UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September
30, 2014
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
to .
Commission file number: 000-54710
Pershing Gold Corporation
(Exact name of registrant as specified in
its charter)
Nevada
(State or other jurisdiction of incorporation
or
organization) |
|
26-0657736
(I.R.S. Employer Identification No.) |
|
|
|
1658 Cole Boulevard
Building 6, Suite 210
Lakewood, CO |
|
80401 |
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code (720) 974-7254
(Former name, former address and former
fiscal year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). x Yes ¨ No.
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer”
in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer o |
|
Accelerated filer o |
|
|
|
Non-accelerated filer o |
|
Smaller reporting company x |
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Applicable only to issuers involved in bankruptcy proceedings
during the preceding five years:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a court. Yes o No o
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date. As of November 10, 2014, there were 351,996,041 shares of common
stock, par value $0.0001, outstanding.
PERSHING GOLD CORPORATION
TABLE OF CONTENTS
ITEM 1 Financial Statements
PERSHING GOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| |
September 30, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
| |
ASSETS | |
| | | |
| | |
CURRENT ASSETS: | |
| | | |
| | |
Cash and cash equivalents | |
$ | 10,444,318 | | |
$ | 7,743,107 | |
Restricted cash | |
| 2,250,000 | | |
| 2,250,000 | |
Other receivables | |
| 7,164 | | |
| 17,276 | |
Prepaid expenses and other current assets | |
| 351,370 | | |
| 582,278 | |
| |
| | | |
| | |
Total Current Assets | |
| 13,052,852 | | |
| 10,592,661 | |
| |
| | | |
| | |
NON - CURRENT ASSETS: | |
| | | |
| | |
Property and equipment, net | |
| 6,635,876 | | |
| 6,450,640 | |
Mineral rights | |
| 16,786,912 | | |
| 16,786,912 | |
Reclamation bond deposit | |
| 25,000 | | |
| 25,000 | |
Deposits | |
| - | | |
| 3,884 | |
| |
| | | |
| | |
Total Non - Current Assets | |
| 23,447,788 | | |
| 23,266,436 | |
| |
| | | |
| | |
Total Assets | |
$ | 36,500,640 | | |
$ | 33,859,097 | |
| |
| | | |
| | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
| |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 654,455 | | |
$ | 624,753 | |
Note payable - current portion | |
| 23,973 | | |
| 23,036 | |
| |
| | | |
| | |
Total Current Liabilities | |
| 678,428 | | |
| 647,789 | |
| |
| | | |
| | |
LONG-TERM LIABILITIES: | |
| | | |
| | |
Note payable - long term portion | |
| 23,596 | | |
| 36,474 | |
Asset retirement obligation | |
| 813,983 | | |
| - | |
| |
| | | |
| | |
Total Liabilities | |
| 1,516,007 | | |
| 684,263 | |
| |
| | | |
| | |
Commitments and Contingencies | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS' EQUITY : | |
| | | |
| | |
Preferred stock, $0.0001 par value; 50,000,000 authorized | |
| | | |
| | |
Convertible Series A Preferred stock ($.0001 Par Value; 2,250,000 Shares Authorized; none issued and outstanding as of September 30, 2014 and December 31, 2013 ) | |
| - | | |
| - | |
Convertible Series B Preferred stock ($.0001 Par Value; 8,000,000 Shares Authorized; none issued and outstanding as of September 30, 2014 and December 31, 2013 ) | |
| - | | |
| - | |
Convertible Series C Preferred stock ($.0001 Par Value; 3,284,396 Shares Authorized; none issued and outstanding as of September 30, 2014 and December 31, 2013 ) | |
| - | | |
| - | |
Convertible Series D Preferred stock ($.0001 Par Value; 7,500,000 Shares Authorized; none issued and outstanding as of September 30, 2014 and December 31, 2013 ) | |
| - | | |
| - | |
Convertible Series E Preferred stock ($.0001 Par Value; 15,151 Shares Authorized; 9,425 and 11,185 issued and outstanding as of September 30, 2014 and December 31, 2013 , respectively) | |
| 1 | | |
| 1 | |
Common stock ($.0001 Par Value; 500,000,000 Shares Authorized; 317,301,282 and 275,917,023 shares issued and 316,281,754 and 275,790,008 outstanding as of September 30, 2014 and December 31, 2013 , respectively) | |
| 31,730 | | |
| 27,592 | |
Additional paid-in capital | |
| 146,117,373 | | |
| 133,201,209 | |
Treasury stock, at cost, (1,019,528 and 127,015 shares as of September 30, 2014 and December 31, 2013, respectively ) | |
| (225,876 | ) | |
| (44,455 | ) |
Accumulated deficit | |
| (110,938,595 | ) | |
| (100,009,513 | ) |
| |
| | | |
| | |
Total Stockholders' Equity | |
| 34,984,633 | | |
| 33,174,834 | |
| |
| | | |
| | |
Total Liabilities and Stockholders' Equity | |
$ | 36,500,640 | | |
$ | 33,859,097 | |
See accompanying notes to consolidated financial statements.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
| |
For the Three
Months Ended September 30, | | |
For the Nine
Months Ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
| | |
| | |
| |
Net revenues | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Compensation and related taxes | |
| 826,203 | | |
| 1,615,926 | | |
| 3,171,286 | | |
| 4,689,581 | |
Exploration cost | |
| 2,019,373 | | |
| 1,078,139 | | |
| 3,900,798 | | |
| 1,793,214 | |
Consulting fees | |
| 215,807 | | |
| 477,311 | | |
| 868,858 | | |
| 1,259,924 | |
General and administrative
expenses | |
| 913,581 | | |
| 745,235 | | |
| 2,984,952 | | |
| 2,811,265 | |
| |
| | | |
| | | |
| | | |
| | |
Total operating expenses | |
| 3,974,964 | | |
| 3,916,611 | | |
| 10,925,894 | | |
| 10,553,984 | |
| |
| | | |
| | | |
| | | |
| | |
Loss from operations | |
| (3,974,964 | ) | |
| (3,916,611 | ) | |
| (10,925,894 | ) | |
| (10,553,984 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSES): | |
| | | |
| | | |
| | | |
| | |
Warrant settlement expense | |
| - | | |
| - | | |
| - | | |
| (45,484 | ) |
Realized gain - available
for sale securities | |
| - | | |
| - | | |
| - | | |
| 1,656,333 | |
Interest
expense and other finance costs, net of interest income | |
| (957 | ) | |
| (4,963 | ) | |
| (3,188 | ) | |
| (22,665 | ) |
| |
| | | |
| | | |
| | | |
| | |
Total
other income (expenses) - net | |
| (957 | ) | |
| (4,963 | ) | |
| (3,188 | ) | |
| 1,588,184 | |
| |
| | | |
| | | |
| | | |
| | |
Loss before provision
for income taxes | |
| (3,975,921 | ) | |
| (3,921,574 | ) | |
| (10,929,082 | ) | |
| (8,965,800 | ) |
| |
| | | |
| | | |
| | | |
| | |
Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (3,975,921 | ) | |
$ | (3,921,574 | ) | |
$ | (10,929,082 | ) | |
$ | (8,965,800 | ) |
| |
| | | |
| | | |
| | | |
| | |
Preferred deemed dividend | |
| - | | |
| (4,101,659 | ) | |
| - | | |
| (4,101,659 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net
loss available to common stockholders | |
$ | (3,975,921 | ) | |
$ | (8,023,233 | ) | |
$ | (10,929,082 | ) | |
$ | (13,067,459 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Net
loss per common share, basic and diluted | |
$ | (0.01 | ) | |
$ | (0.03 | ) | |
$ | (0.04 | ) | |
$ | (0.05 | ) |
| |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING - Basic and Diluted | |
| 313,227,134 | | |
| 273,292,023 | | |
| 290,457,315 | | |
| 272,236,712 | |
See accompanying notes to consolidated financial
statements.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
For the nine months ended September 30, | |
| |
2014 | | |
2013 | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | | |
| | |
| |
| | | |
| | |
Net loss | |
$ | (10,929,082 | ) | |
$ | (8,965,800 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation | |
| 733,920 | | |
| 729,771 | |
Realized gain - available for sale securities | |
| - | | |
| (1,656,333 | ) |
Stock-based compensation | |
| 2,000,663 | | |
| 3,834,352 | |
| |
| | | |
| | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Other receivables | |
| 10,112 | | |
| 77,364 | |
Prepaid expenses - current portion and other current assets | |
| 234,792 | | |
| 143,346 | |
Accounts payable and accrued expenses | |
| 34,608 | | |
| (172,319 | ) |
| |
| | | |
| | |
NET CASH USED IN OPERATING ACTIVITIES | |
| (7,914,987 | ) | |
| (6,009,619 | ) |
| |
| | | |
| | |
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | |
Net proceeds received from the sale of marketable securities | |
| - | | |
| 1,656,333 | |
Purchase of property and equipment | |
| (105,173 | ) | |
| (23,898 | ) |
| |
| | | |
| | |
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | |
| (105,173 | ) | |
| 1,632,435 | |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES: | |
| | | |
| | |
Proceeds from sale of common stock, net of issuance costs | |
| 10,919,639 | | |
| - | |
Proceeds from sale of preferred stock, net of issuance costs | |
| - | | |
| 10,227,079 | |
Purchase of treasury stock | |
| (181,421 | ) | |
| - | |
Payments on notes payable | |
| (16,847 | ) | |
| (17,277 | ) |
Distribution to former parent company | |
| - | | |
| (15,066 | ) |
| |
| | | |
| | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 10,721,371 | | |
| 10,194,736 | |
| |
| | | |
| | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | |
| 2,701,211 | | |
| 5,817,552 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS- beginning of period | |
| 7,743,107 | | |
| 3,218,191 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS- end of period | |
$ | 10,444,318 | | |
$ | 9,035,743 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid for: | |
| | | |
| | |
Interest | |
$ | 3,188 | | |
$ | 4,050 | |
Income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | |
| |
| | | |
| | |
| |
| | | |
| | |
Issuance of preferred stock in connection
with the conversion of a promissory note and accrued interest into a current private placement | |
$ | - | | |
$ | 645,480 | |
Increase in property and equipment as a result of
recognition of asset retirement obligation | |
$ | 813,983 | | |
$ | - | |
See accompanying notes to consolidated financial
statements.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 1 — ORGANIZATION AND DESCRIPTION OF BUSINESS
Organization
Pershing Gold Corporation (the “Company”), formerly
named Sagebrush Gold Ltd., was incorporated under the laws of the State of Nevada on August 2, 2007. The Company is a gold
and precious metals exploration company pursuing exploration and development opportunities primarily in Nevada. The Company is
currently focused on exploration of its Relief Canyon properties in Pershing County in northwestern Nevada. None of the Company’s
properties contain proven and probable reserves, and all of the Company’s activities on all of its properties are exploratory
in nature.
A wholly-owned subsidiary, EXCX Funding Corp., a Nevada corporation
was formed in January 2011 and held the note payable - related party, which was exchanged for the Company’s Series E
Convertible Preferred Stock (“Series E Preferred Stock”) and warrants in August 2013 and was cancelled. On
April 6, 2014 EXCX Funding Corp. was liquidated and dissolved.
On August 30, 2011, the Company, through its wholly-owned
subsidiary, Gold Acquisition Corp. (“Gold Acquisition”), acquired the Relief Canyon Mine property (“Relief Canyon”)
located in Pershing County, near Lovelock, Nevada, for an aggregate purchase price consisting of $12,000,000 cash and $8,000,000
in senior secured convertible promissory notes.
A wholly-owned subsidiary, Pershing Royalty Company, a Delaware
corporation, was formed on May 17, 2012 to hold royalty interests in two gold exploration properties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The consolidated financial statements are prepared in accordance
with U.S. generally accepted accounting principles (“US GAAP”) and present the consolidated financial statements of
the Company as of September 30, 2014. All intercompany transactions and balances have been eliminated. All adjustments (consisting
of normal recurring items) necessary to present fairly the Company’s financial position as of September 30, 2014, and the
results of operations and cash flows for the nine months ended September 30, 2014 have been included. The results of operations
for the nine months ended September 30, 2014 are not necessarily indicative of the results to be expected for the full year. The
accounting policies and procedures employed in the preparation of these consolidated financial statements have been derived from
the audited financial statements of the Company for the fiscal year ended December 31, 2013, which are contained in the Company’s
Form 10-K as filed with the Securities and Exchange Commission (“SEC”) on March 26, 2014. The consolidated
balance sheet as of December 31, 2013 contained herein, was derived from those financial statements.
Use of estimates
In preparing the consolidated financial statements, management
is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the
consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those
estimates. Significant estimates made by management include, but are not limited to, the useful life of property and equipment,
amounts and timing of closure obligations, the assumptions used to calculate fair value of options and warrants granted, beneficial
conversion on convertible notes payable and preferred stock, capitalized mineral rights, asset valuations, common stock issued
for services, common stock issued for conversion of notes and common stock issued in connection with an acquisition.
Cash and cash equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when acquired to be cash equivalents. The Company places its cash with high credit quality financial institutions.
The Company’s accounts at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”)
up to $250,000. At September 30, 2014, the Company had bank balances exceeding the FDIC insurance limit on interest bearing accounts.
To reduce its risk associated with the failure of such financial institutions, the Company evaluates at least annually the rating
of the financial institutions in which it holds deposits.
Restricted cash
Restricted cash consists of cash and investments which are held
as collateral under a surface management surety bond issued on the Company’s behalf.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Marketable securities
Marketable securities consist of the Company’s investment
in publicly traded equity securities and are generally restricted for sale under Federal securities laws. The Company’s policy
is to liquidate securities received when market conditions are favorable for sale. Since these securities are often restricted,
the Company is unable to liquidate them until the restriction is removed. Marketable securities that are bought and held principally
for the purpose of selling them in the near term are classified as trading securities and reported at fair value, with unrealized
gains and losses included in earnings. Pursuant to ASC Topic 320, “Investments — Debt and Equity Securities,”
the Company’s marketable securities have a readily determinable and active quoted price, such as from NASDAQ, NYSE Euronext,
the Over the Counter Bulletin Board, or the OTC Markets Group.
Trading securities are carried at fair value, with changes in
unrealized holding gains and losses included in income and classified within interest and other income, net, in the accompanying
consolidated statements of operations.
Available for sale securities are carried at fair value, with
changes in unrealized gains or losses are recognized as an element of comprehensive income based on changes in the fair value
of the security. Once liquidated, realized gains or losses on the sale of marketable securities available for sale are reflected
in the net income (loss) for the period in which the security was liquidated.
Fair value of financial instruments
The Company adopted ASC 820, “Fair Value Measurements
and Disclosures” (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820
establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require
the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value
measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results,
but did expand certain disclosures.
ASC 820 defines fair value as the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the
use of unobservable inputs.
These inputs are prioritized below:
| Level 1: | Observable inputs such as quoted market prices in active markets for identical assets or liabilities |
| Level 2: | Observable market-based inputs or unobservable inputs that are corroborated by market data |
| Level 3: | Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own
assumptions. |
The Company analyzes all financial instruments with features
of both liabilities and equity under the FASB’s accounting standard for such instruments. Under this standard, financial
assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value
measurement.
The carrying amounts reported in the consolidated balance sheets
for cash and cash equivalents, prepaid expenses, accounts payable and accrued expenses approximate their estimated fair market
values based on the short-term maturity of these instruments. The carrying amount of the note payable at September 30, 2014 approximates
its respective fair value based on the Company’s incremental borrowing rate.
Prepaid expenses
Prepaid expenses of $351,370 and $582,278 at September 30, 2014
and December 31, 2013, respectively, consist primarily of costs paid for future services which will occur within a year. Prepaid
expenses principally include prepayments for consulting and business advisory services, insurance premiums, drilling services,
and mineral lease fees which are being amortized over the terms of their respective agreements.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Mineral property acquisition and exploration costs
Costs of lease, exploration, carrying and retaining unproven
mineral lease properties are expensed as incurred. The Company expenses all mineral exploration costs as incurred as it is still
in the exploration stage. If the Company were to identify proven and probable reserves in its investigation of its properties and
upon development of a plan for operating a mine, it would enter the development stage and capitalize future costs until production
is established. When a property reaches the production stage, the related capitalized costs are amortized using the units-of-production
method over the estimated life of the proven and probable reserves. If in the future the Company has capitalized mineral properties,
these properties will be periodically assessed for impairment.
To date, the Company has not established the commercial feasibility
of any exploration prospects; therefore, all exploration costs are expensed. During the nine months ended September 30, 2014 and
2013, the Company incurred exploration cost of $3,900,798 and $1,793,214, respectively.
ASC 930-805, “Extractive Activities-Mining: Business Combinations”
(“ASC 930-805”), states that mineral rights consist of the legal right to explore, extract, and retain at least a portion
of the benefits from mineral deposits. Acquired mineral rights are considered tangible assets under ASC 930-805. ASC 930-805 requires
that mineral rights be recognized at fair value as of the acquisition date. As a result, the direct costs to acquire mineral rights
are initially capitalized as tangible assets. Mineral rights include costs associated with acquiring patented and unpatented mining
claims.
ASC 930-805-30-1 and 30-2 provides that in fair valuing mineral
rights, an acquirer should take into account both:
· The
value beyond proven and probable reserves (“VBPP”) to the extent that a market participant would include VBPP in determining
the fair value of the assets.
· The
effects of anticipated fluctuations in the future market price of minerals in a manner that is consistent with the expectations
of market participants.
Property and equipment
Property and equipment are carried at cost. The cost of repairs
and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed
of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income
in the year of disposition. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets, generally
one to twenty five years.
Impairment of long-lived assets
The Company accounts for the impairment or disposal of long-lived
assets according to the ASC 360 “Property, Plant and Equipment”. The Company continually monitors events and changes
in circumstances that could indicate that the carrying amounts of long-lived assets, including mineral rights, may not be recoverable.
Long-lived assets in the exploration stage are monitored for impairment based on factors such as the Company’s continued
right to explore the area, exploration reports, assays, technical reports, drill results and the Company’s continued plans
to fund exploration programs on the property, and whether sufficient work has been performed to indicate that the carrying amount
of the mineral property cost carried forward as an asset will not be fully recovered. The tests for long-lived assets in the exploration
stage are monitored for impairment based on factors such as current market value of the long-lived assets and results of exploration,
future asset utilization, business climate, mineral prices and future undiscounted cash flows expected to result from the use of
the related assets.
Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to the estimated future net undiscounted cash flows expected to be generated by
the asset. When necessary, impaired assets are written down to estimated fair value based on the best information available. Estimated
fair value is generally based on either appraised value or measured by discounting estimated future cash flows. Considerable management
judgment is necessary to estimate discounted future cash flows. Accordingly, actual results could vary significantly from such
estimates. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying
amount of the asset. The Company did not record any charges for impairment of its long-lived assets at September 30, 2014 and December 31,
2013, respectively.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Asset Retirement Obligations
Asset retirement obligations (“ARO”), consisting
primarily of estimated mine reclamation and closure costs at the Company’s Relief Canyon property, are recognized in the
period incurred and when a reasonable estimate can be made, and recorded as liabilities at fair value. Such obligations, which
are initially estimated based on discounted cash flow estimates, are accreted to full value over time through charges to accretion
expense. Corresponding asset retirement costs are capitalized as part of the carrying amount of the related long-lived asset and
depreciated over the asset’s remaining useful life. Asset retirement obligations are periodically adjusted to reflect changes
in the estimated present value resulting from revisions to the estimated timing or amount of reclamation and closure costs. The
Company reviews and evaluates its asset retirement obligations annually or more frequently at interim periods if deemed necessary.
Income taxes
The Company accounts for income taxes pursuant to the provision
of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”) which requires, among other things, an asset
and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the
tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management
believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provision of ASC 740-10 related to Accounting
for Uncertain Income Tax Position. When tax returns are filed, there may be uncertainty about the merits of positions taken or
the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a
tax position is recognized in the financial statements in the period during which, based on all available evidence, management
believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or
litigation processes, if any. Tax positions taken are not offset or aggregated with other positions.
Tax positions that meet the more likely than not recognition
threshold are measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement
with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured
as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any
associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax
positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for
uncertain tax benefits.
The Company has adopted ASC 740-10-25, “Definition of
Settlement”, which provides guidance on how an entity should determine whether a tax position is effectively settled for
the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon
the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively
settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than
not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The
federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally
for three years after they are filed.
Stock-based compensation
Stock-based compensation is accounted for based on the requirements
of the Share-Based Payment Topic of ASC 718, “Compensation — Stock Compensation”, which requires recognition
in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity
instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an
award based on the grant-date fair value of the award.
Pursuant to ASC Topic 505-50, “Equity Based Payments to
Non-employees”, for share-based payments to consultants and other third-parties, compensation expense is determined at the
“measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached,
the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair
value of the award at the reporting date.
Treasury stock
Treasury stock is accounted for using the cost method, with
the purchase price of the common stock recorded separately as a deduction from stockholders’ equity.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Related party transactions
Parties are considered to be related to the Company if the parties,
directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company.
Related parties also include principal stockholders of the Company, its management, members of the immediate families of principal
stockholders of the Company and its management and other parties that control or can significantly influence the management or
operating policies of the Company. The Company discloses all related party transactions.
Recent accounting pronouncements
In July 2013, the FASB issued ASU 2013-11, “Presentation
of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”
(“ASU 2013-11”). ASU 2013-11 provides guidance on the presentation of unrecognized tax benefits related to any disallowed
portion of net operating loss carryforwards, similar tax losses, or tax credit carryforwards, if they exist. ASU 2013-11 is effective
for fiscal years beginning after December 15, 2013. The adoption of ASU 2013-11 is not expected to have a material impact
on the Company’s consolidated financial statements.
In June 2014, the FASB issued ASU 2014-10, “Development
Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements”. ASU 2014-10 eliminates the distinction
of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information
on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 are effective prospectively
for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods; however early
adoption is permitted. The Company evaluated and adopted ASU 2014-10 for the interim reporting period ended September 30, 2014.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation
of Financial Statements—Going Concern.” The provisions of ASU No. 2014-15 require management to assess an entity’s
ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing
standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every
reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s
plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s
plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment
for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in
this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
The Company is currently assessing the impact of ASU No. 2014-15 on the Company’s consolidated financial statements.
Other accounting standards that have been issued or proposed
by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are
unrelated to its financial condition, results of operations, cash flows or disclosures.
NOTE 3 — MARKETABLE SECURITIES
In January 2013, the Company sold the remaining 1,513,333
shares of American Strategic Minerals Corp. common stock it owned in a private transaction and generated net proceeds of $151,333.
Between February 2013 and May 2013, the Company sold 25,000,000 shares of Valor Gold Corp. common stock in private transactions
and generated net proceeds of $1,505,000. The Company recorded a realized gain — available for sale securities of $0 and
$1,656,333 during the nine months ended September 30, 2014 and 2013, respectively.
NOTE 4 — MINERAL PROPERTIES
Relief Canyon Properties
The Relief Canyon properties are located in Pershing County
about 100 miles northeast of Reno, Nevada and at the southern end of the Humboldt Range. The Relief Canyon properties do not currently
have any mineral reserves and all activities undertaken and currently proposed are exploratory in nature.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 4 — MINERAL PROPERTIES (continued)
Relief Canyon Mine
Through the Company’s wholly-owned subsidiary, Gold Acquisition,
the Company owns 164 unpatented lode mining claims and 120 unpatented millsites at the Relief Canyon Mine property. The property
includes the Relief Canyon Mine and gold processing facilities, currently in a care and maintenance status. The Relief Canyon Mine
includes three open pit mines, heap leach pads comprised of six cells, two solution ponds and a cement block constructed adsorption
desorption-recovery (ADR) solution processing circuit. The ADR type process plant consists of four carbon columns, acid wash system,
stripping vessel, and electrolytic cells. The process facility was completed in 2008 by Firstgold Corp and produced gold until
2009 and is currently in care and maintenance status. The facilities are generally in good condition. Most of the Relief Canyon
Mine property is burdened by a production royalty equal to 2% of net smelter returns payable to Battle Mountain Gold Exploration
LLC (now owned by Royal Gold).
Pershing Pass Property
The Pershing Pass property consists of over 700 unpatented mining
claims covering approximately 12,000 acres and a mining lease covering approximately 600 acres. The Pershing Pass property
also includes approximately 490 unpatented lode mining claims covering approximately 9,700 acres that the Company acquired from Silver
Scott Mines in March 2012 and approximately 283 unpatented lode mining claims covering about 5,660 acres owned directly by
a Victoria Gold Corp. subsidiary prior to our purchase. Victoria Gold has reserved a 2% net smelter return production royalty on
the 221 claims that are located outside the area of interest related to the Newmont Leased property, discussed below. The
Pershing Pass property also includes 17 unpatented mining claims acquired from a third party in April 2012 subject to a 2%
net smelter return royalty, 17 unpatented mining claims that the Company located in mid-2012, and approximately 635 acres of private
lands that the Company leased in January 2013.
The primary term of the lease is ten years, which may be extended
as long as mineral development work continues on the property. Production from the lease is subject to a 2% net smelter return
royalty on all metals produced other than gold, and to a royalty on gold indexed to the gold price, ranging from 2% at gold prices
of less than $500 per ounce to 3.5% at gold prices over $1,500 per ounce. Prior to one year after commercial production, the Company
can repurchase up to 3% of the royalty on gold production at the rate of $600,000 for each 1%.
In September 2013, the Company entered into a lease agreement
and purchase option with Wolf Pack Gold (Nevada) Corp for 19 unpatented mining claims (approximately 400 acres) in the Pershing
Pass Property. The lease grants the Company exclusive rights to conduct mineral exploration, development and mining and an
exclusive option to purchase the claims. The primary term of the lease is ten years, which may be extended as long as mineral exploration,
development, or mining work continues on the property. Production from the lease is subject to a 1% net smelter return royalty
on precious metals and a 0.5% net smelter royalty on all other metals produced from the lease. Prior to production, and starting
in September 2016, the Company is required to pay a $10,000 per year advance minimum royalty payment to Wolf Pack Gold. The
advance minimum royalty remains at $10,000 per year until September 2023 and then increases to $12,500 per year. The
advance royalty payment increases to $15,000 per year in September 2028 and $20,000 per year in September 2033.
The advance minimum royalty payments are due on or before the anniversary dates of the lease agreement. If the Company decides
to exercise the purchase option, which is exercisable at any time, it can acquire the 19 unpatented mining claims from Wolf Pack
Gold for $250,000.
Newmont Leased Properties
On April 5, 2012, the Company purchased from Victoria Gold
Corp. and Victoria Resources (US) Inc. their interest in approximately 13,300 acres of mining claims and private lands adjacent
to the Company’s landholdings at the Relief Canyon Mine in Pershing County, Nevada. Victoria Gold has reserved a 2% net smelter
return royalty from the production on 221 of the 283 unpatented mining claims that it owned directly.
Approximately 8,900 acres of the lands that the Company acquired
from Victoria Gold Corporation are a leasehold interest comprised of unpatented mining claims and private lands subject to a 2006
Mineral Lease and Sublease with Newmont USA Ltd., which the Company refers to as the Newmont Leased property. The Newmont Leased
property consists of 155 unpatented lode mining claims owned by Newmont comprising approximately 2,800 acres, approximately
4,900 acres of privately-owned fee minerals leased by Newmont from the owners, and 62 unpatented mining claims that were owned
by Victoria within the Newmont Leased property and area of interest.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 4 — MINERAL PROPERTIES (continued)
In order to maintain the 2006 Minerals Lease and Sublease with
Newmont, the Company was required to spend approximately $1.0 million in exploration expenses in 2013. The Company has satisfied
this 2013 direct drilling work commitment. Starting in 2014, the Company is required to spend $0.5 million per year on exploration
expenditures or pay Newmont rental payments of $10 per acre per year. The rental payments will escalate by 5% per year. The Company
has also satisfied the 2014, 2015 and 2016 direct drilling work commitments. Under the current terms of the 2006 Minerals Lease
and Sublease and commencing in 2014, the annual rent, if the Company elects not to or fails to incur at least $0.5 million
in exploration expenditures, would be approximately $0.1 million. Because the Company has satisfied the direct drilling
work commitment for 2014, 2015 and 2016, it will not incur annual rental payments in 2014, 2015 or 2016. The Company will
be required to expend $0.5 million in additional direct drilling expenditures in 2017 in order to avoid the annual rental payment
requirement.
Pursuant to the 2006 Minerals Lease and Sublease, the Company
is subject to a 3% to 5% net smelter royalty tied to the gold price in the event Newmont elects not to pursue the Venture Option
and quitclaims the claims and leased lands to the Company. The 5% net smelter royalty would apply if the monthly average gold price
is equal to or greater than $400 per ounce. In addition, the Company is subject to a 2.5% net smelter returns royalty payable
to the underlying lessor on approximately 800 acres of the Newmont Leased properties under the 1994 Mining Lease and a 3.5%
net smelter returns royalty payable to the underlying lessor on approximately 495 acres of the Newmont Leased properties under
the 1999 Mining Lease; these royalties would offset the Newmont royalty down to 2%.
General
The Company has posted a statewide bond with the United States
Department of the Interior Bureau of Land Management (“BLM”) as required by the State of Nevada in an amount of approximately
$5.4 million, which is currently approximately $235,000 in excess of the current coverage requirement, to reclaim land disturbed
in its exploration and mining operations. Previously the Company posted a reclamation bond deposit in the amount equal to the bond
requirement with the BLM. In November 2013 the Company replaced the bond deposit by issuing a surface management surety bond
in the amount of $5.0 million through a third-party insurance underwriter, which was increased to $5.4 million in October 2014.
In order to issue the surface management surety bond the Company
was required to place 45% of the original $5.0 million bond ($2,250,000) in a collateral account. No further collateral was required
for the bond increase in October 2014. The funds deposited in the collateral account have been classified as restricted cash on
the Company’s balance sheet as of September 30, 2014.
As of September 30, 2014, based on management’s review
of the carrying value of mineral rights, management determined that there is no evidence that the cost of these acquired mineral
rights will not be fully recovered and accordingly, the Company has determined that no adjustment to the carrying value of mineral
rights was required.
As of the date of these consolidated financial statements, the
Company has not established any proven or probable reserves on its mineral properties and has incurred only acquisition and exploration
costs.
Mineral properties consisted of the following:
| |
September 30, 2014 (Unaudited) | | |
December 31, 2013 | |
Relief Canyon Mine — Gold Acquisition | |
$ | 8,501,071 | | |
$ | 8,501,071 | |
Relief Canyon Mine — Newmont Leased Properties | |
| 7,709,441 | | |
| 7,709,441 | |
Pershing Pass Property | |
| 576,400 | | |
| 576,400 | |
| |
| | | |
| | |
| |
$ | 16,786,912 | | |
$ | 16,786,912 | |
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 5 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| |
Estimated Life | |
September 30, 2014 (Unaudited) | | |
December 31, 2013 | |
Furniture and fixtures | |
5 years | |
$ | 56,995 | | |
$ | 56,995 | |
Office and computer equipment | |
1 - 5 years | |
| 330,800 | | |
| 234,518 | |
Land | |
— | |
| 266,977 | | |
| 266,977 | |
Asset retirement costs (see Note 7) | |
3 – 18 years | |
| 813,983 | | |
| - | |
Building and improvements | |
5 - 25 years | |
| 738,959 | | |
| 730,068 | |
Site costs | |
10 years | |
| 1,272,732 | | |
| 1,272,732 | |
Crushing system | |
20 years | |
| 2,256,943 | | |
| 2,256,943 | |
Process plant and equipment | |
10 years | |
| 3,169,442 | | |
| 3,169,442 | |
Vehicles and mining equipment | |
5 - 10 years | |
| 695,825 | | |
| 695,825 | |
| |
| |
| 9,602,656 | | |
| 8,683,500 | |
Less: accumulated depreciation | |
| |
| (2,966,780 | ) | |
| (2,232,860 | ) |
| |
| |
| | | |
| | |
| |
| |
$ | 6,635,876 | | |
$ | 6,450,640 | |
For the nine months ended September 30, 2014 and 2013, depreciation
expense totaled $733,920 and $729,771, respectively.
NOTE 6 — NOTES PAYABLE
In August 2012, the Company issued a note payable in the
amount of $92,145 in connection with the acquisition of mining equipment. The note payable bears interest at approximately 7% per
annum and is secured by a lien on the mining equipment. The note is payable in 48 equal monthly payments of $2,226 beginning in
September 2012.
Notes payable — short and long term portion consisted
of the following:
| |
September 30, 2014 (Unaudited) | | |
December 31, 2013 | |
Total notes payable | |
$ | 47,569 | | |
$ | 59,510 | |
Less: current portion | |
| (23,973 | ) | |
| (23,036 | ) |
Long term portion | |
$ | 23,596 | | |
$ | 36,474 | |
NOTE 7 – ASSET RETIREMENT OBLIGATIONS
In conjunction with the permit approval permitting the Company
to resume mining in the existing open pits at the Relief Canyon Mine, during the third quarter of 2014 the Company has recorded
an asset retirement obligation based upon the reclamation plan submitted in connection with the permit.
The following table summarizes
activity in the Company’s ARO:
| |
September 30,
2014
(Unaudited) | |
Balance, beginning of period | |
$ | - | |
Accretion expense | |
| - | |
Reclamation expenditures | |
| - | |
Additions and changes in estimates | |
| 813,983 | |
Balance, end of period | |
$ | 813,983 | |
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 8 — RELATED PARTY TRANSACTIONS
Continental Resources Group, Inc.
In January 2013, the Company paid $15,066 of Continental
Resources Group Inc.’s expenses. The Company recorded such advances to additional paid in capital which represents distributions
to the Company’s former parent company for a total of $15,066 for the nine months ended September 30, 2013. Continental Resources
Group Inc. was dissolved on February 27, 2013.
NOTE 9 — STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized within the limitations and restrictions
stated in the Amended and Restated Articles of Incorporation to provide by resolution or resolutions for the issuance of 50,000,000
shares of Preferred Stock, par value $0.0001 per share in such series and with such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions as the Company’s Board of Directors establish.
Series A Convertible Preferred Stock
As of September 30, 2014, 2,250,000 shares of Series A
Preferred Stock, $0.0001 par value were authorized with none issued and outstanding.
Series B Convertible Preferred Stock
As of September 30, 2014, 8,000,000 shares of Series B
Preferred Stock, $0.0001 par value were authorized with none issued and outstanding.
Series C Convertible Preferred Stock
As of September 30, 2014, 3,284,396 shares of Series C
Preferred Stock, $0.0001 par value were authorized with none issued and outstanding.
9% Series D Cumulative Preferred Stock
As of September 30, 2014, 7,500,000 shares of Series D
Preferred Stock, $0.0001 par value were authorized with none issued and outstanding.
Series E Preferred Stock
On August 5, 2013, the Company designated 15,151 shares
of its Series E Preferred Stock. Each share of Series E Preferred Stock is convertible into shares of the Company’s
common stock at a conversion rate of 3,000 shares of common stock for each share of Series E which is equivalent to a conversion
price of $0.33 per share of common stock, subject to certain adjustments in the event of stock dividends, stock splits and subsequent
equity sales. As discussed below, the Series E conversion price was adjusted effective October 20, 2014.
The holders of the Series E Preferred Stock are entitled
to vote on an as-converted basis on all matters on which the holders of the common stock have a right to vote. The Company
may, at any time after February 8, 2014, redeem all the then outstanding Series E Preferred Stock for cash in an amount
equal to 110% of the purchase price for the Series E Preferred Stock, provided that the optional redemption provisions are
met as defined in the certificate of designation. Upon liquidation, dissolution or winding up of the Company, each holder
of Series E Preferred Stock is entitled to receive the greater of: (i) 110% of the purchase price of the Series E
Preferred Stock, or (ii) the amount each holder would be entitled to receive if such holder’s shares of Series E
Preferred Stock were converted into common stock. Upon a change of control, all outstanding shares of Series E
Preferred Stock will automatically convert into shares of common stock and the holders will also be entitled to receive a cash
payment equal to 10% of the purchase price paid for the Series E Preferred Stock. The Company believes that the occurrence
of the optional redemption is considered a conditional event and as a result the instrument does not meet the definition of mandatorily
redeemable financial instrument based from ASC 480-10-25, “Distinguishing Liabilities from Equity”.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 9 — STOCKHOLDERS’ EQUITY (continued)
In August 2013, the Company completed private placements
to several accredited investors for the purchase of 10,533 shares of the Company’s Series E Preferred Stock and warrants
to acquire 12,639,600 shares of the Company’s common stock for aggregate net proceeds of approximately $10.2 million. Each
purchaser of Series E Preferred Stock received a 3-year warrant to acquire a number of shares of the Company’s common
stock equal to 40% of the number of shares of common stock issuable upon conversion of the shares of Series E Preferred Stock.
The warrants are immediately exercisable at an exercise price of $0.40 per share of the Company’s common stock, subject to
adjustments in the event of stock dividends, recapitalizations or certain other transactions and expire three years from the date
of issuance. The purchase price of one share of Series E Preferred Stock and the associated warrant was $990.
Additionally, Mr. Barry Honig, a director of the Company,
exchanged the outstanding principal and accrued interest of $645,480 owed by the Company under a Credit Facility Agreement for
652 shares of Series E Preferred Stock and warrants to acquire 782,400 shares of the Company’s common stock on equivalent
terms to those of investors purchasing in the private placement.
During February and March 2014 certain holders of
the Company’s Series E Preferred Stock converted 1,529 shares into 4,587,000 shares of common stock of the Company in
accordance with the Series E Preferred Stock certificate of designation. The conversion rate applied to these exchanges was
3,000 shares of common stock for each share of Series E Preferred Stock which was equivalent to a conversion price of $0.33
per share of common stock.
During April 2014 a certain holder of the Company’s
Series E Preferred Stock converted 50 shares into 150,000 shares of common stock of the Company in accordance with the Series E
Preferred Stock certificate of designation. The conversion rate applied to these exchanges was 3,000 shares of common stock for
each share of Series E Preferred Stock which was equivalent to a conversion price of $0.33 per share of common stock.
During July 2014 certain holders of the Company’s
Series E Preferred Stock converted 181 shares into 543,000 shares of common stock of the Company in accordance with the Series E
Preferred Stock certificate of designation. The conversion rate applied to these exchanges was 3,000 shares of common stock for
each share of Series E Preferred Stock which was equivalent to a conversion price of $0.33 per share of common stock.
As of September 30, 2014, there were 15,151 shares of Series E
Preferred Stock authorized and 9,425 shares issued and outstanding.
As a result of a private placement completed in October 2014,
the conversion price for the Series E Preferred Stock has been reduced effective October 20, 2014 from $0.33 to $0.28 per share
of Series E Preferred Stock. Following this adjustment, and in accordance with ASC 470-20 “Debt with Conversion and Other
Options”, the Company will record an additional deemed dividend in the amount of approximately $1.7 million. As a result
of the adjustment, each share of Series E Preferred Stock is convertible into approximately 3,535.714 shares of Common Stock, and
the 9,425 Series E Preferred Stock outstanding as of September 30, 2014 are convertible into approximately 33,324,114 shares of
Common Stock in the aggregate, compared to 28,275,000 shares of Common Stock prior to the adjustment. (See Note 12).
Common Stock
Private Placements
Subsequent to the third quarter, in October 2014, the Company
completed a private placement to accredited investors for the purchase of 35,714,287 shares of its common stock for aggregate net
proceeds of approximately $9.9 million (see Note 12).
The Company completed two private placements in the third quarter
of 2014. In the first private placement, the Company issued 26,578,854 Units on July 2, 2014 and an additional 2,461,760 Units
on July 14, 2014, with each Unit comprised of one share of Common Stock (the “Unit Shares”) and a 30 month warrant
(the “Warrant”) to purchase 0.4 of a share of Common Stock (the “Warrant Shares”) at an exercise price
of $0.45, for a total of 29,040,614 shares of Common Stock and Warrants to acquire an additional 11,616,222 shares of Common Stock,
all pursuant to subscription agreements (each, a “Subscription Agreement”) and a unit purchase agreement (the “Unit
Purchase Agreement”) entered into with accredited investors. The gross proceeds totaled approximately $9.8 million
and net proceeds of approximately $8.9 million after commissions and expenses. The Warrants sold as part of the Units are exercisable
immediately at an exercise price of $0.45 per share of Common Stock, subject to adjustment in the event of stock dividends, recapitalizations
or certain other transactions. The Warrants will expire on January 2, 2017. Certain FINRA broker-dealers acted on behalf
of the Company and were paid aggregate cash commissions of approximately $784,000 and expenses of approximately $136,000 and were
issued 30 month warrants to purchase an aggregate of 2,125,391 shares of Common Stock at an exercise price of $0.34.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 9 — STOCKHOLDERS’ EQUITY (continued)
In the second private placement, the Company issued 6,813,645
Units on July 30, 2014, with each Unit comprised of one share of Common Stock and a 30 month warrant to purchase 0.4 of a share
of Common Stock at an exercise price of $0.45, for a total of 6,813,645 shares of Common Stock and Warrants to acquire an additional
2,725,454 shares of Common Stock, all pursuant to subscription agreements and a unit purchase agreement entered into with accredited
investors. The gross proceeds totaled approximately $2.3 million and the net proceeds totaled approximately $2.2 million
after commissions and expenses. In connection with this private placement, certain FINRA broker-dealers acted on behalf of the
Company and were paid aggregate cash commissions of approximately $100,000 and expenses of approximately $18,000 and were issued
30 month warrants to purchase an aggregate of 342,855 shares of Common Stock at an exercise price of $0.34.
Additionally, the Company paid a total of approximately $174,000
of legal fees in connection with the July 2014 private placements thereby resulting in total net proceeds of $10.9 million to the
Company.
Common stock for services
On February 12, 2013, the Company granted an aggregate
of 6,700,000 shares of restricted common stock to a director and certain employees and consultants of the Company, which were valued
at fair market value on the date of grant at approximately $3,417,000 or $0.51 per share. These restricted shares vest one third
at the end of each of the first three years from the date of issuance.
On November 1, 2013, pursuant to an employment agreement,
the Company granted 125,000 shares of restricted common stock to an employee of the Company which were valued at fair market value
on the date of grant at approximately $0.36 per share. These restricted shares vest one third at the end of each of the first three
years from the date of issuance.
On December 16, 2013, the Company granted an aggregate
of 2,500,000 shares of restricted common stock to certain employees and consultants of the Company, which were valued at fair market
value on the date of grant at approximately $875,000 or $0.35 per share. The shares granted to employees (1,300,000) vest one third
on the date of grant and one third at the end of each of the years ending two and three years after the date of issuance. The remaining
restricted shares issued to consultants vest one third at the end of each of the first three years from the date of issuance.
On January 1, 2014, pursuant to an employment agreement,
the Company granted 250,000 shares of restricted common stock to an employee of the Company which were valued at fair market value
on the date of grant at approximately $0.35 per share. These restricted shares vest one third at the end of each of the first three
years from the date of issuance.
On June 11, 2014, the Company and Mr. Steve Alfers,
the Company’s CEO, entered into the Second Amendment to the Restricted Stock Agreement (the “Alfers Amendment”)
to amend that certain Restricted Stock Agreement, dated as of May 13, 2013, and amended by the First Amendment to the Restricted
Stock Agreement dated December 23, 2013 by and between the Company and Mr. Alfers. Pursuant to the Alfers Amendment,
the vesting of 1,666,500 restricted shares, of a total of 5,000,000 restricted shares that were granted on June 18, 2012,
was extended from June 18, 2014 to March 14, 2015. 1,666,500 shares had previously vested in March 2014 and
the vesting schedule for the remaining 1,667,000 shares vesting on June 18, 2015 remains unchanged.
During the nine months ended September 30, 2014, the Company
recorded stock-based compensation expense in connection with restricted stock awards of $2,022,747. During the nine months ended
September 30, 2014, the Company reversed $76,007 of previously recognized compensation cost related to restricted stock awards
that did not vest due to the holder’s termination of employment. At September 30, 2014, there was a total of $1,420,214
unrecognized compensation expense in connection with restricted stock awards.
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 9 — STOCKHOLDERS’ EQUITY (continued)
Common Stock Options
A summary of the Company’s outstanding stock options
as of September 30, 2014 and changes during the period then ended is presented below:
| |
Number of Options | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life (Years) | |
Balance at December 31, 2013 | |
| 32,900,000 | | |
$ | 0.40 | | |
| 8.18 | |
Granted | |
| — | | |
| — | | |
| — | |
Exercised | |
| — | | |
| — | | |
| — | |
Forfeited | |
| (300,000 | ) | |
| 0.34 | | |
| 7.97 | |
Cancelled | |
| — | | |
| — | | |
| — | |
Balance at September 30, 2014 | |
| 32,600,000 | | |
| 0.40 | | |
| 7.43 | |
| |
| | | |
| | | |
| | |
Options exercisable at end of period | |
| 31,775 000 | | |
$ | 0.40 | | |
| | |
Options expected to vest through December 31, 2014 | |
| 825,000 | | |
| | | |
| | |
Weighted average fair value of options granted during the period | |
| | | |
$ | — | | |
| | |
At September 30, 2014 there was no intrinsic value for the stock
options outstanding in the above table.
During the nine months ended September 30, 2014, the Company
recorded stock based compensation expense related to options of $70,593. During the nine months ended September 30, 2014, the Company
reversed $16,670 of previously recognized compensation cost related to stock option awards that did not vest due to the holder’s
termination of employment. At September 30, 2014, there was a total of $22,170 of unrecognized compensation expense related
to non-vested options.
Common Stock Warrants
A summary of the Company’s outstanding stock warrants
as of September 30, 2014 and changes during the period then ended are presented below:
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
Weighted Average Remaining Contractual Life (Years) | |
Balance at December 31, 2013 | |
| 26,244,621 | | |
$ | 0.45 | | |
| 2.22 | |
Granted | |
| 16,809,922 | | |
| 0.43 | | |
| 2.50 | |
Cancelled | |
| — | | |
| — | | |
| — | |
Forfeited | |
| (5,000,000 | ) | |
| 0.60 | | |
| — | |
Exercised | |
| — | | |
| — | | |
| — | |
Balance at September 30, 2014 | |
| 38,054,543 | | |
$ | 0.43 | | |
| 2.08 | |
| |
| | | |
| | | |
| | |
Warrants exercisable at September 30, 2014 | |
| 38,054,543 | | |
$ | 0.43 | | |
| 2.08 | |
| |
| | | |
| | | |
| | |
Weighted average fair value of warrants granted during the period | |
| | | |
$ | 0.43 | | |
| | |
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 9 — STOCKHOLDERS’ EQUITY (continued)
Treasury Stock
The Company accounts for treasury stock under the cost method.
On December 16, 2013, the Company reacquired 127,015 shares of its common stock from certain employees of the Company. Additionally,
between February 2014 and March 2014, the Company reacquired 492,513 shares of its common stock from certain employees
of the Company. The reacquisition by the Company of its common stock is the result of certain employees electing to surrender shares
in order to satisfy their minimum applicable withholding obligation due to the vesting of restricted stock awards. The Company
recorded charges of $44,455 and $181,421, respectively, in connection with the 2013 and 2014 stock surrenders. In July 2014, 400,000
unvested restricted stock awards were returned to treasury stock as a result of an employee termination. The value of the treasury
stock is reflected separately as a deduction from stockholders’ equity. As of September 30, 2014, there were 1,019,528 of
treasury shares valued at $225,876.
NOTE 10 — NET LOSS PER COMMON SHARE
Net loss per common share is calculated in accordance with
ASC Topic 260, “Earnings Per Share”. Basic loss per share is computed by dividing net loss available to common stockholder,
adjusted for preferred dividends, by the weighted average number of shares of common stock outstanding during the period. The
computation of diluted net loss per share does not include anti-dilutive common stock equivalents in the weighted average shares
outstanding. The following table sets forth the computation of basic and diluted loss per share:
| |
For the Three Months ended September 30, 2014 | | |
For the Three Months ended September 30, 2013 | | |
For the Nine Months ended September 30, 2014 | | |
For the Nine Months ended September 30, 2013 | |
Numerator: | |
| | | |
| | | |
| | | |
| | |
Net loss | |
$ | (3,975,921 | ) | |
$ | (8,023,233 | ) | |
$ | (10,929,082 | ) | |
$ | (13,067,459 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Denominator for basic and diluted loss per share (weighted-average shares) | |
| 313,227,134 | | |
| 273,292,023 | | |
| 290,457,315 | | |
| 272,236,712 | |
| |
| | | |
| | | |
| | | |
| | |
Net loss per common share, basic and diluted | |
$ | (0.01 | ) | |
$ | (0.03 | ) | |
$ | (0.04 | ) | |
$ | (0.05 | ) |
The following were excluded from the computation of diluted
shares outstanding as they would have had an anti-dilutive impact on the Company’s loss from continuing operations and loss
from discontinued operations. In periods where the Company has a net loss, all dilutive securities are excluded.
| |
September 30, 2014 | | |
September 30, 2013 | |
Common stock equivalents: | |
| | | |
| | |
Stock options | |
| 32,600,000 | | |
| 33,400,000 | |
Stock warrants | |
| 38,054,543 | | |
| 26,244,621 | |
Convertible preferred stock | |
| 28,275,000 | | |
| 33,555,000 | |
| |
| | | |
| | |
Total | |
| 98,929,543 | | |
| 93,199,621 | |
As a result of a private placement completed in October 2014,
the conversion price for the Series E Preferred Stock has been reduced effective October 20, 2014 from $0.33 to $0.28 per share
of Series E Preferred Stock. Following this adjustment, and in accordance with ASC 470-20 “Debt with Conversion and Other
Options”, the Company will record an additional deemed dividend in the amount of approximately $1.7 million. As a result
of the adjustment, each share of Series E Preferred Stock is convertible into approximately 3,535.714 shares of Common Stock, and
the 9,425 Series E Preferred Stock outstanding as of September 30, 2014 are convertible into approximately 33,324,114 shares of
Common Stock in the aggregate, compared to 28,275,000 shares of Common Stock prior to the adjustment. (See Note 12).
PERSHING GOLD CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
SEPTEMBER 30, 2014
NOTE 11 — COMMITMENTS AND CONTINGENCIES
Operating Lease
In February 2012, the Company signed a three year lease
agreement for office space located in Lakewood, Colorado containing approximately 2,390 net rentable square feet with a term commencing
in March 2012 and expiring in April 2015. The lease requires the Company to pay an annual base rent of $18.50 per rentable
square foot or $44,215 plus a pro rata share of operating expenses. The base rent is subject to annual increases beginning on May 1,
2013 as defined in the lease agreement. Future minimum rental payments required under the lease are as follows:
2014 | |
$ | 11,651 | |
2015 | |
| 15,535 | |
| |
$ | 27,186 | |
Rent expense was $35,694 and $33,759 for the nine months ended
September 30, 2014 and 2013, respectively.
Mining Leases
As more fully discussed in Note 4 — Mineral Properties,
the Company leases certain mineral properties included in its Pershing Pass Property. The future minimum lease payments under these
mining leases are as follows:
2014 | |
$ | 10,000 | |
2015 | |
| 10,000 | |
2016 | |
| 20,000 | |
2017 | |
| 25,000 | |
2018 | |
| 25,000 | |
Thereafter | |
| 117,500 | |
| |
$ | 207,500 | |
NOTE 12 — SUBSEQUENT EVENTS
On October 20, 2014, the Company issued 35,714,287 shares
of Common Stock in a private placement with accredited investors. The gross proceeds totaled approximately $10.0 million
and net proceeds of approximately $9.9 million after commissions and expenses.
As a result of the October 2014 private placement, the conversion
price for the Series E Preferred Stock has been reduced effective October 20, 2014 from $0.33 to $0.28 per share of Series E Preferred
Stock (the “Adjusted Conversion Price”). Following this adjustment, each share of Series E Preferred Stock is convertible
into the number of shares of Common Stock obtained by dividing the Series E Original Issue Price (as defined in the Certificate
of Designation), of is $990.00, by the Adjusted Conversion Price, resulting in each share of Series E Preferred Stock being convertible
into approximately 3,535.714 shares of Common Stock. A total of 9,425 shares of Series E Preferred Stock remain outstanding, and
as a result of the adjustment, are convertible into approximately 33,324,114 shares of Common Stock in the aggregate, compared
to 28,275,000 shares of Common Stock prior to the adjustment. The adjusted conversion price generated additional value to the convertibility
feature of the Series E Preferred Stock. Accordingly, the Company will record a deemed dividend of approximately $1.7 million for
the additional value of the beneficial conversion feature in October 2014, the period of the adjustment.
ITEM 2 Management’s Discussion and
Analysis of Financial Condition and Results of Operations
Pershing Gold Corporation and its subsidiaries (“Pershing
Gold”, the “Company” or “we”) is a gold and precious metals exploration company pursuing exploration
and development opportunities primarily in Nevada. We are currently focused on exploration at our Relief Canyon properties
in Pershing County in northwestern Nevada.
This discussion should be read in conjunction with Management’s
Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
Forward-Looking Statements
This Report on Form 10-Q and other written and oral statements
made from time to time by us may contain so-called “forward-looking statements,” all of which are subject to risks
and uncertainties. Forward-looking statements can be identified by the use of words such as “expects,” “plans,”
“will,” “forecasts,” “projects,” “intends,” “estimates,” and other
words of similar meaning. Forward-looking statements include, without limitation, statements relating to our business goals, planned
exploration, business strategy, planned engineering studies, future operating results, planned permitting activities, our efforts
to obtain extended financing or enter into asset sale or business consolidation transactions, and our liquidity and capital resources
outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the
economy and other future conditions. Our actual results may differ materially from those contemplated by the forward-looking
statements, which are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. Important
factors that could cause actual results to differ materially from those anticipated in forward- looking statements include without
limitation results of future exploration and engineering studies on our Relief Canyon properties; increases in estimates or costs
of exploration and recommissioning activities; our ability to raise necessary capital to conduct our exploration and recommissioning
activities and do so on acceptable terms or at all; reinterpretations of geological information; problems or delays in permitting
or other government approvals; and the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31,
2013. One must carefully consider any such statement and should understand that many factors could cause actual results
to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety
of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement
can be guaranteed and actual future results may vary materially.
Overview
During the nine months ended September
30, 2014, we focused primarily on expansion of the Relief Canyon Mine deposit, advancing towards production at the Relief Canyon
Mine and exploring new targets. An overview of certain significant events follows:
| · | In July 2014, we completed private placements to accredited investors for the purchase of 35,854,259 shares of our common
stock and 14,341,676 warrants to purchase shares of common stock for aggregate net proceeds of approximately $10.9 million. |
| · | In September 2014, we received final permit approval from the BLM and the Nevada Division of Environmental
Protection/Bureau of Mining Regulation and Reclamation authorizing mining within the existing open pit mine at Relief Canyon. |
| · | In October 2014, we completed a private placement to accredited investors for the purchase of 35,714,287 shares of our common
stock for aggregate net proceeds of approximately $9.9 million. |
| · | We commenced drilling on a new target north of the Relief Canyon mine in October 2014. We expect to complete approximately
12 holes for a total of approximately 9,200 feet during the fourth quarter 2014. |
| · | In March 2014, we completed an updated estimate of mineralized material at the Relief Canyon Mine totaling 34,062,000
tons of mineralized material at an average grade of 0.019 ounces per ton gold. The Company’s in-house technical staff calculated
the estimate under Industry Guide 7 of the SEC. |
| · | In May 2014 we launched our 2014 drilling campaign along the high-wall of the current pit, and within and north of the
existing pit, focused on finding mineable ounces to add to our recently updated estimate of mineralized material. Through September
30, 2014 we have drilled 64 holes for a total of approximately 38,000 feet under this campaign. For the remainder of the 2014 drilling
program, we plan to drill approximately 35 more holes for a total of approximately 21,000 additional feet. The remaining holes
will be equally divided between continued step-out drilling in the north target and on targets to the southwest extension of the
Relief Canyon deposit. |
| · | Throughout the period we performed column leach tests on gold-bearing samples from the Relief Canyon Mine property in order
to estimate average gold recovery. In May and June 2014, we reported preliminary results of these tests which show higher
gold recoveries than reported by previous operators of the property and also indicate that the mineralized material leaches relatively
quickly. |
Results of Operations
Three and Nine months ended September 30, 2014 and 2013
Net Revenues
We are an exploration stage company with no operations and we
generated no revenues for the three and nine months ended September 30, 2014 and 2013.
Operating Expenses
Total operating expenses for the three months ended September
30, 2014 as compared to the three months ended September 30, 2013, were $4.0 million and $3.9 million, respectively. The $100,000
increase in operating expenses for the three months ended September 30, 2014 is comprised largely of a $0.9 million increase in
exploration expenses on our Relief Canyon properties and an increase of $0.2 million in general and administrative expenses primarily
for public company expenses and legal costs in the current period offset by a $0.8 million decrease in compensation expense related
primarily to lower stock-based compensation expense and fewer shares awarded and a decrease of $0.2 million in consulting fees.
Total operating expenses for the nine months ended September
30, 2014 as compared to the nine months ended September 30, 2013, were $10.9 million and $10.6 million, respectively. The $0.3
million increase in operating expenses for the nine months ended September 30, 2014 is comprised largely of a $2.1 million increase
in exploration expenses on our Relief Canyon properties and an increase of $0.2 million in general and administrative expenses
primarily for public company expenses and legal costs in the current period offset by a $1.5 million decrease in compensation expense
related primarily to lower stock-based compensation expense and fewer shares awarded and a decrease of $0.4 million in consulting
fees.
Loss from Operations
We reported loss from operations of $4.0 million and $3.9 million
for the three months ended September 30, 2014 and 2013, respectively. The increase in operating loss was due primarily to the increases
in operating expenses described above.
We reported loss from operations of $10.9 million and $10.6
million for the nine months ended September 30, 2014 and 2013, respectively. The increase in operating loss was due primarily to
the increases in operating expenses described above.
Other Income (Expenses)
Total other income (expense) was ($900) and ($5,000) for the
three months ended September 30, 2014 and 2013, respectively. The change in other income (expense) is primarily attributable to
a decrease in interest expense of $4,100.
Total other income (expense) was ($3,200) and $1.6 million for
the nine months ended September 30, 2014 and 2013, respectively. The change in other income (expense) of $1.6 million is primarily
attributable to the absence in 2014 of $1.7 million of realized gain from the sale of our Amicor and Valor Gold securities and
a decrease in interest expense of $20,000.
Net Loss
As a result of the operating expense and other income (expense)
discussed above, we reported a net loss of ($4.0) million for the three months ended September 30, 2014 as compared to a net loss
of ($3.9) million for the three months ended September 30, 2013.
As a result of the operating expense and other income (expense)
discussed above, we reported a net loss of ($10.9) million for the nine months ended September 30, 2014 as compared to a net loss
of ($9.0) million for the nine months ended September 30, 2013.
Liquidity and Capital Resources
At September 30, 2014, our cash and cash equivalents totaled
$10.4 million. Our cash and cash equivalents increased during the nine months ended September 30, 2014 by $2.7 million from our
cash and cash equivalents balance at December 31, 2013 of $7.7 million. The increase in cash and cash equivalents was primarily
the result of net cash provided by financing activities of $10.7 million from the July 2014 private placements of our common stock
partly offset by cash used in operations of $7.9 million that was comprised largely of exploration expenditures, primarily at the
Relief Canyon Mine to establish our estimate of mineralized material, and general and administrative functions, including consultant
fees, compensation costs, legal fees and public company expenses. Subsequent to the third quarter, we completed an additional private
placement of common stock in October 2014 for approximately $9.9 million net proceeds.
We plan the following expenditures for the remaining quarter
of 2014:
| · | $2.8 million on general and administrative expenses (including employee salaries, public company expenses, consultants and
land holding costs); |
| · | $0.8 million on exploration drilling to expand the current resource at the Relief Canyon Mine property; |
| · | $0.5 million on additional work at the Relief Canyon Mine including further metallurgy results, progress towards an internal
economic analysis and pre-development. |
| · | $0.4 million on exploration drilling at our Buffalo Mountain project; and |
| · | $0.2 million on additional permitting and bonding, including an Environmental Assessment to expand the open-pit mine at
the Relief
Canyon Mine
property. |
The actual amount we spend for the remaining quarter of 2014
may vary significantly from the amounts specified above and will depend upon several factors, including the results of our exploration
and pre-development work at the Relief Canyon Mine property and timing of obtaining the necessary permitting approvals. If we continue
with our plans to commence mining at Relief Canyon in the second half of 2015, we expect to require additional external financing
to fund exploration and commencement of mining by mid-2015. This funding could be in the form of equity, debt, asset sales and
strategic alternatives, including potential investors in our projects and potential business combination transactions. There
is no assurance that we will be successful and if we are not, we will be required to significantly curtail our activities and possibly
cease our business.
In October 2014, we completed a private placement to accredited
investors for the purchase of 35,714,287 shares of our common stock for aggregate net proceeds of $9.9 million.
Changes in Significant Accounting Policies
In June 2014, the FASB issued ASU 2014-10, “Development
Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements”. ASU 2014-10 eliminates the distinction
of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information
on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively
for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods; however early
adoption is permitted. We evaluated and adopted ASU 2014-10 for the interim reporting period ended September 30, 2014.
In August 2014, the FASB issued ASU No. 2014-15, “Presentation
of Financial Statements—Going Concern.” The provisions of ASU No. 2014-15 require management to assess an entity’s
ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing
standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every
reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s
plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s
plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment
for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in
this ASU are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter.
We are currently assessing the impact of this ASU on the Company’s consolidated financial statements.
Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results
of operations are based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting
principles. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts
of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis,
we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or
conditions.
Management believes the following critical accounting policies
affect the significant judgments and estimates used in the preparation of the financial statements.
Principles of Consolidation
The consolidated financial statements are prepared in accordance
with U.S. generally accepted accounting principles and present the financial statements of the Company and our wholly-owned subsidiaries.
In the preparation of our consolidated financial statements, intercompany transactions and balances are eliminated and net earnings
are reduced by the portion of the net earnings of subsidiaries applicable to non-controlling interests.
Use of Estimates
In preparing the consolidated financial statements, management
is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the
consolidated balance sheet, and revenues and expenses for the period then ended. Actual results may differ significantly from those
estimates. Significant estimates made by management include, but are not limited to, the useful life of property and equipment,
amounts and timing of closure obligations, the assumptions used to calculate fair value of options and warrants granted, beneficial
conversion on convertible notes payable and preferred stock, capitalized mineral rights, asset valuations, common stock issued
for services, common stock issued for conversion of notes and common stock issued in connection with an acquisition.
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements
of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and
director services received in exchange for an award of equity instruments over the period the employee or director is required
to perform the services in exchange for the award (presumptively, the vesting period).
ASC 718 also requires measurement of the cost of employee and
director services received in exchange for an award based on the grant-date fair value of the award. Pursuant to ASC Topic 505-50,
for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.”
The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain.
Property and Equipment
Property and equipment are carried at cost. The cost of repairs
and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed
of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income
in the year of disposition. We examine the possibility of decreases in the value of fixed assets when events or changes in circumstances
reflect the fact that their recorded value may not be recoverable. Depreciation is calculated on a straight-line basis over the
estimated useful life of the assets, generally from one to twenty five years.
Mineral Property Acquisition and Exploration Costs
Costs of lease, exploration, carrying and retaining unproven
mineral lease properties are expensed as incurred. The Company has chosen to expense all mineral exploration costs as incurred
given that it is still in the exploration stage. Once the Company has identified proven and probable reserves in its investigation
of its properties and upon development of a plan for operating a mine, it would enter the development stage and capitalize future
costs until production is established. When a property reaches the production stage, the related capitalized costs will be amortized,
using the units-of-production method over proven and probable reserves.
When the Company has capitalized mineral properties, these properties
will be periodically assessed for impairment of value and any diminution in value. To date, the Company has not established the
commercial feasibility of any exploration prospects; therefore, all costs are being expensed.
ASC 930-805, states that mineral rights consist of the legal
right to explore, extract, and retain at least a portion of the benefits from mineral deposits. Mining assets include mineral rights.
Acquired mineral rights are considered tangible assets under ASC 805. ASC 805 requires that mineral rights be recognized at fair
value as of the acquisition date. As a result, our direct costs to acquire mineral rights are initially capitalized as tangible
assets. Mineral rights include costs associated with acquiring patented and unpatented mining claims and mill sites. If proven
and probable reserves are established for the property and it has been determined that a mineral property can be economically developed,
costs will be amortized using the units-of-production method over proven and probable reserve. For mineral rights in which proven
and probable reserves have not yet been established, we assess the carrying values for impairment at the end of each reporting
period and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Long-Lived Assets
We review for impairment whenever events or circumstances indicate
that the carrying amount of assets may not be recoverable, pursuant to guidance established in ASC 360-10-35-15, “Impairment
or Disposal of Long-Lived Assets”. An impairment is considered to exist when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between
the asset’s estimated fair value and its carrying amount.
Asset Retirement Obligations
Asset retirement obligations, consisting primarily of estimated
mine reclamation and closure costs at the Company’s Relief Canyon property, are recognized in the period incurred and when
a reasonable estimate can be made, and recorded as liabilities at fair value. Such obligations, which are initially estimated based
on discounted cash flow estimates, are accreted to full value over time through charges to accretion expense. Corresponding asset
retirement costs are capitalized as part of the carrying amount of the related long-lived asset and depreciated over the asset’s
remaining useful life. Asset retirement obligations are periodically adjusted to reflect changes in the estimated present value
resulting from revisions to the estimated timing or amount of reclamation and closure costs. We review and evaluate the asset retirement
obligations annually or more frequently at interim periods if deemed necessary.
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance
sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities.
Contractual Obligations
Not applicable.
ITEM 3 Quantitative and Qualitative Disclosures
About Market Risk
Not applicable.
ITEM 4 Controls and Procedures
Disclosure Controls and Procedures.
We maintain “disclosure controls and procedures,”
as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange
Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under
the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange
Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief
Executive Officer and Vice President Finance, to allow timely decisions regarding required disclosure. In designing and evaluating
our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures
are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment
in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls
and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential future conditions.
With respect to the quarterly period ended September 30, 2014,
under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design
and operations of our disclosure controls and procedures. Based upon this evaluation, the Company’s management has concluded
that certain disclosure controls and procedures were effective as of September 30, 2014.
Changes in Internal Controls.
There have been no changes in the Company’s internal control
over financial reporting during the three months ended September 30, 2014 that have materially affected, or are reasonably likely
to materially affect, the Company’s internal controls over financial reporting.
PART II — OTHER INFORMATION
None.
Not applicable.
| ITEM 2 | Unregistered Sales of Equity Securities and Use of
Proceeds |
None.
| ITEM 3 | Defaults Upon Senior Securities |
There have been no events that are required to be reported under
this Item.
| ITEM 4 | Mine Safety Disclosures. |
None.
None.
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
32.1 |
|
Chief Executive Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2 |
|
Chief Financial Officer Certification Pursuant to 18 USC, Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.ins |
|
XBRL Instance Document |
101.sch |
|
XBRL Taxonomy Schema Document |
101.cal |
|
XBRL Taxonomy Calculation Document |
101.def |
|
XBRL Taxonomy Linkbase Document |
101.lab |
|
XBRL Taxonomy Label Linkbase Document |
101.pre |
|
XBRL Taxonomy Presentation Linkbase Document |
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
Pershing Gold Corporation |
|
|
|
|
Date: November 11, 2014 |
|
By: |
/s/ Stephen Alfers |
|
|
|
Stephen Alfers |
|
|
|
President and Chief Executive Officer
(Principal Executive Officer) |
|
|
|
|
Date: November 11, 2014 |
|
By: |
/s/ Eric Alexander |
|
|
|
Eric Alexander |
|
|
|
Vice President Finance and Controller
(Principal Financial Officer) |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE
OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Stephen Alfers, certify that:
1. I have reviewed this quarterly report
on Form 10-Q of Pershing Gold Corporation;
2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial
statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly for the period in which this quarterly report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, 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; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; |
5. The registrant’s other certifying officer and I have
disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material
weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Dated: November 11, 2014 |
|
By: |
/s/ Stephen Alfers |
|
|
|
Stephen Alfers
President and Chief Executive Officer
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL
OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Eric Alexander, certify that:
1. I have reviewed this quarterly report
on Form 10-Q of Pershing Gold Corporation;
2. Based on my knowledge, this quarterly
report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial
statements, and other financial information included in this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4. The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly for the period in which this quarterly report is being prepared; |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, 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; |
| c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; |
| d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; |
5. The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of
the registrant’s board of directors (or persons performing the equivalent function):
a) all significant deficiencies and material
weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the registrant’s
ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
Dated: November 11, 2014 |
|
By: |
/s/ Eric Alexander |
|
|
|
Eric Alexander
Vice President Finance and Controller
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report
of Pershing Gold Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed
with the Securities and Exchange Commission on the date hereof (the “Report”), Stephen Alfers, President and Chief
Executive Officer (Principal Executive Officer) of the Company, certifies, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley
Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Date: November 11, 2014 |
/s/ Stephen Alfers |
|
Stephen Alfers
President and Chief Executive Officer
(Principal Executive Officer) |
A signed original of this written statement required by Section 906,
or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic
version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002
In connection with the Quarterly Report of Pershing Gold Corporation
(the “Company”) on Form 10-Q for the period ended September 30, 2014 as filed with the Securities and Exchange
Commission on the date hereof (the “Report”), Eric Alexander, Vice President Finance and Controller of the Company,
certifies, pursuant to 18 U.S.C. section 1350 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents,
in all material respects, the financial condition and results of operations of the Company. |
Date: November 11, 2014 |
|
By: |
/s/ Eric Alexander |
|
|
|
Eric Alexander
Vice President Finance and Controller
(Principal Financial Officer) |
A signed original of this written statement required by Section 906,
or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic
version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities
and Exchange Commission or its staff upon request.
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