Project is located in a high desert, semi-arid region. Weather patterns are characterized by relatively dry conditions with hot spring, summer, and fall temperatures ranging from 52°F to 93°F, and cool winter temperatures ranging from 18°F to 63°F. The area experiences two rainy seasons, both occurring in the winter.

Geological Setting    The Holbrook Basin is a 5,000 square mile kidney-shaped sedimentary basin in east-central Arizona located along the southern edge of the Colorado Plateau.

The regional lands and limited vegetation consist of minor salt cedar and scrub grasses and are generally flat with minor low-lying rolling hills. The land supports ranching, light industry and areas of historical mining. There is some hay production in the valley bottoms and there are numerous ranches scattered throughout the Holbrook Project area. Two streams, the Little Colorado, a permanent stream, and the Puerco River, an intermittent stream, intersect the area. Their intersection lies about three miles east of Holbrook, and they tend to generally produce fresh water. The divide area between the rivers is characterized by generally low grassland ridges, broad drainage areas and ledge form buttes and mesas. Ground water occurs throughout the area and forms a regional aquifer.

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

History of the Project    Prior to our exploration program there have been many companies exploring potash in this area tracing back approximately 50 years.

In the 1960’s and 1970’s, a total of 135 holes were drilled to delineate the potash in the area. Arkla Exploration Company and Duval Corporation drilled 105 holes. The others were drilled by Kern County Land, National Potash, New Mexico and Arizona Land, St. Joe American, and U.S. Borax. Only five holes penetrated the entire salt package, but 127 holes were drilled into the upper 100 to 300 feet of salt where the potash is typically present. Most of the historical holes were cored through the upper 100 feet of salt to get direct information about the nature of the potash deposits. Both Arkla and Duval reported the presence of potassium minerals.

To date, there has been no commercial production of potash in Arizona, either by conventional or solution mining.

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

Exploration Program   During calendar year 2011, we completed approximately 70 miles of 2D seismic testing and the drilling and coring of 12 holes. This was combined with the historic information from approximately 58 holes in our project area, the results of which were used to delineate the potash potential on our acreage. During calendar year 2012, we completed the drilling of an additional 16 holes. As part of our ongoing exploration and development work, in 2011 we engaged third party technical consultants i) North Rim Exploration Ltd. to complete a NI 43-101 mineral resource estimate, which was updated in August 2012, which we refer to as the Resource Calculation, and ii) Tetra Tech, Inc. to perform a Preliminary Economic Analysis, or PEA.

Our Resource Calculation and PEA are preliminary in nature and mineral resources are not mineral reserves and have not demonstrated economic viability. The Resource Calculation, as updated, has not estimated any mineral reserves for the Holbrook

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Project and there is no certainty that the estimates in the Resource Calculation, as updated, will be realized. As defined by SEC Industry Guide 7, our resource currently does not meet the definition of proven or probable reserves and further studies that demonstrate the economic viability of the project must be completed, and necessary permits and additional property rights must be obtained. See “Cautionary Note to Investors Regarding Mineral Disclosures” and “Risk Factors” contained in elsewhere herein this Annual Report on Form 10-K.

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

In February 2013, we submitted our application for the Air Quality Control permit to the Arizona Department of Environmental Quality (“ADEQ”) and our Mineral Development Report to the Arizona State Land Department (“ASLD”) to convert certain ASLD exploration permits to mineral leases.

Our goal is to have a DFS completed for the Holbrook Project.  In order to achieve this goal, we estimate that we will need to raise approximately $30 to $35 million of new financing to meet the funding milestones required under the Karlsson Note and to fund our operations (including satisfaction of existing payables to various vendors) through completion of a DFS. We estimate that the cost of completing a DFS will be approximately $5 to $8 million and the cost of the additional drilling during the completion period will be approximately $3 to $5 million.

Governmental Regulation and Environmental, Health and Safety

We must obtain numerous governmental, environmental, mining and other licenses, permits and approvals authorizing our operations. Our existing exploration permits require us to make leasehold payments to either the state or private entities based on the number of leased land sections and acres. If we commence production on these leases, we will then be required to make royalty payments based on the revenue generated by the potash we produce from the leased land. We anticipate making significant leasehold payments to both governmental and private entities. Modifications of financial terms of these leases may adversely affect the viability of our projects.

In addition, portions of the area for the Holbrook Project border, or are within, the expanded boundaries of the Petrified Forest National Park. We hold the mineral rights for some of this land and we will need to work closely with both the State of Arizona and park officials regarding those portions of the Holbrook Project. This coordination could potentially delay the issuance of necessary permits, or lead to the imposition of restrictions to some of our operations that could adversely affect the viability of portions of the Holbrook Project. It could also lead to the denials of, approvals and permits necessary to develop portions of the Holbrook Project. Furthermore, any future expansion of the Petrified Forest National Park could limit our ability to acquire additional mineral rights, and additional acquisitions of lands or interests in land by the National Park Service could lead to further overlap with our current holdings.

Our exploration and development activities subject us to an evolving set of federal, state and local health, safety and environmental, or HSE, laws that regulate or propose to regulate surface disturbance, air and water quality impacts and safety procedures followed by our employees. Upon commencement of potash production, we will also need to comply with laws that regulate or propose to regulate our mining activities, including the management and handling of raw materials, disposal, storage and management of hazardous and solid waste, the safety of our employees and post-mining land reclamation.

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

Industry Overview

Potash is primarily used as an agricultural fertilizer due to its high potassium content. Potassium, nitrogen and phosphate are the three primary nutrients essential for plant growth. A proper balance of these nutrients improves plant health and increases crop yields. Potash helps regulate plants’ physiological functions and improves plant durability, providing crops with protection from drought, disease, parasites and cold weather. Currently, no cost effective substitutes exist for these three nutrients. Less effective

nutrient sources do exist; however, the relatively low nutrient content of these sources and cost of transportation reduce their attractiveness as a viable, economic alternative to potash.

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Potash is primarily mined from underground mines and less frequently, from naturally occurring surface or sub-surface brines. It is mined through both conventional underground methods and surface or solution mining. Unlike nitrogen and phosphate, potash does not require additional chemical conversion to be used as a plant nutrient. Virtually all of the world’s potash is currently extracted from commercial deposits located in 12 countries and production is currently concentrated among a few leading producers. Canada is the largest producer of potash followed by Russia and Belarus, which together account for more than 60% of global production.

Domestically, approximately 85% of all potash produced is used as a fertilizer, most of it in the form of potassium chloride, according to the U.S. Geological Survey. The chemical industry consumes the remaining 15% of potash produced. Non-fertilizer uses of potash include chemical and pharmaceutical products, drilling fluid additive during oil and gas exploration, animal feed, detergents, glass and ceramics, textiles and dyes.  Internationally, the fertilizer industry accounts for approximately 95% of potash consumption.

Market Conditions and Trends

Potash Demand   Potash demand depends primarily on the demand for fertilizer, which is based on the total planted acreage, crop mix, soil characteristics, fertilizer application rates, crop yields and farm income. Each of these factors is affected by current and projected grain stocks and prices, agricultural policies, improvements in agronomic efficiency, fertilizer application rates and weather. From 2000 to 2011, global consumption of potash as a fertilizer grew at a compound annual growth rate (CAGR) of 2.54% per year, from approximately 35.9 million tonnes KCl to approximately 47.3 million tonnes KCl, according to Fertecon.

Potash Supply  The supply of potash is influenced by a broad range of factors including available capacity and achievable operating rates; mining, production and freight costs; government policies and global trade. Barriers to adding new potash production are significant because economically recoverable potash deposits with the appropriate geologic conditions occur rarely. According to Fertecon, in 2011, seven countries accounted for approximately 91% of the world’s aggregate potash production. This scarcity has resulted in a high degree of concentration among the leading producers. Canada currently accounts for approximately 30% of global potash production. The next six largest producers, Russia, Belarus, China, Germany, Israel and Jordan, account for approximately 60% of global production. The U.S. produces approximately 15% of the potash it consumes. U.S. potash reserves are concentrated in the southwestern U.S and account for approximately 3% of world production. Only 12 countries produce nearly all of the world’s supply, making much of the world dependent upon imports to satisfy their potash requirements.

Outlook   We believe the long-term demand for potash remains positive and will be driven by the continued growth in emerging economies, a growing global population and the upgrading of diets worldwide amongst the growing middle class. In the near term, we anticipate that the global economy will continue to recover, albeit on a slower pace. A sustained recovery in the global economy in the coming quarters and years, combined with positive forecasts of global consumption, is likely to lead to an increase in demand for commodities such as potash. Specifically, we believe that as the emerging markets grow and the members of their middle classes increase, the diet of this increasingly affluent population will change and drive demand for more agricultural products. This incremental demand on the agricultural industry should translate, in our opinion, into a sustained increase in demand for potash and fertilizer generally.

Employees

As of June 28, 2013, we had a total of eight employees.

Glossary of Terms

Potash:  A generic term for potassium salts (primarily potassium chloride, but also potassium nitrate, potassium sulfate and sulfate of potash magnesia, or langbeinite) used predominantly and widely as a fertilizer in agricultural markets worldwide. Unless otherwise indicated or inferred by context, references to “potash” refer to muriate of potash.

Potassium Chloride:  (KCl—muriate of potash): a metal halide salt composed of potassium and chlorine, varying in color from white to red depending on the mining and recovery process used. The majority of potassium chloride produced is used for making fertilizer.

Ton:  (also referred to as a short ton) a measurement of mass equal to 2,000 pounds.

Tonne:  (also referred to as a metric ton) a measurement of mass equal to 1000 kg or 2,204.6 pounds.

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Item 1A.  Risk Factors

Investing in our shares involves significant risks, including the potential loss of all or part of your investment. These risks could materially affect our business, financial condition and results of operations and cause a decline in the market price of our shares. You should carefully consider all of the risks described in this Annual Report, in addition to the other information contained in this Annual Report, before you make an investment in our shares. Unless otherwise indicated, references to us, Prospect or Prospect Global include our operating subsidiaries old Prospect Global and AWP.

Risks Related to Our Business

We have significant immediate and short-term capital needs as well as significant capital needs over the next few years. Failure to secure this capital when needed or on terms that are acceptable to us has raised substantial doubt about the Company’s ability to continue as a going concern.

We have received two extensions under the Karlsson Note since its inception as we were not able to meet the requirements under the original agreement and the First Extension Agreement. Under the terms of the Second Extension Agreement, we are required to meet the following development milestones: (i) complete total depth on at least eight wells on or before November 1, 2013, (ii) deliver a completed and updated final NI 43-101 resource report on or before February 1, 2014, (iii) deliver completed metallurgical and rock mechanic test work results that will be used to complete the mine and processing plant designs for the definitive feasibility study on or before June 1, 2014 and, (iv) deliver a completed and published definitive feasibility study on or before December 31, 2014. There can be no assurance that we will be able achieve these development milestones. We are also required to place 50% of the net proceeds of the next $24.0 million of capital we raise (for a total of $12.0 million) into escrow, which funds may be released solely to use specified development expenses for our potash project in the Holbrook Basin. Two million dollars of the proceeds we received from our recent $5.0 million public offering (refer to Note 18— Subsequent Events of the accompanying consolidated financial statements) were placed into this escrow, reducing our remaining escrow obligation to $10.0 million. If we fail to meet the required development milestones or make the required escrow payments Karlsson will be entitled to foreclose on the collateral securing the Karlsson Note which could result in a sale of AWP or its assets to satisfy amounts owing on the note.

Our current operations do not generate any cash flow. Future work on our project will require significant additional financing. As of the date of this filing our cash reserves are approximately $1.4 million (excluding the escrowed cash of approximately $2.4 million which must be used for specified purposes related to development of the Holbrook Project pursuant to the restructured Karlsson Note). We estimate that we will need approximately $30 to $35 million of new capital to meet the funding milestones of the Karlsson Note and to fund our operations (including satisfaction of existing payables to various vendors) through completion of a DFS. We estimate that the cost of completing a DFS will be approximately $5 to $8 million, and the cost of the additional drilling during the completion period will be approximately $3 to $5 million. We are required to pay 10% of all capital raised going forward to both Karlsson and Apollo as payments on their respective promissory notes.

Our current cash situation has slowed the development of our Holbrook Project. Our forecasted cash requirements for the next 12 months include meeting the Karlsson development milestones which requires significant expenditures for the further development of the Holbrook Project. This indicates the existence of a material uncertainty that has raised substantial doubt about the Company’s ability to continue as a going concern as the Company’s ability to continue and meet its obligations is dependent on the Company raising additional equity or debt financing. There can be no assurance that we will be able to obtain these funds on terms acceptable to us, or at all. In addition, there can be no assurance that these estimates will not increase significantly in connection with the additional engineering studies required for a DFS. If we cannot raise the capital required for further development of the Holbrook Project, this will result in the delay or indefinite postponement of further development work and the potential loss of our interests in Holbrook Project. Further, any equity financings would likely result in dilution to existing stockholders and may involve the use of securities that have rights, preferences, or privileges senior to our common stock, and debt financing may contain covenants or other terms that impact our business.

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

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

our coverage limits. Even if we are successful in defending any such claims, securities litigation is distracting to our management, may cause harm to our reputation and could adversely affect our stock price and our ability to raise capital in the future.

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Our restructured senior debt with The Karlsson Group contains required development milestones and restrictions on future debt financings that could cause us to default on the debt or make raising additional capital difficult.

Under the terms of our restructured debt with The Karlsson Group, we are required to meet the following development milestones: (i) complete total depth on at least eight wells on or before November 1, 2013, (ii) deliver a completed and updated final NI 43-101 resource report on or before February 1, 2014, (iii) deliver completed metallurgical and rock mechanic test work results that will be used to complete the mine and processing plant designs for the definitive feasibility study on or before June 1, 2014 and (iv) deliver a completed and published definitive feasibility study on or before December 31, 2014. If we do not meet any one of the required development milestones, Karlsson will be entitled to foreclose on the collateral securing the Karlsson Note, which could result in a sale of AWP or its assets to satisfy amounts owing on the note. Also, the terms of the Karlsson Note significantly restrict the amount and terms of any additional debt we may incur, all of which must be subordinated to the Karlsson Note. These debt restrictions will make raising capital to meet the financing milestones and to fund our operations more difficult. Refer to Note 18—Subsequent Events of the accompanying consolidated financial statements for additional information.

Our substantial indebtedness could adversely affect our financial condition and ability to raise additional capital.

As of March 31, 2013, we had total debt of $128.3 million, including the $6.2 million of tax gross-up due under the Karlsson Note. Furthermore, the restructuring of the Karlsson Note completed on April 15, 2013 (see preceding risk factor) will result in us incurring additional debt going forward since part of the consideration granted to The Karlsson Group for the amendment included additional tax gross-up payments on the Karlsson Note.  As of the date of this filing, our current estimate for the “new” tax gross-ups agreed to in the restructuring is $20.1 million although the actual amount could differ substantially from this amount owing to changes in future tax and interest rates.

As of the date of this filing, we have total debt of approximately $136.8 million, including the recently completed $5.5 million Bridge Loan Financing as well as our estimates for amounts owed for tax gross-ups.  In addition to this amount, we owe approximately another $7.8 million for accrued interest on this debt.  This substantial indebtedness will make raising new capital more difficult for us.

We have agreed to compensate our related party Buffalo Management LLC for reducing its royalty interest in us on terms that are either dilutive or require a significant cash payment upon commencement of revenue.

In connection with restructuring the Karlsson Note, we were required to increase Karlsson’s royalty interest from 1% to 2% without increasing the aggregate amount of royalty interests payable to third parties in the aggregate. In order to achieve this result, we negotiated with Buffalo Management, or Buffalo, to reduce our royalty payable to Buffalo from 2% to 1%. We agreed to compensate Buffalo for this royalty reduction by giving Buffalo either, or a combination of, at its election, (i) equity securities (that may include common stock, preferred stock or warrants for common stock as mutually agreed) equal in value to the determined fair market value of the royalty surrendered or (ii) preferred stock that is redeemable after we commence receiving revenues from the Holbrook Project for the determined fair market value plus accrued interest; provided that no securities shall be issued to Buffalo prior to July 1, 2013 and provided further that in no event will any equity securities or securities convertible into equity securities issued to Buffalo (x) exceed 10% of our outstanding capital stock or (y) be redeemable for aggregate consideration exceeding 10% of our equity market capitalization. To value the surrendered royalty we agreed to engage a third party valuation firm reasonably satisfactory to Buffalo.

We believe that the fair market value of a 1% royalty interest could be substantial and that compensating Buffalo could be significantly dilutive or expensive. If we issue preferred stock that is redeemable, we will have converted a royalty that would be payable only in proportion to our revenue stream into a debt obligation that likely will be payable prior to our revenue stream generating enough revenue to pay the redemption of the preferred stock in full. Further, even if we issue equity securities to Buffalo without a redemption right, Buffalo may insist that any preferred stock we issue to it in satisfaction of this obligation have a liquidation preference or other rights senior to the rights of the holders of common stock.

Quincy Prelude LLC, one of our stockholders beneficially owning more than 5% of our common stock, owns 100% of the voting and 75% of the economic interests of Buffalo and has sole voting and dispositive power of the shares of our common stock owned by Buffalo. Chad Brownstein, one of our directors and our executive vice chairman, is the sole member of Quincy Prelude LLC and has sole voting and dispositive power of the shares of our common stock beneficially owned by Quincy Prelude. Barry Munitz, our chairman, owns a 15% non-voting economic interest in Buffalo.

Also, Chad Brownstein is the son of a founding member of Brownstein Hyatt Farber Schreck, LLP. Brownstein Hyatt serves as our principal outside legal counsel and advises the board on a variety of matters, including the arrangements with Buffalo Management. Brownstein Hyatt and Mr. Brownstein’s father collectively own 1,778,150 shares of our common stock and options to purchase 120,000 shares of our common stock. During the 12 months ended March 31, 2013 and 2012, we paid Brownstein Hyatt

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approximately $3.6 million and $0.5 million, respectively, in legal and lobbying/permitting fees, although Chad Brownstein does not share in any of these fees.

Generally, transactions between a company and one or more of its directors will not be held invalid solely because one or more directors have an interest in the transaction, although, if challenged, courts frequently require the board and company to demonstrate that the terms of such transactions are entirely fair, both in process and in price, to the shareholders. Although we have established a special committee of our board comprised of directors who have no interest in Buffalo or Quincy Prelude and who are otherwise independent with respect to those entities and the individuals who control those entities to negotiate with Buffalo, and to select a third party appraiser to assess the fair market value of the surrendered portion of the royalty, we cannot assure you that the decisions of these directors may not be challenged. Related party transactions such as our relationship with Buffalo frequently give rise to civil litigation involving alleged breaches of fiduciary duty. In our case, plaintiffs may allege that the directors on our committee are not disinterested or independent, or that the advisors they have engaged to assist them also are not disinterested or independent. We cannot assure you that our stockholders will not commence such litigation and if commenced, that we may not be liable for breaches of fiduciary duty by our directors. Further, we cannot assure you that we will have adequate insurance coverage for any such claims should they occur.

Even if we have adequate coverage for any claims that are made, the existence of such claims may cause damage to our reputation in the business community and may lead to our need to pay legal fees for our retainer as well as any judgment or settlement in excess of our coverage limits. Further, such litigation typically provides significant distraction to management. All of these factors may have a substantial and adverse impact on the value of our stock in the market as well as our business prospects.

We have no current revenue source and a history of operating losses, and there is an expectation that we will generate operating losses for the foreseeable future. We may not achieve profitability for some time, if at all.

We have incurred losses each year since our inception. We expect to continue incurring operating losses until several months after production occurs, if ever. As of March 31, 2013, our accumulated losses were $131.6 million, which included derivative losses of $56.7 million that relate to the change in the fair value of the compound embedded derivatives of our convertible notes and warrants (see “Management’s Discussion and Analysis” included elsewhere in this Annual Report on Form 10-K), and the net loss attributable to us for the 12 months ended March 31, 2013 was $51.9 million which included derivative losses of $1.9 million. The process of exploring, developing and bringing into production a producing mine is time-consuming and requires significant up-front and ongoing capital. We have not defined or delineated any proven or probable reserves at any of our properties. The development of the Holbrook Project into a producing mine will require further studies that demonstrate the economic viability of the project, necessary permits, production decisions to be made and the arrangement of financing for construction and development. The PEA is based on estimates of mineral resources, which are not mineral reserves and do not have demonstrated economic viability. There can be no assurance that a DFS will be completed on time or at all, or that the economic feasibility of the Holbrook Project will be confirmed by a DFS.  Few properties that are explored are ultimately developed into producing mines. We expect that we will continue to incur operating losses for the foreseeable future.

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

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

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

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

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

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

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

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

Cost estimates may increase significantly as more detailed engineering work and studies are completed on a project. It is common in new mining operations to experience unexpected costs, problems and delays during development, construction and mine start-up. Accordingly, there are no assurances that our activities will result in profitable mining operations or that we will successfully establish

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mining operations or enter into commercial production. Our failure to enter successfully into commercial production would materially and adversely affect our business, prospects, financial condition and results of operations. In addition, there can be no assurance that our activities will produce natural resources in commercially viable quantities. There can be no assurance that sales of our natural resources production will ever generate sufficient revenues or that we will be able to sustain profitability in any future period.

Our estimated timetable to complete a DFS may not be accurate and we may not be able to complete the Holbrook Project.

We currently are working toward the completion of a DFS; however, there is no guarantee that such a study will be completed on schedule, or at all, or that a completed study will confirm the economic feasibility of the Holbrook Project.  If we decide to commence production, we will require significant amounts of capital, and our ability to obtain the necessary funding will depend on a number of factors, including the status of the national and worldwide economy and the price of potash. Fluctuations in production costs, material changes in the mineral estimates and grades of mineralization or changes in the political conditions or regulations in the United States may make placing the Holbrook Project into production uneconomic. Further, we may also be unable to obtain the necessary permits or additional property interests in a timely manner, on reasonable terms or on terms that provide us sufficient resources to develop the Holbrook Project.

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

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

In addition, our agreement with Sichuan Chemical for delivery of potash is valued based on factors beyond our control including the then market price for potash in the People’s Republic of China. If such market price materially lowers from its current rate, our valuation of the contract would decrease, which could have a material adverse effect on our results of operations and financial condition.

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

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

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

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

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

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with respect to our properties. This may result in us not being compensated for our prior expenditure relating to the property or may impact our ability to develop the Holbrook Project.

The ultimate development plan at the Holbrook Project includes mining on lands that we do not currently have mining rights to. We have not been able to secure mineral rights to all of this land and we may ultimately be unable to secure these rights. Failure to secure these rights would significantly reduce the life of mine currently contemplated in the PEA and the Interim Report and may affect the economic feasibility of the Holbrook Project.

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

We have prepared a technical report and an updated report in accordance with NI 43-101, which differs from the standards generally permitted in reports filed with the SEC. Under the first resource calculation completed in 2011, we reported indicated and inferred resources and under the updated resource calculation completed in 2012, we reported measured, indicated and inferred resources, measurements which are generally not permitted in filings made with the SEC. The estimation of measured or indicated resources involves greater uncertainty as to their existence and economic feasibility than the estimation of proven and probable reserves. Investors should be aware that we have no “reserves” as defined by SEC Industry Guide 7 and much or all of the potential target mineral resources may never be confirmed or converted into SEC Industry Guide 7 compliant “reserves.” The PEA and the Interim Report contain estimates based on our inferred resources. However, in accordance with both Canadian statutes and NI 43-101, estimates of inferred mineral resources cannot form the basis of a feasibility study. See “Cautionary Note to Investors Regarding Mineral Disclosures” elsewhere in this Annual Report on Form 10-K.

Risks Related to the Mining Industry

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

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

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

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

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

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

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

In addition, as noted above, our agreement with Sichuan Chemical for the sale of potash is valued based on factors beyond our control including the then market price for potash in the People’s Republic of China. If that market price would be materially lower than current prices, it could have a material adverse effect on our results and operations and financial condition.

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

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

·                  protection of human health and the environment;

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

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

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

·                  price controls;

·                  taxation and mining royalties;

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

·                  historic and cultural preservation.

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

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

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

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

In addition, portions of the area for the Holbrook Project border, or are within, the expanded boundaries of the Petrified Forest National Park. The National Park Service recently acquired certain surface rights in this expansion area that are included in the Holbrook Project. We hold the mineral rights for some of this land and we will need to work closely with both the State of Arizona and park officials regarding those portions of the Project. This coordination could potentially delay the issuance of necessary permits, or lead to the imposition of restrictions to some of our operations that could adversely affect the viability of portions of the Holbrook Project. It could also lead to the denials of, approvals and permits necessary to develop portions of the Holbrook Project. Furthermore the expansion of the Petrified Forest National Park could limit our ability to acquire additional mineral rights, and additional acquisitions of lands or interests in land by the National Park Service could lead to further overlap with our current holdings.

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

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

We must obtain numerous environmental, mining and other permits and approvals from various United States federal, state and local government authorities authorizing our future operations, including further exploration and development activities and commencement of production on our properties. There can be no assurance that all permits that we require for the construction of mining facilities and to conduct mining operations will be obtainable on reasonable terms, or at all. A decision by a government

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agency to delay or deny a permit or approval, or a failure to comply with the terms of any such permits or approval that we have obtained, may delay the completion of a DFS on the Holbrook Project or may interfere with our planned development of this property and have a material adverse effect on our business, financial condition or results of operations.

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

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

Because we have not commenced commercial production at any of our properties, resource estimates for our properties may require adjustments or downward revisions based upon further exploration or development work or actual production experience. There can be no assurance that recovery of minerals in smallscale tests will be duplicated in largescale tests under on-site conditions or in production scale.

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

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

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

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

Our competitors include other mining companies and fertilizer producers in the United States and globally, including state-owned and government-subsidized entities. Many of these competitors are large, well-established companies having substantially larger operating staffs and greater capital resources than we do. We may not be able to conduct our operations successfully, evaluate and select suitable properties and consummate transactions in this highly competitive environment. Specifically, these larger competitors may be able to pay more for exploratory prospects and productive mineral properties and may be able to define, evaluate, bid for and purchase a greater number of properties and prospects than our financial or human resources permit. We may also encounter increasing competition from other mining companies in our efforts to hire the experienced mining professionals necessary to conduct our operations and advance our properties. In addition, such companies may be able to expend greater resources on the existing and changing technologies that we believe are and will be increasingly important to attaining success in the industry. Our inability to compete with other companies for these resources would have a material adverse effect on our results of operations, financial condition and cash flows.

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

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

·                  fires;

·                  flooding;

·                  power outages;

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·                  explosions;

·                  inclement weather and natural disasters;

·                  mechanical failures;

·                  rock failures and mine roof collapses;

·                  unscheduled downtime;

·                  industrial accidents;

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

·                  availability of needed equipment at acceptable prices.

Any of these risks can cause substantial losses resulting from:

·                  injury or loss of life;

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

·                  pollution and other environmental damage;

·                  regulatory investigations and penalties;

·                  revocation or denial of our permits;

·                  suspension of our operations; and

·                  repair and remediation costs.

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

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

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

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

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

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

·                  the quantity of materials mined:

·                  the cost to mine the materials; and

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

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

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

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

Potash prices have increased since 2009 and this coupled with projected increases in demand for potash have led to a renewed interest in bringing new sources of potash supply into the market. If production increases to the point where the market is over

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supplied, the price at which we are able to sell and the volumes we are able to sell could be impacted, which may materially and adversely affect our projected business, operating results and financial condition.

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

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

Global economic conditions can adversely affect our business.

The unprecedented events in global financial markets in the past several years have had a profound impact on the global economy. Many industries, including the mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity and foreign exchange and a lack of market liquidity. A continuation or worsening of current economic conditions, a prolonged global, national or regional economic recession or other events that could produce major changes in demand patterns could have a material adverse effect on our sales, margins and profitability.

Risks Relating to our Common Stock

We have been notified by Nasdaq that we have failed to satisfy two continuing listing rules, either of which could lead to our common stock being delisted from The Nasdaq Capital Market.

On April 23, 2013, we received written notification from The Nasdaq Stock Market that for the last 30 consecutive business days, the bid price of our common stock had closed below the minimum $1.00 per share requirement for continued inclusion on The Nasdaq Capital Market based on Listing Rule 5550(a)(1).  We have 180 calendar days, or until October 20, 2013, to regain compliance with this rule. On April 25, 2013, we received a second written notification from The Nasdaq Stock Market that we are no longer in compliance with Nasdaq Listing Rule 5550(b)(2) because the market value of our listed securities has fallen below the $35 million minimum requirement for continued listing on The Nasdaq Capital Market for a period of at least 30 consecutive business days. We have 180 calendar days, or until October 22, 2013, to regain compliance. While we are considering available options to regain compliance with these Nasdaq rules, there can be no assurance that we will be able to do so, which would likely result in our common stock being delisted from the Nasdaq Capital Market. Delisting of our common stock from The Nasdaq Capital Market could substantially reduce the liquidity of your investment in our common stock.

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

Our common stock began trading on The Nasdaq Capital Market under the symbol “PGRX” on July 2, 2012. The high and low sale prices of our common stock on The Nasdaq Capital Market since trading commenced has been $4.06 and $0.07, respectively. The price of our common stock has fluctuated and may fluctuate in the future in response to many factors, including:

·                  the perceived prospects for natural resources in general;

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

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

·                  news about our industry and our competitors;

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

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

·                  arrival or departure of key personnel;

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

·                  adverse regulatory actions; and

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

Our shares may trade at prices significantly below current levels, in which case holders of the shares may experience difficulty in reselling, or an inability to sell, the shares. In addition, when the market price of a company’s common equity drops significantly,

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stockholders often institute securities class action lawsuits against the company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources away from the day-to-day operations of our business.

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

Our articles of incorporation permit us to issue debt securities with voting rights as permitted by Nevada corporate law. We have not issued any debt securities with voting rights as of the date of this filing. Holders of voting debt securities may have different interests than stockholders and may vote in accordance with those interests. Issuances of debt securities with voting rights could

also have an anti-takeover effect, in that it could make a change in control or takeover of us more difficult. For example, we could grant voting rights to debt holders of Prospect so as to dilute the voting rights of persons seeking to obtain control of us. Similarly, voting rights could be granted to debt holders allied with our management and could have the effect of making it more difficult to remove our current management by diluting the voting rights of persons seeking to cause such removal.

Future sales or issuances of shares of common stock or the exercise of our outstanding warrants may decrease the value of our existing common stock, dilute existing shareholders and depress the market price of our common stock. We may also issue additional shares of our common stock or securities convertible into our common stock in the future.

We have issued warrants to purchase an aggregate of 66,429,593 shares of our common stock. We may also sell additional common stock in subsequent offerings and may issue additional warrants and shares of our common stock in the future, which may lower the market price of our common stock. Some of our advisors are compensated based on periodic issuances of shares of common stock or warrants to purchase common stock. We cannot predict the size of future sales and issuances of common stock or securities convertible into common stock or the effect, if any, that future sales and issuances of common stock or securities convertible into common stock will have on the market price of our shares of common stock. Sales or issuances of a substantial number of common stock or securities convertible into common stock, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. With any additional sale or issuance of common stock, investors will suffer dilution of their voting power and we may experience dilution in our earnings per share.

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

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

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our compliance with Section 404 of the Sarbanes-Oxley Act will require that we incur substantial accounting expense and expend significant management efforts. If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, the market price of our common stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting that we are required to include in our periodic reports filed with the SEC under Section 404 of the Sarbanes-Oxley Act. Ineffective disclosure controls and procedures or internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock.

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

The SEC has adopted regulations which generally define a “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. Our common stock currently trades and since its initial listing on the Nasdaq Capital Market has traded below $5.00 per share. The SEC’s penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure

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document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and the salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that before a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s agreement to the transaction. These rules may restrict the ability of brokers-dealers to sell our common stock and may affect the ability of investors to sell their shares, until our common stock no longer is considered a penny stock.

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

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

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

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

Item 1B.  Unresolved Staff Comments

None.

Item 3.  Legal Proceedings

We recently received correspondence from a shareholder who purchased $10.0 million of shares in our November 2012 public offering asserting a right to rescind the purchase based on violation of securities laws in connection with that offering.  We believe the claim is without merit and are vigorously defending against it.  No litigation has been commenced in this matter. In a letter dated June 14, 2013, the four underwriters in our November 2012 public offering notified us that they received a letter from this stockholder in which the stockholder elected to void its purchase of shares in our November 2012 public offering. Pursuant to the terms of the underwriting agreement we entered into with the underwriters in our November 2012 public offering, the underwriters requested that we appoint counsel for the underwriters to advise on this matter, subject to their determination that counsel is satisfactory, or, alternatively, we may authorize the underwriters to employ counsel at our expense.

The Company is not a party to any pending material legal proceedings nor is the Company aware of any threatened or contemplated proceeding by any governmental authority against the Company.

Item 4.  Mine Safety Disclosures

Not applicable.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock trades on the Nasdaq under the symbol “PGRX.”  Prior to July 2, 2012, our common stock traded on the OTC Bulletin Board trading system, also under the symbol “PGRX”.

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The following table sets forth the high and low bid prices for our common stock for the respective periods, as reported on the Nasdaq OMX and OTC Bulletin Board trading systems.

Holders

As of June 26, 2013, there were approximately 51 holders of record of our common stock based upon information provided by our transfer agent.

Dividends

We have never declared or paid dividends on our common stock nor do we anticipate paying any cash dividends on our common stock within the foreseeable future. Our board of directors has the ability and may so choose to declare cash dividends on our common stock, at their discretion, in the future. In their determination to declare dividends, the board will consider, among other factors, the company’s financial positions, results of operations, cash requirements, and any applicable outstanding covenants.

Equity Compensation Plans

See Note 13—Equity Based Compensation of the accompanying consolidated financial statements for information related to our equity compensation plans.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 6.  Selected Financial Data

As a smaller reporting company we are not required to provide this information. See Item 8. Financial Statements and Supplementary Data.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the risks described in “Risk Factors” and elsewhere in this Annual Report. See “Cautionary Statement Regarding Forward-Looking Statements” above. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and related notes thereto, which have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), included in this report and with the understanding that our actual future results may be materially different from what we currently expect.

Overview

We are engaged in the exploration and development of a potash deposit located in the Holbrook Basin of eastern Arizona, which we refer to as the Holbrook Project. We hold our interest and control the Holbrook Project through our wholly owned subsidiary, AWP. Through AWP, we hold potash exploration permits on 38 Arizona state sections, own the mineral rights on eight private sections and hold leases for the mineral rights on 101 private sections which, in total, cover approximately 90,000 acres.

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We decided to pursue potash mining in the United States based on our belief that the United States represents lower risks than many other foreign mining jurisdictions. The United States is also one of the world’s largest consumers of potash, importing over 80% of all domestically consumed potash in calendar year 2011.

Our strategy is to increase stockholder value through our focus on the exploration, development and production of potash from our Holbrook Project. Since 2011, we have conducted drilling, geological work and various other technical and preliminary economic assessments to advance and expand our mineralized material base in the Holbrook Project. We expect to complete a pre-feasibility study, or PFS, for the Holbrook Project in July 2013. As is common for natural resources development projects, through our ongoing engineering work and analysis, we are continually evaluating multiple methods to increase stockholder value while decreasing development and operating risks through alternative development scenarios. These ongoing efforts could lead to changes (i) in capital expenditures required to build the mine, (ii) projected production levels, (iii) operating costs and (iv) mine life. We will announce any significant changes to our business plan resulting from our ongoing optimization analyses and will continue to make such evaluations.

On August 1, 2012, we completed the purchase of the 50% interest in AWP that we did not already own, giving us complete control and economic ownership of the Holbrook Project. In connection with this acquisition, we incurred substantial indebtedness that led to our $144.7 million working capital deficit at March 31, 2013.  Subsequent to year-end and as a result of not being able to service this debt, we entered into a debt restructuring on April 15, 2013 that extended the due dates of this and other debt in exchange for certain other considerations and concessions. On June 26, 2013 we entered into a second extension agreement which amended the terms of the Karlsson Note. Refer to Note 18 — Subsequent Events of the accompanying consolidated financial statements for additional information.

As part of the April 15, 2013 debt restructuring, we agreed to certain capital raising commitments or milestones, which if we either fail to raise or raise the funds timely constituted payment defaults under the Karlsson Note.  These milestones required us to raise the following amounts by the dates indicated:

(i)             $5.0 million by May 15, 2013;

(ii)          $7.0 million by June 17, 2013;

(iii)       $18.0 million by September 10, 2013; and

(iv)      $25.0 million by August 1, 2014

The May 15, 2013 raise was satisfied by a $5.0 million subordinate loan from two stockholders completed on May 2, 2013. We obtained an extension of our obligation to raise $7.0 million by June 17, 2013 followed by a second extension agreement with The Karlsson Group on June 26, 2013 in which we amended, among other documents, the Karlsson Note.

As part of the second extension, the interim principal payment of $30.0 million that was due on the earlier of (i) six months following completion of a definitive feasibility study and (ii) January 2, 2015 and the interim fundraising requirements were eliminated.  We are now required to meet the following development milestones:

(i)             Complete total depth on at least eight wells on or before November 1, 2013,

(ii)          Deliver a completed and updated final NI 43-101 resource report on or before February 1, 2014,

(iii)       Deliver completed metallurgical and rock mechanic test work results that will be used to complete the mine and processing plant designs for the definitive feasibility study on or before June 1, 2014, and

(iv)      Deliver a completed and published definitive feasibility study on or before December 31, 2014.

If we do not meet any one of the required development milestones, Karlsson will be entitled to foreclose on the collateral securing the Karlsson Note, which could result in a sale of AWP or its assets to satisfy amounts owing on the note. Refer to Note 18—Subsequent Events of the accompanying consolidated financial statements for further information.

During 2013, we realized a net loss of $51.9 million and consumed cash of $72.2 million between our spending on operating, investing and financing activities.  We were also able to raise $61.9 million through various sales of our common stock throughout the year. However, this left us with just $1.0 million of cash at year-end, which in-turn has slowed our progress on a DFS. We estimate that we will need approximately $30 to $35 million of new financing (in addition to the $5.0 million of proceeds received from the subordinate loan that closed on May 2, 2013) to meet the funding milestones under the Karlsson Note and to fund our operations (including satisfaction of existing payables to various vendors) through completion of a DFS. We estimate that the cost of completing a DFS will be approximately $5 to $8 million and the cost of the additional drilling during the completion period will be approximately $3 to $5 million.

Operating Results

Revenue

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

Exploration Expense

Years Ended March 31, 2013 and 2012

Our exploration expenses for the years ended March 31, 2013 and 2012 totaled nil and $5.0 million, respectively.  The 2012 expense included $0.5 million, $4.3 million and $0.2 million for seismic, drilling and permitting/environmental activities, respectively.  For 2013, $18.8 million was capitalized as development costs in mineral properties that would have been recorded as exploration expense had we not been able to capitalize those costs. The increase in costs between years was primarily due to differences in our operational focus during the respective periods.  During 2012, we drilled a total of 12 holes and incurred costs associated with the

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completion of the Resource Report and PEA while our 2013 activities encompassed the drilling of 14 holes and work associated with our permitting, environmental and feasibility study activities.   The activities in both years related exclusively to the Holbrook Project.

Capitalized development costs are expenses incurred during the year that if not capitalized in mineral properties would have been expensed had we not been able to capitalize these costs.  The Company made a determination following the completion of the Resource Report and PEA in late 2011 that it had met the requirements to transition from an exploration stage to a development stage company and accordingly began capitalizing all development related costs related to the Holbrook Project as of January 1, 2012.  Prior to this date and while we were in the exploration stage, all costs related to the Holbrook Project were expensed as incurred.

Cumulative Period

Our exploration expense for the Cumulative Period totaled $5.6 million and included $1.0 million, $4.4 million and $0.2 million for seismic, drilling and permitting/environmental activities, respectively, all of which related to the Holbrook Project.  For the Cumulative Period, $19.6 million was capitalized as development costs in mineral properties that would have been considered exploration expense had we not been able to capitalize these costs.

General and Administrative Expense (“G&A”)

Years Ended March 31, 2013 and 2012

Our general and administrative expenditures, prior to capitalization considerations, for the years ended March 31, 2013 and 2012 consisted of the following:

Our 2013 expenses for salaries and benefits, stock compensation, management fees and board compensation increased over the comparable 2012 period mainly due to: (i) an increase of approximately $5.8 million in management fees, (ii) an increase of approximately $1.2 million in stock compensation owing to the timing of awards and their respective service periods and (iii) an increase of approximately $4.0 million in employee salaries/bonuses.  Of the $5.8 million increase in management fees, approximately $5.2 million related to a one-time termination fee we paid Buffalo Management as described more fully in Note 12—Related Party Transactions of the accompanying consolidated financial statements.  The remaining changes are largely attributable to the increase in our business activity between 2013 and 2012, including an increase in the number of full-time employees from five as of March 31, 2012 to twelve as of March 31, 2013.

Our legal, accounting and insurance expenses increased in 2013 from what they were in 2012 primarily due to the legal fees that we incurred in connection with (i) the negotiation and closing of The Karlsson Group Acquisition and the restructuring of our Karlsson Group debt and (ii) the additional SEC filings in connection with our two common stock public offerings.

The increase in our office, travel and other expenses in 2013 stemmed primarily from two separate non-recurring charges as follows: (i) a one-time expense of approximately $6.2 million related to the Karlsson Note Tax Gross Up as discussed in Note 3—The Karlsson Group Acquisition and (ii) a one-time expense of approximately $9.7 million incurred on termination of the Apollo agreement as discussed in Note 8—Debt of the accompanying consolidated financial statements.

Capitalized development costs are expenses incurred during the year that if not capitalized in mineral properties would have been expensed had we not been able to capitalize these costs.  The Company made a determination following the completion of the Resource Report and PEA in late 2011 that it had met the requirements to transition from an exploration stage to a development stage

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company and accordingly began capitalizing all development related costs related to the Holbrook Project as of January 1, 2012.  Prior to this date and while we were in the exploration stage, all costs related to the Holbrook Project were expensed as incurred.

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

Cumulative Period

Our general and administrative expenditures, prior to capitalization considerations, for the Cumulative Period were comprised of the following:

Included within total G&A before capitalization are rental expenses of $0.3 million for the Cumulative Period.

Derivative Losses

Years Ended March 31, 2013 and 2012

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

Cumulative Period

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

Loss on Debt Extinguishment

Years Ended March 31, 2013 and 2012 and Cumulative Period

We incurred a $2.0 million loss on the extinguishment of the Merkin Note during 2012 as is more fully described in Note 9—Convertible Notes of the accompanying consolidated financial statements.  No such loss was incurred during 2013.

Interest Expense

Years Ended March 31, 2013 and 2012

Our net interest expense for the years ended March 31, 2013 and 2012 totaled $7.2 million and $1.9 million, respectively.  For 2013, this amount represents the interest expense accrued on The Karlsson Note and the Apollo Notes, all of which were entered into

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during 2013.  An amount equal to this is included in accrued liabilities at March 31, 2013.  Our net interest expense for 2012 was related to the convertible notes then outstanding and was comprised of $0.4 million for interest and $1.5 million for the amortization of related discounts and financing costs.

Cumulative Period

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

Off-Balance Sheet Arrangements

None.

Liquidity and Capital Resources

Short-Term Liquidity and Capital Needs

As of March 31, 2013, we had approximately $1.0 million in cash and a working capital deficit of $144.7 million, including accounts payable and accrued liabilities of $14.6 million and indebtedness of $128.3 million. Subsequent to year-end, we entered into debt restructurings and extension agreements on April 15, 2013 and June 26, 2013 that extended the due dates of this debt in exchange for certain other considerations and concessions. Refer to Note 18 — Subsequent Events of the accompanying consolidated financial statements for additional information.

As part of the Second Extension Agreement, we are now required to meet the following development milestones:

(i)             Complete total depth on at least eight wells on or before November 1, 2013,

(ii)          Deliver a completed and updated final NI 43-101 resource report on or before February 1, 2014,

(iii)       Deliver completed metallurgical and rock mechanic test work results that will be used to complete the mine and processing plant designs for the definitive feasibility study on or before June 1, 2014, and

(iv)      Deliver a completed and published definitive feasibility study on or before December 31, 2014.

In addition, under the terms of the Second Extension Agreement we are required to deposit 50% of the net proceeds of the next $24.0 million of capital we raise (for a total of $12.0 million) into escrow, which funds may be released solely to fund specified development expenses pursuant to the Extension Agreement. We are also required to pay 10% of all capital raised going forward to Karlsson and Apollo as payments on their respective promissory notes. If we do not meet any one of the required development milestones, Karlsson will be entitled to foreclose on the collateral securing the Karlsson Note, which could result in a sale of AWP or its assets to satisfy amounts owing on the note. Refer to Note 18—Subsequent Events of the accompanying consolidated financial statements for further information.

As of the date of this filing, we have $1.4 million of available cash (excluding the escrowed cash of approximately $2.4 million which must be used for specified purposes related to development of the Holbrook Project pursuant to the restructured Karlsson Note), which includes the $4.1 million of net proceeds received from the public offering that closed on June 26, 2013.

Our ability to continue as a going concern is dependent upon our ability to further implement our business plan and raise the additional funds that are needed to fund the significant capital and operating expenses required to complete the development and construction of the Holbrook Project. While we intend to raise additional funds by way of public and private offerings of debt, equity, convertible notes or other financial instruments, there can be no assurances that we will be successful in these efforts or that such raises can be completed on terms reasonably acceptable to us and our shareholders.

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Cash Flow Summary

The following table summarizes our cash flows for the periods indicated:

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

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

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

Critical Accounting Policies and Estimates

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

Note Regarding Forward-Looking Statements

In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Exchange Act, and the Private Securities Litigation Reform Act of 1995. These forward looking statements include statements concerning our plans, estimates, goals, strategies, intent, assumptions, beliefs or current expectations and can be identified by the use of terms and phrases such as “seek,” “is expected,” “budget,” “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future tense or conditional construction (“will,” “may,” “could,” “should,” etc.) and the negative forms of any of these words and other similar expressions.

The forwardlooking statements are based on estimates and assumptions that we have made in light of our experience and perception of historical trends. In making the forwardlooking statements in this Annual Report on Form 10-K and the documents incorporated by reference herein, we have applied several material assumptions including, but not limited to, assumptions relating to: future demand for and supply of potash; our plan to capitalize on potash demand; our plan to convert our mineral resources into mineral reserves; the environmental and permitting process, preliminary mine design and anticipated completion of a definitive feasibility study; our plan of exploration; the economic and legal viability of a potash mine in the Holbrook Basin; future sales of state leases and permits; our ability to raise capital; funding the approximately $128.7 million we owe to The Karlsson Group, Inc., which amount will increase as interest is accrued and potential tax gross-up payments are incurred; funding the approximately $6.8 million we owe to affiliates of Apollo Global Management, LLC; our ability to further implement our business plan and generate revenue; our ability to satisfy the requirements and successfully execute on the commercial arrangement set forth in the potash supply agreement we have entered into with Sichuan Chemical Industry Holding (Group) Co., Ltd.; our anticipation of investing considerable amounts

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of capital to establish production from our mining project in the Holbrook Basin in Arizona; our anticipation of our ability to identify mineral reserves that are capable of providing an acceptable return for investors that is commensurate with the inherent risks of a mining project; anticipated capital and operating costs; impact of the adoption of new accounting standards and our financial and accounting systems and analysis programs; compliance with and impact of laws and regulations; impact of litigation and other legal proceedings; and effectiveness of our internal control over financial reporting.

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

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

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

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

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

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

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

·                  the accuracy of our mineral resource estimates;

·                  our ability to attract and retain key personnel;

·                  competition in the mining industry;

·                  acquiring additional properties, such as difficulties in integrating acquired properties into our business;

·                  our potash supply agreement with Sichuan Chemical;

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

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

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

·                  governmental policies and regulation affecting the agricultural industry;

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

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

·                  the cyclicality of the crop nutrient markets; and

·                  global economic conditions.

This list is not exhaustive of the factors that may affect any of our forwardlooking statements. Readers are urged to carefully review and consider the various risks and uncertainties and other factors referred to under the heading “Risk Factors” elsewhere in this Annual Report on Form 10-K. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected. In addition, although we have attempted to identify important risk factors that could cause actual achievements, events or conditions to differ materially from those identified in the

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forward looking statements, there may be other factors we have not considered, or that we currently deem to be immaterial, that cause achievements, events or conditions not to be as anticipated, estimated or intended

These forwardlooking statements are based on the beliefs, expectation and opinions of management on the date the statements are made. We assume no obligation to update any forwardlooking statements in order to reflect any event or circumstance that may arise after the date made, other than as may be required by applicable law or regulation. For the reasons set out above, readers should not place undue reliance on forwardlooking statements.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company we are not required to provide this information.

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Item 8.  Financial Statements and Supplementary Data

Prospect Global Resources Inc.

(A Development Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2013

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Prospect Global Resources, Inc.

Denver, Colorado

We have audited the accompanying consolidated balance sheets of Prospect Global Resources, Inc. and Subsidiaries (a development stage company, the “Company”) as of March 31, 2013 and 2012 and the related statements of operations, cash flows, and shareholders’ equity for the years ended March 31, 2013 and 2012, and the cumulative period from August 5, 2010 (Inception) to March 31, 2013.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Prospect Global Resources, Inc. and Subsidiaries, as of March 31, 2013 and 2012, and the results of their operations and their cash flows for the years ended March 31, 2013 and 2012, and the cumulative period from August 5, 2010 (Inception) to March 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has significant funding requirements which require capital that may not be available on favorable terms or at all, as well as a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

EKS&H LLLP

July 1, 2013

Denver, Colorado

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PROSPECT GLOBAL RESOURCES INC.

CONSOLIDATED BALANCE SHEETS

(a Development Stage Company)

(In thousands, except number of shares and par value amounts)

The accompanying notes are an integral part of these statements.

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PROSPECT GLOBAL RESOURCES INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(a Development Stage Company)

(In thousands, except per share amounts)

The accompanying notes are an integral part of these statements.

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PROSPECT GLOBAL RESOURCES INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(a Development Stage Company)

(In thousands)

The accompanying notes are an integral part of these statements.

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PROSPECT GLOBAL RESOURCES INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (DEFICIT)

(a Development Stage Company)

(In thousands, except number of shares)