2.4.0.81150 - Disclosure - Commitments and Contingenciestruefalsefalse1false falsefalseD2014Q1http://www.sec.gov/CIK0001477032duration2013-04-01T00:00:002013-06-30T00:00:001true 1us-gaap_CommitmentsAndContingenciesDisclosureAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0Commitments and Contingencies2false 2us-gaap_CommitmentsAndContingenciesDisclosureTextBlockus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalseterseLabel1falsefalsefalse00<div style="font-size:10.0pt;font-family:Times New Roman;"> Note 15 — Commitments and Contingencies   Litigation   On April 26, 2013, we 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.  In a related letter dated June 14, 2013, the four underwriters in our November 2012 public offering notified us that they received a letter from the same stockholder in which the stockholder sought 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, we could be required to appoint counsel for the underwriters to advise on this matter, subject to their determination that counsel is satisfactory, or, alternatively, we could be required to authorize the underwriters to employ counsel at our expense. We believe the claim is without merit and intend to vigorously defend against it.  No litigation has been commenced in this matter.   In the normal course of operations, Prospect and its subsidiaries may be subject to litigation. As of June 30, 2013, there were no material litigation matters. The Company holds various insurance policies in an attempt to protect it and investors.   The Karlsson Group Acquisition   The execution of The Karlsson Group Acquisition agreements (and subsequent amendments thereto in April and June 2013) subjected the Company to various commitments and contingencies, including:   a)             We granted The Karlsson Group the future right to receive payments equal to 2% of the gross sales received by us from potash production from any property over which we currently have leases, licenses and permits or which AWP may hereafter acquire.   b)             In the event of a sale of at least 50% of AWP or a merger of AWP with or into an unaffiliated entity on or prior to February 1, 2018, we agreed to pay The Karlsson Group an additional payment equal to 15% of the net proceeds received from the transaction, capped at $75.0 million.   c)              In the event of any equity or debt offering completed by the Company while the Karlsson Note remain outstanding, we have agreed to place 50% of the net proceeds of the next $20.0 million of capital raised into escrow (for a total of $10.0 million), which funds may be released solely to fund specified development expenses for our Potash Project in the Holbrook Basin.   d)             In the event of any equity or debt offering completed by the Company while the Karlsson Note remain outstanding, we have agreed to pay the Karlsson Group 10% of the gross proceeds raised as a prepayment of the outstanding balance.   e)              In that the Karlsson Group will recognize taxable gain on the principal payments that it receives under the Karlsson Note, we have agreed to compensate them for any incremental income tax liabilities attributable to an increase in federal or state income tax rates over the tax rates that were in effect for 2012, such that they are made whole with respect to any such increase in tax liabilities. We also agreed to compensate The Karlsson Group for certain interest charges imposed on the deferred tax liabilities as a result of the application the “installment sale” rules of the Internal Revenue Code.  Based on current tax and interest rates and assuming the entire principal balance remains outstanding through July 1, 2015, the combined cost of these “gross-up” payments is estimated at approximately $20.0 million which includes the $17.6 million in liabilities at June 30, 2013 plus our estimates of future tax gross-ups of $1.2 million that would become owing as of January 1, 2014 and 2015 of each year assuming the full principal balance remained outstanding on those dates.  However, this is an estimate only and the amount of the tax gross-up payments is subject to change based on future tax rate changes, changes in certain interest rates published by the Internal Revenue Service and the timing of the debt principal payments.   The Apollo Notes   In the event of any equity or debt offering completed by the Company while the Apollo Notes remain outstanding, we have agreed to pay Apollo 10% of the gross proceeds raised as a prepayment of the outstanding principal.   Buffalo Gross Revenue Interest Amendment   In connection with restructuring the Karlsson senior debt, we were required to increase Karlsson’s royalty interest from 1% to 2% without increasing the overall percentage of royalty interests payable to third parties in the aggregate. In order to achieve this result, Buffalo agreed to reduce its gross revenue interest in Prospect Global from 2% to 1%.% in exchange for 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 gross revenue interest being 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 in no event will any equity securities or securities convertible into equity securities issued to Buffalo (x) exceed 10% of our outstanding capital stock (in the case of warrants at the time of exercise) or (y) be redeemable for aggregate consideration exceeding 10% of our equity market capitalization at the time of redemption. Refer to Note 17 — Subsequent Events.   Common Stock and Warrant Commitments   As of June 30, 2013, the Company had commitments to issue an additional 600,000 shares of our common stock and 50,000 warrants to purchase shares of our common stock in exchange for services under existing consulting contracts.  The 600,000 shares of common stock are due in quarterly increments of 75,000 shares each, with the next increment being due on July 5, 2013.  The 50,000 warrants are due in monthly tranches of 10,000 immediately exercisable warrants, with each such warrant tranche having a five year duration and a strike price equal to the most recent sales price of our common stock as reported on Nasdaq.  The due date for the next warrant tranche is July 1, 2013.   As part of our June 26, 2013 public offering, the participating investors received 42,839,890 Series B warrants with each Series B warrant entitling the holder thereof the right to purchase one additional share of our common stock and one additional warrant in exchange for $0.12 per Series B warrant.  The Series B warrants expire at the close of business on November 1, 2013.  If exercised, each B Series warrant would result in the immediate issuance of one additional share of our common stock and one immediately exercisable warrant having an initial exercise price of $0.12 per share and expiration date five years from the date of issuance.   Subsequent to June 30, 2013, we entered into payment agreements with certain vendors in which we agreed to issue shares of our common stock to these vendors in exchange for amounts owed, subject to stockholder approval of the reverse stock split being sought in our August 2013 Annual Shareholder Meeting.  As of the filing date, these post-June 30th commitments total to 10,574,107 shares of our common stock.  Additionally, on July 10, 2013, the Company entered into a note exchange agreement with the Very Hungry Parties under which the Very Hungry Parties have agreed to convert their shares of the Company’s mandatorily convertible preferred stock into shares of the Company’s common stock on receipt of stockholder approval of the reverse stock split.  Refer to Note 17 — Subsequent Events for additional details on the Very Hungry Notes conversion.   </div>falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure for commitments and contingencies.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name FASB Interpretation (FIN) -Number 14 -Paragraph 3 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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