---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2014

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number:000-54751

PASSPORT POTASH INC.(Exact name of small business issuer as specified in its charter)

|British Columbia, Canada                         | Not Applicable                      
|------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                    |                                     
|                                                 |                                     
|608 1199 West Pender Street                      |                                     
|Vancouver, BC, Canada                            | V6E 2R1                             
|(Address of principal executive offices)         | (Zip Code)                          

(604) 687-0300Registrants telephone number,
including area code

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

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act of
1934during 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 [  ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). 
Yes [  ] No [X]

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

---

|Large accelerated filer [  ]                                                   | Accelerated filer [  ]       
|------------------------------------------------------------------------------ | -----------------------------
|Non-accelerated filer [  ] (do not check if a smaller
      reporting company) | Smaller reporting company [X]

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

State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date. 109,490,859 shares
of common stock as of October 20, 2014.

2

---

|PASSPORT POTASH INC. AND SUBSIDIARY
|-----------------------------------
|                                   
|                                   
|Quarterly Report On Form 10-Q      
|For The Quarterly Period Ended     
|May 31, 2014                       
|                                   
|INDEX                              

|PART I
      FINANCIAL INFORMATION | 5                                                                                           
|---------------------------------- | --------------------------------------------------------------------------------------------
|                                   |                                                                                             
|Item 1.                            | Financial
      Statements                                                                  
|Item 2.                            | Managements Discussion and
      Analysis of Financial Conditions and Results of Operations
|Item 3.                            | Quantitative
      and Qualitative Disclosures About Market Risk                            
|Item 4.                            | Controls and Procedures                                                                     
|                                   |                                                                                             
|PART II OTHER INFORMATION          | 26                                                                                          
|                                   |                                                                                             
|Item 1.                            | Legal Proceedings                                                                           
|Item 1A.                           | Risk Factors                                                                                
|Item 2.                            | Unregistered Sales of Equity
      Securities and Use of Proceeds                           
|Item 3.                            | Defaults
      Upon Senior Securities                                                       
|Item 4.                            | Mine Safety Disclosures                                                                     
|Item 5.                            | Other
      Information                                                                     
|Item 6.                            | Exhibits                                                                                    

3

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FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q contains forward-looking
statements that involve risks and uncertainties. Any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. In some cases, you can identify forward-looking statements by
terminology such as may, will, should, expect,
plan, intend, anticipate, believe, estimate,
predict, potential or continue, the negative of such terms
or other comparable terminology. In evaluating these statements, you should
consider various factors, including the assumptions, risks and uncertainties
outlined in our annual report on Form 10-K for the fiscal year ended February
28, 2014 filed with the Securities and Exchange Commission (the SEC) on
June 13, 2014, this quarterly report on Form 10-Q, and, from time to time, in
other reports that we file with the SEC. These factors or any of them may cause
our actual results to differ materially from any forward-looking statement.
Given these uncertainties, readers are cautioned not to place undue reliance on
such forward-looking statements. Forward-looking statements in this quarterly
report include, among others, statements regarding:

| | our capital needs; 
|- | -------------------
| | business plans; and
| | expectations.      

While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current
judgment regarding future events, our actual results will likely vary, sometimes
materially, from any estimates, predictions, projections, assumptions or other
future performance suggested herein. Some of the risks and assumptions include:

| | our need for additional financing;                                                                                                                              
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | our limited operating history;                                                                                                                                  
| | our history of operating losses;                                                                                                                                
| | our exploration activities may not result in
      commercially exploitable quantities of potash on our current or any future
      mineral properties;         
| | the risks inherent in the exploration for
      minerals such as geologic formation, weather, accidents, equipment
      failures and governmental restrictions;
| | the competitive environment in which we
      operate;                                                                                                          
| | changes in governmental regulation and
      administrative practices;                                                                                          
| | our dependence on key personnel;                                                                                                                                
| | conflicts of interest of our directors and
      officers;                                                                                                      
| | our ability to fully implement our business
      plan;                                                                                                         
| | our ability to effectively manage our growth;
      and                                                                                                         
|  | other regulatory, legislative and judicial
      developments.                                                                                                  

We advise the reader that these cautionary remarks expressly
qualify in their entirety all forward-looking statements attributable to us or
persons acting on our behalf. Important factors that you should also consider,
include, but are not limited to, the factors discussed under Risk Factors in our
annual report on Form 10-K for the fiscal year ended February 28, 2014 filed
with the SEC on June 13, 2014.

The forward-looking statements in this quarterly report are
made as of the date of this quarterly report and we do not intend or undertake
to update any of the forward-looking statements to conform these statements to
actual results, except as required by applicable law, including the securities
laws of the United States.

4

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PART I FINANCIAL INFORMATION

|Item 1. | Financial Statements
|------- | --------------------

The following unaudited interim consolidated financial
statements of Passport Potash Inc. (sometimes referred to as we,
us or our Company) are included in this quarterly report on Form
10-Q:

It is the opinion of management that the unaudited interim
consolidated financial statements for the three and six months ended August 31,
2014 and 2013 include all adjustments necessary in order to ensure that the
unaudited interim consolidated financial statements are not misleading. These
unaudited interim financial statements reflect all adjustments which are, in the
opinion of management, necessary to present fairly the financial position,
results of operations and cash flows for the interim periods presented in
accordance with accounting principles generally accepted in the United States of
America. Except where noted, these unaudited interim consolidated financial
statements follow the same accounting policies and methods of their application
as our Companys audited annual financial statements for the year ended February
28, 2014. All adjustments are of a normal recurring nature. These unaudited
interim consolidated financial statements should be read in conjunction with our
Companys audited annual consolidated financial statements as of and for the year
ended February 28, 2014.

5

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|Passport Potash Inc.              
|----------------------------------
|(An Exploration Stage Company)    
|Consolidated Financial Statements 
|Six months Ended August 31, 2014  
|                                  
|Expressed in United States Dollars
|(Unaudited)                       

6

---

|Passport Potash Inc.                
|------------------------------------
|(An Exploration Stage Company)      
|Consolidated Balance Sheets         
|(Expressed in United States dollars)

|                                                          |  | Notes |  |   | August 31,  |   |   | February 28, |  
|--------------------------------------------------------- |  | ----- |  | - | ----------- | - | - | ------------ | -
|                                                          |  |       |  |   | 2014        |   |   | 2014         |  
|                                                          |  |       |  |   | (unaudited) |   |   |              |  
|ASSETS                                                    |  |       |  |   |             |   |   |              |  
|Current assets                                            |  |       |  |   |             |   |   |              |  
|Cash                                                      |  |       |  | $ | 14,372      |   | $ | 49,062       |  
|Receivables                                               |  |       |  |   | 5,747       |   |   | 4,853        |  
|Prepaid expenses                                          |  |       |  |   | 65,776      |   |   | 113,554      |  
|Deferred issuance costs                                   |  |       |  |   | 5,999       |   |   | 3,598        |  
|Total current assets                                      |  |       |  |   | 91,894      |   |   | 171,067      |  
|                                                          |  |       |  |   |             |   |   |              |  
|Equipment                                                 |  | 2     |  |   | 594         |   |   | 660          |  
|Unproven mineral properties                               |  | 3     |  |   | 1,600,000   |   |   | 1,600,000    |  
|Reclamation deposits                                      |  | 3     |  |   | 15,000      |   |   | 15,000       |  
|Total non-current assets                                  |  |       |  |   | 1,615,594   |   |   | 1,615,660    |  
|TOTAL ASSETS                                              |  |       |  | $ | 1,707,488   |   | $ | 1,786,727    |  
|                                                          |  |       |  |   |             |   |   |              |  
|LIABILITIES                                               |  |       |  |   |             |   |   |              |  
|Current liabilities                                       |  |       |  |   |             |   |   |              |  
|Trade payables and accrued
      liabilities              |  | 6     |  | $ | 1,675,925   |   | $ | 980,983      |  
|Convertible debentures                                    |  | 4     |  |   | -           |   |   | 553,233      |  
|Convertible debentures
      subscriptions received       |  | 4     |  |   | 112,250     |   |   | 95,000       |  
|Derivative liability                                      |  | 8     |  |   | 4,731       |   |   | 42,007       |  
|Loans                                                     |  | 5     |  |   | 346,489     |   |   | 546,242      |  
|Total current liabilities                                 |  |       |  |   | 2,139,395   |   |   | 2,217,465    |  
|                                                          |  |       |  |   |             |   |   |              |  
|Convertible debentures                                    |  | 4     |  |   | 5,964,516   |   |   | 5,000,889    |  
|Total non-current liabilities                             |  |       |  |   | 5,964,516   |   |   | 5,000,889    |  
|TOTAL LIABILITIES                                         |  |       |  |   | 8,103,911   |   |   | 7,218,354    |  
|                                                          |  |       |  |   |             |   |   |              |  
|STOCKHOLDERS DEFICIENCY                                  |  |       |  |   |             |   |   |              |  
|Common stock Unlimited
      authorized without par value |  | 7     |  |   | 35,569,788  |   |   | 35,032,933   |  
|Additional paid-in capital                                |  |       |  |   | 17,073,970  |   |   | 16,922,064   |  
|Accumulated deficit                                       |  |       |  |   | (13,514,818 | ) |   | (13,514,818  | )
|Deficit accumulated during exploration stage              |  |       |  |   | (45,525,363 | ) |   | (43,871,806  | )
|TOTAL STOCKHOLDERS DEFICIENCY                            |  |       |  |   | (6,396,423  | ) |   | (5,431,627   | )
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY             |  |       |  | $ | 1,707,488   |   | $ | 1,786,727    |  

Commitments and contingencies (Notes 1 and 3) Subsequent
events (Note 10)

On behalf of the Board of Directors:

|Joshua Bleak |  | “John Eckersley | 
|-------------- |  | ---------------- | 
|Director       |  | Director         | 

|See accompanying notes to the consolidated financial
      statements | F-1
|--------------------------------------------------------------------- | ---

---

|Passport Potash Inc.                            
|------------------------------------------------
|(An Exploration Stage Company)                  
|Consolidated statement of operations - unaudited
|(Expressed in United States dollars)            

For theperiod May22, 2007Three
      months periods
    
    
    Six months
      periods
    
    
    (Inception ofended
    
    
    ended
    
    
    ExplorationStage) toAugust 31,
    
    
    August 31,
    
    
    August 31,
    
    
    August 31,
    
    
    August 31,Note
    
    
    2014
    
    
    2013
    
    
    2014
    
    
    2013
    
    
    2014Operating ExpensesAdministration
    
    6
    
    $
    14,893
    
    $
    64,836
    
    $
    29,100
    
    $
    85,460
    
    $
    1,046,056Advertising
    
    
    
    
    5,032
    
    
    21,050
    
    
    10,761
    
    
    72,543
    
    
    1,847,946Business development
    
    
    
    
    11,461
    
    
    104,677
    
    
    25,605
    
    
    240,485
    
    
    1,353,079Consulting fees
    
    6
    
    
    37,500
    
    
    200,282
    
    
    150,000
    
    
    330,975
    
    
    8,966,422Depreciation
    
    2
    
    
    33
    
    
    41
    
    
    66
    
    
    82
    
    
    2,447Foreign exchange
      loss
    
    
    
    
    1,101
    
    
    11,139
    
    
    32,242
    
    
    19,305
    
    
    174,879Investor relations
    
    
    
    
    22,585
    
    
    79,802
    
    
    60,257
    
    
    140,690
    
    
    1,575,069Management fees
    
    6
    
    
    161,568
    
    
    247,901
    
    
    322,375
    
    
    412,115
    
    
    4,340,670Mineral property impairment
    
    3
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    1,627,784Mineral
      property option payments and exploration costs
    
    3, 6
    
    
    154,872
    
    
    431,073
    
    
    361,472
    
    
    1,076,358
    
    
    22,955,351Office and miscellaneous
    
    
    
    
    8,843
    
    
    15,363
    
    
    19,368
    
    
    35,370
    
    
    366,429Professional
      fees
    
    
    
    
    24,955
    
    
    239,076
    
    
    33,560
    
    
    275,857
    
    
    1,761,089Property investigation costs
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    24,483Transfer agent and filing fees
    
    
    
    
    18,659
    
    
    31,457
    
    
    37,657
    
    
    59,100
    
    
    480,814(461,502
    )
    
    (1,446,697
    )
    
    (1,082,463
    )
    
    (2,748,340
    )
    
    (46,522,518
    )Other itemsAccretion expense
    
    4
    
    
    (103,376
    )
    
    (1,049,013
    )
    
    (209,769
    )
    
    (2,076,400
    )
    
    (4,352,948
    )Change in
      fair value of derivative liability
    
    8
    
    
    10,664
    
    
    816,868
    
    
    37,276
    
    
    1,511,513
    
    
    6,393,081Interest income
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    90,216Interest
      expense on convertible debentures
    
    4
    
    
    (165,013
    )
    
    (218,533
    )
    
    (398,601
    )
    
    (432,947
    )
    
    (1,276,467
    )Gain (loss) on debt
      settlement
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (9,852
    )Other income
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    153,125(257,725
    )
    
    (450,678
    )
    
    (571,094
    )
    
    (997,834
    )
    
    997,155Net loss
    
    
    
    $
    (719,227
    )
    $
    (1,897,375
    )
    $
    (1,653,557
    )
    $
    (3,746,174
    )
    $
    (45,525,363
    )Loss per share basic and diluted
    
    
    
    $
    (0.01
    )
    $
    (0.02
    )
    $
    (0.02
    )
    $
    (0.04
    )Weighted average number of shares outstanding
      basic and diluted
    
    
    
    
    109,490,859
    
    
    91,805,118
    
    
    108,901,663
    
    
    91,798,789


|                                                                |    
|--------------------------------------------------------------- | ---
|See accompanying notes to the consolidated financial
statements | F-2

---

|Passport Potash Inc.                                            
|----------------------------------------------------------------
|(An Exploration Stage Company)                                  
|Consolidated statement of stockholders deficiency -
  Unaudited
|(Expressed in United States dollars)                            

Common StockAccumulatedDeficit DuringNumber of
    
    
    
    
    
    Additional
    
    
    Accumulated
    
    
    Explorationshares
    
    
    Amount
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Stage
    
    
    TotalBalance at February 28,
      2014
    
    105,651,157
    
    $
    35,032,933
    
    $
    16,922,064
    
    $
    (13,514,818
    )
    $
    (43,871,806
    )
    $
    (5,431,627
    )Net loss
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (1,653,557
    )
    
    (1,653,557
    )Rounding upon stock split
    
    140
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -Shares issued for convertible debentures
      exercised
    
    3,839,562
    
    
    460,748
    
    
    -
    
    
    -
    
    
    -
    
    
    460,748Amount allocated to share
      purchase warrants on re-issuance of debenture
    
    -
    
    
    -
    
    
    75,953
    
    
    -
    
    
    -
    
    
    75,953Amount allocated to beneficial conversion
      feature on re- issuance of debenture
    
    -
    
    
    -
    
    
    75,953
    
    
    -
    
    
    -
    
    
    75,953Accretion of discount for
      future periods on exercised convertible debentures
    
    -
    
    
    58,052
    
    
    -
    
    
    -
    
    
    -
    
    
    58,052Accretion of beneficial conversion feature for future periods
      on exercised convertible debentures
    
    -
    
    
    18,055
    
    
    -
    
    
    -
    
    
    -
    
    
    18,055Balance at May 31, 2014
    
    109,490,859
    
    $
    35,569,788
    
    $
    17,073,970
    
    $
    (13,514,818
    )
    $
    (45,525,363
    )
    $
    (6,396,423
    )




|See accompanying notes to the consolidated financial
statements | F-3
|--------------------------------------------------------------- | ---

---

|Passport Potash Inc.                             
|-------------------------------------------------
|(An Exploration Stage Company)                   
|Consolidated statements of cash flows - unaudited
|(Expressed in United States dollars)             

|                                                     |   | Six month
      period ended |   |   |            |  
|---------------------------------------------------- | - | ---------------------------- | - | - | ---------- | -
|                                                     |   |                              |   |   |            |  
|                                                     |   |                              |   |   |            |  
|                                                     |   |                              |   |   |            |  
|                                                     |   | August 31,                   |   |   | August 31, |  
|                                                     |   | 2014                         |   |   | 2013       |  
|Operating activities                                 |   |                              |   |   |            |  
|Net loss                                             | $ | (1,653,557                   | ) | $ | (3,746,174 | )
|Adjustments for:                                     |   |                              |   |   |            |  
|Accretion                                            |   | 209,769                      |   |   | 2,076,400  |  
|Amortization of
      deferred issuance costs        |   | 922                          |   |   | 20,059     |  
|Depreciation                                         |   | 66                           |   |   | 82         |  
|Interest expense
      on convertible debentures     |   | 398,601                      |   |   | 432,947    |  
|Fair value adjustment on
      warrants              |   | (37,276                      | ) |   | (1,511,513 | )
|Foreign exchange                                     |   | -                            |   |   | -          |  
|Loss on debt settlement                              |   | -                            |   |   | -          |  
|Mineral property
      impairment                    |   | -                            |   |   | -          |  
|Mineral property option payments
      - shares      |   | -                            |   |   | -          |  
|Other income                                         |   | -                            |   |   | -          |  
|Stock-based compensation                             |   | -                            |   |   | 368,905    |  
|Changes in non-cash working
      capital items:     |   |                              |   |   |            |  
|Receivables                                          |   | (894                         | ) |   | 36,002     |  
|Injunction bond                                      |   | -                            |   |   | 350,000    |  
|Prepaid expenses                                     |   | 47,778                       |   |   | 98,202     |  
|Trade payables and accrued liabilities               |   | 690,724                      |   |   | 128,862    |  
|Net cash flows used in operating activities          |   | (343,867                     | ) |   | (1,746,228 | )
|                                                     |   |                              |   |   |            |  
|Investing activities                                 |   |                              |   |   |            |  
|Reclamation deposits                                 |   | -                            |   |   | -          |  
|Long term deposits                                   |   | -                            |   |   | -          |  
|Mineral property acquisition costs                   |   | -                            |   |   | -          |  
|Net cash flows used in investing activities          |   | -                            |   |   | -          |  
|                                                     |   |                              |   |   |            |  
|Financing activities                                 |   |                              |   |   |            |  
|Debentures - net of issue
      costs                |   | 296,677                      |   |   | 132,505    |  
|Proceeds on issuance of common shares - net
      of |   |                              |   |   |            |  
|issue costs                                          |   | -                            |   |   | 8,157      |  
|Proceeds from Loans                                  |   | -                            |   |   | -          |  
|Subscriptions received                               |   | 12,500                       |   |   | -          |  
|Net cash flows from financing activities             |   | 309,177                      |   |   | 140,662    |  
|Cash generated (decrease) in
      cash              |   | (34,690                      | ) |   | (1,605,566 | )
|Cash, beginning                                      |   | 49,062                       |   |   | 1,643,771  |  
|                                                     |   |                              |   |   |            |  
|Cash, ending                                         | $ | 14,372                       |   | $ | 38,205     |  
|Supplemental
      disclosures:                      |   |                              |   |   |            |  
|Cash paid for:                                       |   |                              |   |   |            |  
|Income tax                                           | $ | -                            |   | $ | -          |  
|Interest                                             | $ | -                            |   | $ | -          |  

See Note 9 for non-cash transactions.

|See accompanying notes to the consolidated financial
      statements | F-4
|--------------------------------------------------------------------- | ---

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 1 ORGANIZATION AND BASIS OF PRESENTATION

Passport Potash Inc. (the Company) was incorporated on August
11, 1987. The Companys corporate jurisdiction is the province of British
Columbia, Canada. The Company is engaged in the acquisition and exploration of
mineral properties. The Companys shares are listed on the TSX-Venture Exchange
(TSX-V).

The unaudited consolidated financial statements included herein
have been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the instructions
to Form 10-Q and Regulation S-X. They do not include all information and notes
required by generally accepted accounting principles for complete financial
statements. However, except as disclosed herein, there has been no material
change in the information disclosed in the notes to the financial for the year
ended February 28, 2014. In the opinion of management, all adjustments
(including normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
August 31, 2014, are not necessarily indicative of the results that may be
expected for any other interim period or the entire year. For further
information, these unaudited consolidated financial statements and the related
notes should be read in conjunction with the Companys audited consolidated
financial statements for the year ended February 28, 2014 included in the
Companys Form 10-K.

The Companys unaudited consolidated financial statements are
prepared on a going concern basis in accordance with US generally accepted
accounting principles (GAAP) which contemplates the realization of assets and
discharge of liabilities and commitments in the normal course of business. The
Company is in the exploration stage. It has not generated operating revenues to
date, and has accumulated losses of $59,040,181 since inception. The Company has
funded its operations through the issuance of capital stock and debt. In the
longer term, the Company will also need to repay outstanding convertible
debentures if these are not converted which have a maturity date of August 19,
2016. At August 31, 2014, the Company had cash of $14,372 and a working capital
deficit of $2,047,501. Management plans to raise additional funds through equity
and/or debt financings. There is no certainty that further funding will be
available as needed. These factors raise substantial doubt about the ability of
the Company to continue operating as a going concern. The Companys ability to
continue its operations as a going concern, realize the carrying value of its
assets, and discharge its liabilities in the normal course of business is
dependent upon its ability to raise new capital sufficient to fund its
commitments and ongoing losses, and ultimately on generating profitable
operations.

NOTE 2 EQUIPMENT

|                                               |   | Equipment | 
|---------------------------------------------- | - | --------- | 
|Cost:                                          |   |           | 
|At August 31, 2014
      and February 28, 2014 | $ | 34,527    | 
|Depreciation:                                  |   |           | 
|At February 28, 2014                           | $ | 33,867    | 
|Charge for the period                          |   | 66        | 
|At August 31, 2014                             | $ | 33,933    | 
|                                               |   |           | 
|Net book value:                                |   |           | 
|At February 28, 2014                           | $ | 660       | 
|At August 31,
      2014                       | $ | 594       | 

F-5

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 3 UNPROVEN MINERAL PROPERTIES

Holbrook Basin Project

August 31,
    
    
    
    
    
    February 28,
    
    
    
    
    
    February 28,2014
    
    
    Additions
    
    
    2014
    
    
    Additions
    
    
    2013Property
      acquisition costsCash paid for property
    $
    1,600,000
    
    $
    -
    
    $
    1,600,000
    
    $
    -
    
    $
    1,600,000Option payments and
      exploration costsAssay
    $
    309,680
    
    $
    -
    
    $
    309,680
    
    $
    26,603
    
    $
    283,077Drilling and
      related costs
    
    8,992,677
    
    
    12,843
    
    
    8,979,834
    
    
    456,640
    
    
    8,523,194Geological consulting
    
    3,410,707
    
    
    162,000
    
    
    3,248,707
    
    
    757,676
    
    
    2,491,031License and
      filing
    
    698,705
    
    
    54,055
    
    
    644,650
    
    
    200,974
    
    
    443,676Option payments
    
    6,362,855
    
    
    -
    
    
    6,362,855
    
    
    -
    
    
    6,362,855Project
      administration
    
    3,293,395
    
    
    132,574
    
    
    3,160,821
    
    
    482,375
    
    
    2,678,446Recovery
    
    (112,668
    )
    
    -
    
    
    (112,668
    )
    
    -
    
    
    (112,668
    )$
    22,955,351
    
    $
    361,472
    
    $
    22,593,879
    
    $
    1,924,268
    
    $
    20,669,611


The Company acquired mineral claims in the Holbrook Basin
Project through the following agreements:

South West Exploration Property, Arizona

On September 30, 2008, as amended, the Company entered into an
option agreement to purchase 100% of certain mining claims located in the
Holbrook Basin region of Arizona, USA. In terms of the Southwest Option
Agreement, the Company:

| | made cash payments of 575,000 in stages;                                   
|- | ---------------------------------------------------------------------------
| | issued 1,000,000 share purchase options with a
      fair value of $61,152;
| | issued 8,181,000 shares in stages with a fair
      value of $551,921; and 
| | incurred property expenditures of $200,000.                                

During the year ended February 29, 2012, the Company purchased
the 1% Net Smelter Royalty (NSR) for $1 million. The Company now owns a 100%
interest, with no NSR, in the South West Exploration Property.

At August 31, 2014, the Company had a reclamation bond of
$15,000 (February 28, 2014: $15,000) for work done on the South West Exploration
Property.

Twin Butte Ranch Property, Arizona

On August 28, 2009, as amended, the Company entered into a four
year lease with an option to purchase private deeded land within the Holbrook
Basin. Under the terms of the agreement the Company can earn a 100% undivided
interest in the deeded land and sub-surface mineral rights by making lease
payments totaling $1,250,000 over five and a half years and, upon exercising its
option to purchase, by paying $20,000,000 for the entire Twin Butte Ranch
including all sub-surface mineral rights except those pertaining to oil and gas,
petrified wood and geothermal resources. There are no royalties associated with
the sub-surface mineral rights.

F-6

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 3 UNPROVEN MINERAL PROPERTIES (Contd)

Twin Butte Ranch Property, Arizona(contd)

Details of the payments under the agreement are as follows:

|a) | A payment of $50,000 and $10,000 legal costs on or before
      November 26, 2009 (paid);                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------
|b) | A payment of $25,000 on September 17, 2010
  (paid);                                                                           
|c) | A payment of $75,000 on December 1, 2010
(paid);                                                                               
|d) | A payment of $150,000 on August 28, 2011
(paid);                                                                               
|e) | A payment of $200,000 on August 28, 2012
(paid);                                                                               
|f) | A payment of $250,000 on earlier of December 1, 2013 or
      within thirty days of closing a financing of at least
$5,000,000;
|g) | A payment of $250,000 on August 28, 2014; and                                                                                  
|h) | A payment of $250,000 on May 1,
2015.                                                                                          

The Company has not made the required $250,000 payments that
were due on December 1, 2013 and August 28, 2014; therefore, the agreement is in
default and the Company is in negotiations to further amend the option to
purchase as last amended on August 20, 2013. A default notice was issued on
April 17, 2014 and the optionor has the right to terminate the agreement, which
would also terminate the lease, however, the Company is continuing negotiations,
but the risk remains that the Company may not be successful in completing an
amendment to the option to purchase.

Sweetwater/American Potash Property, Arizona

On November 12, 2010, the Company entered into an option
agreement to acquire 100% of the right, title and interest in exploration
permits within the Holbrook basin region of Arizona, USA. In terms of the
Sweetwater/American Potash option agreement, the Company:

| | made cash payments of $90,000 in stages;                                      
|- | ------------------------------------------------------------------------------
| | issued 500,000 shares of the Company with a
      fair value of $130,444; and 
| | paid all taxes and exploration work to keep the
      claims in good standing.

During the year ended February 28, 2013, the Company purchased
the 2% NSR for $300,000. The Company now has a 100% interest, with no NSR, in
the Sweetwater/American Potash Property.

Mesa Uranium, Arizona

On August 31, 2010, the Company entered into an agreement to
acquire 100% undivided interest in exploration permits within the Holbrook basin
region of Arizona, USA. In terms of the Mesa Uranium option agreement, the
Company:


    made cash payments of $20,000;
    issued 500,000 shares of the Company with a
      fair value of $40,625;
    competed $119,518 exploration expenditures in
      2010; and
    obtained the maximum available assessment work
      credits or payments in lieu of the minimum requirements to keep the claims
      in good standing.


During the year ended February 29, 2012, the Company purchased
the 2% NSR for $300,000. The Company now has a 100% interest, with no NSR, in
the Mesa Property.

F-7

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 3 UNPROVEN MINERAL PROPERTIES (Contd)

Ringbolt Property, Arizona

On March 28, 2011 the Company entered into an option agreement
to acquire 90% undivided legal and beneficial interest in and to the Ringbolt
Property free and clear of all encumbrances in exploration leases for the
following consideration:

|a) | $50,000 upon execution of the agreement (paid);                                                                              
|-- | -----------------------------------------------------------------------------------------------------------------------------
|b) | $250,000 upon TSX-V approval on May 17, 2011 (paid) and
      1,000,000 common shares (issued with a fair value of $669,384);
|c) | Minimum exploration expenditures within 1 year of TSX-V
      approval of $500,000 (completed);                              
|d) | On or before the first anniversary of TSX-V approval
      $350,000 and 1,400,000 common shares (see below);                 
|e) | Minimum exploration expenditures within first year of
      first anniversary of TSX-V approval of $750,000;                 
|f) | $350,000 upon second anniversary of TSX-V approval and
      1,600,000 common shares; and                                    
|g) | Minimum exploration expenditures within 1 year of second
      anniversary of TSX-V approval of $1,000,000.                  

On completion of all terms above, the Company shall have earned
a 90% interest and title of the permits shall be transferred to the Company.
Upon exercise of the option agreement, the Company shall be deemed to be granted
an option to purchase the remaining 10% interest in the Property for the payment
of $5,000,000.

The Company paid a finders fee of $25,825 to a third party in
connection with this option agreement.

During the year ended February 28, 2013, the Company became the
subject to a civil action in the Third Judicial District court, Salt Lake
County, State of Utah in connection with the Ringbolt Property option agreement.
The optionors were seeking payment of $350,000, 1,400,000 of the Companys shares
and $20,716 in expenses related to the property, alternatively damages of
$644,000. The Company did not make the required payment and did not issue the
shares to the optionors as it contended that the optionors were in default of
the option agreement. The Company counter claimed for specific performance under
the option agreement and paid the $350,000 and issued the 1,400,000 shares into
the Utah court.

The court ruled that tender to the court was not sufficient;
therefore, the cash and shares were released to the optionors on July 10, 2012.
The fair value of the 1,400,000 shares was $271,936. The Company deposited a
bond in the amount of $350,000 with the Court as security for the preliminary
injunction, which was disclosed on the balance sheet as an injunction bond.
During the year ended February 28, 2014, the injunction bond was returned to the
Company. On September 10, 2012, the court granted the motion for a preliminary
injunction, which enjoined the optionors from terminating the Ringbolt option
agreement based upon the grounds alleged by the optionors.

On October 30, 2012 the Company entered into an amended option
agreement (the Amendment Agreement) to acquire 100% undivided legal and
beneficial interest in and to the Ringbolt Property, free and clear of all
encumbrances in exploration leases, according to the following terms:

|1. | The Company will pay to the optionors a total of
      $3,850,000 according to the following
schedule:
|-- | ------------------------------------------------------------------------------------------------------

|a) | $150,000 upon execution of the Amendment Agreement
      (paid);
|-- | ----------------------------------------------------------------
|b) | $2,450,000 upon TSX-V approval (paid); and                      
|c) | $1,250,000 on or before October 31,
  2014.                     

|2. | The Company will issue 750,000 common shares to the
      optionors upon TSX-V approval (issued with a fair value of
    $168,291).
|-- | -----------------------------------------------------------------------------------------------------------------------------------

F-8

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 3 UNPROVEN MINERAL PROPERTIES (Contd)

Ringbolt Property, Arizona(Contd)

|3. | Upon written notice from the TSX-V that the Amendment
      Agreement has been approved, the parties shall simultaneously do the
      following:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------

|a) | The optionors shall assign all of their right, title, and
      interest in and to the Ringbolt Property and will take all necessary
      action with the Arizona State Land Department to effect such assignment
      (completed); and                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b) | The Company will place into escrow on behalf of the
      optionors the $2,450,000 cash payment and the 750,000 common shares
      (issued with a fair value of $168,291) of the Company. The cash payment
      and shares will be released to the optionors upon receipt of confirmation
      of the assignment of the Ringbolt Property to the Company
    (completed).

|4. | There will be no royalty attached to the transferred
      permits.                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                        
|5. | Should the Company sell or in any way transfer its
      interest in the Ringbolt Property, the optionors will receive a bonus
      payment in accordance with the following
schedule:

|a) | If the Company receives less than $30 million for the
      transaction, then no bonus payment shall be payable;                                                                                                                
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|b) | If the Company receives greater than $30 million but less
      than $40 million the optionors would receive 20% of the gross
      consideration in excess of $30 million;                                                     
|c) | If the Company receives greater than $40 million but less
      than $50 million the optionors would receive $2,000,000 plus 10% of the
      gross consideration in excess of $40 million, to a maximum of $1,000,000;
      or
|d) | If the Company receives greater than $50 million the
      optionors would receive $3,000,000 plus 20% of the gross consideration
      received in excess of $50 million.                                                      

Based upon the foregoing, the parties have agreed to a mutual
release and settlement of any claims and causes of action between the parties as
of the date of the Amended Agreement.

On December 8, 2012, the Company entered into a second
amendment to the option agreement to acquire 100% of the Ringbolt Property. The
amendment stipulates that in the event that the cash payment of $2,450,000
following TSX-V approval of the Amendment Agreement is delayed, the parties
agree to extend the payment deadline for a period of 30 days from the date of
final approval from the TSX-V with the payment of $100,000 to one of the
optionors with this extension payment to be deducted from the $2,450,000 payment
due following TSX-V approval. A payment of $100,000 was made to the optionor on
December 20, 2012 and the balance of $2,350,000 on 28 February 2013.

Cooperative Agreement and Joint Exploration Agreement (JEA)
with the Hopi Tribe

Effective November 1, 2012, the Company and The Hopi Tribe, a
federally recognized Indian Tribe, entered into a Joint Exploration Agreement
(the JEA) pursuant to which the parties agree to explore the Hopi land sections
(the Hopi Property) which are checker-boarded with the Companys southern
landholdings in accordance with an exploration program.

The Company will be responsible for all costs, charges and
expenses incurred in connection with the exploration program.

Joint Exploration Agreement HNZ Potash, LLC (HNZ)

On July 27, 2012 the Company entered into a Joint Exploration
Agreement in which the Company assigned 50% of their interest in twenty-one
permitted parcels within the Holbrook Basin Project (from Holbrook Basin
Property and Twin Buttes Ranch above) to HNZ. In return, HNZ reimbursed the
Company for 50% of mineral exploration costs previously incurred on the permits,
($112,668 received during the year ended February 28, 2013), and the Company
will be liable for 50% of the future costs relating to the permits.

F-9

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 3 UNPROVEN MINERAL PROPERTIES (Contd)

Fitzgerald Ranch, Arizona

On May 7, 2012, as amended, the Company entered into an
agreement to acquire the Fitzgerald Ranch for $17,000,000 as follows:

|a) | A down payment of $500,000 (paid) ($25,000 was expensed
      in the year ended February 29,2012, and the remainder is included in
      long-term deposits);
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|b) | A payment of $500,000 (paid) upon execution of an
      amendment to the agreement in November 2012 (included in long-term
      deposits);                  
|c) | A payment of $500,000 to be paid on the earlier of either
      October 31, 2013, or within 30 days of closing the Companys next financing
  (not paid);    
|d) | A payment of $500,000 to be paid on or before December
      31, 2013 (not paid);                                                                            
|e) | A payment of $1,000,000 to be paid on or before December
      31, 2014; and                                                                                 
|f) | The balance of $14,000,000 to be paid on the closing of
      the sale which is on or before June 30, 2015.                                                  

The Company has not made the required $500,000 payments that
were due on October 31, 2013 and December 31, 2013; therefore, there are
past-due payments and $975,000 capitalized to long-term deposits has been
written-off as at the year ended February 28, 2014. The Company is currently in
negotiations to amend the agreement.

NOTE 4 CONVERTIBLE PROMISORY NOTES PAYABLE

Tranche I

On February 19, 2013, the Company issued $5,305,540 of
convertible debentures (of which $4,140,000 were to related parties) which
mature on February 19, 2014 (the Maturity Date) and bear interest at 15% per
annum which shall accrue and be payable on the earlier of the Maturity Date, or
the date the entire principal amount of the convertible debentures is converted
(the Tranche I Debentures). The principal amount of the Tranche I Debentures is
convertible into shares of common stock of the Company at the option of the
holder, in whole or in part, at a price of US$0.38 per share until the Maturity
Date. The Tranches I Debentures are secured by a first ranking floating charge
security on all of the Companys assets.

In addition, 2.5 common share purchase warrants were issued for
each US$1.00 of principal amount of the Tranche I Debentures, entitling the
holder to acquire one share of common stock of the Company for each warrant at
an exercise price of US$0.38 per share for a period of one year from the date of
issuance. 13,263,850 warrants were issued. The Company determined the fair value
of the warrants to be $2,049,578 using the Black-Scholes Option Pricing Model
with the following assumptions: Expected dividend yield 0; Expected stock price
volatility 76%; Risk-free interest rate 1.07%; Expected life 1 year.

The proceeds were allocated to the Tranche I Debentures and the
warrants based on their relative fair values and accordingly, $3,827,098 was
allocated to the debentures and $1,478,442 was allocated to the warrants and
recorded as a reduction in the liability and an increase in additional paid-in
capital.

In accordance with ASC 470-20 Debt with Conversion and Other
Options, the Company recognized the value of the embedded beneficial conversion
feature of $2,316,159. This value was recorded as a reduction of the liability
and an increase in additional paid-in capital.

F-10

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 4 CONVERTIBLE DEBENTURES(Contd)

Tranche I(Contd)

In connection with the issuance of the Tranche I Debentures,
the Company paid $73,958 in finders fees and issued 101,882 finders warrants.
Each finders warrant entitles the holder to purchase one common share for
US$0.19 per share for one year from the date of issuance. The fair value of the
finders warrant portion calculated using the Black-Scholes Option Pricing Model
was $5,770, recorded as a debenture issuance cost. The Company also incurred
legal and filing fee costs of $51,528, of which $37,380 was recorded as deferred
debt issuance costs and $93,876 was charged to additional paid-in capital. (See
also Tranche I - Amended)

Tranche II

On March 14, 2013, the Company issued $285,000 of convertible
debentures which mature on March 14, 2014 (the Maturity Date), and bear interest
at 15% per annum which shall accrue and be payable on the earlier of the
Maturity Date, or the date the entire principal amount of each debenture is
converted. The principal amount of the debentures is convertible into shares of
common stock of the Company at the option of the holder, in whole or in part, at
a price of US$0.38 per share until the Maturity Date. The debentures are secured
by a first ranking floating charge security on all of the Companys assets.

In addition, 2.5 common share purchase warrants were issued for
each US$1.00 of principal amount of the debentures, entitling the holder to
acquire one share of common stock of the Company for each warrant at an exercise
price of US$0.38 per share for a period of one year from the date of issuance.
712,500 warrants were issued. The Company determined the fair value of the
warrants to be $130,826 using the Black-Scholes Option Pricing Model with the
following assumptions: Expected dividend yield 0; Expected stock price
volatility 75%; Risk-free interest rate 0.97%; Expected life 1 year.

The proceeds were allocated to the debentures and the warrants
based on their relative fair values and accordingly, $195,334 was allocated to
the debentures and $89,666 was allocated to the warrants and recorded as a
reduction in the liability and an increase in additional paid-in capital.

In accordance with ASC 470-20 Debt with Conversion and Other
Options, the Company recognized the value of the embedded beneficial conversion
feature of $164,666. This value was recorded as a reduction of the liability and
an increase in additional paid-in capital.

In connection with this private placement of debentures, the
Company also incurred filing fee costs of $1,425, of which $353 was recorded as
deferred debt issuance costs and $1,272 was charged to additional paid-in
capital. (See also Tranche II - Amended)

Tranche III

On April 4, 2013, the Company issued $200,000 of convertible
debentures which will mature on April 4, 2014 (the Maturity Date) and bear
interest at 15% per annum which shall accrue and be payable on the earlier of
the Maturity Date, or the date the entire principal amount of each debenture is
converted. The principal amount of the debentures is convertible into shares of
common stock of the Company at the option of the holder, in whole or in part, at
a price of US$0.38 per share until the Maturity Date. The Debentures are secured
by a first ranking floating charge security on all of the Companys assets.

In addition, 2.5 common share purchase warrants were issued for
each US$1.00 of principal amount of the debentures, entitling the holder to
acquire one share of common stock of the Company for each warrant at an exercise
price of US$0.38 per share for a period of one year from the date of issuance.
500,000 warrants were issued. The Company determined the fair value of the
warrants to be $62,896 using the Black-Scholes Option Pricing Model with the
following assumptions: Expected dividend yield 0; Expected stock price
volatility 75%; Risk-free interest rate 0.97%; Expected life 1 year.

F-11

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 4 CONVERTIBLE DEBENTURES(Contd)

Tranche III(Contd)

The proceeds were allocated to the debentures and the warrants
based on their relative fair values and accordingly, $152,151 was allocated to
the debentures and $47,849 was allocated to the warrants and recorded as a
reduction in the liability and an increase in additional paid-in capital.

The Company recognized the value of the embedded beneficial
conversion feature of $58,375. This value was recorded as a reduction of the
liability and an increase in additional paid-in capital.

In connection with this issuance of debentures, the Company
also incurred filing fee costs of $1,070, of which $502 was recorded as deferred
debt issuance costs and $568 was charged to additional paid-in capital.

Amendment to Convertible Debentures Tranche I to III

On February 6, 2014, the Company entered into agreements with
all the debenture holders to modify the terms of the convertible debentures as
follows:

| | The maturity date is extended to August 19,
      2016;                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All interest due on the original maturity date
      is added to the principal of the convertible debentures;                                                       
| | The debt is now convertible to into common
      shares of the Company at $0.12 per share; and                                                                      
| | The warrants will have a term of 42 months from
      the date of issuance and are exercisable to purchase one common share of
      the Company at $0.12 per share.

All the amendments came into effect on the original maturity
dates.

Tranche I - Amended

On February 19, 2014, the amendments came into effect for the
Tranche I Debentures. As a result, the principal of the Tranche 1 Debentures
increased to $6,095,894.

The Company determined the incremental fair value of the
warrants issued with the Tranche 1 Debentures due to the modifications to be
$866,295 using the Black-Scholes Option Pricing Model with the following
assumptions: Expected dividend yield 0; Expected stock price volatility 93%;
Risk-free interest rate 1.16%; Expected life 2.5 years.

The proceeds were allocated to the Tranche 1 Debentures and the
warrants based on their relative fair values and accordingly, $5,258,905 was
allocated to the Tranche 1 Debentures and $836,989 was allocated to the warrants
and recorded as a reduction in the liability and an increase in additional
paid-in capital.

In accordance with ASC 470-20 Debt with Conversion and Other
Options, the Company recognized the value of the embedded beneficial conversion
feature of $260,317. This value was recorded as a reduction of the liability and
an increase in additional paid-in capital.

In connection with this amendment, the Company paid $4,379
issuance costs, of which $3,591 was recorded as deferred debt issuance costs and
$788 was charged to additional paid-in capital.

Tranche II - Amended

On March 14, 2014, the amendments came into effect for the
Tranche II Debentures. As a result, the principal of the Tranche II Debentures
increased to $327,750.

F-12

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 4 CONVERTIBLE DEBENTURES(Contd)

Amendment to Convertible Debentures(Contd)

The Company determined the incremental fair value of the
warrants issued with the Tranche 11 Debentures due to the modifications to be
$46,523 using the Black-Scholes Option Pricing Model with the following
assumptions: Expected dividend yield 0; Expected stock price volatility 94%;
Risk-free interest rate 1.09%; Expected life 2.44 years.

The proceeds were allocated to the Tranche II Debentures and
the warrants based on their relative fair values and accordingly, $282,892 was
allocated to the Tranche II Debentures and $44,858 was allocated to the warrants
and recorded as a reduction in the liability and an increase in additional
paid-in capital.

In accordance with ASC 470-20 Debt with Conversion and Other
Options, the Company recognized the value of the embedded beneficial conversion
feature of $44,858. This value was recorded as a reduction of the liability and
an increase in additional paid-in capital.

Tranche III - Amended

On April 04, 2014, the amendments came into effect for the
Tranche III Debentures. As a result, the principal of the Tranche III Debentures
increased to $230,000.

The Company determined the incremental fair value of the
warrants issued with the Tranche III Debentures due to the modifications to be
$32,261 using the Black-Scholes Option Pricing Model with the following
assumptions: Expected dividend yield 0; Expected stock price volatility 94%;
Risk-free interest rate 1.07%; Expected life 2.38 years.

The proceeds were allocated to the Tranche III Debentures and
the warrants based on their relative fair values and accordingly, $198,905 was
allocated to the Tranche III Debentures and $31,095 was allocated to the
warrants and recorded as a reduction in the liability and an increase in
additional paid-in capital.

In accordance with ASC 470-20 Debt with Conversion and Other
Options, the Company recognized the value of the embedded beneficial conversion
feature of $31,095. This value was recorded as a reduction of the liability and
an increase in additional paid-in capital.

Tranche V

On May 29, 2014, the Company issued $500,000 of convertible
debentures (the Tranche V Debentures) to a related party (Note 6), which mature
on May 29, 2018 and bear interest at 9.5% per annum which shall accrue and be
payable annually, as to 50% in cash and 50% in common shares of the Company
subject to the right of the holder to elect to have an interest payment
satisfied entirely in common shares. The issuance price of common shares to pay
accrued interest will be determined by the market price of the common shares, as
defined by the policies of the TSX-V. The principal amount of the debenture is
convertible at any time prior to the maturity date, in whole or in part, at the
option of the holder into either: (a) units of the Company at a conversion price
of US$0.12 per unit, with each unit being comprised of one common share and one
common share purchase warrant of the Company, with each warrant exercisable into
one common share at a price of US$0.12 per warrant share until May 29, 2018, or
(b) into 10% of the shares of the Companys wholly-owned subsidiary, PPI East
Block Holding Corp., or pro rata portion thereof for any partial
conversion. If option (a) is chosen, 4,166,667 shares and 4,166,667 warrants
will be issued. The Tranches V Debentures are secured by a first ranking
floating charge security on all of the Companys assets. In accordance with ASC
470-20 Debt with Conversion and Other Options, the Company determined the value
of the embedded beneficial conversion feature to be negative and as such no
discount has been recorded.

In connection with this private placement of debentures, the
Company paid $3,323 issuance costs which were recorded as deferred debt issuance
costs.

F-13

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 4 CONVERTIBLE DEBENTURES(Contd)

|                                                        |   | May 31,   |   |   | February 28, |  
|------------------------------------------------------- | - | --------- | - | - | ------------ | -
|Convertible Debentures Tranche I to III & Tranche V     |   | 2014      |   |   | 2014         |  
|Opening balance                                         | $ | 5,554,122 |   | $ | 1,624,128    |  
|Subscriptions received                                  |   | 500,000   |   |   | 485,000      |  
|Detachable share purchase
      warrants amended        |   | (75,953   | ) |   | (974,504     | )
|Intrinsic beneficial conversion feature -
      amended |   | (75,953   | ) |   | (483,358     | )
|Exercised transfer to share
      capital               |   | (536,855  | ) |   | (5,000       | )
|Accretion                                               |   | 209,769   |   |   | 4,049,613    |  
|Interest                                                |   | 393,851   |   |   | 858,243      |  
|Interest payable and transferred to accounts payable    |   | (4,465    | ) |   | -            |  
|Closing balance                                         | $ | 5,964,516 |   | $ | 5,554,122    |  

The difference between the amount recorded to the convertible
debentures on initial recognition and the value at maturity will be accreted
using the effective interest rate method. During the period ended August 31,
2014, $393,851 (year ended February 28, 2014 - $4,049,613) was expensed as a
non-cash interest charge.

Subscriptions Received

The Company holds subscriptions of $112,250 (2014 - $95,000)
towards convertible debenture offerings.

NOTE 5 LOANS

Loans comprise certain advances from third parties and related
parties (Note 6). As at August 31, 2014, the loans have no fixed repayment
terms, are unsecured and do not bear interest.

NOTE 6 RELATED PARTY TRANSACTIONS

Related party balances

The following amounts due to related parties are included in
trade payables and accrued liabilities:

|                                                                                            |  |  |  |   | August 31, |  |   | February 28, | 
|------------------------------------------------------------------------------------------- |  |  |  | - | ---------- |  | - | ------------ | 
|                                                                                            |  |  |  |   | 2014       |  |   | 2014         | 
|Directors, officers and companies controlled by directors and
      officers of the Company |  |  |  | $ | 1,037,575  |  | $ | 434,838      | 

The
      following amounts due to related parties are included in loans:

|                                                                    |  | Note |  |   | 2014    |  |   | 2014    | 
|------------------------------------------------------------------- |  | ---- |  | - | ------- |  | - | ------- | 
|Director                                                            |  | 5    |  | $ | 200,000 |  | $ | 200,000 | 
|Companies controlled by directors and officers of the
      Company |  | 5    |  |   | 43,726  |  |   | 46,264  | 
|                                                                    |  |      |  | $ | 243,726 |  | $ | 246,264 | 

F-14

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 6 RELATED PARTY TRANSACTIONS(Contd)

Related party balances(Contd)

The following convertible debentures are outstanding to:

|                                                                    |  |      |  |   | August 31, |  |   | February 28, | 
|------------------------------------------------------------------- |  | ---- |  | - | ---------- |  | - | ------------ | 
|                                                                    |  | Note |  |   | 2014       |  |   | 2014         | 
|Companies controlled by
      directors and officers of the Company |  | 4    |  | $ | 230,000    |  | $ | 200,000      | 
|Significant investor of the Company                                 |  | 4    |  | $ | 4,410,000  |  | $ | -            | 
|                                                                    |  |      |  | $ | 4,640,000  |  | $ | 200,000      | 

Related party transactions

The Company incurred the following transactions with directors,
officers, significant investors and companies that are controlled by directors
and officers of the Company.

|                               |   | Six month period
      ended | 
|------------------------------ | - | ---------------------------- | 
|                               |   | August 31,                   | 
|                               |   | 2014                         | 
|Administration                 | $ | -                            | 
|Consulting fees                |   | 75,000                       | 
|Management fees                |   | 240,000                      | 
|Mineral exploration costs      |   | 252,000                      | 
|Convertible Debenture V issued |   | 500,000                      | 
|                               | $ | 1,067,000                    | 

NOTE 7 COMMON STOCK

Share Issuances:

During the period ended August 31, 2014, the Company issued
3,839,562 shares pursuant to $460,748 of convertible debentures being converted
to shares at a price of $0.12 per share.

Stock options :

At August 31, 2014 and February 28, 2014 the following stock
options were outstanding:

|Number of | Exercise price |                        
|--------- | -------------- | -----------------------
|Options   | CDN$           | Expiry date            
|72,812    | 0.20           | November 16,
      2015
|725,000   | 0.64           | January 10, 2016       
|2,513,500 | 0.40           | February 11,
      2016
|460,750   | 0.40           | March 03, 2016         
|750,500   | 1.18           | June 21, 2016          
|745,250   | 0.84           | September 12, 2016     
|1,900,000 | 0.76           | January 20, 2017       
|234,000   | 0.42           | February 19, 2018      
|500,000   | 0.10           | February 19,
      2018
|1,265,000 | 0.36           | July 02, 2018          
|9,166,812 |                |                        

F-15

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

All options outstanding are exercisable. The weighted average
remaining contractual life of the outstanding stock options is 1.21 years and
the weighted average exercise price is CDN$0.57.

NOTE 7 COMMON STOCK(Contd)

Share purchase warrants

At August 31, 2014 and February 28, 2014 the following share
purchase warrants were outstanding:

|Number of    |  | Exercise price |  |  | Expiry date | 
|------------ |  | -------------- |  |  | ----------- | 
|Warrants     |  | CDN$           |  |  | USD$        | 
|561,013      |  | 0.50           |  |  |             | 
|14,476,350   |  |                |  |  | 0.12        | 
|15,037,363 * |  |                |  |  |             | 

* There is a potential for additional 4,166,667 Warrants to be
issued exercisable at $0.12 until May 29, 2018 upon the exercise of the
convertible debenture described under convertible debenture V option (a) Note 4.

NOTE 8 DERIVATIVE LIABILITY

|                                 |   | Three months    |   |   | Year ended   |  
|-------------------------------- | - | --------------- | - | - | ------------ | -
|                                 |   | ended           |   |   | February 28, |  
|                                 |   | August 31, 2014 |   |   | 2014         |  
|Balance, beginning               | $ | 42,007          |   | $ | 1,619,786    |  
|Fair value of warrants exercised |   | -               |   |   | (2,813       | )
|Fair value change of warrants    |   | (37,276         | ) |   | (1,574,966   | )
|Balance, ending                  | $ | 4,731           |   | $ | 42,007       |  

The derivative liability consists of the fair value of share
purchase warrants that were issued in unit private placements that have an
exercise price in a currency (Canadian dollars) other than the functional
currency of the Company. The derivative liability is a non-cash liability and
the Company is not required to expend any cash to settle this liability.

Details of these warrants and their fair values are as follows:

|                  |   |          |  |  | August 31,
      2014 |  |   | February 28,
      2014 | 
|----------------- | - | -------- |  |  | --------------------- |  | - | ----------------------- | 
|                  |   | Exercise |  |  |                       |  |   |                         | 
|                  |   | Price    |  |  | Number                |  |   |                         | 
|                  |   | ($CDN)   |  |  | Outstanding           |  |   | Fair Value              | 
|February 19, 2013 | $ | 0.50     |  |  | 556,249               |  | $ | 4,731                   | 

The fair value of the share purchase warrants was calculated
using the Black-Scholes Option Pricing Model using the following assumptions:
Expected dividend yield 0 (2014:0%); Expected stock price volatility 104%
(2014:119%) Risk-free interest rate 1.28% (2014:1.52%); Expected life of share
purchase warrants 3.47 years (2014:0.87 -3.97 years).

F-16

---

|Passport Potash Inc.                                      
|----------------------------------------------------------
|(An Exploration Stage Company)                            
|Notes to the consolidated financial statements - unaudited
|(Expressed in United States dollars)                      
|For the six
      months ended August 31, 2014            

NOTE 9 NON CASH TRANSACTIONS

The Company incurred the following non-cash transactions that
are not reflected in the statements of cash flows:

|                                                   |   | Year ended | 
|-------------------------------------------------- | - | ---------- | 
|                                                   |   | August 31, | 
|                                                   |   | 2014       | 
|Fair value of shares issued
      for debt         | $ | -          | 
|Shares issued for convertible debentures exercised |   | 460,748    | 
|                                                   | $ | 460,748    | 

NOTE 10 SUBSEQUENT EVENTS

The Company has evaluated all events that occurred after the
balance sheet date through the date when the financial statements were issued to
determine if they must be reported. The Management of the Company determined
that there were no reportable subsequent events.

F-17

---

|Item 2. | Managements Discussion and Analysis of
      Financial Conditions and Results of Operations
|------- | --------------------------------------------------------------------------------------------

The following discussion of our financial condition, changes in
financial condition and results of operations for the three and six months ended
August 31, 2014 and 2013 should be read in conjunction with our unaudited
interim consolidated financial statements and related notes for the three and
six months ended August 31, 2014 and 2013. The following discussion contains
forward-looking statements that involve risks, uncertainties and assumptions.
Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including, but not
limited to, those set forth under the section entitled Risk Factors in our
annual report on Form 10-K for the fiscal year ended February 28, 2014 filed
with the SEC on June 13, 2014.

Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted. It is suggested that these financial statements be read in conjunction
with the financial statements and notes thereto included in the Companys
February 28, 2014 audited financial statements, which were attached to our
annual report on Form 10-K for the fiscal year ended February 28, 2014 filed
with the SEC on June 13, 2014. The results of operations for the periods ended
August 31, 2014 and the same period last year are not necessarily indicative of
the operating results for the full years.

Overview of our Business

We were incorporated on August 11, 1987 under the laws of
Qubec, Canadaunder the name Bakertalc Inc. On January 21, 1994, we
changed our name to Palace Explorations Inc. On November 11, 1996, we changed
our name to X-Chequer Resources Inc. On September 29, 2004 we changed our name
to International X-Chequer Resources Inc. On October 18, 2007, we changed our
name to Passport Metals Inc. On November 10, 2009 we changed our name to
Passport Potash Inc. Effective April 26, 2011, we continued our governing
corporate jurisdiction from the Province of Qubec to the Province of British
Columbia under the name Passport Potash Inc.

Effective September 29, 2004, we effected a share consolidation
(reverse stock split) of our issued and outstanding shares of common stock on a
basis of twelve (12) old shares for one (1) new share.

Effective October 18, 2007, we effected a forward stock split
of our issued and outstanding shares of common stock on a basis of one (1) old
share for three (3) new shares.

Effective March 13, 2014, we effected a share consolidation
(reverse stock split) of our issued and outstanding shares of common stock on a
basis of two (2) old shares for one (1) new share.

We are a reporting issuer in the Canadian Provinces of British
Columbia, Alberta, Ontario and Qubec and our common shares are listed for
trading on the TSX Venture Exchange (the TSX-V) under the trading symbol
PPI.

Our head and principal office is located at 608 - 1199 West
Pender Street, Vancouver, British Columbia, Canada, V6E 2R1.

We are an exploration stage company engaged in the acquisition,
exploration and development of mineral resource properties. We currently have an
interest in or have the right to earn an interest in eight properties: Southwest
Exploration Property, Twin Butte Ranch, Sweetwater/American Potash, Mesa
Uranium, Ringbolt Property, Joint Exploration Agreement with the Hopi Tribe,
Fitzgerald Ranch and Joint Exploration Agreement with HNZ Potash, which are all
located in Arizona. We are currently in default under the option agreement to
acquire the Twin Buttes Ranch and in arrears under the purchase agreement to
acquire the Fitzgerald Ranch, however, we are in continuing negotiations to
amend these agreements. We have not established any proven or probable reserves
on our mineral property interests and we are not in actual development or
production of any mineral deposit at this time. We are an exploration stage
enterprise, as defined in FASB ASC 915 Development Stage Entities.

Our independent auditors report accompanying our February 28,
2014 and February 28, 2013 financial statements contains an explanatory
paragraph expressing substantial doubt about our ability to continue as a going
concern.

7

---

Our financial statements have been prepared assuming that we
will continue as a going concern, which contemplates that we will realize our
assets and satisfy our liabilities and commitments in the ordinary course of
business.

Subsidiaries

The chart below illustrates our corporate structure, including
our subsidiaries, which are all wholly owned, and the jurisdictions of
incorporation.



Mineral Properties/Agreements

Southwest Exploration Property

On September 30, 2008 we entered into a mineral property option
agreement (the Southwest Option Agreement׆) with Southwest Exploration
Inc. (Southwest) to acquire an undivided 100% interest in 13 Arizona
State Land Department exploration permits (ASLD Exploration Permits)
comprising 8,413.3 acres (3,404.76 ha) of mineral exploration property located
in Navajo County, in the Holbrook Basin, Arizona. Under the terms of the
Southwest Option Agreement, any after acquired permits within the area of common
interest may be made part of the property. Pursuant to this clause, 32
additional ASLD Exploration Permits were made part of the property for a total
of 45 ASLD Exploration Permits.

Under the terms of the Southwest Option Agreement, as amended,
we could acquire a 100% interest in the Southwest mining claims, subject to a 1%
NSR retained by Southwest, in exchange for the following considerations:

| | (a) | $100,000 on execution of the agreement (paid);                                                                                                                                                  
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                 
| | (b) | 1,000,000 options (issued) upon receipt of TSX-V approval
      of the agreement;                                                                                                               
| |     |                                                                                                                                                                                                 
| | (c) | $125,000 from 90 days following issuance of a drilling
      permit from the Arizona State Land Department. This permit was received on
      June 11, 2009 and $125,000 was paid July 23, 2009;
| |     |                                                                                                                                                                                                 
| | (d) | 250,000 shares on April 1, 2009 (issued);                                                                                                                                                       
| |     |                                                                                                                                                                                                 
| | (e) | 2,681,000 shares on October 1, 2009
  (issued);                                                                                                                                                 

8

---

| | (f) | 5,000,000 shares on November 1, 2010 (issued);                                                                               
| | --- | -----------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                              
| | (g) | $350,000 from six months following TSX-V approval of the
      issuance of 5,000,000 shares (paid);                          
| |     |                                                                                                                              
| | (h) | Funding of $200,000 in exploration expenditures pursuant
      to the completion of a NI 43-101 technical report (completed);
| |     |                                                                                                                              
| | (i) | 250,000 shares upon completion of a NI 43-101 technical
      report after drilling (issued); and                            
| |     |                                                                                                                              
| | (j) | Southwest shall retain a 1% NSR (purchased by the
      Company).                                                            

Currently, we have a blanket bond with the Arizona State Land
Department in the amount of $15,000 for the ASLD Exploration Permits. In
addition, we also have a bond with the Arizona Oil and Gas Conservation
Commission in the amount of $55,000 for drilling permits.

We entered into an amendment to the Southwest Option Agreement,
dated September 18, 2009, whereby the parties agreed to settle the October 1,
2009 scheduled cash payment of $225,000 with the issuance of 2,681,000 shares of
the Company.

We entered into a second amendment to the Southwest Option
Agreement, dated April 1, 2010, whereby the parties agreed to extend the due
date for the payment of $250,000 to Southwest until October 1, 2010. As we had
not satisfied this payment obligation by October 1, 2010, we issued 5,000,000
shares of our common stock to Southwest on November 8, 2010 in full satisfaction
of the outstanding payment.

We completed the exercise of our option to purchase the 100%
interest in the Southwest claims and the purchase of the 1% net smelter royalty
in an agreement dated February 13, 2012. The Southwest permits are held by PPI
Holding Corporation, our wholly owned subsidiary.

Twin Buttes Ranch Property

On August 28, 2009, as amended, we entered into a four-year
lease with an option to purchase (the Lease Option
Agreement) with Twin Buttes Ranch, LLC respecting the Twin Buttes Ranch
located in the potash-bearing Holbrook Basin of east-central Arizona. The Twin
Buttes Ranch comprises some 28,526 acres (11,544 hectares) of private deeded
land with 76.7% or approximately 21,894 acres (8,860 hectares) overlying the
potash horizons within the Holbrook Basin.

Under the terms of the Lease & Option Agreement, we may
acquire a 100% undivided interest in the deeded land and sub-surface mineral
rights comprising the Twin Buttes Ranch property by making lease payments
totaling $1,250,000 over five and a half years and, upon exercising our option
to purchase, by paying $20,000,000 for the entire Twin Buttes Ranch including
all sub-surface mineral rights except those pertaining to oil and gas, petrified
wood and geothermal resources. There are no royalties associated with the
sub-surface mineral rights.

On December 4, 2009, we entered into an amendment to the Lease
& Option Agreement whereby we signed a mining lease with Twin Buttes Ranch,
LLC on the Twin Buttes Ranch with a term from December 4, 2009 through August
28, 2013 subject to early termination as provided in the Lease & Option
Agreement. Under the mining lease, we are entitled to explore, develop, mine,
remove, treat and produce all ores, minerals and metals on Twin Buttes Ranch
solely for the purpose of determining the existence of potash and the economic
feasibility of the purchase and development of the property. In consideration,
we shall remain current in our option payments under the Lease & Option
Agreement and keep all terms of the Lease & Option Agreement in good
standing.

On September 7, 2010, we amended the terms of the Lease &
Option Agreement to provide for an extension of a portion of the initial cash
payment until December 1, 2010.

On August 20, 2013, we further amended the Lease & Option
Agreement to extend the term of the option agreement from August 28, 2013 to
January 6, 2016 and provide for the payments of:

9

---

| | (a) | $250,000 on the earlier of (i) within 30 days of closing
      our next round of financing which is a minimum $5 million, or (ii)
      December 1, 2013 (this payment obligation survives any early termination
      of the Lease & Option Agreement by us or a termination resulting from
      an uncured breach by us),
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                             
| | (b) | $250,000 on August 28, 2014; and                                                                                                                                                                                                                                                                                            
| |     |                                                                                                                                                                                                                                                                                                                             
| | (c) | $250,000 on May 1, 2015.                                                                                                                                                                                                                                                                                                    

Concurrently with the amendment to the Lease & Option
Agreement, we also amended the mining lease to provide that the term of the
lease will end on the expiration or earlier termination of the Lease &
Option Agreement, except in the event that we exercise our option pursuant to
the Lease & Option Agreement in which event the term shall end on the
closing date of the Lease & Option Agreement, and any subsequent amendments
thereto.

Details of the payments under the Lease & Option Agreement,
as amended, are as follows:

| | (a) | A payment of $50,000 and $10,000 legal costs on or before
      November 26, 2009 (paid);                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                 
| | (b) | A payment of $25,000 on September 17, 2010
  (paid);                                                                                                                            
| |     |                                                                                                                                                                                 
| | (c) | A payment of $75,000 on December 1, 2010
(paid);                                                                                                                                
| |     |                                                                                                                                                                                 
| | (d) | A payment of $150,000 on August 28, 2011
(paid);                                                                                                                                
| |     |                                                                                                                                                                                 
| | (e) | A payment of $200,000 on August 28, 2012
(paid);                                                                                                                                
| |     |                                                                                                                                                                                 
| | (f) | A payment of $250,000 on the earlier of (a) within 30
      days of closing our next round of financing which is a minimum $5 million,
      or (b) December 1, 2013 (not paid);
| |     |                                                                                                                                                                                 
| | (g) | A payment of $250,000 on August 28, 2014 (not paid);
      and                                                                                                                  
| |     |                                                                                                                                                                                 
| | (h) | A payment of $250,000 on May 1,
2015.                                                                                                                                           

We have not made the required $250,000 payments that were due
on December 1, 2013 and August 28, 2014; therefore, the agreement is in default
and we are in negotiations to further amend the Option Agreement as last amended
on August 20, 2013. A default notice was issued on April 17, 2014 and Twin
Buttes Ranch, LLC has the right to terminate the agreement, which would also
terminate the Lease, however, we are continuing negotiations, but the risk
remains that we may not be successful in completing an amendment to the Option
Agreement.

The Option Agreement currently provides that upon exercise to
purchase the entire Twin Butte Ranch, we must deliver a payment in the amount of
$1,000 on or before 5pm (Arizona time), January 6, 2016 (the option expiry
date), followed by a payment of $19,999,000 within thirty days.

Sweetwater/American Potash Property

On November 12, 2010 we entered into an option of Arizona
exploration leases (the Sweetwater Option Agreement) with Sweetwater
River Resources, LLC (Sweetwater) and American Potash, LLC (American
Potash) to acquire the right, title and interest in five mineral exploration
permits within the Holbrook Basin. The five permits consist of Arizona State
Land Department exploration permits that cover more than 3,200 acres.

Pursuant to the terms of the Sweetwater Option Agreement, we
could acquire a 100% interest in the exploration permits for the consideration
of: (i) issuing 500,000 shares of our common stock by December 15, 2010; (ii)
cash payment of CAD$90,000 payable in three installments of $30,000 each at 12
months, 18 months and 24 months from the date of signing the Sweetwater Option
Agreement; and (iii) meeting the exploration expenditures a required by the
Arizona State Land Department. We are responsible for payment of all exploration
expenditures on the permits. Pursuant to the Sweetwater Option Agreement, the
property was subject to a 2% net smelter royalty in favor of American Potash
which we had the option to purchase at a price of $150,000 for 1% or $300,000
for the full 2%.

10

---

On March 27, 2012, we completed the exercise of the option
under the Sweetwater Option Agreement and the repurchase of the 2% NSR royalty
in respect of the Sweetwater exploration permits. The permits are held by PPI
Holding Corporation, our wholly owned subsidiary.

Mesa Uranium Property

On August 31, 2010 we entered into a mineral property option
agreement (the Mesa Option Agreement) with Mesa Uranium Corp.
(Mesa) in respect of three Arizona State Land Department exploration
permits covering approximately 1,950 acres, which are wholly owned by Mesa.
Pursuant to the terms of the agreement, we had the right to acquire a 75%
interest in the Mesa permits in consideration for the issuance of 500,000 shares
of our common stock to Mesa, the payment of $20,000.00 cash to Mesa and meeting
the minimum exploration expenditures as required by the Arizona State Land
Department. Upon earning a 75% interest in the permits, we had the right to
acquire the remaining 25% interest in the Mesa permits by paying $100,000 in
cash, stock equivalent or work expenditures. Under the terms of the agreement,
we are responsible for payment of all exploration expenditures on the leases.
The property was subject to a 2% net smelter royalty which we had the option to
purchase at a price of $150,000 per 1% or $300,000 for the full 2%.

On February 13, 2012, we exercised our option to acquire a 75%
interest in the Mesa permits. On March 9, 2012, we announced that we had
exercised our option to acquire the remaining 25% interest in the Mesa
properties under the Mesa Option Agreement and to acquire the 2% NSR on those
properties thereby acquiring a royalty-free, 100% interest in the Mesa
properties. The permits are held by PPI Holding Corporation, our wholly owned
subsidiary.

Ringbolt Property

On March 28, 2011 we entered into an option agreement (the
Ringbolt Option Agreement) with Ringbolt Ventures Ltd., Potash Green,
LLC, Wendy Walker Tibbetts and Joseph J. Hansen (collectively, the
Optionor) pursuant to which we acquired the right to acquire a 100%
interest in the Ringbolt potash property located in the Holbrook Basin of
southeast Arizona. The Ringbolt property is comprised of 15,994.32 acres of
mineral exploration permits on land managed by the Arizona State Land
Department.

Pursuant to the terms of the Ringbolt Option Agreement, we may
acquire a 90% interest in the property by: (i) making cash payments totaling
$1.0 million ($50,000 upon execution of the agreement, $250,000 upon TSX Venture
Exchange approval, $350,000 on or before the 1st anniversary of TSX Venture
Exchange approval, and $350,000 on or before the 2nd anniversary of TSX Venture
Exchange approval), (ii) incurring a total of $2.25 million in exploration
expenditures on the property over three years ($500,000 within 1 year of TSX
Venture Exchange approval, $750,000 within 1 year of the 1st anniversary of TSX
Venture Exchange approval, and $1,000,000 within 1 year of the 2nd anniversary
of TSX Venture Exchange approval), and (iii) issuing four million common shares
over a three-year period (1,000,000 shares upon TSX Venture Exchange approval,
1,400,000 shares on or before the 1st anniversary of TSX Venture Exchange
approval, and 1,600,000 shares on or before the 2nd anniversary of TSX Venture
Exchange approval). Upon satisfaction of these terms, we will have the right to
purchase the remaining 10% interest for a cash payment of $5 million, which
shall remain exercisable until the Ringbolt property goes into commercial
production (defined as the sale of any mineral products from the property). In
addition, pursuant to the Ringbolt Option Agreement, the Ringbolt property will
be subject to a 1% gross overriding royalty on production from the property.

On October 30, 2012, as part of a settlement agreement between
us and the Optionor, we entered into an amendment agreement to the Ringbolt
Option Agreement pursuant to which we will pay to the Optionor a total of
$3,850,000, $150,000 of which was paid upon execution of the amendment
agreement, $2,450,000 will be paid upon TSX Ventures Exchange approval of the
amendment agreement, and the remaining $1,250,000 on or before October 31, 2014.
In addition, upon TSX Venture Exchange approval of the amendment agreement, we
will issue 750,000 shares of common stock to the Optionor and the Optionor will
assign to us all of its right, title and interest in and to the property and
will take all necessary action with the ASLD to effect such assignment. The cash
payment of $2,450,000 and 750,000 shares of our common stock will be
placed into escrow and will be released to the Optionor upon receipt of
confirmation of the assignment of the property to us from the ASLD. There will
be no royalty attached to the transferred mineral exploration permits.

11

---

Should we sell or in any way transfer our interest in the
property, the Optionor will receive 20% of the gross consideration in excess of
$30 million to a maximum of $2,000,000 if the aggregate consideration received
for the transfer of the interest in the property is greater than $30 million and
less than $40 million; or $2,000,000 plus 10% of the gross consideration in
excess of $40 million to a maximum of $1,000,000 if the aggregate consideration
is greater than $40 million and less than $50 million; or $3,000,000 plus 20% of
the gross consideration in excess of $50 million if the aggregate consideration
is greater than $50 million.

If we sell or transfer less than a 100% interest in the
property, then the aforementioned bonus payments shall be ratably reduced by
multiplying the bonus payment by the percentage of interest subject to the
transfer transaction. The sale or transfer of the remainder of the interest in
the property held by us will continue to be subject to the aforementioned bonus
payment provisions.

On December 8, 2012, we entered into a second amendment
agreement with the Optionor to amend the amendment agreement to extend the
deadline to make the cash payment of $2,450,000 following TSX Venture Exchange
approval for a period of 30 days from the date of final approval with a payment
of $100,000 to Potash Green, LLC, which payment will be deducted from the
aggregate payment owed.

The amendment agreement and the second amendment agreement to
the Ringbolt Option Agreement were approved by the TSX Venture Exchange on
February 27, 2013, and all payments except the $1,250,000 due on October 31,
2014, have been paid. The permits are held by PPI East Block Holding Corp., our
wholly owned subsidiary.

Cooperative Agreement and Joint Exploration Agreement
with The Hopi Tribe

Portions of our Holbrook Basin potash project in Arizona are
located adjacent to land privately owned by the Hopi Tribe. On March 8, 2011 we
finalized a cooperative agreement with the Hopi Tribe which establishes a
cooperative arrangement between us and the Hopi Tribe and gives us access across
the privately owned Hopi lands to conduct exploration activities while allowing
the Tribe to share in our study results. We are in continuing discussions with
the Hopi Tribe on the project.

On November 8, 2012, but having an effective date of November
1, 2012, we and The Hopi Tribe, a federally recognized Indian Tribe, entered
into a Joint Exploration Agreement (the JEA) pursuant to which the
parties agree to explore the Hopi land sections (the Hopi Property) which
are checker-boarded with our southern landholdings in accordance with an
exploration program, which shall consist of a two-phase drilling campaign as set
out in Exhibit 2 to the JEA. The first phase of the exploration program will
include 8 drill sites and will cover a 25,000 acre swath of the contiguous land
sections in the DoBell ranch area of the Holbrook Basin. The second phase of
drilling, which will be designed by ERCOSPLAN guided from the results from phase
one, will include up to 10 additional drill sites. We will be responsible for
all costs, charges and expenses incurred in connection with the exploration
program.

In addition, under the JEA, we shall indemnify, defend,
release, and hold harmless The Hopi Tribe and its elected officials, advisors
and contractors, employees, agents, lessees, insurers, successors and assigns
(the Indemnities) for, against and from any claim, damage, lien, loss,
cost, charge, expense (including attorneys fees and expenses) or liability
resulting from, or caused by, or incurred in connection with, or alleged to have
resulted from, or been caused by, or been incurred in connection with, in whole
or in part, directly or indirectly, the exploration program. Our payment and
indemnity obligations shall survive the termination of the JEA.

Pursuant to the JEA, the Hopi Tribe grants us and our
contractors, which includes any employee or contractor involved in the
exploration program (as defined in the JEA), a limited license on the terms and
conditions, and during the term of the JEA to (a) enter and cross existing ranch
roads on Hopi Property for ingress and egress purposes related to the
exploration program, (b) blade new roads to drill sites on the Hopi Property
designated by ERCOSPLAN, (c) drill exploratory holes on the Hopi Property at
drill sites designated by ERCOSPLAN, (d) lay cables across the Hopi Property for purposes of seismic studies
that are part of the exploration program, (e) drive a vibrator truck along
seismic lines, and (f) blade existing ranch roads on the Hopi Property. We and
our contractors shall not use the Hopi Property for any other purpose without
the prior written approval of The Hopi Tribe; provided, that with respect to use
of the Hopi Property identified by ERCOSPLAN in writing as necessary or
desirable for purposes of the exploration program, The Hopi Tribes approval
shall not be unreasonably withheld, conditioned or delayed.

12

---

Except as otherwise expressly set forth in the JEA, us and The
Hopi Tribe shall each separately have the right to possess and use all
exploration program results for any purpose. In addition, The Hopi Tribe and us,
and the parties respective successors and assigns, may use and freely disclose
exploration program results received under this JEA without prior approval of
the other for the parties or such successors or assigns internal use, and for
review and use by geologists and other outside advisors engaged by it (including
ERCOSPLAN) or its successors or assigns, lenders and prospective lenders,
venture partners and prospective venture partners, and others who are subject to
confidentiality agreements consistent with the disclosing partys obligations
under the JEA; provided, no exploration program results shall be shared with
venture partners or prospective venture partners by The Hopi Tribe other than us
or persons approved in writing by us in our discretion prior to the earlier of
(1) expiration or termination of one or more of our mineral exploration permits
from the Arizona State Land Department pertaining to our property, or (2)
October 15, 2014 (such earlier date, the Automatic Termination Date).

Furthermore, the JEA contains an exclusivity provision whereby
from the effective date and ending on the date the JEA terminates unless
extended in accordance with the terms of the JEA until October 15, 2015, The
Hopi Tribe will negotiate exclusively with us with respect to the joint
exploration of the Hopi Property and our property, which are contiguous as set
out in a letter of intent (the Letter of Intent) entered into between the
parties on September 26, 2012, and it will not directly or indirectly, take any
of the following actions with any party other than us:

| | (a) | solicit or encourage inquiries or proposals with respect
      to, furnish any information relating to, participate in any negotiations
      or discussions concerning, or cooperate in any manner relating to the
      subject matter of the Letter of Intent (a Transaction);
or
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                       
| | (b) | enter into any agreement or understanding with any person
      or entity providing for a Transaction.                                                                                                                                                                                

Unless the JEA is earlier terminated in accordance with the JEA
or superseded by another agreement between the parties, the JEA shall terminate
automatically at 5:00 PM Arizona time on the Automatic Termination Date.

Fitzgerald Ranch Property

On May 7, 2012, we entered into a purchase agreement with
co-trustees of the Fitzgerald Living Trust (Fitzgerald Living Trust) to
acquire real estate covering a total of 41,000 contiguous acres of royalty-free
private land (the Fitzgerald Ranch) located near Holbrook and adjacent to
our Twin Buttes Ranch holdings in the Holbrook Basin in exchange for a total
purchase price of $15,000,000 on the following material terms: (i) $250,000 to
be irrevocably released to Fitzgerald Living Trust upon execution of the
agreement; (ii) an additional $250,000 to be placed into escrow and irrevocably
released to Fitzgerald Living Trust on July 1, 2012; (iii) during the term of
the agreement, we have the right to perform exploration activities on the
property; (iv) a payment of $14,500,000 at closing to take place on December 18,
2012; and (v) the final purchase is subject to TSX Venture Exchange approval.

A provision of the agreement grants us the right to perform
exploration activities on the property. We have added 8 additional drill holes
to our 2012 drill program which will be drilled on the Fitzgerald Ranch. We have
drilled 5 holes on the Fitzgerald Ranch as part of the drill program.

On November 8, 2012, we entered into an amendment agreement to
the original property purchase agreement. In accordance with the amendment
agreement, in addition to our payment of an aggregate of $500,000 made by July
1, 2012, payments of $500,000 and $4,000,000 were to be made to Fitzgerald
Living Trust upon execution of the amendment agreement and on December 18, 2012,
respectively, which December 18, 2012 payment has not yet been made.
Additionally, a payment of $5,000,000 will be irrevocably paid to Fitzgerald
Living Trust on June 30, 2013 and the balance of $5,000,000 will be paid at the time of
closing of the sale which will take place on December 18, 2013.

13

---

We also agreed to reimburse Fitzgerald Living Trust for any
increase in taxes to it which are attributable to closing this sale in 2013
rather than 2012 and to make this reimbursement within 120 days from the date
Fitzgerald Living Trust provides documentation to us of the increased tax
amount.

On May 29, 2013, we entered into an agreement to amend and
restate the agreement to the original property purchase agreement (the
Amended and Restated Agreement) with Fitzgerald Living Trust for the
purchase of the Fitzgerald Ranch, which also supersedes the amendment agreement
dated November 8, 2012, as follows:

| | (a) | the purchase price has been increased to $17,000,000, of
      which $1,000,000 was paid and the balance is to be paid as
  follows:
| | --- | ------------------------------------------------------------------------------------------------------------------------------------

| | (i)   | a payment of $500,000 on the earlier of October 31, 2013,
      or within 30 days of closing our next financing (not paid);
| | ----- | ---------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                            
| | (ii)  | a payment of $500,000 to be paid on December 31, 2013
      (not paid);                                                    
| |       |                                                                                                                            
| | (iii) | a payment of $1,000,000 to be paid on December 31, 2014;
      and                                                         
| |       |                                                                                                                            
| | (iv)  | the balance of $14,000,000 to be paid on the closing of
      the sale which is on or before June 15, 2015;                

| | (b) | we have provided Fitzgerald Living Trust with the option
      to enter into a grazing lease on the property at the rate currently being
      charged by the Petrified Forest National Park, with the period of the
      lease being 5 years, with the option to renew for an additional 5 year
      term. The parties agreed that any ranching use of the property is
      secondary, and subject to mineral exploration and development;                                                                                                                                                                                                                                     
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (c) | during the term of the Amended and Restated Agreement,
      Fitzgerald Living Trust grants to us the right to enter into and on the
      property as set forth in the agreement to explore for, develop, core drill
      and sample ores, minerals and metals which are or may be found therein or
      thereon; provided however, that such ores, minerals and metals may only be
      removed, treated and produced in de minimus amounts from the core borings,
      solely for the purpose of determining the saturation and existence of such
      ores, minerals and metals and in no event shall we be permitted to sell
      any such ores, minerals or metals; and
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | (d) | the construction of roads shall be subject to the prior
      written approval of Fitzgerald Living Trust, which approval shall not
      unreasonably be withheld and shall be given in a timely
  manner.                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

We have not made the required $500,000 payments that were due
on October 31, 2013 and December 31, 2013; therefore, the Amended and Restated
Agreement is past-due and $975,000 capitalized to long-term deposits has been
written-off as at the year ended February 28, 2014. We are in negotiations to
amend the Amended and Restated Agreement. No default notice has been issued
under the Amended and Restated Agreement but the risk remains that we may not be
successful in completing an amendment to the Amended and Restated Agreement.

The Amended and Restated Agreement is subject to TSX Venture
Exchange approval.

Joint Exploration Agreement with HNZ Potash, LLC

On July 27, 2012, we entered into a Joint Exploration Agreement
(the Agreement) with HNZ Potash, LLC (HNZ) to jointly explore and
potentially develop twenty-one permitted parcels in which we hold ASLD 8
exploration permits and which are located on the southernmost area of our
landholdings (the Permit Property). The Permit Property is within HNZs
private landholdings and has not been previously explored by us. Under the terms of the Agreement, HNZ has agreed to pay us 50% of certain
costs previously incurred by us with respect to the Permit Property, which
payment was received by us during the fiscal year ended February 28, 2013 and we
have assigned a 50% interest in the Permit Property to HNZ. Each of the parties
will be liable for 50% of the future costs relating to the permits. Our interest
in the permits are held by PPI Holding Corporation, our wholly owned subsidiary.

14

---

The purposes of the Agreement are to: (i) conduct exploration
and to evaluate the potential for development and mining of the Permit Property;
(ii) to acquire interests within the lands owned by the Hopi Tribe commonly
referred to as the Dobell Ranch lands as more particularly described in the
Agreement; (iii) if justified by the exploration activities, the parties upon
mutual agreement will form an entity to seek a mining lease to jointly engage in
development and mining of the Permit Property; (iv) to complete and satisfy all
environmental compliance obligations and continuing obligations affecting the
Permit Property; and (v) to perform any other activity necessary, appropriate,
or incidental to any of the foregoing. During the term of the Agreement, the
parties will equally share the costs for maintaining the Permit Property in good
standing with the ASLD. The parties may, either alone or jointly, conduct
exploration of any or all of the Permit Property pursuant to one or more plans
of exploration.

The term of the Agreement shall begin on the effective date of
the Agreement and extend to the expiration of the fifth year term of the last
permit covered by the Agreement, or any permit obtained as a replacement
therefor (the Term); provided, however, that, if during the Term the
participants (or any entity formed by the participants) jointly apply for a
mineral lease or mineral leases on any portion of the Permit Property, the Term
shall be automatically extended to the date a final determination is issued by
the ASLD regarding the last mineral lease application.

Other provisions in the Agreement include the following:

| | The parties will provide to each other existing
      exploration data from their Holbrook Basin potash exploration activities.
      The data provided by each Party may be used by the other party to update
      their existing or future resource reports or any other future reports.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The parties will provide each other vehicular
      access across existing paved and unpaved roads on property controlled by
      the other party.                                                                                                                                        
| | The parties have established an area of mutual
      interest and have agreed to jointly pursue opportunities within this area.                                                                                                                                                            

Additional Exploration Permits

On May 30, 2013, we announced that we had received nine new
exploration permits from the ASLD, adding 4,703.66 acres of Arizona State trust
land to our land package. These additional permits are on Arizona State trust
land sections that had been closed to development related to the proposed
expansion of the Petrified Forest National Park. Seven of the sections lie
within our private landholdings, while the other two border the Hopi Property
development area and abut the south border of the Petrified Forest National
Park. Almost all of these permits are held by PPI West Block Holding Corp., our
wholly owned subsidiary, with a few permits being held by PPI Holding
Corporation, our wholly owned subsidiary.

Employees

As at August 31, 2014, we have one employee, however, we have
10 individuals working on a consulting basis. Our operations are managed by our
officers with input from our directors. We engage geological and engineering
consultants from time to time as required to assist in evaluating our property
interests and recommending and conducting work programs.

15

---

Results of Operations

The following table sets forth our results of operations from
inception of exploration stage on May 22, 2007 to August 31, 2014 as well as for
the three and six month periods ended August 31, 2014 and August 31, 2013.

Three months periods
    
    
    Six months periods
    
    
    For theended
    
    
    ended
    
    
    period May22, 2007August
    
    
    August 31,
    
    
    August
    
    
    August 31,
    
    
    (Inception ofNote
    
    
    31,
    
    
    2013
    
    
    31,
    
    
    2013
    
    
    Exploration2014
    
    
    
    
    
    2014
    
    
    
    
    
    Stage) toAugust 31,2014Operating
      ExpensesAdministration
    
    6
    
    $
    14,893
    
    $
    64,836
    
    $
    29,100
    
    $
    85,460
    
    $
    1,046,056Advertising
    
    
    
    
    5,032
    
    
    21,050
    
    
    10,761
    
    
    72,543
    
    
    1,847,946Business
      development
    
    
    
    
    11,461
    
    
    104,677
    
    
    25,605
    
    
    240,485
    
    
    1,353,079Consulting fees
    
    6
    
    
    37,500
    
    
    200,282
    
    
    150,000
    
    
    330,975
    
    
    8,966,422Depreciation
    
    2
    
    
    33
    
    
    41
    
    
    66
    
    
    82
    
    
    2,447Foreign exchange loss
    
    
    
    
    1,101
    
    
    11,139
    
    
    32,242
    
    
    19,305
    
    
    174,879Investor relations
    
    
    
    
    22,585
    
    
    79,802
    
    
    60,257
    
    
    140,690
    
    
    1,575,069Management fees
    
    6
    
    
    161,568
    
    
    247,901
    
    
    322,375
    
    
    412,115
    
    
    4,340,670Mineral
      property impairment
    
    3
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    1,627,784Mineral property option payments and
      exploration costs
    
    3,
      6
    
    
    154,872
    
    
    431,073
    
    
    361,472
    
    
    1,076,358
    
    
    22,955,351Office and
      miscellaneous
    
    
    
    
    8,843
    
    
    15,363
    
    
    19,368
    
    
    35,370
    
    
    366,429Professional fees
    
    
    
    
    24,955
    
    
    239,076
    
    
    33,560
    
    
    275,857
    
    
    1,761,089Property
      investigation costs
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    24,483Transfer agent and filing
      fees
    
    
    
    
    18,659
    
    
    31,457
    
    
    37,657
    
    
    59,100
    
    
    480,814(461,502
    )
    
    (1,446,697
    )
    
    (1,082,463
    )
    
    (2,748,340
    )
    
    (46,522,518
    )Other
      itemsAccretion expense
    
    4
    
    
    (103,376
    )
    
    (1,049,013
    )
    
    (209,769
    )
    
    (2,076,400
    )
    
    (4,352,948
    )Change in fair value of derivative
      liability
    
    8
    
    
    10,664
    
    
    816,868
    
    
    37,276
    
    
    1,511,513
    
    
    6,393,081Interest income
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    90,216Interest expense on convertible debentures
    
    4
    
    
    (165,013
    )
    
    (218,533
    )
    
    (398,601
    )
    
    (432,947
    )
    
    (1,276,467
    )Gain (loss)
      on debt settlement
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    (9,852
    )Other income
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    153,125(257,725
    )
    
    (450,678
    )
    
    (571,094
    )
    
    (997,834
    )
    
    997,155Net loss
    
    
    
    $
    (719,227
    )
    $
    (1,897,375
    )
    $
    (1,653,557
    )
    $
    (3,746,174
    )
    $
    (45,525,363
    )**Loss per share
      basic and** diluted
    
    
    
    $
    (0.01
    )
    $
    (0.02
    )
    $
    (0.02
    )
    $
    (0.04
    )**Weighted average number**
      of shares outstanding basic and diluted
    
    
    
    
    109,490,859
    
    
    91,805,118
    
    
    108,901,663
    
    
    91,798,789


16

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Results of Operations for the three month periods ended
August 31, 2014 and 2013

Revenues

During three month periods ended August 31, 2014 and August 31,
2013, respectively, we did not generate any revenues.

Operating Expenses

Operating expenses incurred during the three month period ended
August 31, 2014 were $461,502 as compared to $1,446,697 during the three month
period ended August 31, 2013. Significant changes and expenditures are outlined
as follows:

| | Administration expenses were $14,893 and $64,836 for the
      three month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease of $49,943 was mainly due to decrease in
      payment for administration expenses as decrease in invoicing during the
      three month period ended August 31, 2014, compared to the three month
      period ended August 31, 2013.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Advertising expenses were $5,032 and $21,050 for the
      three month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease was due to less promotion purposes related to
      our market awareness during the three month period ended August 31, 2014,
      compared to the three month period ended August 31, 2013.                                             
| | Business Development expenses were $11,461 and $104,677
      for the three month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease of $93,216 was due to less travel expenses and
      attending conventions during the three month period ended August 31, 2014.                                                                                                
| | Consulting fees were $37,500 and $200,282 for the three
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      decrease of $162,782 was mainly due to less payment for consulting fees
      during the three month period ended August 31, 2014, compared to the three
      month period ended August 31, 2013.                                                    
| | Depreciation expense was $33 and $41 for the three month
      periods ended August 31, 2014 and August 31, 2013, respectively.                                                                                                                                                                                                                                                                      
| | Foreign exchange loss was $1,101 and $11,139 for the
      three month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease in foreign exchange loss of $10,038 was due to
      fluctuations in the USD and CAD exchange rate and the translation of
      non-monetary assets.                                                                                      
| | Investor relations expenses were $22,585 and $79,802 for
      the three month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease was mainly due to cost saving efforts during
      the three month period ended August 31, 2014.                                                                                                                                  
| | Management fees were $161,568 and $247,901 for the three
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      decrease in management fees was mainly due to less management fees paid
      during the three month period ended August 31, 2014, compared to the three
      month period ended August 31, 2013.                                                   
| | Mineral property impairment costs were $Nil and $Nil for
      the three month periods ended August 31, 2014 and August 31, 2013,
      respectively. There were no mineral property impairment during the three
      month period ended August 31, 2014 and August 31, 2013.                                                                                                                       
| | Mineral property option payments and exploration costs
      were $154,872 and $431,073 for the three month periods ended August 31,
      2014 and August 31, 2013, respectively. The decrease was due to the
      Company incurring less exploration costs during the three month period
      ended August 31, 2014.                                                                             
| | Office and miscellaneous expenses were $8,843 and $15,363
      for the three month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease was due to the decrease in operating activities
      during the three month period ended August 31, 2014.                                                                                                                   
| | Professional fees were $24,955 and $239,076 for the three
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      decrease was mainly due to a decrease in operating activities, regulatory
      filings and legal proceedings with respect to our operating activities
      during the three month period ended August 31, 2014.                                   
| | Property investigation costs were $Nil and $Nil for the
      three month periods ended August 31, 2014 and August 31, 2013,
      respectively. There were no activities in new property acquisition during
      the three month period ended August 31, 2014 and August 31, 2013.                                                                                                                 
| | Transfer agent and filing fees were $18,659 and $31,457
      for the three month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease was due to a decrease in the services being
      provided by the transfer agent during the three month period ended August
      31, 2014, compared to the three month period ended August 31, 2013.                          

17

---

Other Items

During the three month period ended August 31, 2014, our other
items accounted for $257,725 in expenses as compared to $450,678 in expenses for
the three month period ended August 31, 2013. The significant changes in other
items income (expenses) are outlined as follows:

| | Accretion expense was $103,376 and $1,049,013
      for the three month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease in accretion expense was mainly due to the
      lower values of discount on debenture and beneficial conversion feature
      upon conversion of debentures and the longer term, for accretion of the
      beneficial conversion feature and accretion of the discount in connection
      with the convertible debentures, which resulted in a decrease in the
      accretion during the three month period ended August 31, 2014, compared to
      the three month period ended August 31, 2013.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Change in derivative liability was $10,664 and
      $816,868 for the three month periods ended August 31, 2014 and August 31,
      2013, respectively. The change in derivative liability was due to a
      decrease in the outstanding term of the warrants denominated in Canadian
      dollars which resulted in a decrease in the derivative liability in the
      three month period ended August 31, 2014, compared to the three month
      period ended August 31, 2013.                                                                                                                                                                             
| | Interest income was $Nil and $Nil for the three
      month periods ended August 31, 2014 and August 31, 2013, respectively.
      There were no funds invested in interest bearing instruments during the
      three month period ended August 31, 2014 and August 31, 2013.                                                                                                                                                                                                                                                                                                                                                                                    
| | Interest expense on convertible debentures was
      $165,013 and $218,533 for the three month periods ended August 31, 2014
      and August 31, 2013, respectively. The decrease in interest expense was
      mainly due to the lower interest rate during the three month period, for
      charging interest in connection with the convertible debentures, which
      resulted in a decrease in the interest expense on convertible debentures
      in the three month period ended August 31, 2014, compared to the three
      month period ended August 31, 2013.                                                                                      
| | Gain on debt settlement and other income was
      $Nil and $Nil for the three month periods ended August 31, 2014 and August
      31, 2013, respectively. There were no activities in debt settlement or
      other income during the three month period ended August 31, 2014 and
      August 31, 2013.                                                                                                                                                                                                                                                                                                                                                      

Net Income (Loss)

The net loss was $719,227 and $1,897,375 for the three month
periods ended August 31, 2014 and August 31, 2013, respectively. The decrease in
net loss of $1,178,148 resulted from the decrease in operating expenses of
$985,195 and the decrease in expenses in other items of $192,953 in the three
month period ended August 31, 2014, compared to the three month period ended
August 31, 2013.

Results of Operations for the six month periods ended
August 31, 2014 and 2013

Revenues

During six month periods ended August 31, 2014 and August 31,
2013, respectively, we did not generate any revenues.

Operating Expenses

Operating expenses incurred during the six month period ended
August 31, 2014 were $1,082,463 as compared to $2,748,340 during the six month
period ended August 31, 2013. Significant changes and expenditures are outlined
as follows:

| | Administration expenses were $29,100 and $85,460 for the
      six month periods ended August 31, 2014 and August 31, 2013, respectively.
      The decrease of $56,360 was mainly due to decrease in payment for
      administration expenses as a decrease in invoicing during the six month
      period ended August 31, 2014, compared to the six month period ended
      August 31, 2013.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

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| | Advertising expenses were $10,761 and $72,543 for the six
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      decrease was due to less promotion purposes related to our market
      awareness during the six month period ended August 31, 2014, compared to
      the six month period ended August 31, 2013.                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Business Development expenses were $25,605 and $240,485
      for the six month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease of $214,880 was due to less travel expenses and
      attending conventions during the six month period ended August 31, 2014.                                                                   
| | Consulting fees were $150,000 and $330,975 for the six
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      decrease of $180,975 was mainly due to less payment for consulting fees
      during the six month period ended August 31, 2014, compared to the six
      month period ended August 31, 2013.                         
| | Depreciation expense was $66 and $82 for the six month
      periods ended August 31, 2014 and August 31, 2013, respectively.                                                                                                                                                                                                                                        
| | Foreign exchange loss was $32,242 and $19,305 for the six
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      increase in foreign exchange loss of $12,937 was due to fluctuations in
      the USD and CAD exchange rate and the translation of non-monetary assets.                                                             
| | Investor relations expenses were $60,257 and $140,690 for
      the six month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease was mainly due to cost saving efforts during
      the six month period ended August 31, 2014.                                                                                                     
| | Management fees were $322,375 and $412,115 for the six
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      decrease in management fees was mainly due to less management fees paid
      during the six month period ended August 31, 2014, compared to the six
      month period ended August 31, 2013.                         
| | Mineral property impairment costs were $Nil and $Nil for
      the six month periods ended August 31, 2014 and August 31, 2013,
      respectively. There were no mineral property impairment during the six
      month periods ended August 31, 2014 and August 31, 2013.                                                                                          
| | Mineral property option payments and exploration costs
      were $361,472 and $1,076,358 for the six month periods ended August 31,
      2014 and August 31, 2013, respectively. The decrease was due to the
      Company incurring less exploration costs during the six month period ended
      August 31, 2014.                                               
| | Office and miscellaneous expenses were $19,368 and
      $35,370 for the six month periods ended August 31, 2014 and August 31,
      2013, respectively. The decrease was due to the decrease in operating
      activities during the six month period ended August 31, 2014.                                                                                      
| | Professional fees were $33,560 and $275,857 for the six
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      decrease was mainly due to a decrease in operating activities, regulatory
      filings and legal proceedings with respect to our operating activities
      during the six month period ended August 31, 2014.       
| | Property investigation costs were $Nil and $Nil for the
      six month periods ended August 31, 2014 and August 31, 2013, respectively.
      There were no activities in new property acquisition during the six month
      period ended August 31, 2014 and August 31, 2013.                                                                                     
| | Transfer agent and filing fees were $37,657 and $59,100
      for the six month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease was due to a decrease in the services being
      provided by the transfer agent during the six month period ended August
      31, 2014, compared to the six month period ended August 31, 2013.

Other Items

During the six month period ended August 31, 2014, our other
items accounted for $571,094 in expenses as compared to $997,834 in expenses for
the six month period ended August 31, 2013. The significant changes in other
items income (expenses) are outlined as follows:

| | Accretion expense was $209,769 and $2,076,400 for the six
      month periods ended August 31, 2014 and August 31, 2013, respectively. The
      decrease in accretion expense was mainly due to the lower values of
      discount on debenture and beneficial conversion feature upon conversion of
      debentures and the longer term, for accretion of the beneficial conversion
      feature and accretion of the discount in connection with the convertible
      debentures, which resulted in a decrease in the accretion during the six
      month period ended August 31, 2014, compared to the six month period ended
      August 31, 2013.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19

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| | Change in derivative liability was $37,276 and $1,511,513
      for the six month periods ended August 31, 2014 and August 31, 2013,
      respectively. The change in derivative liability was due to a decrease in
      the number and the outstanding term of the warrants denominated in
      Canadian dollars which resulted in a decrease in the derivative liability
      in the six month period ended August 31, 2014, compared to the six month
      period ended August 31, 2013.                                                                    
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Interest income was $Nil and $Nil for the six month
      periods ended August 31, 2014 and August 31, 2013, respectively. There
      were no funds invested in interest bearing instruments during the six
      month period ended August 31, 2014 and August 31, 2013.                                                                                                                                                                                                                                                                                          
| | Interest expense on convertible debentures was $398,601
      and $432,947 for the six month periods ended August 31, 2014 and August
      31, 2013, respectively. The decrease in interest expense was mainly due to
      the lower interest rate during the six month period, for charging interest
      in connection with the convertible debentures, which resulted in a
      decrease in the interest expense on convertible debentures in the six
      month period ended August 31, 2014, compared to the six month period ended
      August 31, 2013.
| | Gain on debt settlement and other income was $Nil and
      $Nil for the six month periods ended August 31, 2014 and August 31, 2013,
      respectively. There were no activities in debt settlement or other income
      during the six month period ended August 31, 2014 and August 31, 2013.                                                                                                                                                                                                                                                                  

Net Income (Loss)

The net loss was $1,653,557 and $3,746,174 for the six month
periods ended August 31, 2014 and August 31, 2013, respectively. The decrease in
net loss of $2,092,617 resulted from the decrease in operating expenses of
$1,665,877 and the decrease in expenses in other items of $426,740 in the six
month period ended August 31, 2014, compared to the six month period ended
August 31, 2013.

Liquidity and Capital Resources

Our financial statements have been prepared assuming that we
will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of
liabilities that might be necessary should we be unable to continue in
operation.

The following table sets out our cash and working capital as of
August 31, 2014 and February 28, 2014:

|                          |   | As of August 31,
      2014 |   |   | As of February 28,
      2014 |  
|------------------------- | - | --------------------------- | - | - | ----------------------------- | -
|                          |   | (unaudited)                 |   |   | (audited)                     |  
|Cash reserves             | $ | 14,372                      |   | $ | 49,062                        |  
|Working capital (deficit) |   | ($2,047,501                 | ) |   | ($2,046,398                   | )

As at August 31, 2014, our current assets were $91,894 and our
current liabilities were $2,139,395 resulting in a working capital deficit of
$2,047,501. Our current assets as at August 31, 2014 consisted of cash and cash
equivalents of $14,372, receivables of $5,747, prepaid expenses of $65,776 and
deferred issuance costs of $5,999. Our current liabilities as at August 31, 2014
consisted of trade payables and accrued liabilities of $1,675,925, convertible
debentures subscriptions received of $112,250, derivative liability of $4,731
and loans of $346,489.

As at February 28, 2014, our current assets were $171,067 and
our current liabilities were $2,217,465 resulting in a working capital deficit
of $2,046,398. Our current assets as at February 28, 2014 consisted of cash and
cash equivalents of $49,062, receivables of $4,853, prepaid expenses of $113,554
and deferred issuance costs of $3,598. Our current liabilities as at February
28, 2014 consisted of trade payables and accrued liabilities of $980,983,
convertible debentures of $553,233 convertible debentures subscriptions received
of $95,000, derivative liability of $42,007 and loans of $546,242.

20

---

As at August 31, 2014 we also had non-current liabilities of
$5,964,516 compared to February 28, 2014 of $5,000,889. Our non-current
liabilities at August 31, 2014 and February 28, 2014 consisted of Convertible
debentures.

During the six month period ended August 31, 2014, we received
cash of $296,677 (2013: $132,505) for Debentures issued net of issue costs and
received $Nil for stock issuances net of issuance costs (2013: $8,157). At
August 31, 2014, we had an aggregate of 15,037,363 (2013:25,484,073) share
purchase warrants exercisable, 561,013 for CAD$0.50 per share and 14,476,350 for
USD$0.12 (2013: 10,956,782 between CAD$0.40 and CAD$0.50) per share and (2013:
14,527,291 for USD$0.38 per share), which have the potential upon exercise to
convert to approximately CAD$280,506 (2013:CAD$4,438,814) plus USD$1,737,162
(2013:USD$5,520,370) in cash over the next two years. There is also a potential
further 4,166,667 warrants to be issued exercisable at $0.12 until May 29, 2018
upon the exercise of convertible debentures providing an additional $500,000.
Further, as at August 31, 2014, a total of 9,166,812 (2013:9,166,812) stock
options exercisable between $0.20 and $1.18 (CAD$0.20 and CAD$1.18) per share
which have the potential upon exercise to generate a total of approximately
CAD$5,227,542 (2013:CAD$5,463,442) in cash over the next four years. There is no
assurance that these securities will be exercised.

Deficit accumulated since inception of exploration stage
increased from ($43,871,806) as at February 28, 2014 to ($45,525,363) as at
August 31, 2014.

Our plan of operations over the next twelve months is to focus
on the following:

| | Renegotiate the terms of the Fitzgerald Living
      Trust Agreement which will require approximately $1,000,000.       
|- | ------------------------------------------------------------------------------------------------------------------------
| | Renegotiate the terms of the Twin Buttes Ranch
      property, which will require a payment of approximately $1,000,000.
| | Generate the $1,250,000 required for the
      Ringbolt property.                                                       
| | Completion of Phase 1 of our planned
      exploration program which requires approximately $7,500,000.                 

Therefore, based on the above, we anticipate that we will
require a total of approximately $10,250,000 for our plan of operations over the
next twelve months. At August 31, 2014, we had cash of $14,372 and a working
capital deficit of $2,047,501. During the next twelve months, we anticipate that
we will not generate any revenue. Accordingly, we will be required to obtain
additional equity financing in order to pursue our plan of operations for and
beyond the next twelve months. We cannot provide investors with any assurance
that we will be able to raise sufficient funding from the sale of our common
stock to fund our exploration programs, property acquisitions and repayment of
debt going forward. In the absence of such financing, we will not be able to
continue our planned property acquisitions and possibly our anticipated
exploration programs and our business plan may fail. Even if we are successful
in obtaining financing to fund our exploration program, there is no assurance
that we will obtain the funding necessary to complete our planned property
acquisitions.

Statement of Cash Flows

During the six month period ended August 31, 2014, our net cash
decreased by $34,690, which included net cash used in operating activities of
($343,867), net cash used in investing activities of $NIL and net cash provided
by financing activities of $309,177.

Cash Flow used in Operating Activities

Operating activities in the six month period ended August 31,
2014 used cash of ($343,867) compared to ($1,746,228) in the six month period
ended August 31, 2013. Significant changes in cash used in operating activities
are outlined as follows:

21

---

| | Loss was ($1,653,557) compared to a loss of ($3,746,174)
      in the six month periods ended August 31, 2014 and August 31, 2013,
      respectively. The decrease in loss was due to a decrease in the operating
      expenses and a decrease in losses of other items.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following non-cash items further adjusted the loss for the
six month periods ended August 31, 2014 and August 31, 2013:

| | Accretion was $209,769 and $2,076,400 in the
      six month periods ended August 31, 2014 and August 31, 2013, respectively.                                                                                                                                                                                                                                                                                                                                                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Amortization of deferred issuance costs was
      $922 and $20,059 in the six month periods ended August 31, 2014 and August
      31, 2013, respectively.                                                                                                                                                                                                                                                                                                                                                                    
| | Depreciation was $66 and $82 in the six month
      periods ended August 31, 2014 and August 31, 2013, respectively.                                                                                                                                                                                                                                                                                                                                                                                                          
| | Interest expense on convertible debentures was
      $398,601 and $432,947 in the six month periods ended August 31, 2014 and
      August 31, 2013.                                                                                                                                                                                                                                                                                                                                                                          
| | Fair value adjustment on warrants was ($37,276) and
      ($1,511,513) in the six month periods ended August 31, 2014 and August 31,
      2013, respectively. The decrease in fair value adjustment on warrants was
      a result of the decrease in the number and the term of the outstanding
      warrants denominated in Canadian dollars which resulted in a decrease in
      the derivative liability in the six month period ended August 31, 2014 as
      compared to the six month period ended August 31, 2013.
| | No stock-based compensation was issued $Nil and
      $36,002 in the six month periods ended August 31, 2014 and August 31,
      2013, respectively.                                                                                                                                                                                                                                                                                                                                                                         

The following changes in working capital items further adjusted
the cash flow usage for the six month periods ended August 31, 2014 and August
31, 2013, respectively:

| | Receivables were ($894) and $36,000 in the six month
      periods ended August 31, 2014 and August 31, 2013, respectively. The small
      increase in receivables resulted in a smaller cash outflow in receivables
      compared to a prior decrease in receivables resulting in an increase in
      cash flow compared period over period.                               
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Injunction bond inflow were $Nil and $350,000 in the six
      month periods ended August 31, 2014 and August 31, 2013, respectively.                                                                                                                                                                                                                                          
| | Prepaid expenses were $47,778 and $98,202 in the six
      month periods ended August 31, 2014 and August 31, 2013, respectively, due
      to a decrease by the Company in prepaid expenses.                                                                                                                                                                                  
| | Trade payables and accrued liabilities were $690,724 and
      $128,862 in the six month periods ended August 31, 2014 and August 31,
      2013, respectively. The increase in trade payables was due to the effect
      of a delay in payment of accounts payable and accrued liabilities compared
      to trade payables and accrued liabilities period over prior period.

Cash Flow used in Investing Activities

During the six month periods ended August 31, 2014 and August
31, 2013 there were no investing activities. In the period from inception (May
22, 2007) to August 31, 2014, investing activities utilized net cash of
$2,590,000, primarily for mineral property acquisition costs.

Cash Flow provided by Financing Activities

During the six month period ended August 31, 2014, cash
provided by financing activities consisted of (i) proceeds from debentures net
of issue costs of $296,677 and $132,505 in the six month periods ended August
31, 2014 and August 31, 2013, (ii) Proceeds from issuance of common shares net
of issuance costs of $Nil and $8,157 in the six month periods ended August 31,
2014 and August 31, 2013. (iii) Proceeds on subscriptions received of $12,500
and $Nil in the six month periods ended August 31, 2014 and August 31, 2013. In
the period from inception (May 22, 2007) to August 31, 2014, financing activities provided net
cash of $31,744,847, primarily from the sale of our equity securities.

22

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Off-Balance Sheet Arrangements

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

Subsequent Events

Not applicable.

Outstanding share data

At August 31, 2014, we had on a post-consolidation basis
109,490,859 issued and outstanding common shares, 9,166,812 outstanding stock
options at a weighted average exercise price of CAD$0.57 per share, and
15,037,363 outstanding warrants at an exercise price of $0.12 and CAD$0.50 per
share.

Critical Accounting Policies

Our financial statements and accompanying notes have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis. The preparation of financial
statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods.

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

We believe the following critical accounting policies require
us to make significant judgments and estimates in the preparation of our
consolidated financial statements.

Mineral Property Expenditures

We are primarily engaged in the acquisition, exploration and
development of mineral properties.

Mineral property acquisition costs are capitalized in
accordance with FASB ASC 930-805, Extractive Activities-Mining, when management
has determined that probable future benefits consisting of a contribution to
future cash inflows have been identified and adequate financial resources are
available or are expected to be available as required to meet the terms of
property acquisition and budgeted exploration and development expenditures.
Mineral property acquisition costs are expensed as incurred if the criteria for
capitalization are not met. In the event that mineral property acquisition costs
are paid with Company shares, those shares are recorded at the estimated fair
value at the time the shares are due in accordance with the terms of the
property agreements.

Mineral property exploration costs are expensed as incurred.

When it has been determined that a mineral property can be
economically developed as a result of establishing proven and probable reserves
and pre-feasibility, the costs incurred to develop such property are
capitalized.

23

---

Estimated future removal and site restoration costs, when
determinable are provided over the life of proven reserves on a
units-of-production basis. Costs, which include production equipment removal and
environmental remediation, are estimated each period by management based on
current regulations, actual expenses incurred, and technology and industry
standards. Any charge is included in exploration expense or the provision for
depletion and depreciation during the period and the actual restoration
expenditures are charged to the accumulated provision amounts as incurred.

As of the date of these financial statements, we have incurred
property acquisition costs that have been capitalized and property option
payments and exploration costs which have been expensed.

To date we have not established any proven or probable reserves
on our mineral properties.

Stock-based Compensation

We account for Stock-Based Compensation under ASC 718
Compensation Stock Compensation, which addresses the accounting for transactions
in which an entity exchanges its equity instruments for goods or services, with
a primary focus on transactions in which an entity obtains employee services in
share-based payment transactions. ASC 718-10 requires measurement of the cost of
employee services received in exchange for an award of equity instruments based
on the grant-date fair value of the award (with limited exceptions). Incremental
compensation costs arising from subsequent modifications of awards after the
grant date must be recognized.

We account for stock-based compensation awards to non-employees
in accordance with ASC 505-50, Equity-Based Payments to Non-Employees. Under ASC
505-50, we determine the fair value of the warrants or stock-based compensation
awards granted as either the fair value of the consideration received or the
fair value of the equity instruments issued, whichever is more reliably
measurable. Any stock options or warrants issued to non-employees are recorded
in expense and additional paid-in capital in shareholders equity/(deficit) over
the applicable service periods using variable accounting through the vesting
dates based on the fair value of the options or warrants at the end of each
period.

The value of the common stock is measured at the earlier of (i)
the date at which a firm commitment for performance by the counterparty to earn
the equity instruments is reached or (ii) the date at which the counterpartys
performance is complete. We recognized consulting expense and a corresponding
increase to additional paid-in-capital related to stock issued for services.

Recent Accounting Pronouncements

We have reviewed recently issued accounting pronouncements and
we plan to adopt those that are applicable to us. We do not expect the adoption
of these pronouncements to have a material impact on our financial position,
results of operations or cash flows.

|Item 3. | Quantitative and Qualitative Disclosures
      About Market Risk
|------- | ----------------------------------------------------------------

We are exposed in varying degrees to a variety of financial
instrument related risks. The Board of Directors approves and monitors the risk
management processes, inclusive of documented investment policies, counterparty
limits, and controlling and reporting structures. The type of risk exposure and
the way in which such exposure is managed is provided as follows:

Credit risk

Credit risk is the risk that one party to a financial
instrument will fail to discharge an obligation and cause the other party to
incur a financial loss. Our primary exposure to credit risk is on our cash and
cash equivalents. As most of our cash and cash equivalents are held by the same
bank there is a concentration of credit risk. This risk is managed by using a
major Canadian banks that are high credit quality financial institutions as
determined by rating agencies.

24

---

Our secondary exposure to risk is on our other receivables.
This risk is minimal as receivables consist primarily of refundable government
goods and services taxes.

Liquidity risk

Liquidity risk is the risk that we will not be able to meet our
financial obligations as they become due. Our objective in managing liquidity
risk is to maintain sufficient readily available capital in order to meet our
liquidity requirements at any point in time. We achieve this by maintaining
sufficient cash and cash equivalents and raising capital through debt and/or
equity financing.

Historically, our sole source of funding has been the issuance
of equity securities for cash, primarily through private placements. Our access
to financing is always uncertain. There can be no assurance of continued access
to significant equity funding.

Foreign exchange risk

Foreign exchange risk is the risk that we will be subject to
foreign currency fluctuations in satisfying obligations related to our foreign
activities. We operate primarily in Canada and the United States and are
consequently exposed to foreign exchange risk arising from transactions
denominated in foreign currency. Fluctuations in foreign currency exchange rates
may affect our results of operations. We manage foreign exchange risk by closely
monitoring relevant exchange rates and when possible, executes currency exchange
transactions at times when exchange rates are most advantageous for us. We do
not use hedging to manage its foreign exchange risk.

Interest rate risk

Interest rate risk is the risk that the fair value of future
cash flows of a financial instrument will fluctuate because of changes in market
interest rates. We are exposed to interest rate risk on our cash equivalents as
these instruments have original maturities of three months or less and are
therefore exposed to interest rate fluctuations on renewal.

|Item 4. | Controls and Procedures
|------- | -----------------------

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the SECs
rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer, Joshua Bleak (being our
principal executive officer), and our Chief Financial Officer, Bill Allred
(being our principal financial and accounting officer), to allow for timely
decisions regarding required disclosure. Our Chief Executive Officer and our
Chief Financial Officer are responsible for establishing and maintaining
disclosure controls and procedures for our Company.

Our management has evaluated the effectiveness of our
disclosure controls and procedures as of August 31, 2014 (under the supervision
and with the participation of the Chief Executive Officer and the Chief
Financial Officer), pursuant to Rule 13a-15(b) promulgated under the Securities
Exchange Act of 1934, as amended. As part of such evaluation, management
considered the matters discussed below relating to internal control over
financial reporting. Based on this evaluation, our Companys Chief Executive
Officer and Chief Financial Officer have concluded that our Companys disclosure
controls and procedures were not effective as of August 31, 2014.

Changes in Internal Control over Financial Reporting

The term internal control over financial reporting׆ is defined
as a process designed by, or under the supervision of, the registrants principal
executive and principal financial officers, or persons performing similar
functions, and effected by the registrants board of directors, management and
other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
generally accepted accounting principles and includes those policies and
procedures that:

25

---

| | pertain to the maintenance of records that in
      reasonable detail accurately and fairly reflect the transactions and
      dispositions of the assets of the registrant;                                                                                                                                                                                                   
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | provide reasonable assurance that transactions are
      recorded as necessary to permit preparation of financial statements in
      accordance with generally accepted accounting principles, and that
      receipts and expenditures of the registrant are being made only in
      accordance with authorizations of management and directors of the
      registrant; and
| | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of the
      registrants assets that could have a material effect on the financial
      statements.                                                                                                                                              

A material weakness is defined in Public Company Accounting
Oversight Board Auditing Standard No. 5 as a significant deficiency, or a
combination of significant deficiencies, in internal control over financial
reporting that results in there being more than a remote likelihood that a
material misstatement of the annual or interim financial statements will not be
prevented or detected.

There have not been any changes in our internal control over
financial reporting that occurred during our fiscal quarter ended August 31,
2014 that have materially affected, or are likely to materially affect, our
internal control over financial reporting.

PART II OTHER INFORMATION

|Item 1. | Legal Proceedings
|------- | -----------------

Management is not aware of any legal proceedings contemplated
by any governmental authority or any other party involving us or our properties.
As of the date of this quarterly report, no director, officer or affiliate is a
party adverse to us in any legal proceeding, or has an adverse interest to us in
any legal proceedings.

|Item 1A. | Risk Factors
|-------- | ------------

We are a smaller reporting company as defined by Rule 12b-2 of
the Exchange Act and are not required to provide the information required under
this item.

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

On May 8, 2014, we issued 182,083 shares to one individual
pursuant to the conversion of $21,850 of principal of a convertible debenture
issued to such individual on February 19, 2013 at a conversion price of $0.12
per share. We relied on the exemption from registration under the United States
Securities Act of 1933, as amended, provided by Section 3(a)(9) thereof,
with respect to the issuance of the shares pursuant to the conversion of
principal of the such convertible debenture.

On April 28, 2014, we issued 1,000 shares to one individual
pursuant to the conversion on April 23, 2014 of $41,400 of principal of a
convertible debenture issued to such individual on February 19, 2013 at a
conversion price of $0.12 per share as there was a shortfall on the issuance on
April 23, 2014 of 1,000 shares due to a clerical error. We relied on the
exemption from registration under the United States Securities Act of
1933, as amended, provided by Section 3(a)(9) thereof, with respect to the
issuance of the shares pursuant to the conversion of principal of the such
convertible debenture.

On April 23, 2014, we issued 344,000 shares to one individual
pursuant to the conversion of $41,400 of principal of a convertible debenture
issued to such individual on February 19, 2013 at a conversion price of $0.12
per share. We relied on the exemption from registration under the United States
Securities Act of 1933, as amended, provided by Section 3(a)(9) thereof,
with respect to the issuance of the shares pursuant to the conversion of
principal of the such convertible debenture.

26

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On April 16, 2014, we issued 191,647 common shares to one
individual pursuant to the conversion of $22,997.70 of principal of a
convertible debenture issued to such individual on February 19, 2013 at a
conversion price of $0.12 per share. We relied on the exemption from
registration under the United States Securities Act of 1933, as amended,
provided by Section 3(a)(9) thereof, with respect to the issuance of the shares
pursuant to the conversion of principal of the such convertible debenture.

On March 28, 2014 we issued 500,000 common shares to one entity
pursuant to the conversion of $60,000 of principal of a convertible debenture
issued to such entity on February 19, 2013 at a conversion price of $0.12 per
share. We relied on the exemption from registration under the United States
Securities Act of 1933, as amended, provided by Section 3(a)(9) thereof,
with respect to the issuance of the shares pursuant to the conversion of
principal of the such convertible debenture.

On March 21, 2014, we issued 2,204,166 common shares to one
entity pursuant to the conversion of $264,500 of principal of a convertible
debenture issued to such entity on February 19, 2013 at a conversion price of
$0.12 per share. We relied on the exemption from registration under the United
States Securities Act of 1933, as amended, provided by Section 3(a)(9)
thereof, with respect to the issuance of the shares pursuant to the conversion
of principal of the such convertible debenture.

On March 19, 2014, we issued 416,666 common shares to one
entity pursuant to the conversion of $50,000 of principal of a convertible
debenture issued to such entity on February 19, 2013 at a conversion price of
$0.12 per share. We relied on the exemption from registration under the United
States Securities Act of 1933, as amended, provided by Section 3(a)(9)
thereof, with respect to the issuance of the shares pursuant to the conversion
of principal of the such convertible debenture.

|Item 3. | Defaults Upon Senior Securities
|------- | -------------------------------

None.

|Item 4. | Mine Safety Disclosures
|------- | -----------------------

Not applicable.

|Item 5. | Other Information
|------- | -----------------

None.

|Item 6. | Exhibits
|------- | --------

Exhibit No.
    Document3.1.1
    Certificate of Registration(2)3.1.2
    Certificate of Modification, dated January 21,
      1994(2)3.1.3
    Certificate of Modification, dated November 11,
      1996(2)3.1.4
    Certificate of Modification, dated June 16,
      2004(2)3.1.5
    Certificate of Modification, dated October 17,
      2007(2)3.1.6
    Certificate of Modification, dated November 10,
      2009(2)3.1.7
    Certificate of Continuation, dated April 26,
      2011(3)3.1.8
    Notice of Articles, dated May 31, 2012(3)3.2
    Articles(1)


27

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Exhibit No.
    Document3.3
    Articles as altered on September 12, 2013(13)4.1
    Share Option Plan dated August 25, 2011(1)4.2
    Share Rights Plan(1)10.1
    Mineral Property Option Agreement between Southwest
      Exploration, Inc. and Passport Potash Inc., dated September 30, 2008(2)10.2
    Amendment No. 1 to Mineral Property Option Agreement
      between Southwest Exploration, Inc. and Passport Potash Inc., dated
      September 18, 2009(1)10.3
    Option Agreement between Twin Buttes Ranch, LLC and
      Passport Potash Inc., dated August 28, 2009(3)10.4
    Amendment Agreement to Option Agreement between Twin
      Buttes Ranch, LLC and Passport Potash Inc., dated September 7, 2010(1)10.5
    Amendment No. 2 to Mineral Property Option Agreement
      between Southwest Exploration, Inc. and Passport Potash Inc., dated
      October 1, 2010(1)10.6
    Mineral Property Option Agreement between Mesa Uranium
      Corp. and Passport Potash Inc., dated August 31, 2010(3)10.7
    Option of Arizona Exploration Leases Agreement between
      Sweetwater River Resources, LLC, American Potash, LLC and Passport Potash
      Inc., dated November 12, 2010(3)10.8
    Option Agreement between Ringbolt Ventures Ltd., Potash
      Green, LLC, Wendy Walker Tibbetts, Joseph J. Hansen and Passport Potash
      Inc., dated March 28, 2011(3)10.9
    Cooperative Agreement between Hopi Tribe and Passport
      Potash Inc., dated March 8, 2011(3)10.10
    Agreement between Southwest Exploration, Inc. and
      Passport Potash Inc., dated February 13, 2012(3)10.11
    Property Purchase Agreement between Fitzgerald Living
      Trust and Passport Potash Inc., dated May 7, 2012(2)10.12
    Joint Exploration Agreement between HNZ Potash, LLC and
      Passport Potash Inc., dated July 27, 2012(2)10.13
    Amendment Agreement between Passport Potash Inc., North
      American Potash Developments Inc., Potash Green, LLC, Wendy Walker
      Tibbetts and Joseph J. Hansen, dated October 30, 2012(4)10.14
    Joint Exploration Agreement between Passport Potash Inc.
      and The Hopi Tribe, dated effective November 1, 2012(5)10.15
    Amendment to Agreement to Purchase Real Estate between
      Passport Potash Inc. and the Fitzgerald Living Trust, dated November 8,
      2012(5)10.16
    Second Amendment Agreement between Passport Potash Inc.,
      North American Potash Developments Inc., Potash Green, LLC, Wendy Walker
      Tibbetts and Joseph J. Hansen, dated December 8, 2012(6)10.17
    Agreement to Amend and Restate Agreement to Purchase Real
      Estate between Fitzgerald Living Trust and Passport Potash Inc., dated May
      29, 2013(8)10.18
    Form of Placement Agent Agreement (12)10.19
    Amendment to Option Agreement between Passport Potash
      Inc. and Twin Buttes Ranch, LLC, dated December 4, 2009(12)10.20
    Amendment to Option Agreement between Passport Potash
      Inc. and Twin Buttes Ranch, LLC, dated August 20, 2013(11)


28

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Exhibit No.
    Document10.21
    Mining Lease between Passport Potash Inc. and
    Twin Buttes Ranch, LLC, dated December 4, 2009 (included in Exhibit
    10.19)(12)10.22
    Amendment to Mining Lease between Passport
      Potash Inc. and Twin Buttes Ranch, LLC, dated August 20, 2013(11)20.1
    Advance Notice Policy, dated July 22, 2013(10)21.1
    Subsidiaries of the Issuer(14)31.1
    Certification of Chief Executive Officer
      Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act.*31.2
    Certification of the Chief Financial Officer
      Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act.*32.1
    Certification of Chief Executive Officer and
      Chief Financial officer Under Section 1350 as Adopted Pursuant to Section
      906 of the Sarbanes-Oxley Act.*99.1
    Consulting Agreement between Upstream
      Consulting and Passport Potash Inc., dated effective December 1, 2011(3)99.2
    Form of Professional Services Agreement between
      R. Dennis Ickes and Passport Potash Inc., dated December 14, 2011(2)99.3
    Consulting Agreement between Transnational
      Enterprises Ltd. and Passport Potash Inc., dated January 1, 2012(3)99.4
    Consulting Agreement between Double Jointed
      Solutions, LLC and Passport Potash Inc., dated January 16, 2012(2)99.5
    Consulting Agreement between Jerry Aiken and
      Passport Potash Inc., dated January 25, 2012(2)99.6
    Form of Convertible Debenture(7)99.7
    Consulting Agreement between Schlumpberger Inc.
      and Passport Potash Inc., dated June 3, 2013(9)


Notes:

|(*)  | Filed herewith.                                                                                                                                                             
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1)  | Filed as an exhibit to our Registration
      Statement on Form 10 as filed with the SEC on June 29, 2012 and
      incorporated herein by reference.                       
|(2)  | Filed as an exhibit to our Registration
      Statement on Form 10 (Amendment No. 1) as filed with the SEC on September
      21, 2012 and incorporated herein by reference.
|(3)  | Filed as an exhibit to our Registration
      Statement on Form 10 (Amendment No. 2) as filed with the SEC on October
      12, 2012 and incorporated herein by reference.  
|(4)  | Filed as an exhibit to our Current Report on
      Form 8-K as filed with the SEC on November 8, 2012 and incorporated herein
      by reference.                           
|(5)  | Filed as an exhibit to our Current Report on
      Form 8-K as filed with the SEC on November 23, 2012 and incorporated
      herein by reference.                          
|(6)  | Filed as an exhibit to our Quarterly Report on
      Form 10-Q as filed with the SEC on January 14, 2013 and incorporated
      herein by reference.                        
|(7)  | Filed as an exhibit to our Current Report on
      Form 8-K as filed with the SEC on February 25, 2013 and incorporated
      herein by reference.                          
|(8)  | Filed as an exhibit to our Annual Report on
      Form 10-K as filed with the SEC on May 31, 2013 and incorporated herein by
      reference.                               
|(9)  | Filed as an exhibit to our Quarterly Report on
      Form 10-Q as filed with the SEC on July 15, 2013 and incorporated herein
      by reference.                           
|(10) | Filed as an exhibit to our Current Report on
      Form 8-K as filed with the SEC on July 24, 2013 and incorporated herein by
      reference.                              

29

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|(11) | Filed as an exhibit to our Current Report on Form 8-K as
      filed with the SEC on August 23, 2013 and incorporated herein by
      reference.                            
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(12) | Filed as an exhibit to our Registration Statement on Form
      S-1/A (Amendment No. 4) as filed with the SEC on August 26, 2013 and
      incorporated herein by reference.
|(13) | Field as an exhibit to our Quarterly Report on Form 10-Q
      as filed with the SEC on October 15, 2013 and incorporated herein by
      reference.                        
|(14) | Filed as an exhibit to our Annual Report on Form 10-K as
      filed with the SEC on June 13, 2014 and incorporated herein by
      reference.                              

30

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

PASSPORT POTASH INC.**By:**
    /s/
      Joshua BleakJoshua BleakPresident, Chief Executive Officer and a
      director(Principal Executive Officer)Date: October 21, 2014**By:**
    /s/ Bill AllredBill AllredChief Financial Officer(Principal Financial Officer and Principal
      AccountingOfficer)Date: October 21, 2014


31

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