Filed Pursuant to Rule 424(b)(5)
Registration No. 333–211910
The information in this preliminary
prospectus supplement is not complete and may be changed. This preliminary prospectus supplement and accompanying prospectus are
not an offer to sell these securities and are not soliciting an offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
Subject to Completion
Preliminary Prospectus Supplement
dated December 11, 2017
PROSPECTUS SUPPLEMENT
(To Prospectus dated June 29, 2016)
Pershing Gold
Corporation
Shares of Common Stock
Warrants to Purchase Shares
of Common Stock
We are
offering shares of our common stock and associated four-tenth
common stock warrants to purchase an aggregate of shares of common
stock. The combined purchase price for each share of common stock and accompanying warrant is $ . The shares of
common stock and warrants are immediately separable and will be issued separately. The warrants will become exercisable on
the date of issuance, and will remain exercisable until , 2019. The
exercise price for the warrants initially will be $ per whole share of common stock.
Our common stock trades
on the Nasdaq Global Market (“Nasdaq”) and on the Toronto Stock Exchange (the “TSX”) under the symbol “PGLC.”
On December 8, 2017, the closing price of our common stock on Nasdaq was $2.87 and on the TSX was CDN$3.66. There is
no established trading market for the warrants and we do not expect a market to develop. In addition, we do not intend to list
the warrants on any national securities exchange or any other nationally recognized trading system.
The underwriters may offer the shares of common stock from time to time for sale in one or more transactions
on Nasdaq, the TSX, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing
at the time of sale, at prices related to prevailing market prices or at negotiated prices.
In conjunction with this
offering, we have entered into subscription agreements with certain existing shareholders and other investors with whom the company
or its directors have an existing relationship (the “Private Purchasers”), whereby the Private Purchasers have agreed
to purchase from us at the public offering price, through a private placement (the “Private Placement”) to be completed
concurrently with the offering, shares of our common stock (the “Private
Placement Shares”), together with an associated four-tenth warrant for the purchase of an aggregate of shares
of common stock (the “Private Placement Warrant Shares”). The Private Placement will be conducted on the same price
and terms as this offering. Any shares purchased by the Private Purchasers are not covered by this prospectus supplement and will
be sold pursuant to an exemption from registration pursuant to Regulation D under the Securities Act of 1933, as amended (the “Securities
Act”). This offering and the Private Placement are contingent on the completion of the other and are expected to close concurrently.
On December 11, 2017, the
aggregate market value of our outstanding common stock held by non-affiliates, or the public float, was approximately $56.7 million
based on 28,402,389 shares of common stock outstanding, of which 18,457,539 shares of common stock were held by non-affiliates,
and a per share price of $3.07 based on the closing sale price of our common shares on October 12, 2017. In December 2016 we sold
an aggregate of $7,500,002.20 in common shares pursuant to the Registration Statement on Form S-3 of which this prospectus supplement
is a part (the “December 2016 Offering”). Other than the securities offered by this prospectus supplement and the December
2016 Offering, we have not sold any securities pursuant to General Instruction I.B.6. of Form S-3 during the prior 12 calendar
month period that ends on, and includes, the date of this prospectus supplement.
Investing
in our common stock AND ASSOCIATED WARRANTS involves a high degree of risk. You should review carefully the “Risk Factors”
beginning on page S-
5
of this prospectus supplement AND PAGE 6 OF THE ACCOMPANYING
PROSPECTUS.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
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Per Share
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Per Warrant
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Total
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Public Offering Price
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$
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$
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$
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Underwriting Discounts and Commissions
(1)
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$
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$
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$
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Proceeds, before expenses, to us
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$
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$
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$
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(1)
We have granted the
underwriters an option to purchase up to an additional shares and/or
warrants to purchase shares of common stock from us at the price set forth above
within 30 days from the date of this prospectus supplement. If the underwriters exercise their option in full, the aggregate underwriting
discounts will be $ .
See the “Underwriting” section
of this prospectus supplement for a description of compensation payable to the underwriters.
In connection with this
offering, we have filed a short form prospectus with the securities regulatory authorities in the Provinces of Ontario, British
Columbia and Alberta, Canada, which upon final receipt, will permit us to offer and sell in such Canadian jurisdictions the shares
of our common stock being sold in this offering. The shares will be offered in Canada by Canaccord Genuity Corp., BMO Nesbitt Burns
Inc. and Cantor Fitzgerald Canada Corporation, and in the United States by BMO Capital Markets, a U.S. affiliate of BMO Nesbitt
Burns Inc., Canaccord Genuity Inc., a U.S. affiliate of Canaccord Genuity Corp., and Cantor Fitzgerald & Co., a U.S. affiliate
of Cantor Fitzgerald Canada Corporation. References to the “underwriters” include each of these entities, as applicable.
Delivery of the shares
of common stock and warrants is expected to be made on or about December , 2017.
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Joint Book-Running Managers
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Canaccord Genuity
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BMO Capital Markets
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Cantor Fitzgerald
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December , 2017
TABLE OF CONTENTS
Prospectus Supplement
Prospectus
ABOUT THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
This document is in two
parts. The first part is this prospectus supplement, which describes the terms of this offering of our common stock and warrants
and certain other matters relating to our business. The second part is the accompanying prospectus, which gives more general information,
some of which does not apply to this offering. To the extent the information contained in this prospectus supplement differs or
varies from the information contained in the accompanying prospectus or any document incorporated by reference, you should rely
on the information in this prospectus supplement. You should read this prospectus supplement and the accompanying prospectus as
well as the additional information described under “Incorporation of Certain Information by Reference” on page S-38
of this prospectus supplement before investing in our common stock and warrants. Also see “Cautionary Statement Regarding
Forward-Looking Statements” on page S-iii of this prospectus supplement.
We have filed with the
Securities and Exchange Commission (“SEC”) a registration statement on Form S-3 with respect to the securities
offered hereby (the “Registration Statement”). This prospectus supplement and the accompanying prospectus do not contain
all of the information set forth in the Registration Statement, parts of which are omitted in accordance with the rules and regulations
of the SEC. For further information with respect to us and the securities offered hereby, reference is made to the Registration
Statement and the exhibits that are a part of the registration statement.
We have not authorized
anyone to provide any information other than that contained or incorporated by reference in this prospectus or in any free writing
prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance
as to the reliability of, any other information that others may give you. We have not, and the underwriters have not, authorized
anyone to provide you with different information. We are not, and the underwriters are not, making an offer to sell these securities
in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in each of this
prospectus supplement, the accompanying prospectus, the documents incorporated by reference into this prospectus supplement and
the accompanying prospectus and any related free writing prospectus is accurate as of the respective dates of those documents.
Our business, financial condition, results of operations and prospects may have changed since those dates. You should read this
prospectus supplement, the accompanying prospectus, the documents incorporated by reference into this prospectus supplement and
the accompanying prospectus and any related free writing prospectus when making your investment decision. You should also read
and consider the information in the documents to which we have referred you in the sections entitled “Where You Can Find
More Information” and “Incorporation of Certain Information by Reference” in this prospectus supplement and in
the accompanying prospectus.
Unless otherwise stated,
information in this prospectus supplement assumes the underwriters will not exercise their option to purchase additional shares
or warrants.
As used in this prospectus
supplement, the terms “Pershing,” “we,” “our,” “ours” and “us” may,
depending on the context, refer to Pershing Gold Corporation or to one or more of Pershing Gold Corporation’s consolidated
subsidiaries or to Pershing Gold Corporation and its consolidated subsidiaries, taken as a whole.
All references are to United
States currency in this prospectus supplement unless otherwise specifically referenced. References to “CDN$” are to
Canadian dollars.
CAUTIONARY STATEMENT
REGARDING FORWARD-LOOKING STATEMENTS
Some information contained
in or incorporated by reference into this prospectus supplement and the accompanying prospectus contain “forward-looking
statements” within the meaning of applicable Canadian and United States securities laws. Forward-looking statements include,
without limitation, statements relating to our planned expenditures and cash position, business goals, planned exploration and
metallurgical work, our drilling program, business strategy, planned permitting activities, geographic surveys, plans with respect
to an environmental studies to expand the Relief Canyon open-pit mines, our liquidity and capital resources outlook and future
financing requirements, and estimates and assumptions required under our financial statements.
We use the words “anticipate,”
“continue,” “likely,” “estimate,” “expect,” “may,” “could,”
“will,” “project,” “should,” “believe” and similar expressions to identify forward-looking
statements. Statements that contain these words discuss our future expectations and plans, or state other forward-looking information.
Although we believe the expectations and assumptions reflected in those forward-looking statements are reasonable, we cannot assure
you that these expectations and assumptions will prove to be correct. Our actual results could differ materially from those expressed
or implied in these forward-looking statements as a result of various factors described in this prospectus supplement and the accompanying
prospectus, including:
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Risks relating to the future exploration efforts to expand the Relief Canyon deposit, our ability
to fund future exploration costs or purchase additional equipment, and our ability to obtain or amend the necessary permits, consents,
or authorizations needed to advance expansion of the deposit, or recommissioning of the gold processing facility;
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Our ability to acquire additional mineral targets;
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Our ability to achieve any meaningful revenue;
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Our ability to engage or retain geologists, engineers, consultants and other key management and
mining personnel necessary to successfully operate and grow our business;
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The volatility of the market price of our common stock or our intention not to pay any cash dividends
in the foreseeable future;
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Changes in any federal, state or local laws and regulations or possible challenges by third parties
or contests by the federal government that increase costs of operation or limit our ability to explore on certain portions of our
property;
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Decreases in the market price for gold and economic and political events affecting the market prices
for gold and other minerals which may be found on our exploration properties;
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The timing and consummation of our Private Placement (as described in this prospectus supplement),
if at all;
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The factors set forth under “Risk Factors” beginning on page S-5 of this prospectus
supplement; and
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other factors described elsewhere in this prospectus supplement, the accompanying prospectus,
and our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, as amended by the Annual Report on Form 10-K/A
filed on April 28, 2017 (the “2016 10-K”).
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Many of these factors are
beyond our ability to control or predict. Although we believe that the expectations reflected in our forward-looking statements
are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risk and uncertainties.
You should not unduly rely on any of our forward-looking statements. These statements speak only as of the date of this prospectus
supplement. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements
to reflect future events or developments. All subsequent written and oral forward-looking statements attributable to us and persons
acting on our behalf are qualified in their entirety by the cautionary statements contained in this section and elsewhere in this
prospectus supplement.
CURRENCY AND
EXCHANGE RATES
The following table sets
out the exchange rates for currencies expressed in terms of equivalent Canadian dollars for one US dollar:
US dollar
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2014
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2015
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2016
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End of period
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$
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0.8599
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$
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0.7225
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$
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0.7419
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Average for the period
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$
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0.9059
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$
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0.7830
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$
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0.7551
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Exchange rates are the
historical interbank foreign exchange rates for the appropriate period as quoted by the Bank of Canada. The noon rate quoted by
the Bank of Canada for the conversion of Canadian dollars into United States dollars on December 8, 2017 is US$1.00 = CDN$1.2860.
SUMMARY
This summary
provides a brief overview of information contained elsewhere in this prospectus supplement, the accompanying prospectus and the
documents we incorporate by reference. Because it is abbreviated, this summary does not contain all of the information that you
should consider before investing in our common stock and warrants in this offering. You should read the entire prospectus supplement,
the accompanying prospectus, the documents incorporated by reference and the other documents to which we refer for a more complete
understanding of our business and this offering. Please read the section entitled “Risk Factors” beginning on page
S-
5
of this prospectus supplement and beginning on page 6 of the accompanying prospectus, and additional information contained
in our 2016 10-K, which is incorporated by reference in this prospectus supplement for more information about important factors
you should consider before investing in our common stock and warrants in this offering.
Overview
We are a gold
and precious metals exploration company pursuing exploration, development and mining opportunities primarily in Nevada. We are
currently focused on exploration at our Relief Canyon properties in Pershing County in northwestern Nevada and, if economically
feasible, commencing mining at the Relief Canyon Mine. None of our properties contain proven and probable reserves, and our activities
on all of our properties are exploratory in nature.
Business Strategy
Our business
strategy is to acquire and advance precious metals exploration properties. We seek properties with known mineralization that are
in an advanced stage of exploration and have previously undergone drilling but are under-explored, which we believe we can advance
quickly to increase value. We are currently focused on exploration of the Relief Canyon properties and, if economically feasible,
commencing mining at the Relief Canyon Mine. We also are reviewing strategic opportunities, focused primarily in Nevada.
Relief Canyon Mine Property
Our Relief Canyon
property rights currently total approximately 27,000 acres and are comprised of approximately 1,056 owned unpatented mining claims,
120 owned millsite claims, 100 leased unpatented mining claims, and 2,228 acres of leased and 3,739 acres of subleased private
lands. As currently defined by exploration drilling, most of the Relief Canyon deposit is located on property that is
subject to a 2% net smelter return production royalty, with a portion of the deposit located on property subject to net smelter
return production royalties totaling 4.5%. The rest of the property is subject, under varying circumstances, to net smelter
return production royalties ranging from 2% to 5%.
Since our acquisition
of the Relief Canyon Mine property in 2011, our exploration efforts have been focused primarily on expanding the known Relief Canyon
Mine deposit.
During the nine months
ended September 30, 2017, we focused primarily on engineering and other work related to the potential commencement of mining at
the Relief Canyon Mine; continuing permitting and bonding; and financing efforts. An overview of certain significant events follows:
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For the nine months ended
September 30, 2017, we drilled 14 holes, totaling approximately 5,800 feet, at our Blackjack Project Area, located approximately
nine miles south of our Relief Canyon Mine.
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In May 2017, Mine Development
Associates of Reno, Nevada (“MDA”) completed a preliminary feasibility study (“PFS”) on the Relief Canyon
Mine. The PFS indicates the possibility of a viable mine and recommended work should continue on advancing the Relief Canyon Mine
to a production decision.
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During the quarter ended
March 31, 2017, we successfully completed the environmental permitting process and have secured all necessary permits to restart
and expand the Relief Canyon Mine. As part of the permitting process we increased our statewide surface management surety bonds
with the United States Department of the Interior Bureau of Land Management (“BLM”) as required by the State of Nevada
from approximately $5.6 million to approximately $12.3 million.
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On March 29, 2017, we entered
into a Mining Sublease with Newmont granting us the exclusive right to prospect, explore for, develop, and mine minerals on certain
lands within the Pershing Pass area south of the Relief Canyon Mine.
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The PFS included
an estimate of mineralized material at the Relief Canyon Mine deposit, calculated at a cut-off grade of 0.005 ounces of gold per
ton for oxide material, 0.01 ounces of gold per ton for mixed material and 0.02 ounces of gold per ton for sulfide material. Silver
grades were only available for a portion of the deposit. The database used for the mineralized material estimate described
below includes 419 core holes and 676 reverse circulation holes for a total of 482,755 feet, of which 415 core holes and 89 reverse
circulation holes were drilled by the Company from 2011 to September 2016.
Tons
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Average gold grade
(ounces per ton)
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41,876,000
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0.019
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Tons
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Average silver grade
(ounces per ton)
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17,576,000
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0.117
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“Mineralized
material” as used in this prospectus supplement, although permissible under the SEC Guide 7, does not indicate “reserves”
by SEC standards. We cannot be certain that any part of the Relief Canyon deposit will ever be confirmed or converted
into SEC Industry Guide 7 compliant “reserves.” Investors are cautioned not to assume that all or any part
of the mineralized material will be confirmed or converted into reserves or that mineralized material can be economically or legally
extracted.
We are actively pursuing discussions with potential counterparties for the remaining financing that will
be needed to commence production at Relief Canyon. This additional external financing could include streaming, royalty financing,
forward sale arrangements, debt offerings (including convertible debt), or other similar arrangements. It may also include further
sales of equity securities. There are no assurances that we will be successful in raising sufficient financing to commence production
at Relief Canyon.
Corporate Information
Our principal
executive offices are located at 1658 Cole Boulevard, Building 6, Suite 210, Lakewood, Colorado 80401 and our telephone number
is 720-974-7254. We maintain a website at www.pershinggold.com, which contains information about us. Our website and the information
contained in and connected to it are not a part of this prospectus.
THE OFFERING
Shares of common stock offered by us:
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shares of common stock of the company.
(1)
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Warrants offered by us:
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Warrants to purchase up to
shares of common stock offered in combination with the shares of common stock offered hereby. The warrants will become exercisable
on the date of issuance, and will remain exercisable until , 2019. (collectively
with the common stock offered hereby, the “securities”).
The initial exercise price for the
warrants will be $ per whole share of common stock. The exercise price will be subject
to certain further adjustments as described herein. This prospectus supplement also relates to the offering of the
shares of common stock issuable upon exercise of the warrants.
(1)
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Total shares of common stock outstanding on December 11, 2017:
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28,402,389 shares
(2)
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Common stock outstanding immediately after this offering and the Private Placement:
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shares
(3)
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Option to purchase additional shares granted by us:
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We have granted the underwriters an option for a period of 30 days to purchase, severally and not jointly, up to an additional shares of our common stock and/or additional warrants to purchase up to shares of our common stock.
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Use of proceeds:
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We estimate that our net proceeds from this
offering and the concurrent Private Placement, after deducting fees and expenses, will be approximately $ million
($ million if the underwriters exercise their option to purchase additional shares and/or warrants in full).
We intend to use the net proceeds from
this offering and the concurrent Private Placement for advancing our Relief Canyon project, including
pre-construction and development and exploration drilling to expand the mineralization at Relief Canyon, and/or
general corporate purposes. See “Use of Proceeds.”
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Concurrent Private Placement:
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We have entered into subscription agreements with the Private Purchasers, including our director and significant shareholder Barry Honig, whereby the Private Purchasers have agreed to purchase from us at the public offering price, through the Private Placement, up to shares of our common stock (the “Private Placement Shares”), together with an associated four-tenth warrant for the purchase of up to shares of common stock (the “Private Placement Warrant Shares”). Any shares purchased by the Private Purchasers are not covered by this prospectus supplement and will be sold pursuant to an exemption from registration pursuant to Regulation D under the Securities Act.
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Nasdaq and TSX:
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PGLC
We do not intend to list the warrants on Nasdaq,
TSX, any other national securities exchange or any other nationally recognized trading system.
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Dividend policy:
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We have not paid dividends on our common stock and do not intend to pay cash dividends in the foreseeable future.
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Risk factors:
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You should carefully consider the information set forth in this prospectus supplement and, in particular, the specific factors set forth in the “Risk Factors” section beginning on page S-5 of this prospectus supplement and the “Risk Factors” section of the 2016 10-K before deciding whether or not to invest in our securities.
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(1)
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See “Description of Securities We Are Offering”
on page S-21 of this prospectus supplement for additional information regarding the common stock and warrants to be issued in
this offering.
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(2)
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Excludes the following shares of common stock, none of
which are being offered by this prospectus supplement:
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2,725,092 shares of common stock issuable upon conversion of the Series E Convertible
Preferred Stock based on the current conversion price of $3.25;
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1,794,453 shares of common stock issuable upon the exercise
of outstanding options;
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2,377,576 shares of common stock issuable upon the exercise
of outstanding warrants; and
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1,047,224 shares of common stock issuable pursuant to restricted
stock units.
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(3)
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Based on 28,402,389 shares of common stock outstanding as
of December 11, 2017 and assumes the underwriters’ option to purchase additional shares and/or warrants is not exercised.
It also includes (i) shares issuable upon exercise of the warrants
that are being offered pursuant to this prospectus supplement, (ii)
shares that may be issued in the Private Placement, and (iii) shares
issuable upon exercise of the warrants that may be issued in the Private Placement, but excludes the following shares of common
stock, none of which are being offered by this prospectus supplement:
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shares of common stock issuable upon conversion of the Series E Convertible Preferred Stock based on a new conversion price of $ ;
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1,794,453
shares of common stock issuable upon the exercise of outstanding options;
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2,377,576
shares of common stock issuable upon the exercise of outstanding warrants; and
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1,047,224
shares of common stock issuable pursuant to restricted stock units.
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RISK FACTORS
Investing in our securities
involves a high degree of risk. Before investing in our securities you should carefully consider the following risks in addition
to the remainder of this prospectus supplement and the accompanying prospectus, together with the information incorporated by reference,
including the risk factors included in the 2016 10-K and any subsequently filed reports, before making an investment decision.
The risks and uncertainties described in these incorporated documents and described below are not the only risks and uncertainties
that we face. Additional risks and uncertainties not presently known to us or which we currently consider to be immaterial may
also impair our business. If any of the following risks actually occurs, our business, prospects, financial condition and results
of operations could be adversely affected. In that case, the value of our securities would likely decline and you may lose all
or a part of your investment. The risks discussed below also include forward-looking statements, and our actual results may differ
substantially from those discussed in these forward-looking statements. Please see the section entitled “Cautionary Statement
Regarding Forward-Looking Statements” in this prospectus supplement.
Risks Related to the Offering
The trading price of the common stock may experience substantial
volatility.
The trading price of our
common stock may experience substantial volatility that is unrelated to our financial condition or operations. The trading price
of our common stock may also be significantly affected by short-term changes in the price of gold and other minerals. The market
price of our securities is affected by many other variables which may be unrelated to its success and are, therefore, not within
our control. These include other developments that affect the market for all resource sector-related securities, the breadth of
the public market for the common stock and the attractiveness of alternative investments. The effect of these and other factors
on the market price of the common stock is expected to make the price of the common stock volatile in the future, which may result
in losses to investors.
Management will have broad discretion as to the use of the
net proceeds from this offering, and we may not use these proceeds effectively.
We currently intend to
allocate the net proceeds we will receive from this offering as described under the heading “Use of Proceeds” below.
However, management will have discretion in the actual application of the net proceeds, and may elect to allocate proceeds differently
from that described in “Use of Proceeds” if it believes it would be in its best interests to do so. Accordingly, you
will be relying on the judgment of our management with regard to the use of these net proceeds, and you will not have the opportunity,
as part of your investment decision, to assess whether the proceeds are being used appropriately. Our failure to apply these funds
effectively could have an adverse effect on our business and cause the price of our common stock to decline.
Sales of substantial amounts of the common stock, including
in this offering and the Private Placement, may have an adverse effect on the market price of the common stock.
Sales of substantial amounts
of the common stock, or the availability of such securities for sale, could adversely affect the prevailing market prices for the
common stock. A decline in the market prices of the common stock could impair our ability to raise additional capital through the
sale of securities should we desire to do so. If we were to decide to pursue the commencement of production at Relief Canyon, additional
external financing would be required in addition to the amounts raised in this offering and the Private Placement. Such external
financing could include streaming, royalty financing, forward sale arrangements, debt offerings (including convertible debt), additional
equity financing or other alternatives, and may result in additional dilution to existing holders of our common stock.
There is currently no public market for the warrants and we
do not intend to list the warrants for trading.
There
is currently no public market for the
warrants and we do not intend to list the warrants for trading. Because of the illiquidity
of the warrants, an investor may have to exercise the warrants
to realize
value.
The warrants are speculative in nature. You may not be able
to recover your investment in the warrants, and the warrants may expire worthless.
If our common stock price does not increase
to an amount sufficiently above the applicable exercise price of the warrants during the period the warrants are exercisable, you
will be unable to recover any of your investment in the warrants. There can be no assurance that the market price of the common
stock will ever equal or exceed the exercise price of the warrants, and consequently, whether it will ever be profitable for holders
of the warrants to exercise the warrants.
Investors will have no rights as a shareholder with respect
to their warrants until they exercise their warrants and acquire our common stock.
Until you acquire common stock upon exercise
of your warrants, you will have no rights with respect to the common stock underlying such warrants. Upon exercise of your warrants,
you will be entitled to exercise the rights of a shareholder only as to matters for which the record date occurs after the exercise
date.
Risks Related to Our Business
We have no proven or probable reserves
on our properties and we do not know if our properties contain any gold or other minerals that can be mined at a profit.
The properties on which
we have the right to explore for gold and other minerals do not contain mineral reserves and we do not know if any deposits of
gold or other minerals can be mined at a profit. Whether a gold or other mineral deposit can be mined at a profit depends upon
many factors. Some but not all of these factors include: the particular attributes of the deposit, such as size, grade and proximity
to infrastructure; operating costs and capital expenditures required to start mining a deposit; the availability and cost of financing;
the price of the gold or other minerals which is highly volatile and cyclical; and government regulations, including regulations
relating to prices, taxes, royalties, land use, importing and exporting of minerals and environmental protection. We are also obligated
to pay production royalties on certain of our mineral production, including a net smelter royalty of 2% on production from most
of our Relief Canyon Mine property, with a portion of the deposit located on property subject to net smelter return production
royalties totaling 4.5%, which would increase our costs of production and make our ability to operate profitably more difficult.
We are also obligated to pay a net smelter royalty of up to 5% on production from some of our claims and lands.
We are an exploration stage company and
have conducted exploration activities only since 2011. We reported a net loss for the year ended December 31, 2016 and in
the subsequent fiscal quarters ending with the September 30, 2017 fiscal quarter, and expect to incur operating losses for the
foreseeable future.
Our evaluation of our Relief
Canyon Mine property is primarily based on historical production data and on new exploration data that we have developed since
2011, supplemented by historical exploration data. Our plans for recommencing mining and processing activities at the Relief Canyon
Mine property are still being developed, as are our exploration programs on the Relief Canyon expansion properties. Accordingly,
we are not yet in a position to estimate expected amounts of minerals, yields or values or evaluate the likelihood that our business
will be successful. We have not earned any revenues from mining operations. The likelihood of success must be considered in light
of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration of the mineral
properties and commencement of mining activities that we plan to undertake. These potential problems include, but are not limited
to, unanticipated problems relating to exploration, costs and expenses that may exceed current estimates and the requirement for
external funding to continue our business. Prior to completion of our exploration stage, we anticipate that we will incur increased
operating expenses without realizing any revenues. We reported a net loss of approximately $15.6 million for the year ended December 31,
2016 and a net loss of approximately $9.1 million for the nine months ended September 30, 2017. We expect to incur significant
losses into the foreseeable future. Our monthly burn rate for all costs during the nine months ended September 30, 2017 was approximately
$0.7 million, including $0.6 million for general and administrative costs (including all employee salaries, public company expenses,
consultants, and land holdings costs) and $0.1 million for exploration activities. If we are unable to raise sufficient additional
external funding to commence mining and processing at Relief Canyon, including in this offering and future offerings and financings,
we will not be able to earn profits or continue operations. We have no production history upon which to base any assumption as
to the likelihood that we will prove successful, and it is uncertain that we will generate any operating revenues or ever achieve
profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail.
Exploring for gold and other minerals
is inherently speculative, involves substantial expenditures, and is frequently non-productive.
Mineral exploration (currently
our only business), and gold exploration in particular, is a business that by its nature is very speculative. We may not be able
to establish mineral reserves on our properties or be able to mine any gold or any other minerals on a profitable basis. Few properties
that are explored are ultimately developed into producing mines. Unusual or unexpected geological conditions, fires, flooding,
explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are just some of
the many risks involved in mineral exploration programs and the subsequent development of gold deposits.
The mining industry is capital intensive
and we may be unable to raise necessary funding.
We spent approximately
$11.3 million on our business and exploration during the year ended December 31, 2016. Our estimated total costs for business
and exploration for 2017 is $10.1 million. Our estimated total cost for 2018 for advancement of the Relief Canyon project, exploration,
permitting, landholding, and for general and administrative costs is approximately $11.0 million. In addition, in order to commence
mining at Relief Canyon, based on the estimates contained in the PFS, we currently expect to incur capital expenditures and working
capital expenditures of approximately $35 million. To pursue the commencement of production at Relief Canyon, additional external
financing, in addition to this offering and, if it occurs, the Private Placement private offering, would be required. Such additional
financing could include streaming, royalty financing, forward sale arrangements, debt offerings (including convertible debt), additional
equity financing or other alternatives. We may be unable to secure additional financing on terms acceptable to us, or at all. Our
inability to raise additional funds would prevent us from achieving our business objectives and would have a negative impact on
our business, financial condition, results of operations and the value of our securities. If we raise additional funds by issuing
additional equity or convertible debt securities, the ownership of existing stockholders, including investors in this offering
and the Private Placement, may be diluted and the securities that we may issue in the future may have rights, preferences or privileges
senior to those of the current holders of our common stock. Such securities may also be issued at a discount to the market price
of our common stock, resulting in possible further dilution to the book value per share of common stock. If we raise additional
funds by issuing debt, we could be subject to debt covenants that could place limitations on our operations and financial flexibility.
Although we entered into a non-binding term sheet with Sprott Resource Lending (“Sprott”), as discussed in “Management’s
Discussion and Analysis of Financial Condition and Results of Operation – Liquidity and Capital Resources,” in our
2016 10-K, after further negotiations the Company and Sprott decided not to enter into a binding agreement.
Uunanticipated problems or delays may
negatively affect our ability to commence mining and processing activities at Relief Canyon.
If we were to decide to
pursue the commencement of mining and processing activities at Relief Canyon, additional external financing, in addition to this
offering and the Private Placement, would be required. Although the Relief Canyon Mine currently has an available leach pad
and processing facility and we have senior mine and processing personnel in place, we would be required to obtain mining equipment
(which could be through purchase, lease, contract mining or a combination of these), hire employees for the mine and the processing
plant, purchase materials and supplies, commence mining, leaching and processing activities, and continue these activities as well
as the corporate activities currently conducted for a number of months until sufficient positive cash flow is produced by gold
sales to fund all of these ongoing activities. We may suffer significant delays or cost overruns as a result of a variety of factors,
such as increases in the prices of materials, mining or processing problems, unanticipated variations in mined materials, shortages
of workers or materials, transportation constraints, adverse weather, equipment failures, fires, damage to or destruction of property
and equipment, environmental problems, unforeseen difficulties or labor issues, any of which could delay or prevent us from commencing
or ramping up mining and processing. If our start-up were prolonged or delayed or our costs were higher than anticipated, we could
be unable to obtain sufficient funds to cover the additional costs, and our business could experience a substantial setback. Prolonged
problems could have a material adverse effect on our business, consolidated financial condition or results of operations and threaten
our viability.
We are a junior exploration company with
no mining activities and we may never have any mining activities in the future.
Our primary business is
exploring for gold and, to a lesser extent, other minerals. If we discover commercially exploitable gold or other deposits, we
will not be able to make any money from mining activities unless the gold or other deposits are actually mined, or we sell our
interest. Accordingly, we will need to seek additional capital through debt or equity financing, streaming, royalty financing,
forward sale arrangements, or other alternatives, find some other entity to mine our properties or operate our facilities on our
behalf, enter into joint venture or other arrangements with a third party, or sell or lease the property or rights to mine to third
parties. Mine development projects typically require a number of years and significant expenditures during the development phase
before production is possible. Such projects could experience unexpected problems and delays during development, construction and
mine start up. Mining operations in the United States are subject to many different federal, state and local laws and regulations,
including stringent environmental, health and safety laws. If and when we assume operational responsibility for mining on our properties,
we must demonstrate that we will be able to comply with current or future laws and regulations, which can change at any time. It
is possible that changes to these laws will be adverse to any potential mining operations. Moreover, compliance with such laws
may cause substantial delays and require capital outlays in excess of those anticipated, adversely affecting any potential mining
operations. Our future mining operations, if any, may also be subject to liability for pollution or other environmental damage.
It is possible that we will choose to not be insured against this risk because of high insurance costs or other reasons.
We must make annual lease payments, advance
royalty and royalty payments and claim maintenance payments or we will lose our rights to our property.
We are required under the
terms of the leases covering some of our property interests to make annual lease payments and advance royalty and royalty payments
each year. We are also required to make annual claim maintenance payments to the BLM and pay a fee to Pershing County in order
to maintain our rights to explore and, if warranted, to develop our unpatented mining claims. If we fail to meet these obligations,
we will lose the right to explore for gold and other minerals on our property. Our total annual property maintenance costs payable
to the BLM and Pershing County for all of the unpatented mining claims and millsites in the Relief Canyon area in 2016 were approximately
$207,000, and we expect our annual maintenance costs to be approximately $213,000 in 2017 and 2018. Our lease payments, advance
royalty and royalty payments and claim maintenance payments are described under “ITEMS 1 AND 2: BUSINESS AND PROPERTIES—Business
Strategy” in our 2016 10-K.
Our business is subject to extensive
environmental regulations that may make exploring, mining or related activities prohibitively expensive, and which may change at
any time.
All of our operations are
subject to extensive environmental regulations that can substantially delay exploration and mine development and make exploration
and mine development expensive or prohibit it altogether. We may be subject to potential liabilities associated with the pollution
of the environment and the disposal of waste products that may occur as the result of exploring and other related activities on
our properties, including our plan to process gold at our processing facility. We may have to pay to remedy environmental pollution,
which may reduce the amount of money that we have available to use for exploration, mine development, or other activities, and
adversely affect our financial position. If we are unable to fully remedy an environmental problem, we might be required to suspend
operations or to enter into interim compliance measures pending the completion of the required remedy. If a decision is made to
mine our properties and we retain any operational responsibility for doing so, our potential exposure for remediation may be significant,
and this may have a material adverse effect upon our business and financial position. We have not purchased insurance for potential
environmental risks (including potential liability for pollution or other hazards associated with the disposal of waste products
from our exploration activities) and such insurance may not be available to us on reasonable terms or at a reasonable price. All
of our exploration and, if warranted, development activities will be subject to regulation under one or more local, state and federal
environmental impact analyses and public review processes. It is possible that future changes in applicable laws, regulations and
permits or changes in their enforcement or regulatory interpretation could have significant impact on some portion of our business,
which may require our business to be economically re-evaluated from time to time. These risks include, but are not limited to,
the risk that regulatory authorities may increase bonding requirements beyond our financial capability. Inasmuch as posting of
bonding in accordance with regulatory determinations is a condition to the right to operate under specific federal and state operating
permits, increases in bonding requirements could prevent operations even if we are in full compliance with all substantive environmental
laws. We have been required to post a substantial bond under various laws relating to mining and the environment and may in the
future be required to post a larger bond to pursue additional activities. For example, we must provide BLM and the Nevada Division
of Environmental Protection Bureau of Mining Regulation and Reclamation (“NDEP”) additional financial assurance (reclamation
bonds) to guarantee reclamation of any new surface disturbance required for drill roads, drill sites, or mine expansion. In March
2017, we increased the amount of our reclamation bond with BLM and the NDEP to approximately $12.3 million. Approximately $12.2
million of our reclamation bond covers both exploration and mining at the Relief Canyon Mine property, including the three open-pit
mines and associated waste rock disposal areas, the mineral processing facilities, ancillary facilities, and the exploration roads
and drill pads. Approximately $76,000 covers exploration on the Relief Canyon expansion properties. The reclamation bond was collateralized
by approximately 30% of the $12.3 million bond amount, or about $3.7 million. Approximately $30,000 of the reclamation bond remains
available for future mining or exploration operations. Our preliminary estimate of the likely amount of additional financial assurance
for future exploration is approximately $100,000, although we expect periodic increases due to effects of inflation.
The government licenses and permits which
we need to explore on our property may take too long to acquire or cost too much to enable us to proceed with exploration. In the
event that we conclude that the Relief Canyon Mine deposit can be profitably mined, or discover other commercially exploitable
deposits, we may face substantial delays and costs associated with securing the additional government licenses and permits that
could preclude our ability to develop the mine.
Exploration activities
usually require the granting of permits from various governmental agencies. For example, exploration drilling on unpatented mining
claims requires a permit to be obtained from the BLM, which may take several months or longer to grant the requested permit. Depending
on the size, location and scope of the exploration program, additional permits may also be required before exploration activities
can be undertaken. Prehistoric or Indian graves, threatened or endangered species, archeological sites or the possibility thereof,
difficult access and excessive dust may all result in the need for additional permits before exploration activities can commence.
If we conclude that the
Relief Canyon deposit can be profitably mined and the minable material exceeds 21 million tons, the current capacity of the leach
pad, we would also need to seek an amendment of the processing facility permit to expand the capacity of the leach pad and ponds
to accommodate additional material. As with all permitting processes, there is substantial uncertainty about when and if the permits
will be issued. There is the risk that unexpected delays and excessive costs may be experienced in obtaining required permits.
The needed permits may not be granted or could be challenged by third parties, which could result in protracted litigation that
could cause substantial delays, or may be granted in an unacceptable timeframe or cost too much. While permitting efforts have
not encountered opposition to date, proposed mineral exploration and mining projects can become controversial and be opposed by
nearby landowners and communities, which can substantially delay and interfere with the permitting process. Additional permitting
would also be required in the future to mine below the water table, and the BLM may require an Environmental Impact Statement to
evaluate the associated impacts. Delays in or inability to obtain the necessary permits discussed above would result in unanticipated
costs, which may result in serious adverse effects upon our business.
The value of our property and any other
deposits we may seek or locate is subject to volatility in the price of gold.
Our ability to obtain additional
and continuing funding, and our profitability if and when we commence mining or sell our rights to mine, will be significantly
affected by changes in the market price of gold and other mineral deposits. Gold and other minerals prices fluctuate widely and
are affected by numerous factors, all of which are beyond our control. The price of gold may be influenced by:
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fluctuation in the supply
of, demand and market price for gold;
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mining activities of our competitors;
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sale or purchase of gold by central banks and for investment purposes by individuals and financial institutions;
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currency exchange rates;
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inflation or deflation;
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fluctuation in the value of the United States dollar and other currencies;
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global and regional supply and demand, including investment, industrial and jewelry demand; and
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political and economic conditions of major gold or other mineral-producing countries.
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The price of gold and other
minerals have fluctuated widely in recent years, and a decline in the price of gold or other minerals could cause a significant
decrease in the value of our property, limit our ability to raise money, and render continued exploration and development of our
property impracticable. If that happens, then we could lose our rights to our property or be compelled to sell some or all of these
rights. Additionally, the future development of our mining properties beyond the exploration stage is heavily dependent upon gold
prices remaining sufficiently high to make the development of our property economically viable.
Our property title may be challenged.
We are not insured against any challenges, impairments or defects to our mining claims or title to our other properties.
Our property is comprised
primarily of unpatented lode mining claims and millsites located and maintained in accordance with the federal General Mining Law
of 1872 (the “General Mining Law”). Unpatented lode mining claims and millsites are unique U.S. property interests
and are generally considered to be subject to greater title risk than other real property interests because the validity of unpatented
mining claims and millsites is often uncertain. This uncertainty arises, in part, out of the complex federal and state laws and
regulations with which the owner of an unpatented mining claim or millsite must comply in order to locate and maintain a valid
claim. Moreover, if we discover mineralization that is close to the claim boundaries, it is possible that some or all of the mineralization
may occur outside the boundaries on lands that we do not control. In such a case we would not have the right to extract those minerals.
We do not have title reports or opinions covering all of our Relief Canyon properties. The uncertainty resulting from not having
title opinions for all of our Relief Canyon properties or having detailed claim surveys on all of our properties leaves us exposed
to potential title defects. Defending challenges to our property title would be costly, and may divert funds that could otherwise
be used for exploration activities and other purposes.
In addition, unpatented
lode mining claims and millsites are always subject to possible challenges by third parties or contests by the federal government,
which, if successful, may prevent us from exploiting any discovery of commercially extractable gold. Challenges to our title may
increase our costs of operation or limit our ability to explore on certain portions of our property. We are not insured against
challenges, impairments or defects to our property title.
Possible amendments to the General Mining
Law and other environmental regulations could make it more difficult or impossible for us to execute our business plan.
In recent years, the U.S.
Congress has considered a number of proposed amendments to the General Mining Law, as well as legislation that would make comprehensive
changes to the law. Although no such legislation has been adopted to date, there can be no assurance that such legislation will
not be adopted in the future. If adopted, such legislation, if it includes concepts that have been part of previous legislative
proposals, could, among other things, (i) limit on the number of millsites that a claimant may use, discussed below, (ii) impose
time limits on the effectiveness of plans of operation that may not coincide with mine life, (iii) impose more stringent environmental
compliance and reclamation requirements on activities on unpatented mining claims and millsites, (iv) establish a mechanism
that would allow states, localities and Native American tribes to petition for the withdrawal of identified tracts of federal land
from the operation of the General Mining Law, (v) allow for administrative determinations that mining would not be allowed
in situations where undue degradation of the federal lands in question could not be prevented, (vi) impose royalties on gold
and other mineral production from unpatented mining claims or impose fees on production from patented mining claims, and (vii)
impose a fee on the amount of material displaced at a mine. Further, it could have an adverse impact on earnings from our operations,
could reduce estimates of any reserves we may establish and could curtail our future exploration and development activity on our
unpatented claims.
Our ability to conduct
exploration, development, mining and related activities may also be impacted by administrative actions taken by federal agencies.
With respect to unpatented millsites, for example, the ability to use millsites and their validity has been subject to greater
uncertainty since 1997. In November of 1997, the Secretary of the Interior (appointed by President Clinton) approved a Solicitor’s
Opinion that concluded that the General Mining Law imposed a limitation that only a single five-acre millsite may be claimed or
used in connection with each associated and valid unpatented or patented lode mining claim. Subsequently, however, on November 7,
2003, the new Secretary of the Interior (appointed by President Bush) approved an Opinion by the Deputy Solicitor which concluded
that the mining laws do not impose a limitation that only a single five-acre millsite may be claimed in connection with each associated
unpatented or patented lode mining claim. Current federal regulations do not include the millsite limitation. There can be no assurance,
however, that the Department of the Interior will not seek to re-impose the millsite limitation at some point in the future.
In addition, a consortium
of environmental groups has filed a lawsuit in the United District Court for the District of Columbia against the Department of
the Interior, the Department of Agriculture, the BLM, and the U.S. Forest Service (“USFS”), asking the court to order
the BLM and USFS to adopt the five-acre millsite limitation. That lawsuit also asks the court to order the BLM and the USFS to
require mining claimants to pay fair market value for their use of the surface of federal lands where those claimants have not
demonstrated the validity of their unpatented mining claims and millsites. If the plaintiffs in that lawsuit were to prevail, that
could have an adverse impact on our ability to use our unpatented millsites for facilities ancillary to our exploration, development
and mining activities, and could significantly increase the cost of using federal lands at our properties for such ancillary facilities.
In 2009, the U.S. Environmental
Protection Agency (“EPA”) announced that it would develop financial assurance requirements under CERCLA Section 108(b)
for the hard rock mining industry. On January 29, 2016, the U.S. District Court for the District of Columbia issued an order requiring
that if the EPA intended to prepare such regulations, it had to do so by December 1, 2016. The EPA issued its proposed rule on
January 11, 2017. Under the proposed rule, owners and operators of facilities subject to the rule would be required to (i) notify
the EPA that they are subject to the rule; (ii) calculate a level of financial responsibility for their facility using a formula
provided in the rule; (iii) obtain a financial responsibility instrument, or qualify to self-assure, for the amount of financial
responsibility; (iv) demonstrate that they have obtained such evidence of financial responsibility; and (v) update and maintain
financial responsibility until the EPA releases the owner or operator from the CERCLA Section 108(b) regulations. As drafted, those
additional financial assurance obligations could be in addition to the reclamation bonds and other financial assurances the Company
has and would be required to have in place under current federal and state laws. The draft form of the proposed rule has been commented
upon by the public and the regulated community, and the EPA is currently evaluating the comments to determine if changes to the
draft rule are needed. If such requirements are retained in the final rule, they could require significant additional expenditures
on financial assurance, which could have a material adverse effect on our future business operations.
Market forces or unforeseen developments
may prevent us from obtaining the supplies and equipment necessary to explore for gold and other minerals.
Gold exploration, and mineral
exploration in general, is a very competitive business. Competitive demands for contractors and unforeseen shortages of supplies
and/or equipment could result in the disruption of our planned exploration activities. Current demand for exploration drilling
services, equipment and supplies is robust and could result in suitable equipment and skilled manpower being unavailable at scheduled
times for our exploration program. Fuel prices are extremely volatile as well. We will attempt to locate suitable equipment, materials,
manpower and fuel if sufficient funds are available. If we cannot find the equipment and supplies needed for our various exploration
programs, we may have to suspend some or all of them until equipment, supplies, funds and/or skilled manpower become available.
Any such disruption in our activities may adversely affect our exploration activities and financial condition.
Our directors and executive officers
lack significant experience or technical training in exploring for precious and base metal deposits and in developing mines.
Most of our directors and
executive officers lack significant experience or technical training in exploring for precious and base metal deposits and in developing
mines. Accordingly, although our Senior Vice President has significant experience and expertise in environmental permitting and
regulatory matters for developing and operating mines and our Chief Operating Officer has significant experience with mine operations,
our management may not be fully aware of many of the other specific requirements related to working within this industry. Their
decisions and choices may not take into account standard engineering or managerial approaches that mineral exploration companies
commonly use. Consequently, our operations, earnings, and ultimate financial success could suffer irreparable harm due to some
of our management’s lack of experience in the mining industry.
We may not be able to maintain the infrastructure
necessary to conduct exploration activities.
Our exploration activities
and any future mine development activities depend upon adequate infrastructure. Reliable roads, bridges, power sources and water
supply are important factors that affect capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government
or other interference in the maintenance or provision of such infrastructure could adversely affect our exploration activities
and financial condition.
Our exploration activities and any future
mine development may be adversely affected by the local climate or seismic events, which could prevent us from gaining access to
our property year-round.
Earthquakes, heavy rains,
snowstorms, and floods could result in serious damage to or the destruction of facilities, equipment or means of access to our
property, or may otherwise prevent us from conducting exploration activities on our property. There may be short periods of time
when the unpaved portion of the access road is impassible in the event of extreme weather conditions or unusually muddy conditions.
During these periods, it may be difficult or impossible for us to access our property, make repairs, or otherwise conduct exploration
or mine development activities on them.
Risks Relating to Our Organization and Our Common Stock
We have relied on certain stockholders
to provide significant investment capital to fund our operations.
We have in the past relied
on cash infusions primarily from Frost Gamma Investments Trust (“Frost Gamma”) and one of the Company’s directors,
Barry Honig. During the year ended December 31, 2012, Frost Gamma provided approximately $4.6 million in consideration for
the issuance of certain of our securities. In the year ended December 31, 2013, Mr. Honig provided approximately $5.6 million
to us in consideration for the issuance of shares of the Company’s Series E Preferred Stock. Additionally, Mr. Honig
and Frost Gamma provided approximately $1.9 million and $150,000, respectively, to us in consideration for the issuance of shares
of common stock and warrants to purchase shares of common stock in July 2014 private placements. Mr. Honig invested $150,000
in a private placement of our common stock in October 2014, $2.5 million in an April 2015 private placement, and $1.25 million
in a February 2016 private placement. Donald Smith invested $6 million in a March 2016 private placement. Curtailment of cash investments
by significant investors could detrimentally impact our cash availability and our ability to fund our operations.
Our principal stockholders, officers
and directors own a substantial interest in our voting securities, and investors may have limited voice in our management.
Our principal stockholders,
Barry Honig, Donald Smith, and Levon Resources Ltd. (“Levon Resources”), as well as our officers and directors, own,
in the aggregate, in excess of approximately 50.1% of our voting securities, including shares of common stock issuable upon the
conversion of our Series E Preferred Stock. As of December 11, 2017, Mr. Honig, who is a director, owned 9,217,622 or approximately
29.6%, of our voting securities, Mr. Smith owned 3,251,500, or approximately 10.5%, of our voting securities, and Levon Resources
owned 1,954,366, or approximately 6.3%, of our voting securities. As of that date, our officers and directors, including Mr. Honig,
owned 10,377,146, or approximately 33.3%, of our voting securities. Additionally, the holdings of our officers and directors may
increase in the future upon exercise of options, warrants or convertible securities they may hold or be granted in the future or
if they otherwise acquire additional shares of our common stock, including through grants under our employee benefit plans.
As a result of their ownership
and positions, our principal stockholder, directors and executive officers collectively may be able to influence all matters requiring
stockholder approval, including the following matters:
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election of our directors;
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amendment of our articles
of incorporation or bylaws; and
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effecting or preventing a
merger, sale of assets or other corporate transaction.
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In addition, their stock
ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company,
which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
We are subject to the information and
reporting requirements of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and other federal
securities laws, as well as the listing rules of Nasdaq and the TSX.
The costs of preparing
and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to stockholders will
cause our expenses to be higher than they would have been if we were privately held. These costs for the years ended December 31,
2015 and December 31, 2016 were approximately $950,000 and $850,000 respectively. We estimate that these costs will be approximately
$850,000 for the year ending 2017.
It may be time consuming,
difficult and costly for us to develop, implement and maintain the internal controls and reporting procedures required by the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”). We may need to hire additional financial reporting, internal controls and other
finance personnel in order to develop and implement appropriate internal controls and reporting procedures.
If we fail to establish and maintain
an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any
inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading
price of our common stock and our ability to file registration statements pursuant to registration rights agreements and other
commitments.
Effective internal control
is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or
prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed,
and our business and reputation with investors may be harmed. As a result of our small size, any current internal control deficiencies
may adversely affect our financial condition, results of operation and access to capital. Although, as of December 31, 2016,
management has concluded that our internal control over financial reporting is effective, there can be no assurance that our internal
control over financial reporting will remain effective.
Public company compliance may make it
more difficult to attract and retain officers and directors.
The Sarbanes-Oxley Act
and rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public
company, we expect these rules and regulations to further increase our compliance costs and to make certain activities more
time consuming and costly. As a public company, we also expect that these rules and regulations may make it more difficult
and expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits
and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult
for us to attract and retain qualified persons to serve on our board of directors or as executive officers, and to maintain insurance
at reasonable rates, or at all.
Our stock price may be volatile.
The market price of our
common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which
are beyond our control, including the following:
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results of our operations
and exploration efforts;
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fluctuation in the supply of, demand and market price for gold;
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our ability to obtain working capital financing;
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additions or departures of key personnel;
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limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
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our ability to execute our business plan;
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sales of our common stock and decline in demand for our common stock;
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regulatory developments;
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economic and other external factors;
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investor perception of our industry or our prospects; and
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period-to-period fluctuations in our financial results.
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In addition, the securities
markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance
of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
As a result, you may be unable to resell your shares of our common stock at a desired price.
Volatility in the price of our common
stock may subject us to securities litigation.
As discussed above, the
market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that
our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have
often initiated securities class action litigation against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs and
liabilities and could divert management’s attention and resources.
We have not paid cash dividends in the
past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.
We have never paid cash
dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board
of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your
investment will only occur if our common stock price appreciates.
There is currently a limited trading
market for our common stock and we cannot ensure that one will ever develop or be sustained.
Although the Company’s
common stock is currently quoted on Nasdaq, the TSX, and Frankfurt Stock Exchange, there is limited trading activity. The
Company can give no assurance that an active market will develop, or if developed, that it will be sustained. If an
investor acquires shares of the Company’s common stock, the investor may not be able to liquidate the Company’s shares
should there be a need or desire to do so. Only a small percentage of our common stock is available to be traded and is held by
a small number of holders and the price, if traded, may not reflect our actual or perceived value. There can be no assurance that
there will be an active market for our shares of common stock either now or in the future. The market liquidity of our common stock
is limited and may be dependent on the market perception of our business, among other things. We may, in the future, take certain
steps, including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our
business and any steps that we might take to bring us to the awareness of investors may require we compensate consultants with
cash and/or stock. There can be no assurance that there will be any awareness generated or the results of any efforts will result
in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a
price that reflects the value of the business and trading may be at an inflated price relative to the performance of our Company
due to, among other things, availability of sellers of our shares. If a market should develop, the price may be highly volatile.
Because there may be a low price for our shares of common stock, many brokerage firms or clearing firms may not be willing to effect
transactions in the securities or accept our shares for deposit in an account. Even if an investor finds a broker willing to effect
a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any
other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of low priced shares
of common stock as collateral for any loans.
Offers or availability for sale of a
substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell
substantial amounts of our common stock in the public market or upon the expiration of any statutory holding period, under Rule 144,
or upon the exercise of outstanding options or warrants, including the associated warrants offered in this offering and the Private
Placement, it could create a circumstance commonly referred to as an “overhang” in anticipation of which the market
price of our common stock could decline. The existence of an overhang, whether or not sales have occurred or are occurring, also
could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the
future at a time and price that we deem reasonable or appropriate.
The Private Placement, the conversion
of preferred stock, the change in the conversion rate of preferred stock and exercise of options or warrants may result in substantial
dilution to existing stockholders.
Conversions of our Series E
Preferred Stock presently owned by our principal shareholders and others and exercise of options and warrants would have a dilutive
effect on our common stock. As of December 11, 2017, we have reserved (i) 2,725,092 shares of our common stock that are issuable
upon conversion of our Series E Preferred Stock at a conversion rate of one share of Series E Preferred Stock for approximately
304.615 shares of common stock (following an adjustment in the conversion ratio effective February 25, 2016), (ii) 1,794,453 shares
of our common stock that are issuable upon exercise of options to purchase our common stock, (iii) 2,377,576 shares of our common
stock that are issuable upon exercise of warrants to purchase our common stock, and (iv) 1,047,224 shares of our common stock that
are issuable pursuant to restricted stock units upon vesting and/or upon termination of service or in connection with a change
of control. Because the common stock issued in this offering will be offered at a price of $
, the conversion rate will be adjusted effective as of the closing of the offering to a rate of one share of Series E Preferred
Stock for approximately shares of common stock. As a result, the number
of shares of common stock issuable upon conversion of outstanding Series E Preferred Stock will increased by approximately to shares
of common stock. Further, any additional financing that we secure is likely to require the sale of additional common stock and
the granting of rights, preferences or privileges senior to those of our common stock and will result in additional dilution of
the existing ownership interests of our common stockholders.
Our issuance of additional shares of
common stock or securities convertible into common stock in exchange for services or to repay debt would dilute the proportionate
ownership and voting rights of existing stockholders and could have a negative impact on the market price of our common stock.
Our board of directors
may generally issue shares of common stock or securities convertible into common stock to pay for debt or services, without further
approval by our stockholders, based upon such factors that our board of directors may deem relevant at that time. We have, in the
past, issued securities for debt to reduce our obligations. We have also issued securities as payment for services. It is likely
that we will issue additional securities to pay for services and reduce debt in the future. We cannot give you any assurance that
we will not issue additional shares of common stock or securities convertible into common stock under circumstances we may deem
appropriate at the time.
Our articles of incorporation allow for
our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect the
rights of the holders of our common stock.
Our board of directors
has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has
the authority to issue preferred stock without further stockholder approval. As a result, our board of directors could authorize
the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the
right to receive dividend payments before dividends are distributed to the holders of our common stock and the right to the redemption
of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board of directors could
authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible
into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing
stockholders.
The elimination of monetary liability
against our directors, officers and employees under our articles of incorporation and the existence of indemnification rights to
our directors, officers and employees may result in substantial expenditures by our Company and may discourage lawsuits against
our directors, officers and employees.
Our articles of incorporation
contain provisions which eliminate the liability of our directors for monetary damages to our Company and stockholders. Our bylaws
also require us to indemnify our officers and directors. We may also have contractual indemnification obligations under our agreements
with our directors, officers and employees. The foregoing indemnification obligations could result in our Company incurring substantial
expenditures to cover the cost of settlement or damage awards against directors, officers and employees that we may be unable to
recoup. These provisions and resultant costs may also discourage our Company from bringing a lawsuit against directors, officers
and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders
against our directors, officers and employees even though such actions, if successful, might otherwise benefit our Company and
stockholders.
Anti-takeover provisions may impede the
acquisition of our Company.
Certain provisions of the
Nevada General Corporation Law have anti-takeover effects and may inhibit a non-negotiated merger or other business combination.
These provisions are intended to encourage any person interested in acquiring us to negotiate with, and to obtain the approval
of, our board of directors in connection with such a transaction. However, certain of these provisions may discourage a future
acquisition of us, including an acquisition in which the stockholders might otherwise receive a premium for their shares. As a
result, stockholders who might desire to participate in such a transaction may not have the opportunity to do so.
Non-U.S. holders of our common stock,
in certain situations, could be subject to U.S. federal income tax upon sale, exchange or disposition of our common stock.
It is likely that we are,
and will remain for the foreseeable future, a U.S. real property holding corporation for U.S. federal income tax purposes because
our assets consist primarily of “United States real property interests” as defined in the Internal Revenue Code of
1986, as amended, or the Code, and applicable Treasury regulations. As a result, under the Foreign Investment in Real Property
Tax Act, or FIRPTA, certain non-U.S. investors may or may in the future be subject to U.S. federal income tax on any gain from
the disposition of shares of our common stock, in which case they would also be required to file U.S. tax returns with respect
to such gain. In general, whether these FIRPTA provisions apply depends on the amount of our common stock that such non-U.S.
investors hold. In addition, such non-U.S. investors may or may in the future be subject to withholding if, at the time they
dispose of their shares, our common stock is not regularly traded on an established securities market within the meaning of the
applicable Treasury regulations. So long as our common stock continues to be regularly traded on an established securities
market, only a non-U.S. investor who has owned, actually or constructively, more than 5% of our common stock at any time during
the shorter of (i) the five-year period ending on the date of disposition and (ii) the non-U.S. investor’s holding
period for its shares may or may in the future be subject to U.S. federal income tax on the disposition of our common stock under
FIRPTA. See “Certain United States Federal Income Tax Considerations.”
USE OF PROCEEDS
We
estimate that our net proceeds from this offering of common stock and associated warrants, after deducting underwriting discounts
and commissions and estimated fees and expenses, will be approximately $ million
($ million if the underwriters exercise their option to purchase additional share
and/or warrants in full).
Concurrently with this
offering, we are conducting a Private Placement of shares of our common
stock and associated four-tenth common stock warrants to purchase an aggregate of
shares of common stock that is not subject to the registration requirements of the Securities Act.
We intend to use the
net proceeds from this offering and the Private Placement for advancing our Relief Canyon project, including pre-construction
and development and exploration drilling to expand the mineralization at Relief Canyon, and/or general corporate purposes.
The expected use of the net proceeds from the sale of common stock and associated warrants offered by this prospectus
supplement represents our intentions based upon our current plans and business conditions. The amounts and timing of our
actual expenditures may vary significantly depending on numerous factors. Pending such intended uses, we intend to deposit
the proceeds in an interest-bearing account.
CAPITALIZATION
The following table sets
forth our capitalization and cash position as of September 30, 2017 on:
|
·
|
an as-adjusted basis to give
effect to the issuance and sale of shares of our common stock and warrants
in this offering, assuming the exercise of shares of common stock issuable upon the exercise of the warrants, but assuming no
exercise of the underwriters’ option to purchase additional shares and/or warrants; and
|
|
·
|
an as-further-adjusted basis
to give effect to the issuance and sale of the Private Placement Shares and Private Placement Warrant Shares, assuming the exercise
of shares of common stock issuable upon the exercise of warrants in the Private Placement.
|
This table should be read
in conjunction with, and is qualified in its entirety by reference to, our financial statements and the accompanying notes, incorporated
by reference into this prospectus supplement and the accompanying prospectus and “Use of Proceeds” in this prospectus
supplement.
|
|
As of September 30, 2017
|
|
|
|
|
|
|
Actual
|
|
|
As
Adjusted
|
|
|
As Further
Adjusted
|
|
|
|
(unaudited; in thousands)
|
|
|
|
|
|
Cash and cash equivalents:
|
|
$
|
1,963
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total indebtedness
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Series E Preferred stock ($0.0001 par
value; 15,151 shares authorized; 8,946 shares issued and outstanding; liquidation preference of $9,742,194)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Common stock, ($0.0001 par value; 200,000,000 shares authorized; 28,402,389 shares issued and outstanding)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
197,298
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
(165,658
|
)
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Pershing Gold stockholders’ equity
|
|
$
|
31,643
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
31,643
|
|
|
$
|
|
|
|
$
|
|
|
DILUTION
Purchasers of common shares
and warrants offered by this prospectus will experience an immediate dilution in the net tangible book value of their
common shares from the price paid in the offering. The net tangible book value of our common shares as of September 30, 2017 was
approximately $31.6 million, or $1.10 per share. Net tangible book value per share is determined by dividing our total tangible
assets, less total liabilities, by the number of common shares outstanding as of September 30, 2017.
Dilution per share
represents the difference between the public offering price per common share and the adjusted net tangible book value per common
share after giving effect to this offering. After reflecting the sale in this offering of common
shares in this offering (not including common shares issuable upon the exercise of warrants sold in this offering), less underwriter
fees and estimated offering expenses, the adjusted net tangible book value of our common shares as of September 30, 2017 would
have been approximately $ million, or approximately $ per
share. The change represents an immediate increase in net tangible book value per common share of $ per
share to existing stockholders and an immediate dilution of $ per share
to new investors purchasing the common shares in this offering. The following table illustrates this per share dilution:
Public offering price per common share
|
|
$
|
|
|
Net tangible book value per share as of September 30, 2017
|
|
$
|
|
|
Increase per share attributable to this offering
|
|
$
|
|
|
|
|
|
|
|
Adjusted net tangible book value per share as of September 30, 2017
|
|
$
|
|
|
Dilution per share attributable to this offering
|
|
$
|
|
|
If the underwriters were
to fully exercise their option to purchase shares and/or warrants, less the applicable underwriting discounts and commissions,
the as adjusted net tangible book value per share after the offering would be $
per share, and the dilution per share to new investors would be $ per share.
The foregoing calculations
are based on 28,402,389 common shares outstanding as of September 30, 2017 and excludes (i) outstanding options to purchase 1,794,453
shares of our common stock at a weighted average exercise price of $7.21 per share, (ii)
shares of common stock issuable upon conversion of Series E Convertible Preferred Stock after the change in the conversion rate
triggered by this offering, (iii) 2,377,576 shares of common stock issuable upon the exercise of outstanding warrants, and (iv)
1,794,453 shares of common stock issuable pursuant to restricted stock units. Dilution caused by the issuance of shares in the
Private Placement are not reflected in the foregoing calculations.
Because the common stock
issued in this offering will be offered at a price of $ , the conversion rate for
our Series E Preferred Stock will be adjusted effective as of the closing of the offering to a rate of one share of Series E Preferred
Stock for approximately shares of common stock. As a result, the number of shares
of common stock issuable upon conversion of outstanding Series E Preferred Stock will increased by approximately to
shares of common stock.
PRICE
RANGE OF OUR COMMON STOCK
Our common stock commenced trading
on August 20, 2009 and was quoted on the OTC Bulletin Board under the symbol EXCX.OB from June 23, 2009 through May 31,
2011. Prior to August 20, 2009, there was no active market for our Common Stock. Our Common Stock traded under the symbol
SAGE.OB from June 1, 2011 until March 26, 2012. On March 26, 2012, our symbol was changed to PGLC.OB. On June 18,
2015 our stock underwent a 1-for-18 reverse stock split. On July 6, 2015, our stock began trading on Nasdaq under the symbol PGLC.
On November 17, 2016, our stock began trading on the TSX under the symbol PGLC.
The following table sets
forth the high and low sales prices in U.S. dollars or Canadian dollars for each of the quarterly periods indicated as reported
on Nasdaq (as reported by Nasdaq) and the TSX (as reported by TMX Datalinx), respectively.
|
|
Nasdaq
|
|
|
TSX (C$)
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
Year Ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
4.99
|
|
|
|
3.12
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Second Quarter
|
|
|
4.65
|
|
|
|
3.62
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Third Quarter
|
|
|
5.02
|
|
|
|
3.77
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Fourth Quarter
|
|
|
4.58
|
|
|
|
3.10
|
|
|
|
3.76
|
|
|
|
3.16
|
|
Year Ending December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
3.49
|
|
|
|
2.67
|
|
|
|
3.40
|
|
|
|
2.81
|
|
Second Quarter
|
|
|
3.10
|
|
|
|
2.60
|
|
|
|
3.38
|
|
|
|
2.64
|
|
Third Quarter
|
|
|
3.31
|
|
|
|
2.70
|
|
|
|
3.23
|
|
|
|
2.71
|
|
Fourth Quarter (through December 8, 2017)
|
|
|
3.23
|
|
|
|
2.66
|
|
|
|
4.02
|
|
|
|
3.40
|
|
The last reported sales
price of our Common Stock on Nasdaq on December 8, 2017, was $2.87 per share. The last reported sales price of our Common
Stock on TSX on December 8, 2017, was CDN$3.66 per share.
As of December 8, 2017,
there were 499 holders of record of our Common Stock.
Dividend Policy
In the past, we have not
declared or paid cash dividends on our Common Stock, and we do not intend to pay any cash dividends on our Common Stock. Rather,
we intend to retain future earnings (if any) to fund the operation and expansion of our business and for general corporate purposes.
Subject to legal and contractual limits, our board of directors will make any decision as to whether to pay dividends in the future.
DESCRIPTION
OF SECURITIES WE ARE OFFERING
Common Stock
We are authorized to issue
200,000,000 shares of common stock, par value $0.0001 per share, and 50,000,000 shares of preferred stock. As of December 11,
2017, we have the following issued and outstanding securities on a fully diluted basis:
|
·
|
28,402,389 shares of common stock (including 42,961 shares of
restricted stock granted under our equity incentive plans that vested December 11, 2017);
|
|
·
|
8,946 shares of Series E
Convertible Preferred Stock, which are convertible into 2,725,092 shares of common stock;
|
|
·
|
Warrants to purchase 2,377,576
shares of common stock;
|
|
·
|
Options to purchase 1,794,453
shares of common stock; and
|
|
·
|
Restricted stock units, which
entitle the holders to receive 1,047,224 shares of common stock upon vesting and upon the satisfaction of certain specified conditions.
|
The holders of our common
stock are entitled to one vote per share. In addition, the holders of our common stock will be entitled to receive ratably such
dividends, if any, as may be declared by our board of directors out of legally available funds; however, the current policy of
our board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the
holders of our common stock will be entitled to share ratably in all assets that are legally available for distribution. The holders
of our common stock will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges
of holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any series of
preferred stock, which may be designated solely by action of our board of directors.
Our common stock is listed
on Nasdaq and on the TSX under the symbol “PGLC.” The transfer agent for our common stock in the United States is Computershare
Investor Services, Inc. located at 462 South 4th Street, Suite 1600, Louisville, Kentucky 40233-5000. The transfer agent for our
common stock in Canada is Computershare Investor Services, Inc. located at 100 University Avenue, 8
th
Floor, Toronto,
Ontario M5J 2Y1.
Warrants
The following is a brief
summary of certain terms and conditions of the warrants being offered by this prospectus supplement. The following description
is subject in all respects to the provisions contained in the warrant agreements.
The warrants will be issued
as an individual warrant agreement to the investor. The warrants are exercisable at any time after their original issuance and
at any time for up to two years following the issuance date. The warrants will be exercisable, at the option of each holder, in
whole or in part by delivering to us a duly executed exercise notice and by payment in full in immediately available funds for
the number of shares of common stock purchased upon such exercise. In the event the Registration Statement (or subsequent registration
statement applicable to the warrant shares) permitting the registered issuance of the warrant shares is not then effective or the
prospectus forming a part thereof is not then available, then the warrant may be exercised through a “cashless exercise,”
in which case the holder would receive upon such exercise the net number of shares of common stock determined according to the
formula set forth in the warrant. No fractional shares of common stock will be issued in connection with the exercise of a warrant.
In lieu of fractional shares, we will, at our election, either pay a cash adjustment with respect of such fraction in an amount
equal to such fraction multiplied by $ , or round up to the next whole share.
The
exercise price per whole share of our common stock purchasable upon the exercise of the warrants is
$ per share of common stock. The exercise price of the warrants is subject to appropriate
adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or
similar events affecting our common stock and also upon any distributions of assets, including cash, stock or other property
to our stockholders.
A
holder will not have the right to exercise any portion of the warrant if the holder (together with its affiliates) would beneficially
own in excess of 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the exercise,
as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease
such percentage to any other percentage upon at least
61
days’
prior notice from the holder to us.
We do not plan on applying
to list the warrants on Nasdaq, the TSX, or any other national securities exchange or automated quotation system.
Subject to applicable laws,
the warrants may be offered for sale, sold, transferred or assigned without our consent.
During the period the warrants are
outstanding, we will reserve from our authorized and unissued common stock a sufficient number of shares to provide for the issuance
of shares of common stock underlying the warrants upon the exercise of the warrants.
In the event of an organic
change, as described in the warrants and generally including any reorganization, recapitalization or reclassification of our common
stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger
with or into another person, the acquisition of more than 50% of our outstanding common stock, or any person or group becoming
the beneficial owner of 50% of the voting power represented by our outstanding common stock, we will elect, at our option, to (i)
require holders of a warrant to exercise such warrant prior to the consummation of such organic change, and if not so exercised,
such warrant will terminate upon consummation of such organic change, or (ii) to secure from the person or entity purchasing such
assets or the successor resulting from such organic change a written agreement to deliver to a holder, in exchange for such holder’s
warrant, a replacement warrant similar in form and substance.
Except by virtue of such
holder’s ownership of shares of our common stock, the holder of a warrant does not have the rights or privileges of a holder
of our common stock, including any voting rights, until the holder exercises the warrant.
UNDERWRITING
Under the terms and subject
to the conditions set forth in an underwriting agreement by and among us and Canaccord Genuity Corp., BMO Nesbitt Burns Inc.
and Cantor Fitzgerald Canada Corporation, we have agreed to sell to the underwriters and the underwriters have agreed to purchase
from us, shares of common stock and associated four-tenth common stock warrants to purchase an aggregate of shares of
common stock:
UNDERWRITER
|
|
NUMBER OF
SHARES
|
|
|
NUMBER OF
WARRANTS
|
|
Canaccord Genuity Corp.
|
|
|
|
|
|
|
|
|
BMO Nesbitt Burns Inc.
|
|
|
|
|
|
|
|
|
Cantor Fitzgerald Canada Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
The underwriting agreement
provides that the obligations of the underwriters are subject to certain conditions precedent such as the receipt by the underwriters
of officers’ certificates and legal opinions. The underwriting agreement also provides that the underwriters may terminate,
at or prior to the closing, upon the occurrence of certain events such as a material adverse change in the US or international
financial markets, an outbreak of hostilities, or a suspension of trading in our securities. The underwriters are obligated to
purchase all of the shares of common stock and accompanying warrants (other than those covered by the option to purchase additional
shares and/or warrants described below) if they purchase any of the shares of common stock and accompanying warrants.
Each share of common stock
is being sold together with a 0.4 warrant to purchase shares of our common stock. Each whole warrant is exercisable for one share
of common stock. The shares of common stock and warrants will be issued separately. There is no market through which the warrants
may be sold and purchasers may not be able to resell the warrants purchased under this prospectus supplement. In addition, we do
not intend to apply to list the warrants on any national securities exchange or other nationally recognized trading system, including
Nasdaq or the TSX.
Option to Purchase Additional Common Shares
We have granted to the
underwriters an option, exercisable for 30 days from the date of this prospectus supplement, to purchase, from time to time, in
whole or in part, (i) up to shares at a purchase price of $ per
share and/or (ii) additional warrants from us at a purchase price of
$ per warrant.
Underwriting Discount and Commissions and Offering Expenses
The underwriters propose
to offer the common stock and accompanying warrants to the public at the public offering price set forth on the cover of this prospectus
supplement. The underwriters may offer the common stock to securities dealers at the price to the public less a concession not
in excess of $ per share of common stock and accompanying warrant. The underwriters may offer the shares of common stock from time to time to purchasers directly or through agents, or through
brokers in brokerage transactions on Nasdaq, or to dealers in negotiated transactions or in a combination of such methods
of sale, or otherwise, at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices. The difference between the price, at which the
underwriters purchase shares from us and the price at which the underwriters resell such shares may be deemed underwriting
compensation. If the underwriters effect such transactions by selling shares of common stock and associated warrants to or
through dealers, such dealers may receive compensation in the form of discounts, concessions or commissions from the underwriters
and/or purchasers of shares of common stock for whom they may act as agents or to whom they may sell as principal.
The following table shows
the public offering price, the underwriting discounts and commissions that we are to pay the underwriters, and the proceeds, before
estimated expenses, to us in connection with this offering. Such amounts are shown assuming both no exercise and full exercise
of the underwriters’ option to purchase additional shares and/or warrants.
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PER COMBINED SHARE AND RELATED
WARRANT
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TOTAL
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WITHOUT
OPTION TO
PURCHASE
ADDITIONAL
SHARES AND
WARRANTS
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|
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WITH
OPTION TO
PURCHASE
ADDITIONAL
SHARES AND
WARRANTS
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|
|
WITHOUT
OPTION TO
PURCHASE
ADDITIONAL
SHARES AND
WARRANTS
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|
WITH
OPTION TO
PURCHASE
ADDITIONAL
SHARES AND
WARRANTS
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|
Public offering price
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|
$
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$
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|
|
|
$
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|
|
|
$
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Underwriting discounts and commissions paid by us
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$
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|
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$
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$
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$
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Proceeds to us, before estimated expenses
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|
$
|
|
|
|
$
|
|
|
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$
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$
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We have agreed to reimburse
the underwriters of up to $200,000 of their expenses. We estimate our total expenses associated with the offering, excluding underwriting
discounts and commissions (but including the reimbursement obligation), will be approximately $300,000.
The underwriters will also
serve as placement agents for the concurrent Private Placement, and we will pay them a cash fee equal to 7.0% of the gross sales
price of the Private Placement Shares and Private Placement Warrant Shares.
Settlement
We expect to deliver the
shares of common stock and warrants against payment for the shares of common stock and warrants on or about the date specified
in the last paragraph of the cover page of this prospectus supplement, which will be the fifth business day following the pricing
of the shares of common stock and warrants. Since trades in the secondary market generally settle in two business days, purchasers
who wish to trade the shares of common stock and warrants prior to the delivery of the shares of common stock and warrants hereunder
will be required, by virtue of the fact that the shares of common stock and warrants will settle in T+5, to specify alternative
settlement arrangements at the time of any such trade to prevent a failed settlement. Purchasers of the shares of common stock
and warrants who wish to trade the shares of common stock and warrants prior to their date of delivery hereunder should consult
their advisors.
Indemnification and Contribution
We have agreed in the Underwriting
Agreement to indemnify the underwriters against certain liabilities, including liabilities under United States and Canadian securities
laws, and, where such indemnification is unavailable, to contribute to payments that the Underwriters may be required to make in
respect of such liabilities.
Standstill
We have agreed in the Underwriting
Agreement that for a period of 90 days from the date of this prospectus supplement, we will not, without the prior written consent
of the underwriters (which consent may be withheld at the sole discretion of the underwriters), directly or indirectly, offer,
pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any shares of our common stock or any securities convertible into
or exercisable or exchangeable for shares of our common stock or file any registration statement under the Securities Act with
respect to any of the foregoing or enter into any swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of our common stock, whether any such swap or transaction described above
is to be settled by delivery of our common shares or such other securities, in cash or otherwise.
The restrictions above
do not apply to (i) the securities issued in connection with this offering and the concurrent Private Placement, (ii) any
shares of common stock issued by us upon the exercise of an option or warrant or the conversion of a security outstanding on the
date of this prospectus and referred to in any documents incorporated herein by reference or (iii) any shares of common stock
issued or options to purchase common stock granted pursuant to our employee benefit plans; provided that, in each case, the recipient
of such shares or other securities is subject to substantially the same restrictions as those contained in herein.
Lock-Up Agreements
Our officers and directors
have agreed that, for a period of 90 days from the date of this prospectus supplement, we and they will not, without the prior
written consent of the underwriters (which consent may be withheld at the sole discretion of the representatives), directly or
indirectly, sell, offer to sell, contract to sell, or grant any option for the sale (including without limitation any short sale),
grant any security interest in, pledge, hypothecate, hedge, establish an open “put equivalent position” within the
meaning of the Exchange Act or otherwise dispose of or transfer, or announce the offering of, or file any registration statement
under the Securities Act in respect of, any shares of our common stock. In addition, the parties may not enter into a swap or other
arrangement which is designed to, or could be expected to, result in a disposition, in whole or in part, the economic benefits
or risk of ownership in our common stock, or otherwise dispose of any shares of our common stock, currently or later owned either
of record or beneficially, or publicly announce an intention to do any of the foregoing.
The restrictions above
do not apply to (i) sales by officers and directors under an aggregate total of $100,000, (ii) exercises of options granted under
an employee benefit plan; provided that the shares acquired will be subject to the restrictions set forth in the lock-up agreement,
(iii) bona fide gift transfers of common stock or securities to immediate family member(s) (as defined in Item 404(a) of Regulation
S-K under the Exchange Act), (iv) transfers of common stock or securities by will or the laws of descent and distribute to one
or more trusts for bona fide estate planning purposes, (v) if the party is a corporation, partnership, limited liability company
or other business entity, transfers of common stock or securities to any shareholder, partner or member of, or owner of a similar
equity interest in, if, such transfer is not for value, (vi) if the party is a corporation, partnership, limited liability company
or other business entity, transfers of common stock or securities to another corporation, partnership, limited liability company
or other business entity so long as the transferee is an affiliate and the transfer is not for value; provided that any transfer
pursuant to clause (iii), (iv), (v) or (vi), the transferee agrees to be bound the terms of the lock-up agreement.
The lock-up agreement does
not apply to the entering into a written trading plan designed to comply with Section 10b5-1 of the Exchange Act, provided that
(i) no sales or other transactions are made pursuant to such plan during the 90 day lock-up period and (ii) no filing or other
public announcement by any party under the Exchange Act or otherwise shall be required or shall be voluntarily made in connection
therewith.
Price Stabilization, Short Positions and
Penalty Bids; Passive Market Making
The underwriters may engage
in over-allotment, stabilizing transactions, syndicate covering transactions, penalty bids, and passive market making in accordance
with Regulation M under the Exchange Act. Over-allotment involves syndicate sales in excess of the offering size, which creates
a syndicate short position. Covered short sales are sales made in an amount not greater than the number of shares available for
purchase by the underwriters under their option to purchase additional shares and/or warrants. The underwriters may close out a
covered short sale by exercising such option or purchasing shares in the open market. Naked short sales are sales made in an amount
in excess of the number of shares available under the option to purchase additional shares and/or warrants. The underwriters must
close out any naked short sale by purchasing shares in the open market. Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified maximum. Syndicate covering transactions involve purchases of
shares of common stock in the open market after the distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the shares of common stock originally
sold by such syndicate member is purchased in a syndicate covering transaction to cover syndicate short positions. Penalty bids
may have the effect of deterring syndicate members from selling to people who have a history of quickly selling their shares. In
passive market making, market makers in our common stock who are underwriters or prospective underwriters may, subject to certain
limitations, make bids for or purchases of the common stock until the time, if any, at which a stabilizing bid is made. These stabilizing
transactions, syndicate covering transactions and penalty bids may cause the price of our common stock to be higher than it would
otherwise be in the absence of these transactions. In connection with this offering, the underwriters may engage in passive market
making transactions in the shares of common stock in accordance with Rule 103 of Regulation M under the Exchange Act during the
period before the commencement of offers or sales of common stock and extending through the completion of distribution. A passive
market maker must display its bids at a price not in excess of the highest independent bid of the security. However, if all independent
bids are lowered below the passive market maker’s bid, that bid must be lowered when specified purchase limits are exceeded.
The underwriters are not required to engage
in these activities and may end any of these activities at any time.
Electronic Distribution
This prospectus supplement,
the accompanying prospectus, any free writing prospectus and the documents incorporated herein and therein by reference in electronic
format may be made available on the websites maintained by one or more of the underwriters. The underwriters may agree to allocate
a number of shares of common stock for sale to their online brokerage account holders. The common stock will be allocated to underwriters
that may make Internet distributions on the same basis as other allocations. In addition, common stock may be sold by the underwriters
to securities dealers who resell common stock to online brokerage account holders.
Other than this prospectus
supplement, any accompanying prospectus, the free writing prospectus and the documents incorporated herein and therein by reference
in electronic format, information contained in any website maintained by an underwriter is not part of this prospectus supplement,
the accompanying prospectus, any free writing prospectus, the documents incorporated herein and therein by reference or registration
statement of which the prospectus supplement forms a part, has not been endorsed by us and should not be relied on by investors
in deciding whether to purchase common stock. The underwriters are not responsible for information contained in websites that they
do not maintain.
Relationship with the Underwriters
From time to time, certain
of the underwriters and their respective affiliates have provided, and may continue to provide, investment banking services to
us in the ordinary course of their businesses, and have received, and may continue to receive, compensation for such services.
Offering in Canada and the United States
In connection with
this offering, we have filed a short form prospectus with the securities regulatory authorities in the Provinces of Ontario,
British Columbia and Alberta, Canada, which upon final receipt, will permit us to offer and sell in such Canadian
jurisdictions the shares of our common stock being sold in this offering. The shares will be offered in Canada by Canaccord
Genuity Corp., BMO Nesbitt Burns Inc. and Cantor Fitzgerald Canada Corporation, and in the United States by Canaccord Genuity
Inc., a U.S. affiliate of Canaccord Genuity Corp., BMO Capital Markets Corp., a U.S. affiliate of BMO Nesbitt Burns Inc., and
Cantor Fitzgerald & Co., a U.S. affiliate of Cantor Fitzgerald Canada Corporation. References to the
“underwriters” include each of these entities, as applicable.
NOTICE TO INVESTORS
Australia
This prospectus is not a disclosure document
for the purposes of Australia’s Corporations Act 2001 (Cth) of Australia, or Corporations Act, has not been lodged with the
Australian Securities & Investments Commission and is only directed to the categories of exempt persons set out below.
Accordingly, if you receive this prospectus in Australia:
You confirm and warrant that you are either:
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a “sophisticated investor”
under section 708(8)(a) or (b) of the Corporations Act;
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a “sophisticated investor”
under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to the
company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations
before the offer has been made; or
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a “professional investor”
within the meaning of section 708(11)(a) or (b) of the Corporations Act.
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To the extent that you are unable to confirm
or warrant that you are an exempt sophisticated investor or professional investor under the Corporations Act any offer made to
you under this prospectus is void and incapable of acceptance.
You warrant and agree that you will not offer
any of the shares issued to you pursuant to this prospectus for resale in Australia within 12 months of those securities being
issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations
Act.
European Economic Area
In relation to each member state of the European
Economic Area which has implemented the Prospectus Directive, each referred to herein as a Relevant Member State, with effect from
and including the date on which the Prospectus Directive is implemented in that Relevant Member State, referred to herein as the
Relevant Implementation Date, no offer of any securities which are the subject of the offering contemplated by this prospectus
has been or will be made to the public in that Relevant Member State other than any offer where a prospectus has been or will be
published in relation to such securities that has been approved by the competent authority in that Relevant Member State or, where
appropriate, approved in another Relevant Member State and notified to the relevant competent authority in that Relevant Member
State in accordance with the Prospectus Directive, except that with effect from and including the Relevant Implementation Date,
an offer of such securities may be made to the public in that Relevant Member State:
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to any legal entity which
is a “qualified investor” as defined in the Prospectus Directive;
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to fewer than 100 or, if
the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons
(other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject
to obtaining the prior consent of the representatives of the underwriters for any such offer; or
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in any other circumstances
falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall require the Company or
any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant
to Article 16 of the Prospectus Directive.
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For the purposes of this provision, the expression
an “offer to the public” in relation to any securities in any Relevant Member State means the communication in any
form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor
to decide to purchase or subscribe the securities, as the same may be varied in that Relevant Member State by any measure implementing
the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC
(and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and
includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive”
means Directive 2010/73/EU.
Hong Kong
No securities have been offered or sold, and
no securities may be offered or sold, in Hong Kong, by means of any document, other than to persons whose ordinary business is
to buy or sell shares or debentures, whether as principal or agent; or to “professional investors” as defined in the
Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or in other circumstances which
do not result in the document being a “prospectus” as defined in the Companies Ordinance (Cap. 32) of Hong Kong or
which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32) of Hong Kong. No document,
invitation or advertisement relating to the securities has been issued or may be issued or may be in the possession of any person
for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely
to be accessed or read by, the public of Hong Kong (except if permitted under the securities laws of Hong Kong) other than with
respect to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional
investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance.
This prospectus has not been registered with
the Registrar of Companies in Hong Kong. Accordingly, this prospectus may not be issued, circulated or distributed in Hong Kong,
and the securities may not be offered for subscription to members of the public in Hong Kong. Each person acquiring the securities
will be required, and is deemed by the acquisition of the securities, to confirm that he is aware of the restriction on offers
of the securities described in this prospectus and the relevant offering documents and that he is not acquiring, and has not been
offered any securities in circumstances that contravene any such restrictions.
Japan
The offering has not been and will not be registered
under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948 of Japan, as amended), or FIEL, and the Initial
Purchaser will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of
Japan (which term as used herein means, unless otherwise provided herein, any person resident in Japan, including any corporation
or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or
to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with,
the FIEL and any other applicable laws, regulations and ministerial guidelines of Japan.
Singapore
This prospectus has not been and will not be
lodged or registered with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material
in connection with the offer or sale, or the invitation for subscription or purchase of the securities may not be issued, circulated
or distributed, nor may the securities be offered or sold, or be made the subject of an invitation for subscription or purchase,
whether directly or indirectly, to the public or any member of the public in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant
person as defined under Section 275(2), or any person pursuant to Section 275(1A) of the SFA, and in accordance with
the conditions, specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions
of any other applicable provision of the SFA.
Where the securities are subscribed or purchased
under Section 275 of the SFA by a relevant person which is:
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a corporation (which is not
an accredited investor as defined under Section 4A of the SFA) the sole business of which is to hold investments and the
entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
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a trust (where the trustee
is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares,
debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust
shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 of
the SFA except:
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to an institutional investor
under Section 274 of the SFA or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant
to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such
rights and interest in that trust are acquired at a consideration of not less than $200,000 (or its equivalent in a foreign currency)
for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further
for corporations, in accordance with the conditions, specified in Section 275 of the SFA;
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where no consideration is
given for the transfer; or
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where the transfer is by
operation of law.
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Switzerland
The securities may not be publicly offered
in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or regulated trading facility
in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art.
652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the
SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus
nor any other offering or marketing material relating to the securities or the offering may be publicly distributed or otherwise
made publicly available in Switzerland.
Neither this prospectus nor any other offering
or marketing material relating to the offering, the Company or the securities have been or will be filed with or approved by any
Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of securities will not be supervised
by, the Swiss Financial Market Supervisory Authority FINMA, or FINMA, and the offer of securities has not been and will not be
authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers
of interests in collective investment schemes under the CISA does not extend to acquirers of securities.
Israel
This document does not constitute a prospectus
under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities
Authority. In the State of Israel, this document is being distributed only to, and is directed only at, and any offer of the shares
is directed only at, investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily
of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members
of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and
“qualified individuals”, each as defined in the Addendum (as it may be amended from time to time), collectively referred
to as qualified investors (in each case purchasing for their own account or, where permitted under the Addendum, for the accounts
of their clients who are investors listed in the Addendum). Qualified investors will be required to submit written confirmation
that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
United Kingdom
This prospectus is only being distributed to,
and is only directed at, persons in the United Kingdom that are qualified investors (as defined in the Prospectus Directive) that
are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial
Promotion) Order 2005, as amended, referred to herein as the Order, and/or (ii) high net worth entities falling within Article
49(2)(a) to (d) of the Order and other persons to whom it may lawfully be communicated. Each such person is referred to herein
as a Relevant Person.
This prospectus and its contents are confidential
and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in
the United Kingdom. Any person in the United Kingdom that is not a Relevant Person should not act or rely on this document or any
of its contents.
CERTAIN MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general
discussion of the material United States federal income tax considerations of the purchase, ownership, and disposition of our common
stock and warrants. This discussion is for general information only and does not describe all of the potential tax considerations
that may be relevant in light of a holder’s particular circumstances. This discussion is limited to holders that acquire
our common stock and warrants in the offering and hold our common stock and warrants as capital assets within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the “Code”) (generally, property held for investment purposes). Further,
it does not address the United States federal income consequences to holders subject to special treatment under the United States
federal income tax laws such as:
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persons holding common stock as part of
a conversion, constructive sale, wash sale, or other integrated transaction or a straddle, hedge or synthetic security;
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persons subject to the alternative minimum
tax;
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certain former citizens or long term residents
of the United States;
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foreign governments or international organizations;
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financial institutions;
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controlled foreign corporations and passive
foreign investment companies, and shareholders of such entities;
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real estate investment trusts and the
shareholders of such trusts;
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regulated investment companies and shareholders
of such companies;
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persons who acquired our common stock
in consideration for services;
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entities that are tax exempt for U.S.
federal income tax purposes and retirement plans, individual retirement accounts and tax deferred accounts; and
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pass through entities, including partnerships
and entities and arrangements classified as partnerships for U.S. federal tax purposes, and beneficial owners of pass through entities.
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Holders subject to the
special circumstances described above may be subject to tax rules that differ significantly from those summarized below. In addition,
this summery does not address estate tax consequences, or consequences under the tax laws of any state or local jurisdiction or
of any foreign jurisdiction that may be applicable to such shares of common stock or warrants. This discussion is based on the
Code, the United States Treasury regulations promulgated thereunder, the United States-Canada tax treaty, and administrative and
judicial decisions, all as in effect on the date hereof, and all of which are subject to change or differing interpretations, possibly
on a retroactive basis. There can be no assurance that the Internal Revenue Service (the “IRS”) will not challenge
one or more of the descriptions of the tax consequences described herein, and we have not obtained, nor do we intend to obtain,
a ruling from the IRS with respect to the United States federal income tax consequences of the ownership and disposition of such
shares of common stock or warrants.
As used in this prospectus,
the term “U.S. Holder” means:
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an individual who is a citizen or resident
of the United States;
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a corporation, or other entity treated
as a corporation for U.S. federal income tax purposes, created or organized in, or under the laws of, the United States or any
political subdivision of the United States;
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an estate, the income of which is subject
to United States federal income taxation regardless of its source; or
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a trust, if either (i) a court within
the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons
have the authority to control all substantial decisions of the trust, or (ii) such trust has made a valid election under applicable
U.S. Treasury regulations to be treated as a United States person.
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As used in this prospectus,
the term “Non-U.S. Holder” means a beneficial owner of our securities (other than an entity that is treated as a partnership
or other pass-through entity for U.S. federal income tax purposes) that is not a U.S. Holder.
If a partnership (including
an entity treated as a partnership for United States federal income tax purposes) holds our securities, the tax treatment of a
partner in the partnership generally will depend upon the status of the partner, the activities of the partnership and certain
determinations made at the partner level. Any partner in a partnership (including an entity treated as a partnership for United
States federal income tax purposes) holding our securities, should consult their tax advisor.
WE URGE ALL PROSPECTIVE
HOLDERS TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME, ESTATE AND
OTHER TAX CONSIDERATIONS OF ACQUIRING, HOLDING AND DISPOSING OF OUR COMMON STOCK AND WARRANTS.
General
The purchase price paid
for a share of common stock and associated warrant must be allocated between the share of common stock and the warrant based on
their respective relative fair market values. We will complete this determination following the closing of the offering based on
the relative values of the warrants and of our common stock. This allocation will determine a Holder’s adjusted tax basis
in its shares of common stock and warrants purchased pursuant to this offering. This allocation will be reported to any person
to which we transfer investment units that acts as a custodian of securities in the ordinary course of its trade or business, or
that effects sales of securities by others in the ordinary course of its trade or business, and may be reported to the IRS or other
taxing authorities by such persons. This allocation is not binding on purchasers in this offering, the IRS, or the courts. Prospective
investors are urged to consult their tax advisors regarding the United States federal income tax consequences of an investment
in a unit and the allocation of the purchase price paid in the offering.
Under Section 305
of the Code, if certain adjustments are made (or not made) to the number of shares to be issued upon the exercise of a warrant
or to the warrant’s exercise price, a holder may be deemed to have received a constructive distribution that would be treated
as a dividend.
Taxation of U.S. Holders
The following is a discussion
of the material United States federal income tax consequences to U.S. Holders of the ownership and disposition of the shares of
common stock and warrants purchased in this offering.
Dividends and Other Distributions on
Shares of Common Stock
Distributions on shares
of our common stock, including distributions on shares of our common stock received upon exercise of a warrant and constructive
dividends under Section 305 of the Code, will constitute dividends for U.S. federal income tax purposes to the extent paid
from our current or accumulated earnings and profits, as determined under United States federal income tax principles. If a distribution
exceeds our current or accumulated earnings and profits, the excess will be treated first as a tax-free return of capital and will
reduce (but not below zero) the U.S. Holder’s adjusted tax basis in the common stock, and any remaining excess will be treated
as capital gain from a sale or exchange of our shares of common stock, subject to the tax treatment described below in “—Sale,
Exchange or Other Disposition of Shares of our Common Stock.”
Dividends received by a
corporate U.S. Holder generally will qualify for the dividends received deduction if the requisite holding period and other requirements
are satisfied. With certain exceptions, and provided certain holding period and other requirements are met, dividends received
by a non-corporate U.S. Holder generally will constitute “qualified dividends” that will be subject to tax at the maximum
tax rate accorded to long-term capital gains.
Cash distributions paid
on the warrants, on an “as-converted” basis, if any, are subject to substantially the same tax consequences as described
in the preceding paragraph for common stock; however, distributions received in respect of a warrant may not qualify for the lower
tax rates applicable to qualified dividend income. U.S. holders should consult their own tax advisors regarding the property treatment
of any distributions paid on the warrants.
Sale, Exchange or Other Disposition of
Shares of Our Common Stock or Warrants
Upon the sale, exchange
or other disposition of shares of our common stock or warrants, including common stock received upon exercise of a warrant, a U.S.
Holder will recognize gain or loss in an amount equal to the difference between the amount realized upon such event and the U.S.
Holder’s adjusted tax basis in such shares of common stock or warrants. Generally, such gain or loss will be capital gain
or loss. Any such capital gain or loss will be long-term capital gain or loss if the U.S. Holder’s holding period for the
shares exceeds one year, and will otherwise be short-term capital gain or loss.
Exercise or Lapse of Warrants
A U.S. Holder generally
will not recognize gain or loss for United States federal income tax purposes on the exercise of a warrant and related receipt
of common stock, unless cash is received in lieu of the issuance of a fractional share or as discussed below with respect to the
net exercise of a warrant (referred to herein as a “cashless exercise”). Generally, upon the exercise of a warrant
(other than upon a cashless exercise), a U.S. Holder will have a tax basis in the common stock received equal to the U.S. Holder’s
tax basis in the warrant, plus the exercise price of the warrant, and the holding period for the common stock acquired pursuant
to the exercise of a warrant will begin on the date following the date of exercise and will not include the period during which
the U.S. Holder held the warrant. If a warrant is allowed to lapse unexercised, a U.S. Holder will recognize a capital loss in
an amount equal to his tax basis in the warrant. Such loss will be long-term capital loss if the warrant has been held for more
than one year as of the date the warrant lapsed and will otherwise be short-term capital loss. The deductibility of capital losses
is subject to certain limitations.
The tax consequences of
a cashless exercise of a warrant are not clear under current tax law. A cashless exercise may be tax-free (except with respect
to any cash received in lieu of fractional shares) either because the exercise is not a gain realization event or because the exercise
is treated as a tax-free recapitalization for United States federal income tax purposes. In either tax-free situation, a U.S. Holder’s
basis in the common stock received would equal the U.S. Holder’s basis in the warrant. If the cashless exercise were treated
as a recapitalization, the holding period of the common stock would include the holding period of the warrant. If the cashless
exercise were otherwise treated as not being a gain realization event, the holding period in the shares of our common stock might
be treated as commencing on the date following the date of exercise (or possibly the date of exercise) of the warrant. We expect
to treat such an exchange as a tax-free recapitalization for U.S. federal income tax purposes.
It is possible, however,
that a cashless exercise could be treated as a taxable exchange in which gain or loss would be recognized. In such event, a U.S.
Holder could be deemed to have exchanged for cash equal to their fair market value, a number of warrants having a value equal to
the exercise price for the total number of warrants to be exercised. In this case, a U.S. Holder would recognize gain or loss in
an amount equal to the difference between the fair market value of the warrants deemed surrendered to pay the exercise price, and
the U.S. Holder’s tax basis in such warrants deemed surrendered. A U.S. Holder’s tax basis in the common stock received
would equal the sum of the U.S. Holder’s tax basis in the warrants deemed exercised plus the amount of gain recognized in
the exchange. A U.S. Holder’s holding period for the common stock received would commence on the date following the date
of exercise of the warrant.
DUE TO THE ABSENCE OF AUTHORITY
ON THE UNITED STATES FEDERAL INCOME TAX TREATMENT OF A CASHLESS EXERCISE OF WARRANTS, THERE CAN BE NO ASSURANCE WHICH, IF ANY,
OF THE ALTERNATIVE TAX CONSEQUENCES AND HOLDING PERIODS DESCRIBED ABOVE WOULD BE ADOPTED BY THE IRS OR A COURT. ACCORDINGLY, HOLDERS
SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF A CASHLESS EXERCISE OF WARRANTS.
Information Reporting and Backup Withholding
In general, information
reporting is required with respect to dividends paid on our common stock and to proceeds from the sale, exchange or other disposition
of our common stock or warrants. In addition, “backup withholding” at a rate of 28% may apply to U.S. Holders that
are not exempt and fail to provide a correct taxpayer identification number certified under penalties of perjury, as well as certain
other information, or otherwise to comply with applicable requirements of the backup withholding rules.
Backup withholding is not
an additional tax and may be refunded or credited against a holder’s U.S. federal income tax liability, provided that the
correct information is timely provided to the IRS.
Surtax on Net Investment Income
A surtax at the rate of
3.8% (the “unearned income Medicare contribution tax”) is imposed on the “net investment income” of certain
U.S. citizens and resident aliens, and on the undistributed “net investment income” of certain estates and trusts,
in each case in excess of a certain threshold amount. Net investment income generally includes interest, dividends, royalties,
rents, gross income from a trade or business involving “passive” activities, and net gain from disposition of property
(other than property held in a “non-passive” trade or business). Net investment income is reduced by deductions that
are properly allocable to such income.
Taxation of Non-U.S. Holders
The following is a discussion
of the material United States federal income tax consequences to Non-U.S. Holders of the ownership and disposition of the shares
of common stock and warrants purchased in this offering.
Distributions
Distributions on shares
of our common stock, including distributions on shares of our common stock received upon exercise of a warrant and constructive
dividends under Section 305 of the Code, will constitute dividends for United States federal income tax purposes to the extent
paid from our current or accumulated earnings and profits, as determined under United States federal income tax principles. If
a distribution exceeds our current and accumulated earnings and profits, the excess will be treated first as a tax-free return
of capital and will reduce (but not below zero) the Non-U.S. Holder’s adjusted tax basis in the common stock, and any remaining
excess will be treated as gain realized from the sale or exchange of the shares of our common stock, the treatment of which is
described below under the section entitled “—Sale, Exchange or Other Disposition of Shares of our Common Stock.”
Dividends paid to a Non-U.S.
Holder generally will be subject to a United States federal withholding tax at the rate of 30%, or such lower rate as may be specified
by an applicable income tax treaty. United States federal withholding tax on dividends paid to an individual Non-U.S. Holder who
is resident of Canada for purposes of the United States-Canada income tax treaty is generally reduced to 15% pursuant to the United
States-Canada income tax treaty. If a dividend is effectively connected with the Non-U.S. Holder’s conduct of a trade or
business in the United States (and, if an applicable tax treaty requires, is also attributable to a United States permanent establishment
maintained by such Non-U.S. Holder), the dividend will not be subject to any United States federal withholding tax, provided certain
certification requirements are satisfied (as described below). Instead, such dividends will be subject to United States federal
income tax imposed on net income on the same basis that applies to United States persons generally. A corporate Non-U.S. Holder
under certain circumstances also may be subject to an additional branch profits tax equal to 30%, or such lower rate as may be
specified by an applicable income tax treaty, on a portion of its effectively connected earnings and profits attributable to such
dividends.
As discussed below under
the section entitled “—Sale, Exchange or Other Disposition of Shares of our Common Stock”, we believe that we
currently are, and expect to remain for the foreseeable future, a USRPHC for United States federal income tax purposes. As a USRPHC,
if our stock were to no longer be treated as “regularly traded on an established securities market” under applicable
U.S. Treasury regulations, we may be required to withhold and remit to the IRS 15% of any distribution on our stock in excess of
our current and accumulated earnings and profits, which was previously described above as a tax-free return of capital.
To claim the benefit of
a tax treaty or to claim exemption from withholding on the ground that income is effectively connected with the conduct of a trade
or business in the United States, a Non-U.S. Holder must provide a properly executed form, generally on IRS Form W-8BEN or
W-8BEN-E for treaty benefits or Form W-8ECI for effectively connected income, or such successor forms as the IRS designates,
prior to the payment of dividends. These forms must be periodically updated. Non-U.S. Holders generally may obtain a refund of
any excess amounts withheld by timely filing an appropriate claim for refund with the Internal Revenue Service.
Non-U.S. holders should
consult their own tax advisors regarding the potential applicability of any income tax treaty in their particular circumstances.
Sale, Exchange or Other Disposition of
Shares of Common Stock or Warrants
A Non-U.S. Holder generally
will not be subject to United States federal income tax and, in certain cases, withholding tax on the sale, exchange or other disposition
of shares of our common stock or warrants purchased in the offering unless:
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the gain is effectively connected with
a United States trade or business of the Non-U.S. Holder (and, if an applicable tax treaty requires, is also attributable to a
United States permanent establishment maintained by such Non-U.S. Holder),
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in the case of a Non-U.S. Holder who is
an individual, such holder is present in the United States for a period or periods aggregating 183 or more days (as calculated
for United States federal income tax purposes) during the taxable year of the disposition, and certain other conditions are satisfied,
or
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our common stock constitutes a “U.S.
real property interest” or USRPI, by reason of our status as a “United States real property holding corporation,”
or “USRPHC,” as defined for United States federal income tax purposes.
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Gain described in the first
bullet point above will be subject to tax at generally applicable United States federal income tax rates in the same manner as
gain is taxable to U.S. Holders. Any gain described in the first bullet point above of a Non-U.S. Holder that is a foreign corporation
may also be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.
An individual Non-U.S.
Holder described in the second bullet point above generally will be subject to U.S. federal income tax at a flat rate of 30% (or
at a reduced rate under an applicable income tax treaty) on any gain recognized on the sale, exchange or other disposition of our
common stock or warrants, which may be offset by certain U.S. source capital losses (even though such individual is not considered
a resident of the United States) provided the Non-U.S. holder has timely filed United States federal income tax returns with respect
to such losses.
With respect to our status
as a USRPHC, we believe that we currently are, and expect to remain for the foreseeable future, a USRPHC for United States federal
income tax purposes. However, so long as our common stock continues to be “regularly traded on an established securities
market”, as defined by applicable U.S. Treasury regulations, a Non-U.S. holder will be taxed on gains realized on the disposition
of our common stock or warrants as a result of our USRPHC status, only if the Non-U.S. holder actually or constructively holds
or has held more than 5% of such common stock outstanding at any time during the shorter of (i) the five-year period ending on
the date of disposition or (ii) the Non-U.S. holder’s holding period for our common stock. If our common stock ceases to
be regularly traded on an established securities market, all Non-U.S. holders would be subject to United States federal income
tax on a sale or other taxable disposition of our common stock or warrants, and a purchaser of the stock may be required to withhold
and remit to the IRS 15% of the purchase price, unless an exception applies.
Non-U.S. holders should
consult their tax advisors with respect to the application of the foregoing rules to their ownership and disposition of our common
stock and warrants and regarding potentially applicable income tax treaties that may provide for different rules.
Exercise or Lapse of Warrants
A Non-U.S. Holder generally
will not recognize gain or loss for United States federal income tax purposes on the exercise of a warrant and related receipt
of a shares of common stock (unless cash is received in lieu of the issuance of a fractional share and certain other conditions
are present, as discussed under “
Sale, Exchange or Other Disposition of Shares of our Common Stock or Warrants
,”
above).
The United States federal
income tax consequences of a cashless exercise of warrants is unclear, and could differ from the consequences upon the exercise
described in the preceding paragraph (as discussed under “U.S. Holders-Exercise or Lapse of Warrants,” above). Any
gain recognized on a cashless exercise of a warrant will generally be subject to U.S. federal income tax only in the circumstances
described under “
Sale, Exchange or Other Disposition of Shares of our Common Stock,”
above.
Upon the lapse or expiration
of a warrant, a Non-U.S. Holder generally will not recognize a capital loss unless such Non-U.S. Holder is otherwise subject to
U.S. federal income tax.
Information Reporting and Backup Withholding
Tax
Information reporting and
backup withholding at a current rate of 28% may apply to dividends paid with respect to our common stock and to proceeds from the
sale, exchange or other disposition of our common stock or warrants. Non-U.S. Holders will generally not be subject to backup withholding
if they certify under penalties of perjury as to their status as Non-U.S. Holders or otherwise establish an exemption and certain
other requirements are met. Non-U.S. Holders should consult their own tax advisors regarding the application of the information
reporting and backup withholding rules to them.
Backup withholding is not
an additional tax. Amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder generally may be refunded
or credited against the Non-U.S. Holder’s United States federal income tax liability, if any, provided that certain required
information is timely furnished to the Internal Revenue Service.
Foreign Accounts
Sections 1471 through 1474
of the Code (commonly referred to as “FATCA”) generally impose a 30% withholding tax on “withholdable payments,”
which include dividends on our common stock and gross proceeds from the disposition of our common stock or warrants paid to (i)
a foreign financial institution (as defined in Section 1471 of the Code) unless it agrees to withhold on payments to non compliant
foreign financial institutions and certain account holders, and collect and disclose to the IRS information regarding direct and
indirect U.S. account holders and (ii) a non financial foreign entity unless it certifies certain information regarding substantial
U.S. owners of the entity, which generally includes any U.S. person who directly or indirectly owns more than 10% of the entity.
Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing
FATCA may be subject to different rules. Under U.S. Treasury regulations and IRS guidance, the withholding obligations described
above apply to payments of dividends on our common stock, and will apply to payments of gross proceeds from a sale or other disposition
of our common stock or warrants on or after January 1, 2019. Prospective non U.S. holders should consult their own tax advisors
with respect to the potential tax consequences of FATCA.
THE UNITED STATES FEDERAL
INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER’S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO ALL TAX CONSEQUENCES TO THEM OF THE ACQUISITION
OF, AND THE OWNERSHIP AND DISPOSITION OF, OUR COMMON STOCK AND WARRANTS, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS, AND THE POSSIBLE EFFECTS OF ANY CHANGES THEREIN.
LEGAL MATTERS
The
validity of the issuance of the securities offered hereby and certain legal matters will be passed upon for the company by Davis
Graham & Stubbs LLP, Denver, Colorado and Stikeman Elliot LLP, Toronto, Ontario, Canada. Certain legal matters for the
underwriters will be passed upon by Cooley LLP, New York, New York and Bennett Jones LLP, Toronto, Ontario, Canada.
EXPERTS
The
financial statements incorporated in this prospectus supplement by reference to the 2016 10-K have been so incorporated in reliance
on the report of KBL, LLP, an independent registered public accounting firm, given on the authority of said firm as experts in
auditing and accounting.
The estimates of our mineralized
material with respect to the Relief Canyon property incorporated by reference in this prospectus have been included in reliance
upon the technical report prepared by Mine Development Associates.
WHERE YOU CAN
FIND MORE INFORMATION
We file and furnish annual,
quarterly and current reports and other information, including proxy statements, with the SEC. You may read and copy any document
we file or furnish with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Room 1580, Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Our SEC
filings are available to the public on the SEC’s website at
www.sec.gov.
Our SEC filings are also available through
the “Investor Relations” section of our website at
www.pershinggold.com
.
This prospectus supplement
is part of a registration statement we filed with the SEC. This prospectus supplement and the accompanying prospectus omit some
information contained in the registration statement in accordance with SEC rules and regulations. You should review the information
and exhibits in the registration statement for further information on us and our consolidated subsidiaries and the securities we
are offering. Statements in this prospectus supplement and the accompanying prospectus concerning any document we filed as an exhibit
to the registration statement or that we otherwise filed with the SEC are not intended to be comprehensive and are qualified by
reference to these filings. You should review the complete document to evaluate these statements. You can obtain a copy of the
registration statement from the SEC at the address listed above or from the SEC’s website.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate
by reference” information into this prospectus and any accompanying prospectus supplement, which means that we can disclose
important information to you by referring you to other documents filed separately with the SEC. The information incorporated by
reference is considered part of this prospectus, and information filed with the SEC subsequent to this prospectus and prior to
the termination of the particular offering referred to in such prospectus supplement will automatically be deemed to update and
supersede this information. We incorporate by reference into this prospectus and any accompanying prospectus supplement the documents
listed below (excluding any portions of such documents that have been “furnished” but not “filed” for purposes
of the Exchange Act):
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Annual Report on Form 10-K
for the fiscal year ended December 31, 2016, as amended by the Annual Report on Form 10-K/A filed on April 28, 2017;
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Quarterly Reports on Form
10-Q filed on May 10, 2017 (for the quarter ended March 31, 2017), August 11, 2017 (for the quarter ended June 30, 2017), and
November 13, 2017 (for the quarter ended September 30, 2017);
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Current Reports on Form 8-K
filed January 18, 2017, March 24, 2017, April 14, 2017, June 15, 2017, August 10, 2017, October 12, 2017 and November 2, 2017;
and
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The description of our common
stock set forth in our registration statement on Form 8-A filed on July 1, 2015, and any amendment or report filed for the purpose
of updating such description.
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We also incorporate by
reference all documents we subsequently file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the initial filing of the registration statement of which this prospectus is a part (including prior to the effectiveness of the
registration statement) and prior to the termination of the offering. Any statement in a document incorporated by reference in
this prospectus will be deemed to be modified or superseded to the extent a statement contained in this prospectus or any other
subsequently filed document that is incorporated by reference in this prospectus modifies or supersedes such statement.
Unless specifically stated
to the contrary, none of the information that we disclose under Items 2.02 or 7.01 or corresponding information furnished under
Item 9.01 or included as an exhibit of any Current Report on Form 8-K that we may from time to time furnish to the SEC will be
incorporated by reference into, or otherwise included in, this prospectus.
We will provide without
charge upon written or oral request, a copy of any or all of the documents which are incorporated by reference into this prospectus.
Requests should be directed to:
Pershing Gold Corporation
Attention: Corporate Secretary
1658 Cole Boulevard
Building 6 – Suite 210
Lakewood, Colorado 80401
Except as provided above,
no other information, including information on our internet site, is incorporated by reference in this prospectus.
PROSPECTUS
PERSHING GOLD CORPORATION
$100,000,000
Senior Debt Securities
Subordinated Debt Securities
Common Stock
Preferred Stock
Warrants
Rights
Units
Pershing Gold Corporation (the
“Company,” “we,” “us,” or “our”) may offer and sell from time to time up to
$100 million of our senior and subordinated debt securities, common stock, $0.0001 par value per share, preferred stock,
$0.0001 par value per share, warrants to purchase any of the other securities that may be sold under this prospectus, rights
to purchase common stock, preferred stock and/or senior or subordinated debt securities, and units consisting of two or more
of these classes or series of securities, securities that may be convertible or exchangeable to other securities covered
hereby, in one or more transactions.
We will provide specific terms of any offering
in supplements to this prospectus. The securities may be offered separately or together in any combination and as separate series.
You should read this prospectus and any supplement carefully before you invest.
We may sell securities directly to you,
through agents we select, or through underwriters or dealers we select. If we use agents, underwriters or dealers to sell the securities,
we will name them and describe their compensation in a prospectus supplement. The net proceeds we expect to receive from these
sales will be described in the prospectus supplement.
Our common stock is traded on the Nasdaq
Stock Market under the symbol “PGLC.” On June 6, 2016, the last reported sales price of our common stock on the Nasdaq
Stock Market was $4.35 per share. The applicable prospectus supplement will contain information, where applicable, as to any other
listing on the Nasdaq Stock Market or any securities exchange of the securities covered by the prospectus supplement.
As of June 3, 2016, the aggregate market
value of our outstanding voting and non-voting common equity held by non-affiliates was $58.7 million, based on an aggregate of
26,106,654 shares of common stock outstanding, of which 13,621,630 shares were held by non-affiliates, and a per share price of
$4.31, the closing price of our common stock on June 3, 2016 as reported on the Nasdaq Stock Market. Pursuant to General Instruction
I.B.6 of Form S-3, in no event will we sell shares of our common stock in a public primary offering with a value exceeding more
than one-third of our public float in any 12-month period so long as our public float remains below $75.0 million. We have not
offered any securities pursuant to General Instruction I.B.6 of Form S-3 during the 12 calendar months prior to and including the
date of this prospectus.
The securities offered in this prospectus
involve a high degree of risk.
You should carefully consider the matters set forth in “
Risk Factors
”
on
page 6 of this prospectus or incorporated by reference herein in determining
whether to purchase our securities.
Neither the Securities and Exchange Commission
nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus
is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is June 29,
2016.
TABLE OF CONTENTS
As used in this prospectus, the terms the “Company,”
“we,” “our,” “ours” and “us” may, depending on the context, refer to Pershing Gold
Corporation or to one or more of Pershing Gold Corporation’s consolidated subsidiaries or to Pershing Gold Corporation and
its consolidated subsidiaries, taken as a whole. When we refer to “shares” throughout this prospectus, we include all
rights attaching to our shares of common stock under any shareholder rights plan then in effect.
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration
statement that we filed with the Securities and Exchange Commission, which we refer to as the “SEC” or the “Commission”,
using a “shelf” registration process. Under the shelf registration, we may sell any combination of the securities described
in this prospectus in one or more offerings. This prospectus provides you with a general description of the securities that we
may offer. Each time that we sell securities, we will provide a prospectus supplement that will contain specific information about
the terms of that offering. The prospectus supplement also may add, update or change information contained in this prospectus.
You should read both this prospectus and any prospectus supplement together with additional information incorporated by reference
in this prospectus before making an investment in our securities. See “Where You Can Find More Information” for more
information. We may use this prospectus to sell securities only if it is accompanied by a prospectus supplement.
You should not assume that the information
in this prospectus, any accompanying prospectus supplement or any document incorporated by reference is accurate as of any date
other than the date of such document.
WHERE
YOU CAN FIND MORE INFORMATION
We file and furnish annual, quarterly and
current reports and other information, including proxy statements, with the SEC. You may read and copy any document we file or
furnish with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. Our SEC filings are
available to the public on the SEC’s website at
www.sec.gov.
Our SEC filings are also available through the “Investor
Relations” section of our website at
www.pershinggold.com
.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to “incorporate
by reference” information into this prospectus and any accompanying prospectus supplement, which means that we can disclose
important information to you by referring you to other documents filed separately with the SEC. The information incorporated by
reference is considered part of this prospectus, and information filed with the SEC subsequent to this prospectus and prior to
the termination of the particular offering referred to in such prospectus supplement will automatically be deemed to update and
supersede this information. We incorporate by reference into this prospectus and any accompanying prospectus supplement the documents
listed below (excluding any portions of such documents that have been “furnished” but not “filed” for purposes
of the Exchange Act):
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Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as amended by the Annual Report on Form 10-K/A filed
on April 29, 2016;
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Quarterly Report on Form 10-Q filed on May 13, 2016;
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Current Reports on Form 8-K filed on February 10, 2016, March 2, 2016, March 4, 2016 and March 30, 2016; and
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The description of our common stock set forth in our registration statement on Form 8-A filed on July 1, 2015, and any amendment
or report filed for the purpose of updating such description.
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We also incorporate by reference all documents
we subsequently file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the initial filing of
the registration statement of which this prospectus is a part (including prior to the effectiveness of the registration statement)
and prior to the termination of the offering. Any statement in a document incorporated by reference in this prospectus will be
deemed to be modified or superseded to the extent a statement contained in this prospectus or any other subsequently filed document
that is incorporated by reference in this prospectus modifies or supersedes such statement.
Unless specifically stated to the contrary,
none of the information that we disclose under Items 2.02 or 7.01 or corresponding information furnished under Item 9.01 or included
as an exhibit of any Current Report on Form 8-K that we may from time to time furnish to the SEC will be incorporated by reference
into, or otherwise included in, this prospectus.
We will provide without charge upon written
or oral request, a copy of any or all of the documents which are incorporated by reference into this prospectus. Requests should
be directed to:
Pershing Gold Corporation
Attention: Corporate Secretary
1658 Cole Boulevard
Building 6 – Suite 210
Lakewood, Colorado 80401
Except as provided above, no other information,
including information on our internet site, is incorporated by reference in this prospectus.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some information contained
in or incorporated by reference into this registration statement on Form S-3 may contain forward-looking statements within the
meaning of the United States Private Securities Litigation Reform Act of 1995. These statements include statements relating to
our plans to complete a PEA (as defined below) on the Relief Canyon Mine, conduct geophysical surveys and determine the scope of
our drilling program in 2016, our mineralized material estimate and plans to update the mineralized material estimate, plans to
commence our 2016 drilling program, further development efforts required to advance the Relief Canyon Mine to production, further
permitting and mine planning for the Relief Canyon Mine, expectations and the timing and budget for exploration and future development
of our Relief Canyon properties, our planned expenditures for 2016, our estimates of the cost of future permitting changes and
additional bonding requirements, future exploration plans, the estimated preliminary internal economics for the Relief Canyon Mine,
our expected cash needs, our ability to fund our business with our current cash reserves based on our currently planned activities
and statements concerning our financial condition, business and operating strategies, and operating and legal risks.
We use the words “anticipate,”
“continue,” “likely,” “estimate,” “expect,” “may,” “could,”
“will,” “project,” “should,” “believe” and similar expressions to identify forward-looking
statements. Statements that contain these words discuss our future expectations and plans, or state other forward-looking information.
Although we believe the expectations and assumptions reflected in those forward-looking statements are reasonable, we cannot assure
you that these expectations and assumptions will prove to be correct. Our actual results could differ materially from those expressed
or implied in these forward-looking statements as a result of various factors described in this registration statement on Form S-3,
including:
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Risks relating to the 2016 exploration efforts to expand the Relief Canyon deposit, determining the feasibility and economic viability of commencing mining, our ability to fund future exploration costs or purchase additional equipment, and our ability to obtain or amend the necessary permits, consents, or authorizations needed to advance expansion of the deposit or recommissioning of the gold processing facility;
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Risks related to the Relief Canyon properties other than the Relief Canyon Mine, including our ability to advance gold exploration, discover any deposits of gold of other minerals which can be mined at a profit, maintain our unpatented mining claims and millsites, commence mining, obtain and maintain any necessary permits, consents, or authorizations needed to continue exploration, and raise the necessary capital to finance exploration and potential expansion;
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Our ability to acquire additional mineral targets;
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Our ability to obtain additional external funding;
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Our ability to achieve any meaningful revenue;
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Our ability to engage or retain geologists, engineers, consultants and other key management and mining personnel necessary to successfully operate and grow our business;
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The volatility of the market price of our common stock or our intention not to pay any cash dividends in the foreseeable future;
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Changes in any federal, state or local laws and regulations or possible challenges by third parties or contests by the federal government that increase costs of operation or limit our ability to explore on certain portions of our property;
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Continuing decreases in the market price for gold and economic and political events affecting the market prices for gold and other minerals which may be found on our exploration properties; and
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The factors set forth under “Risk Factors” beginning on page 6 of this registration statement on Form S-3.
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Many of these factors
are beyond our ability to control or predict. Although we believe that the expectations reflected in our forward-looking statements
are based on reasonable assumptions, such expectations may prove to be materially incorrect due to known and unknown risk and uncertainties.
You should not unduly rely on any of our forward-looking statements. These statements speak only as of the date of this registration
statement on Form S-3. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking
statements to reflect future events or developments. All subsequent written and oral forward-looking statements attributable to
us and persons acting on our behalf are qualified in their entirety by the cautionary statements contained in this section and
elsewhere in this registration statement on Form S-3.
OUR BUSINESS
Overview
We are a gold and precious
metals exploration company pursuing exploration, development and mining opportunities primarily in Nevada. We are currently focused
on exploration at our Relief Canyon properties in Pershing County in northwestern Nevada and, if economically feasible, commencing
mining at the Relief Canyon Mine. None of our properties contain proven and probable reserves, and our activities on all of our
properties are exploratory in nature.
Business Strategy
Our business strategy
is to acquire and advance precious metals exploration properties. We seek properties with known mineralization that are in an advanced
stage of exploration and have previously undergone some drilling but are under-explored, which we believe we can advance quickly
to increase value.
Relief Canyon Mine Property
Our Relief Canyon property
rights currently total approximately 25,000 acres and are comprised of approximately 948 owned unpatented mining claims, 120 owned
millsite claims, 172 leased unpatented mining claims, and 2,235 acres of leased and 2,770 acres of subleased private lands. As
currently defined by exploration drilling, most of the Relief Canyon deposit is located on property that is subject
to a 2% net smelter return production royalty, with a portion of the deposit located on property subject to net smelter return
production royalties totaling 4.5%. The rest of the property is subject, under varying circumstances, to net smelter return
production royalties ranging from 2% to 5%.
Since acquisition of
the Relief Canyon Mine property, our exploration efforts have been focused primarily on expanding the known Relief Canyon Mine
deposit. Our 2011-2013 exploration drilling programs expanded the deposit. We began a drilling program in 2014 which we completed
in early 2015. In this program, we drilled a total of 134 holes, for approximately 74,000 feet, for the purpose of extending and
upgrading the current deposit. The 2014 drill results included some gold intercepts at significantly higher grades than the average
historic grade of the Relief Canyon deposit of approximately one gram per ton. We conducted a 2015 drilling program from May 2015
through December 2015, which demonstrated that the high-grade zone in the North Target Area has continued south under the North
Pit and that the higher-grade L Zone of the Relief Canyon deposit is open to the west, south and southwest. Since we acquired Relief
Canyon, we have drilled a total of 465 drill holes comprising approximately 259,000 feet at the Relief Canyon Mine property. During
the first-half of 2016, we plan to conduct geophysical surveys over the mine and the covered areas south and southeast of the pits.
Drilling for the remainder of 2016 will be determined based upon the results of these geophysical surveys and available funding.
In July 2015, we reported
the following update of our estimate of mineralized material at the Relief Canyon deposit, calculated at a gold price assumption
of $1,200 per ounce and a cut-off grade of 0.005 ounces of gold per ton.
Tons
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Average gold grade
(ounces per ton)
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37,335,000
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0.020
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“Mineralized
material” as used in this registration statement on Form S-3, although permissible under the Securities and Exchange Commission
(“SEC”) Guide 7, does not indicate “reserves” by SEC standards. We cannot be certain that
any part of the Relief Canyon deposit will ever be confirmed or converted into SEC Industry Guide 7 compliant “reserves.” Investors
are cautioned not to assume that all or any part of the mineralized material will be confirmed or converted into reserves or that
mineralized material can be economically or legally extracted.
We completed the 2015
drilling program in December 2015 and plan to incorporate the results of the 2015 drilling program into a further updated mineralized
material estimate.
Work on the updated mineralized material estimate and a Preliminary Economic
Assessment ("PEA") is currently underway. The PEA will include extensive engineering and metallurgical work and
will provide third party updated economics on the Relief Canyon Mine. Pershing Gold has retained a firm to initiate pre-feasibility
level geotechnical studies for the Relief Canyon Mine.
If we were to decide
to pursue the commencement of production at Relief Canyon, additional external financing would be required. Although the Relief
Canyon Mine currently has an available leach pad and processing facility and we have senior mine and processing personnel in place,
we would be required to obtain mining equipment (which could be through purchase, lease, contract mining or a combination of these),
hire employees for the mine and the processing plant, purchase materials and supplies, commence mining, leaching and processing
activities, and continue these activities as well as the corporate activities currently conducted for a number of months until
sufficient positive cash flow is produced by gold sales to fund all of these ongoing activities.
Additional external
financing could be obtained by the sale of equity or debt securities, asset sales, project or product financing or strategic alternatives,
which could include third party purchasers of an interest in the Relief Canyon Mine or other projects or business combinations
which could include a sale of the mine or the Company. There are no assurances that we will be successful in raising sufficient
financing to commence production at Relief Canyon or to continue our business.
During 2016, we plan
to focus primarily on completing an updated mineralized material estimate and the PEA, pre-feasibility studies, and continuing
work to develop an economically feasible mining and processing plan. We estimate that costs for these activities for 2016, not
including general and administrative costs, will total approximately $1.5 million.
Corporate Information
Our principal executive
offices are located at 1658 Cole Boulevard, Building 6-Suite 210, Lakewood, CO 80401 and our telephone number is 720-974-7254.
We maintain a website at www.pershinggold.com, which contains information about us. Our website and the information contained in
and connected to it are not a part of this prospectus.
RISK
FACTORS
Investing in our
securities involves a high degree of risk. Before investing in our securities you should carefully consider the following risks,
together with the financial and other information contained in this prospectus. If any of the following risks actually occurs,
our business, prospects, financial condition and results of operations could be adversely affected. In that case, the value of
our securities would likely decline and you may lose all or a part of your investment.
Risks Relating to Our Business
We have no proven or probable reserves
on our properties and we do not know if our properties contain any gold or other minerals that can be mined at a profit.
The properties on which
we have the right to explore for gold and other minerals do not contain mineral reserves and we do not know if any deposits of
gold or other minerals can be mined at a profit. Whether a gold or other mineral deposit can be mined at a profit depends upon
many factors. Some but not all of these factors include: the particular attributes of the deposit, such as size, grade and proximity
to infrastructure; operating costs and capital expenditures required to start mining a deposit; the availability and cost of financing;
the price of the gold or other minerals which is highly volatile and cyclical; and government regulations, including regulations
relating to prices, taxes, royalties, land use, importing and exporting of minerals and environmental protection. We are also obligated
to pay production royalties on certain of our mineral production, including a net smelter royalty of 2% or 2.5% on production from
most of our Relief Canyon Mine property, which would increase our costs of production and make our ability to operate profitably
more difficult. We are also obligated to pay a net smelter royalty of up to 5% on production from some of our claims and lands.
We are an exploration stage company
and have only recently commenced exploration activities on our claims. We reported a net loss for the year ended December 31,
2015, and expect to incur operating losses for the foreseeable future.
Our evaluation of our
Relief Canyon Mine property is primarily based on historical production data and on new exploration data that we have developed
since 2011, supplemented by historical exploration data. Our plans for recommencing mining and processing activities at the Relief
Canyon Mine property are in their early stages and preliminary, as are our exploration programs on the Relief Canyon expansion
properties. Accordingly, we are not yet in a position to estimate expected amounts of minerals, yields or values or evaluate the
likelihood that our business will be successful. We have not earned any revenues from mining operations. The likelihood of success
must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the
exploration of the mineral properties and commencement of mining activities that we plan to undertake. These potential problems
include, but are not limited to, unanticipated problems relating to exploration, costs and expenses that may exceed current estimates
and the requirement for external funding to continue our business. Prior to completion of our exploration stage, we anticipate
that we will incur increased operating expenses without realizing any revenues. We reported a net loss of approximately $19.1 million
for the year ended December 31, 2015. We expect to incur significant losses into the foreseeable future. Our monthly burn
rate for all costs during 2015 was approximately $1.86 million, including $635,000 for general and administrative costs (including
all employee salaries, public company expenses, consultants, and land holdings costs), $720,000 for exploration activities, and
$510,000 for purchases of mineral rights, property and equipment. We expect, based on our current preliminary budget, our monthly
burn rate for all costs in 2016 to be approximately $600,000 (including approximately $490,000 for general and administrative costs
and $110,000 for exploration, permitting, and plant recommissioning), which may increase as our plans develop. Based on our current
cash position, we expect to require additional external financing to fund operations and exploration by early to mid-2018. If we
decide to pursue a plan to commence mining and processing at Relief Canyon, additional external financing would be required. If
we are unable to raise external funding, and eventually generate significant revenues from our claims and properties, we will not
be able to earn profits or continue operations. We have no production history upon which to base any assumption as to the likelihood
that we will prove successful, and it is uncertain that we will generate any operating revenues or ever achieve profitable operations.
If we are unsuccessful in addressing these risks, our business will most likely fail.
Exploring for gold and other minerals
is inherently speculative, involves substantial expenditures, and is frequently non-productive.
Mineral exploration
(currently our only business), and gold exploration in particular, is a business that by its nature is very speculative. We may
not be able to establish mineral reserves on our properties or be able to mine any gold or any other minerals on a profitable basis.
Few properties that are explored are ultimately developed into producing mines. Unusual or unexpected geological conditions, fires,
flooding, explosions, cave-ins, landslides and the inability to obtain suitable or adequate machinery, equipment or labor are just
some of the many risks involved in mineral exploration programs and the subsequent development of gold deposits.
The mining industry is capital intensive and we may be
unable to raise necessary funding.
We spent approximately
$22.4 million on our business and exploration during the year ended December 31, 2015 (of which $6.0 million was related to
the transaction with Newmont USA Limited (“Newmont”)). Our estimated total cost for 2016 for exploration, permitting,
landholding, facilities recommissioning and for general and administrative costs is approximately $7.0 million. If we decide to
pursue the commencement of production at Relief Canyon, additional external financing would be required. In addition, even if we
do not decide to pursue the commencement of production at Relief Canyon, we will be required to raise additional funds in order
to finance our operations. We may be unable to secure additional financing on terms acceptable to us, or at all. Our inability
to raise additional funds would prevent us from achieving our business objectives and would have a negative impact on our business,
financial condition, results of operations and the value of our securities. If we raise additional funds by issuing additional
equity or convertible debt securities, the ownership of existing stockholders may be diluted and the securities that we may issue
in the future may have rights, preferences or privileges senior to those of the current holders of our common stock. Such securities
may also be issued at a discount to the market price of our common stock, resulting in possible further dilution to the book value
per share of common stock. If we raise additional funds by issuing debt, we could be subject to debt covenants that could place
limitations on our operations and financial flexibility.
If we decide to pursue the commencement
of mining and processing activities at Relief Canyon, unanticipated problems or delays may negatively affect our business and financial
condition.
If we were to decide
to pursue the commencement of mining and processing activities at Relief Canyon, additional external financing would be required.
Although the Relief Canyon Mine currently has an available leach pad and processing facility and we have senior mine and processing
personnel in place, we would be required to obtain mining equipment (which could be through purchase, lease, contract mining or
a combination of these), hire employees for the mine and the processing plant, purchase materials and supplies, commence mining,
leaching and processing activities, and continue these activities as well as the corporate activities currently conducted for a
number of months until sufficient positive cash flow is produced by gold sales to fund all of these ongoing activities. We may
suffer significant delays or cost overruns as a result of a variety of factors, such as increases in the prices of materials, mining
or processing problems, unanticipated variations in mined materials, shortages of workers or materials, transportation constraints,
adverse weather, equipment failures, fires, damage to or destruction of property and equipment, environmental problems, unforeseen
difficulties or labor issues, any of which could delay or prevent us from commencing or ramping up mining and processing. If our
start-up were prolonged or delayed or our costs were higher than anticipated, we could be unable to obtain sufficient funds to
cover the additional costs, and our business could experience a substantial setback. Prolonged problems could have a material adverse
effect on our business, consolidated financial condition or results of operations and threaten our viability.
We are a junior exploration company
with no mining activities and we may never have any mining activities in the future.
Our primary business
is exploring for gold and, to a lesser extent, other minerals. If we discover commercially exploitable gold or other deposits,
we will not be able to make any money from mining activities unless the gold or other deposits are actually mined, or we sell our
interest. Accordingly, we will need to seek additional capital through debt or equity financing, find some other entity to mine
our properties or operate our facilities on our behalf, enter into joint venture or other arrangements with a third party, or sell
or lease the property or rights to mine to third parties. Mine development projects typically require a number of years and significant
expenditures during the development phase before production is possible. Such projects could experience unexpected problems and
delays during development, construction and mine start up. Mining operations in the United States are subject to many different
federal, state and local laws and regulations, including stringent environmental, health and safety laws. If and when we assume
operational responsibility for mining on our properties, it is possible that we will be unable to comply with current or future
laws and regulations, which can change at any time. It is possible that changes to these laws will be adverse to any potential
mining operations. Moreover, compliance with such laws may cause substantial delays and require capital outlays in excess of those
anticipated, adversely affecting any potential mining operations. Our future mining operations, if any, may also be subject to
liability for pollution or other environmental damage. It is possible that we will choose to not be insured against this risk because
of high insurance costs or other reasons.
We have a short operating history,
have a history of losses and may never achieve any meaningful revenue.
We acquired all of
our property interests since August 2011. Our operating history consists of our exploration activities. We have no income-producing
activities from mining or exploration, and have a history of losses stemming from the acquisition of the rights to explore on our
property and conducting our exploration activities. Exploring for gold and other minerals or resources is an inherently speculative
activity and there is no assurance we will be able to develop an economically feasible operating plan for the Relief Canyon Mine.
There is a strong possibility that we will not find any other commercially exploitable gold or other deposits on our property.
Because we are an exploration company, we may never achieve any meaningful revenue.
We must make annual lease payments, advance royalty and
royalty payments and claim maintenance payments or we will lose our rights to our property.
We are required under
the terms of the leases covering some of our property interests to make annual lease payments and advance royalty and royalty payments
each year. We are also required to make annual claim maintenance payments to the U.S. Bureau of Land Management (“BLM”)
and pay a fee to Pershing County in order to maintain our rights to explore and, if warranted, to develop our unpatented mining
claims. If we fail to meet these obligations, we will lose the right to explore for gold and other minerals on our property. Our
total annual property maintenance costs payable to the BLM and Pershing County for all of the unpatented mining claims and millsites
in the Relief Canyon area in 2015 were approximately $224,000, and we expect our annual maintenance costs to be approximately $234,000
in 2016. Our lease payments, advance royalty and royalty payments and claim maintenance payments are described above under “Our
Business”.
Our business is subject to extensive
environmental regulations that may make exploring, mining or related activities prohibitively expensive, and which may change at
any time.
All of our operations
are subject to extensive environmental regulations that can substantially delay exploration and make exploration expensive or prohibit
it altogether. We may be subject to potential liabilities associated with the pollution of the environment and the disposal of
waste products that may occur as the result of exploring and other related activities on our properties, including our plan to
process gold at our processing facility. We may have to pay to remedy environmental pollution, which may reduce the amount of money
that we have available to use for exploration or other activities, and adversely affect our financial position. If we are unable
to fully remedy an environmental problem, we might be required to suspend operations or to enter into interim compliance measures
pending the completion of the required remedy. If a decision is made to mine our properties and we retain any operational responsibility
for doing so, our potential exposure for remediation may be significant, and this may have a material adverse effect upon our business
and financial position. We have not purchased insurance for potential environmental risks (including potential liability for pollution
or other hazards associated with the disposal of waste products from our exploration activities) and such insurance may not be
available to us on reasonable terms or at a reasonable price. All of our exploration and, if warranted, development activities
may be subject to regulation under one or more local, state and federal environmental impact analyses and public review processes.
It is possible that future changes in applicable laws, regulations and permits or changes in their enforcement or regulatory interpretation
could have significant impact on some portion of our business, which may require our business to be economically re-evaluated from
time to time. These risks include, but are not limited to, the risk that regulatory authorities may increase bonding requirements
beyond our financial capability. Inasmuch as posting of bonding in accordance with regulatory determinations is a condition to
the right to operate under all material operating permits, increases in bonding requirements could prevent operations even if we
are in full compliance with all substantive environmental laws. We have been required to post a substantial bond under various
laws relating to mining and the environment and may in the future be required to post a larger bond to pursue additional activities.
For example, we must provide BLM and the Nevada Division of Environmental Protection Bureau of Mining Regulation and Reclamation
(“NDEP”) additional financial assurance (reclamation bonds) to guarantee reclamation of any new surface disturbance
required for drill roads, drill sites, or mine expansion. In March 2015, we increased the amount of our reclamation bond with BLM
and the NDEP to approximately $5.6 million, which is currently approximately $108,000 in excess of the current coverage requirement,
to reclaim land disturbed in our exploration and mining operations. Approximately $5.5 million of our reclamation bond covers both
exploration and mining at the Relief Canyon Mine property, including the three open-pit mines and associated waste rock disposal
areas, the mineral processing facilities, ancillary facilities, and the exploration roads and drill pads, and approximately $12,500
covers exploration on the Relief Canyon expansion properties. The remaining $108,000 of financial assurance can be used to satisfy,
or partially satisfy, future bonding requirements for exploration or mining. Our preliminary estimate of the likely amount of additional
financial assurance for future exploration is approximately $100,000, although we expect periodic increases due to effects of inflation.
Our preliminary estimate of the likely amount of additional financial assurance to recommence mining operations is $600,000, which
may increase as our mining plans are finalized and reviewed by the applicable agencies.
The government licenses and permits
which we need to explore on our property may take too long to acquire or cost too much to enable us to proceed with exploration.
In the event that we conclude that the Relief Canyon Mine deposit can be profitably mined, or discover other commercially exploitable
deposits, we may face substantial delays and costs associated with securing the additional government licenses and permits that
could preclude our ability to develop the mine. For example, we seek to amend the permits for our existing gold processing facility,
which may be delayed.
Exploration activities
usually require the granting of permits from various governmental agencies. For example, exploration drilling on unpatented mining
claims requires a permit to be obtained from the BLM, which may take several months or longer to grant the requested permit. Depending
on the size, location and scope of the exploration program, additional permits may also be required before exploration activities
can be undertaken. Prehistoric or Indian graves, threatened or endangered species, archeological sites or the possibility thereof,
difficult access, excessive dust and important nearby water resources may all result in the need for additional permits before
exploration activities can commence.
In addition, we plan
to seek amendments to our permits for our Relief Canyon gold processing facility to add a gold recovery (stripping) system to the
facility. If we conclude that the Relief Canyon deposit can be profitably mined, we would seek amendments to the BLM Plan of Operations
and the NDEP reclamation permit to increase the size of the Relief Canyon open pit-mines and waste rock storage areas. If the minable
material exceeds 21 million tons, the current capacity of the leach pad, we would also need to seek an amendment of the processing
facility to expand the capacity of the leach pad and ponds to accommodate additional material. If there are delays in obtaining
the permit to add the gold recovery system, we would sell gold-loaded carbon to another facility that would recover/strip the gold.
We estimate the annual cost of holding these permits will be approximately $35,000, and the cost to amend these permits to authorize
potential future mining including mining beneath the water table will total about $1.2 million, which is based on preliminary estimates
and may increase as our mining plans are finalized. As with all permitting processes, there is substantial uncertainty about when
and if the permits will be issued. There is the risk that unexpected delays and excessive costs may be experienced in obtaining
required permits. The needed permits may not be granted or could be challenged by third parties, which could result in protracted
litigation that could cause substantial delays, or may be granted in an unacceptable timeframe or cost too much. Additionally,
proposed mineral exploration and mining projects can become controversial and be opposed by nearby landowners and communities,
which can substantially delay and interfere with the permitting process. Delays in or inability to obtain necessary permits would
result in unanticipated costs, which may result in serious adverse effects upon our business.
The value of our property and any
other deposits we may seek or locate is subject to volatility in the price of gold.
Our ability to obtain
additional and continuing funding, and our profitability if and when we commence mining or sell our rights to mine, will be significantly
affected by changes in the market price of gold and other mineral deposits. Gold and other minerals prices fluctuate widely and
are affected by numerous factors, all of which are beyond our control. The price of gold may be influenced by:
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fluctuation in the supply of, demand and market price for gold;
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mining activities of our competitors;
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sale or purchase of gold by central banks and for investment purposes by individuals and financial institutions;
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currency exchange rates;
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inflation or deflation;
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fluctuation in the value of the United States dollar and other currencies;
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global and regional supply and demand, including investment, industrial and jewelry demand; and
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political and economic conditions of major gold or other mineral-producing countries.
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The price of gold and
other minerals have fluctuated widely in recent years, and a decline in the price of gold or other minerals could cause a significant
decrease in the value of our property, limit our ability to raise money, and render continued exploration and development of our
property impracticable. If that happens, then we could lose our rights to our property or be compelled to sell some or all of these
rights. Additionally, the future development of our mining properties beyond the exploration stage is heavily dependent upon gold
prices remaining sufficiently high to make the development of our property economically viable.
Our property title may be challenged.
We are not insured against any challenges, impairments or defects to our mining claims or title to our other properties.
Our property is comprised
primarily of unpatented lode mining claims and millsites located and maintained in accordance with the federal General Mining Law
of 1872. Unpatented lode mining claims and millsites are unique U.S. property interests and are generally considered to be subject
to greater title risk than other real property interests because the validity of unpatented mining claims and millsites is often
uncertain. This uncertainty arises, in part, out of the complex federal and state laws and regulations with which the owner of
an unpatented mining claim or millsite must comply in order to locate and maintain a valid claim. Moreover, if we discover mineralization
that is close to the claim boundaries, it is possible that some or all of the mineralization may occur outside the boundaries on
lands that we do not control. In such a case we would not have the right to extract those minerals. We do not have title reports
or opinions covering all of our Relief Canyon properties. The uncertainty resulting from not having title opinions for all of our
Relief Canyon properties or having detailed claim surveys on all of our properties leaves us exposed to potential title defects.
Defending challenges to our property title would be costly, and may divert funds that could otherwise be used for exploration activities
and other purposes.
In addition, unpatented
lode mining claims and millsites are always subject to possible challenges by third parties or contests by the federal government,
which, if successful, may prevent us from exploiting any discovery of commercially extractable gold. Challenges to our title may
increase our costs of operation or limit our ability to explore on certain portions of our property. We are not insured against
challenges, impairments or defects to our property title.
Possible amendments to the General
Mining Law could make it more difficult or impossible for us to execute our business plan.
In recent years, the
U.S. Congress has considered a number of proposed amendments to the General Mining Law, as well as legislation that would make
comprehensive changes to the law. Although no such legislation has been adopted to date, there can be no assurance that such legislation
will not be adopted in the future. If adopted, such legislation, if it includes concepts that have been part of previous legislative
proposals, could, among other things, (i) adopt the limitation on the number of millsites that a claimant may use, discussed
below, (ii) impose time limits on the effectiveness of plans of operation that may not coincide with mine life, (iii) impose
more stringent environmental compliance and reclamation requirements on activities on unpatented mining claims and millsites, (iv) establish
a mechanism that would allow states, localities and Native American tribes to petition for the withdrawal of identified tracts
of federal land from the operation of the General Mining Law, (v) allow for administrative determinations that mining would
not be allowed in situations where undue degradation of the federal lands in question could not be prevented, (vi) impose
royalties on gold and other mineral production from unpatented mining claims or impose fees on production from patented mining
claims, and (vii) impose a fee on the amount of material displaced at a mine. Further, it could have an adverse impact on earnings
from our operations, could reduce estimates of any reserves we may establish and could curtail our future exploration and development
activity on our unpatented claims.
Our ability to conduct
exploration, development, mining and related activities may also be impacted by administrative actions taken by federal agencies.
With respect to unpatented millsites, for example, the ability to use millsites and their validity has been subject to greater
uncertainty since 1997. In November of 1997, the Secretary of the Interior (appointed by President Clinton) approved a Solicitor’s
Opinion that concluded that the General Mining Law imposed a limitation that only a single five-acre millsite may be claimed or
used in connection with each associated and valid unpatented or patented lode mining claim. Subsequently, however, on November 7,
2003, the new Secretary of the Interior (appointed by President Bush) approved an Opinion by the Deputy Solicitor which concluded
that the mining laws do not impose a limitation that only a single five-acre millsite may be claimed in connection with each associated
unpatented or patented lode mining claim. Current federal regulations do not include the millsite limitation. There can be no assurance,
however, that the Department of the Interior will not seek to re-impose the millsite limitation at some point in the future.
In addition, a consortium
of environmental groups has filed a lawsuit in the United District Court for the District of Columbia against the Department of
the Interior, the Department of Agriculture, the BLM, and the USFS, asking the court to order the BLM and USFS to adopt the five-acre
millsite limitation. That lawsuit also asks the court to order the BLM and the USFS to require mining claimants to pay fair market
value for their use of the surface of federal lands where those claimants have not demonstrated the validity of their unpatented
mining claims and millsites. If the plaintiffs in that lawsuit were to prevail, that could have an adverse impact on our ability
to use our unpatented millsites for facilities ancillary to our exploration, development and mining activities, and could significantly
increase the cost of using federal lands at our properties for such ancillary facilities.
Market forces or unforeseen developments
may prevent us from obtaining the supplies and equipment necessary to explore for gold and other minerals.
Gold exploration, and
mineral exploration in general, is a very competitive business. Competitive demands for contractors and unforeseen shortages of
supplies and/or equipment could result in the disruption of our planned exploration activities. Current demand for exploration
drilling services, equipment and supplies is robust and could result in suitable equipment and skilled manpower being unavailable
at scheduled times for our exploration program. Fuel prices are extremely volatile as well. We will attempt to locate suitable
equipment, materials, manpower and fuel if sufficient funds are available. If we cannot find the equipment and supplies needed
for our various exploration programs, we may have to suspend some or all of them until equipment, supplies, funds and/or skilled
manpower become available. Any such disruption in our activities may adversely affect our exploration activities and financial
condition.
Our directors and executive officers
lack significant experience or technical training in exploring for precious and base metal deposits and in developing mines.
Most of our directors
and executive officers lack significant experience or technical training in exploring for precious and base metal deposits and
in developing mines. Accordingly, although our Senior Vice President has significant experience and expertise in environmental
permitting and regulatory matters for developing and operating mines and our Chief Operating Officer has significant experience
with mine operations, our management may not be fully aware of many of the other specific requirements related to working within
this industry. Their decisions and choices may not take into account standard engineering or managerial approaches that mineral
exploration companies commonly use. Consequently, our operations, earnings, and ultimate financial success could suffer irreparable
harm due to some of our management’s lack of experience in the mining industry.
We may not be able to maintain the
infrastructure necessary to conduct exploration activities.
Our exploration activities
depend upon adequate infrastructure. Reliable roads, bridges, power sources and water supply are important factors that affect
capital and operating costs. Unusual or infrequent weather phenomena, sabotage, government or other interference in the maintenance
or provision of such infrastructure could adversely affect our exploration activities and financial condition.
Our exploration activities may be
adversely affected by the local climate or seismic events, which could prevent us from gaining access to our property year-round.
Earthquakes, heavy
rains, snowstorms, and floods could result in serious damage to or the destruction of facilities, equipment or means of access
to our property, or may otherwise prevent us from conducting exploration activities on our property. There may be short periods
of time when the unpaved portion of the access road is impassible in the event of extreme weather conditions or unusually muddy
conditions. During these periods, it may be difficult or impossible for us to access our property, make repairs, or otherwise conduct
exploration activities on them.
Risks Relating to Our Organization and
Common Stock
We have relied on certain stockholders to provide significant
investment capital to fund our operations.
We have in the past
relied on cash infusions primarily from Frost Gamma Investments Trust (“Frost Gamma”) and one of the Company’s
directors, Barry Honig. During the year ended December 31, 2012, Frost Gamma provided approximately $4.6 million in consideration
for the issuance of certain of our securities. In the year ended December 31, 2013, Mr. Honig provided approximately
$5.6 million to us in consideration for the issuance of shares of the Company’s Series E Preferred Stock. Additionally,
Mr. Honig and Frost Gamma provided approximately $1.9 million and $150,000, respectively, to us in consideration for the issuance
of shares of common stock and warrants to purchase shares of common stock in July 2014 private placements. Mr. Honig invested
$150,000 in a private placement of our common stock in October 2014, $2.5 million in an April 2015 private placement, and $1.25
million in a February 2016 private placement. Donald Smith invested $6.0 million in a March 2016 private placement. Curtailment
of cash investments by significant investors could detrimentally impact our cash availability and our ability to fund our operations.
Our principal stockholders, officers
and directors own a substantial interest in our voting securities, and investors may have limited voice in our management.
Our principal stockholders,
Barry Honig, Donald Smith, and Levon Resources Ltd. (“Levon Resources”), as well as our officers and directors, own,
in the aggregate, in excess of approximately 51.2% of our voting securities, including shares of common stock issuable upon the
conversion of our Series E preferred stock. As of June 3, 2016, Mr. Honig, who is a director, owned 8,348,763, or approximately
28.9%, of our voting securities, Mr. Smith owned 3,350,000, or approximately 11.6%, of our voting securities, and Levon Resources
owned 1,954,366, or approximately 6.8%, of our voting securities. As of that date, our officers and directors, including Mr. Honig,
owned 9,505,787, or approximately 32.8%, of our voting securities. Additionally, the holdings of our officers and directors may
increase in the future upon exercise of options, warrants or convertible securities they may hold or be granted in the future or
if they otherwise acquire additional shares of our common stock, including through grants under our employee benefit plans.
As a result of their
ownership and positions, our principal stockholder, directors and executive officers collectively may be able to influence all
matters requiring stockholder approval, including the following matters:
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election of our directors;
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amendment of our articles of incorporation or bylaws; and
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effecting or preventing a merger, sale of assets or other corporate transaction.
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In addition, their
stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the
Company, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
We are subject to the information
and reporting requirements of the Securities and Exchange Act of 1934, as amended (the “
Exchange Act
”), and
other federal securities laws, as well as the listing rules of the Nasdaq stock market.
The costs of preparing
and filing annual and quarterly reports and other information with the Securities and Exchange Commission and furnishing audited
reports to stockholders will cause our expenses to be higher than they would have been if we were privately held. These costs for
the years ended December 31, 2014 and December 31, 2015 were approximately $900,000 and $950,000 respectively. We estimate
that these costs will be approximately $950,000 for the year ending 2016.
It may be time consuming,
difficult and costly for us to develop, implement and maintain the internal controls and reporting procedures required by the Sarbanes-Oxley
Act of 2002 (the “
Sarbanes-Oxley Act
”). We may need to hire additional financial reporting, internal controls
and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures.
If we fail to establish and maintain
an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any
inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading
price of our common stock and our ability to file registration statements pursuant to registration rights agreements and other
commitments.
Effective internal
control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports
or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed,
and our business and reputation with investors may be harmed. As a result of our small size, any current internal control deficiencies
may adversely affect our financial condition, results of operation and access to capital. Although as of December 31, 2015,
management has concluded that our internal control over financial reporting is effective, there can be no assurance that our internal
control over financial reporting will remain effective.
Public company compliance may make
it more difficult to attract and retain officers and directors.
The Sarbanes-Oxley
Act and rules implemented by the Securities and Exchange Commission have required changes in corporate governance practices
of public companies. As a public company, our compliance costs increased in 2015 and we expect these rules and regulations
to further increase our compliance costs and to make certain activities more time consuming and costly. As a public company, we
also expect that these rules and regulations may make it more difficult and expensive for us to obtain director and officer
liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve
on our board of directors or as executive officers, and to maintain insurance at reasonable rates, or at all.
Our stock price may be volatile.
The market price of
our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which
are beyond our control, including the following:
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results of our operations and exploration efforts;
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fluctuation in the supply of, demand and market price for gold;
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our ability to obtain working capital financing;
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additions or departures of key personnel;
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limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our common stock;
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our ability to execute our business plan;
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sales of our common stock and decline in demand for our common stock;
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regulatory developments;
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economic and other external factors;
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investor perception of our industry or our prospects; and
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period-to-period fluctuations in our financial results.
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In addition, the securities
markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance
of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
As a result, you may be unable to resell your shares at a desired price.
Volatility in the price of our common
stock may subject us to securities litigation.
As discussed above,
the market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect
that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs
have often initiated securities class action litigation against a company following periods of volatility in the market price of
its securities. We may in the future be the target of similar litigation. Securities litigation could result in substantial costs
and liabilities and could divert management's attention and resources.
We have not paid cash dividends in
the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.
We have never paid
cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board
of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your
investment will only occur if our stock price appreciates.
There is currently a limited trading
market for our common stock and we cannot ensure that one will ever develop or be sustained.
Although the Company’s
common stock is currently quoted on the Nasdaq Global Market, there is limited trading activity. The Company can give
no assurance that an active market will develop, or if developed, that it will be sustained. If an investor acquires
shares of the Company’s common stock, the investor may not be able to liquidate the Company’s shares should there be
a need or desire to do so. Only a small percentage of our common stock is available to be traded and is held by a small number
of holders and the price, if traded, may not reflect our actual or perceived value. There can be no assurance that there will be
an active market for our shares of common stock either now or in the future. The market liquidity of our common stock is limited
and may be dependent on the market perception of our business, among other things. We may, in the future, take certain steps, including
utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our business and any
steps that we might take to bring us to the awareness of investors may require we compensate consultants with cash and/or stock.
There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on
our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects
the value of the business and trading may be at an inflated price relative to the performance of our Company due to, among other
things, availability of sellers of our shares. If a market should develop, the price may be highly volatile. Because there may
be a low price for our shares of common stock, many brokerage firms or clearing firms may not be willing to effect transactions
in the securities or accept our shares for deposit in an account. Even if an investor finds a broker willing to effect a transaction
in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling
costs may exceed the selling price. Further, many lending institutions will not permit the use of low priced shares of common stock
as collateral for any loans.
Offers or availability for sale of
a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders
sell substantial amounts of our common stock in the public market or upon the expiration of any statutory holding period, under
Rule 144, or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as
an “overhang” in anticipation of which the market price of our common stock could decline. The existence of an overhang,
whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through
the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
Conversion of preferred stock and exercise of options
or warrants may result in substantial dilution to existing stockholders.
Conversions of our
Series E Preferred Stock presently owned by our principal shareholders and others and exercise of options and warrants would
have a dilutive effect on our common stock. As of June 3, 2016, we have reserved (i) 2,825,007 shares of our common stock
that are issuable upon conversion of our Series E Preferred Stock at a conversion rate of one share of Series E Preferred
Stock for approximately 304.615 shares of common stock (following an adjustment in the conversion ratio effective February 25,
2016), (ii) 1,802,787 shares of our common stock that are issuable upon exercise of options to purchase our common stock, (iii)
5,057,598 shares of our common stock that are issuable upon exercise of warrants to purchase our common stock, and (iv) 842,770
shares of our common stock that are issuable pursuant to restricted stock units upon vesting and/or upon termination of service
or in connection with a change of control. Further, any additional financing that we secure is likely to require the sale of additional
common stock and the granting of rights, preferences or privileges senior to those of our common stock and will result in additional
dilution of the existing ownership interests of our common stockholders.
Our issuance of additional shares
of common stock or securities convertible into common stock in exchange for services or to repay debt would dilute the proportionate
ownership and voting rights of existing stockholders and could have a negative impact on the market price of our common stock.
Our board of directors
may generally issue shares of common stock or securities convertible into common stock to pay for debt or services, without further
approval by our stockholders based upon such factors that our board of directors may deem relevant at that time. We have, in the
past, issued securities for debt to reduce our obligations. We have also issued securities as payment for services. It is likely
that we will issue additional securities to pay for services and reduce debt in the future. We cannot give you any assurance that
we will not issue additional shares of common stock or securities convertible into common stock under circumstances we may deem
appropriate at the time.
Our articles of incorporation allow
for our board to create new series of preferred stock without further approval by our stockholders, which could adversely affect
the rights of the holders of our common stock.
Our board of directors
has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has
the authority to issue preferred stock without further stockholder approval. As a result, our board of directors could authorize
the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, the
right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption
of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board of directors could
authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible
into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing
stockholders.
The elimination of monetary liability
against our directors, officers and employees under our articles of incorporation and the existence of indemnification rights to
our directors, officers and employees may result in substantial expenditures by our Company and may discourage lawsuits against
our directors, officers and employees.
Our articles of incorporation
contain provisions which eliminate the liability of our directors for monetary damages to our Company and stockholders. Our bylaws
also require us to indemnify our officers and directors. We may also have contractual indemnification obligations under our agreements
with our directors, officers and employees. The foregoing indemnification obligations could result in our Company incurring substantial
expenditures to cover the cost of settlement or damage awards against directors, officers and employees that we may be unable to
recoup. These provisions and resultant costs may also discourage our Company from bringing a lawsuit against directors, officers
and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders
against our directors, officers and employees even though such actions, if successful, might otherwise benefit our Company and
stockholders.
Anti-takeover provisions may impede
the acquisition of our Company.
Certain provisions
of the Nevada General Corporation Law have anti-takeover effects and may inhibit a non-negotiated merger or other business combination.
These provisions are intended to encourage any person interested in acquiring us to negotiate with, and to obtain the approval
of, our board of directors in connection with such a transaction. However, certain of these provisions may discourage a future
acquisition of us, including an acquisition in which the stockholders might otherwise receive a premium for their shares. As a
result, stockholders who might desire to participate in such a transaction may not have the opportunity to do so.
USE
OF PROCEEDS
Unless otherwise indicated in the applicable
prospectus supplement, we intend to use the net proceeds for general corporate purposes, including without limitation, advancing
our Relief Canyon project, working capital and/or capital expenditures.
PLAN
OF DISTRIBUTION
We may offer the securities directly to
one or more purchasers, through agents, or through underwriters or dealers designated from time to time. We may distribute the
securities from time to time in one or more transactions at a fixed price or prices (which may be changed from time to time), at
market prices prevailing at the times of sale, at prices related to these prevailing market prices or at negotiated prices. We
may offer securities in the same offering, or we may offer securities in separate offerings. The applicable prospectus supplement
will describe the terms of the offering of the securities, including:
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the offeror(s) of the securities;
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the terms of the securities to which the prospectus supplement relates;
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the name or names of any underwriters;
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the purchase price of the securities and the proceeds to be received from the sale;
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any underwriting discounts and other items constituting underwriters’ compensation; and
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any discounts or concessions allowed or reallowed or paid to dealers.
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If underwriters are used in the sale, the
securities will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions
at a fixed public offering price or at varying prices determined at the time of sale. The securities may be either offered to the
public through underwriting syndicates represented by managing underwriters or by underwriters without a syndicate. The obligations
of the underwriters to purchase securities will be subject to the conditions precedent agreed to by the parties and the underwriters
will be obligated to purchase all the securities of a class or series if any are purchased. Any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time.
Underwriters or agents may make sales in
privately negotiated transactions and/or any other method permitted by law, including sales deemed to be an “at-the-market”
offering as defined in Rule 415 promulgated under the Securities Act, which includes sales made directly on an existing trading
market for our common shares, or sales made to or through a market maker other than on an exchange.
Securities may be sold directly by our company
or through agents designated by our company from time to time. Any agent involved in the offer or sale of the securities in respect
of which this prospectus is delivered will be named, and any commissions payable by our company to any agent will be set forth,
in the prospectus supplement. Unless otherwise indicated in the prospectus supplement, any agent will be acting on a best efforts
basis for the period of its appointment.
We may authorize agents or underwriters
to solicit offers by eligible institutions to purchase securities from our company at the public offering price set forth in the
prospectus supplement under delayed delivery contracts providing for payment and delivery on a specified date in the future. The
conditions to these contracts and the commissions payable for solicitation of these contracts will be set forth in the applicable
prospectus supplement.
Agents and underwriters may be entitled
to indemnification by our company against some civil liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the agents or underwriters may be required to make relating to these liabilities. Agents and underwriters
may be customers of, engage in transactions with, or perform services for, our company in the ordinary course of business.
Each class or series of securities other
than the common shares will be a new issue of securities with no established trading market. Any underwriter may make a market
in these securities, but will not be obligated to do so and may discontinue any market making at any time without notice. There
may be limited liquidity in the trading market for any such securities.
DESCRIPTION
OF DEBT SECURITIES
The following description, together with
the additional information we include in any applicable prospectus supplements, summarizes the material terms and provisions of
the debt securities that we may offer under this prospectus. While the terms we have summarized below will apply generally to any
future debt securities we may offer, we will describe the particular terms of any debt securities that we may offer in more detail
in the applicable prospectus supplement. Because the terms of a specific series of debt securities may vary from the general information
that we have provided below, you should rely on information in the applicable prospectus supplement that varies from any information
below.
We may issue senior notes under a senior
indenture to be entered into among us and a trustee to be named in the senior indenture. We may issue subordinated notes under
a subordinated indenture to be entered into among us and a trustee to be named in the subordinated indenture. We have filed forms
of these documents as exhibits to the registration statement which includes this prospectus. We use the term “indentures”
to refer to both the senior indenture and the subordinated indenture. The indentures will be qualified under the Trust Indenture
Act of 1939 (the “Trust Indenture Act”). We use the term “trustee” to refer to either the senior trustee
or the subordinated trustee, as applicable. We urge you to read the indenture applicable to your investment because the indenture,
and not this section, defines your rights as a holder of debt securities.
The following summaries of material provisions
of senior notes, subordinated notes and the indentures are subject to, and qualified in their entirety by reference to, the provisions
of the indenture applicable to a particular series of debt securities. Except as we may otherwise indicate, the terms of the senior
indenture and the subordinated indenture are identical in all material respects.
General
The senior debt securities will have the
same ranking as all of our other unsecured and unsubordinated debt. The subordinated debt securities will be unsecured and will
be subordinated and junior to all senior indebtedness.
The debt securities may be issued in one
or more separate series of senior debt securities and/or subordinated debt securities. The prospectus supplement relating to the
particular series of debt securities being offered will specify the particular amounts, prices and terms of those debt securities.
These terms may include:
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the title of the debt securities;
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any limit upon the aggregate principal amount of the debt securities;
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the date or dates, or the method of determining the dates, on which the debt securities will mature;
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the interest rate or rates of the debt securities, or the method of determining those rates, the interest payment dates and, for registered debt securities, the regular record dates;
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if a debt security is issued with original issue discount, the yield to maturity;
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the places where payments may be made on the debt securities;
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any mandatory or optional redemption provisions applicable to the debt securities;
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any sinking fund or analogous provisions applicable to the debt securities;
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whether and on what terms we will pay additional amounts to holders of the debt securities that are not U.S. persons in respect of any tax, assessment or governmental charge withheld or deducted and, if so, whether and on what terms we will have the option to redeem the debt securities rather than pay the additional amounts;
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any terms for the attachment to the debt securities of warrants, options or other rights to purchase or sell our securities;
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the portion of the principal amount of the debt security payable upon the acceleration of maturity if other than the entire principal amount of the debt securities;
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any deletions of, or changes or additions to, the events of default or covenants applicable to the debt securities;
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if other than U.S. dollars, the currency or currencies in which payments of principal, premium and/or interest on the debt securities will be payable and whether the holder may elect payment to be made in a different currency;
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the method of determining the amount of any payments on the debt securities which are linked to an index;
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whether the debt securities will be issued in fully registered form without coupons or in bearer form, with or without coupons;
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or any combination of these, and whether they will be issued in the form of one or more global securities in temporary or definitive form;
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whether the debt securities will be convertible or exchangeable into or for common stock, preferred stock or other debt securities and the conversion price or exchange ratio, the conversion or exchange period and any other conversion or exchange provisions;
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any terms relating to the delivery of the debt securities if they are to be issued upon the exercise of warrants; and
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any other specific terms of the debt securities.
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Unless otherwise specified in the applicable
prospectus supplement, (1) the debt securities will be registered debt securities and (2) debt securities denominated in U.S.
dollars will be issued, in the case of registered debt securities, in denominations of $1,000 or an integral multiple of $1,000
and, in the case of bearer debt securities, in denominations of $5,000. Debt securities may bear legends required by United States
federal tax law and regulations.
If any of the debt securities are sold for
any foreign currency or currency unit or if any payments on the debt securities are payable in any foreign currency or currency
unit, the prospectus supplement will contain any restrictions, elections, tax consequences, specific terms and other information
with respect to the debt securities and the foreign currency or currency unit.
Some of the debt securities may be issued
as original issue discount debt securities. Original issue discount securities bear no interest during all or a part of the time
that these debt securities are outstanding or bear interest at below-market rates and will be sold at a discount below their stated
principal amount at maturity. The prospectus supplement will also contain special tax, accounting or other information relating
to original issue discount securities or relating to other kinds of debt securities that may be offered, including debt securities
linked to an index or payable in currencies other than U.S. dollars.
Exchange, Registration and Transfer
Debt securities may be transferred or exchanged
at the corporate trust office of the security registrar or at any other office or agency maintained by our company for these purposes,
without the payment of any service charge, except for any tax or governmental charges. The senior trustee initially will be the
designated security registrar in the United States for the senior debt securities. The subordinated trustee initially will be the
designated security registrar in the United States for the subordinated debt securities.
If debt securities are issuable as both
registered debt securities and bearer debt securities, the bearer debt securities will be exchangeable for registered debt securities.
Except as provided below, bearer debt securities will have outstanding coupons. If a bearer debt security with related coupons
is surrendered in exchange for a registered debt security between a record date and the date set for the payment of interest, the
bearer debt security will be surrendered without the coupon relating to that interest payment and that payment will be made only
to the holder of the coupon when due.
In the event of any redemption in part of
any class or series of debt securities, we will not be required to:
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issue, register the transfer of, or exchange, debt securities of any series between the opening of business 15 days before any selection of debt securities of that series to be redeemed and the close of business on:
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if debt securities of the series are issuable only as registered debt securities, the day of mailing of the relevant notice of redemption, and
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if debt securities of the series are issuable as bearer debt securities, the day of the first publication of the relevant notice of redemption or, if debt securities of the series are also issuable as registered debt securities and there is no publication, the day of mailing of the relevant notice of redemption;
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register the transfer of, or exchange, any registered debt security selected for redemption, in whole or in part, except the unredeemed portion of any registered debt security being redeemed in part; or
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exchange any bearer debt security selected for redemption, except to exchange it for a registered debt security which is simultaneously surrendered for redemption.
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Payment and Paying Agent
We will pay principal, interest and any
premium on fully registered securities in the designated currency or currency unit at the office of a designated paying agent.
Payment of interest on fully registered securities may be made at our option by check mailed to the persons in whose names the
debt securities are registered on days specified in the indentures or any prospectus supplement.
We will pay principal, interest and any
premium on bearer securities in the designated currency or currency unit at the office of a designated paying agent or agents outside
of the United States. Payments will be made at the offices of the paying agent in the United States only if the designated currency
is U.S. dollars and payment outside of the United States is illegal or effectively precluded. If any amount payable on any debt
security or coupon remains unclaimed at the end of two years after that amount became due and payable, the paying agent will release
any unclaimed amounts to our company, and the holder of the debt security or coupon will look only to our company for payment.
Global Securities
A global security represents one or any
other number of individual debt securities. Generally all debt securities represented by the same global securities will have the
same terms. Each debt security issued in book-entry form will be represented by a global security that we deposit with and register
in the name of a financial institution or its nominee that we select. The financial institution that we select for this purpose
is called the depositary. Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New
York, New York, known as DTC, will be the depositary for all debt securities that are issued in book-entry form.
A global security may not be transferred
to or registered in the name of anyone other than the depositary or its nominee, unless special termination situations arise. As
a result of these arrangements, the depositary, or its nominee, will be the sole registered holder of all debt securities represented
by a global security, and investors will be permitted to own only beneficial interests in a global security. Beneficial interests
must be held by means of an account with a broker, bank or other financial institution that in turn has an account either with
the depositary or with another institution that has an account with the depositary. Thus, an investor whose security is represented
by a global security will not be registered holder of the debt security, but an indirect holder of a beneficial interest in the
global security.
Temporary Global Securities
All or any portion of the debt securities
of a series that are issuable as bearer debt securities initially may be represented by one or more temporary global debt securities,
without interest coupons, to be deposited with the depositary for credit to the accounts of the beneficial owners of the debt securities
or to other accounts as they may direct. On and after an exchange date provided in the applicable prospectus supplement, each temporary
global debt security will be exchangeable for definitive debt securities in bearer form, registered form, definitive global bearer
form or any combination of these forms, as specified in the prospectus supplement. No bearer debt security delivered in exchange
for a portion of a temporary global debt security will be mailed or delivered to any location in the United States.
Interest on a temporary global debt security
will be paid to the depositary with respect to the portion held for its account only after they deliver to the trustee a certificate
which states that the portion:
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is not beneficially owned by a United States person;
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has not been acquired by or on behalf of a United States person or for offer to resell or for resale to a United States person or any person inside the United States; or
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if a beneficial interest has been acquired by a United States person, that the person is a financial institution, as defined in the Internal Revenue Code, purchasing for its own account or has acquired the debt security through a financial institution and that the debt securities are held by a financial institution that has agreed in writing to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code and the regulations to the Internal Revenue Code and that it did not purchase for resale inside the United States.
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The certificate must be based on statements
provided by the beneficial owners of interests in the temporary global debt security. The depositary will credit the interest received
by it to the accounts of the beneficial owners of the debt security or to other accounts as they may direct.
“United States person” means
a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws
of the United States or an estate or trust with income subject to United States federal income taxation regardless of its source.
Definitive Global Securities
Bearer Securities.
The applicable
prospectus supplement will describe the exchange provisions, if any, of debt securities issuable in definitive global bearer form.
We will not deliver any bearer debt securities delivered in exchange for a portion of a definitive global debt security to any
location in the United States.
U.S. Book-Entry Securities.
Debt
securities of a series represented by a definitive global registered debt security and deposited with or on behalf of a depositary
in the United States will be represented by a definitive global debt security registered in the name of the depositary or its nominee.
Upon the issuance of a global debt security and the deposit of the global debt security with the depositary, the depositary will
credit, on its book-entry registration and transfer system, the respective principal amounts represented by that global debt security
to the accounts of participating institutions that have accounts with the depositary or its nominee. The accounts to be credited
shall be designated by the underwriters or agents for the sale of U.S. book-entry debt securities or by us, if these debt securities
are offered and sold directly by us.
Ownership of U.S. book-entry debt securities
will be limited to participants or persons that may hold interests through participants. In addition, ownership of U.S. book-entry
debt securities will be evidenced only by, and the transfer of that ownership will be effected only through, records maintained
by the depositary or its nominee for the definitive global debt security or by participants or persons that hold through participants.
So long as the depositary or its nominee
is the registered owner of a global debt security, that depositary or nominee, as the case may be, will be considered the sole
owner or holder of the U.S. book-entry debt securities represented by that global debt security for all purposes under the indenture.
Payment of principal of, and premium and interest, if any, on, U.S. book-entry debt securities will be made to the depositary or
its nominee as the registered owner or the holder of the global debt security representing the U.S. book-entry debt securities.
Owners of U.S. book-entry debt securities:
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will not be entitled to have the debt securities registered in their names;
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will not be entitled to receive physical delivery of the debt securities in definitive form; and
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will not be considered the owners or holders of the debt securities under the indenture.
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The laws of some jurisdictions require that
purchasers of securities take physical delivery of securities in definitive form. These laws impair the ability to purchase or
transfer U.S. book-entry debt securities.
We expect that the depositary for U.S. book-entry
debt securities of a series, upon receipt of any payment of principal of, or premium or interest, if any, on, the related definitive
global debt security, will immediately credit participants’ accounts with payments in amounts proportionate to their respective
beneficial interests in the principal amount of the global debt security as shown on the records of the depositary. We also expect
that payments by participants to owners of beneficial interests in a global debt security held through those participants will
be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers
in bearer form or registered in “street name,” and will be the responsibility of those participants.
Consolidation, Merger, Sale or Conveyance
We may, without the consent of the holders
of the debt securities, merge into or consolidate with any other person, or convey or transfer all or substantially all of our
company’s properties and assets to another person provided that:
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the successor assumes on the same terms and conditions all the obligations under the debt securities and the indentures; and
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immediately after giving effect to the transaction, there is no default under the applicable indenture.
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The remaining or acquiring person will be
substituted for our company in the indentures with the same effect as if it had been an original party to the indenture. A prospectus
supplement will describe any other limitations on the ability of our company to merge into, consolidate with, or convey or transfer
all or substantially all or our properties and assets to, another person.
Satisfaction and Discharge; Defeasance
We may be discharged from our obligations
on the debt securities of any class or series that have matured or will mature or be redeemed within one year if we deposit with
the trustee enough cash and/or U.S. government obligations or foreign government securities, as the case may be, to pay all the
principal, interest and any premium due to the stated maturity or redemption date of the debt securities and comply with the other
conditions set forth in the applicable indenture. The principal conditions that we must satisfy to discharge our obligations on
any debt securities are (1) pay all other sums payable with respect to the applicable series of debt securities and (2) deliver
to the trustee an officers’ certificate and an opinion of counsel which state that the required conditions have been satisfied.
Each indenture contains a provision that
permits us to elect to be discharged from all of our obligations with respect to any class or series of debt securities then outstanding.
However, even if we effect a legal defeasance, some of our obligations will continue, including obligations to:
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maintain and apply money in the defeasance trust,
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register the transfer or exchange of the debt securities,
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replace mutilated, destroyed, lost or stolen debt securities, and
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maintain a registrar and paying agent in respect of the debt securities.
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Each indenture also permits us to elect
to be released from our obligations under specified covenants and from the consequences of an event of default resulting from a
breach of those covenants. To make either of the above elections, we must deposit in trust with the trustee cash and/or U.S. government
obligations, if the debt securities are denominated in U.S. dollars, and/or foreign government securities if the debt securities
are denominated in a foreign currency, which through the payment of principal and interest under their terms will provide sufficient
amounts, without reinvestment, to repay in full those debt securities. As a condition to legal defeasance or covenant defeasance,
we must deliver to the trustee an opinion of counsel that the holders of the debt securities will not recognize income, gain or
loss for U.S. federal income tax purposes as a result of the deposit and defeasance and will be subject to U.S. federal income
tax in the same amount and in the same manner and times as would have been the case if the deposit and defeasance had not occurred.
In the case of a legal defeasance only, the opinion of counsel must be based on a ruling of the U.S. Internal Revenue Service or
other change in applicable U.S. federal income tax law.
The indentures specify the types of U.S.
government obligations and foreign government securities that we may deposit.
Events of Default, Notice and Waiver
Each indenture defines an event of default
with respect to any class or series of debt securities as one or more of the following events:
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failure to pay interest on any debt security of the class or series for 30 days when due;
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failure to pay the principal or any premium on any debt securities of the class or series when due;
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failure to make any sinking fund payment for 30 days when due;
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failure to perform any other covenant in the debt securities of the series or in the applicable indenture with respect to debt securities of the series for 90 days after being given notice; and
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occurrence of an event of bankruptcy, insolvency or reorganization set forth in the indenture.
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An event of default for a particular class
or series of debt securities does not necessarily constitute an event of default for any other class or series of debt securities
issued under an indenture.
In the case of an event of default arising
from events of bankruptcy or insolvency set forth in the indenture, all outstanding debt securities will become due and payable
immediately without further action or notice. If any other event of default as to a series of debt securities occurs and is continuing,
the trustee or the holders of at least 25% in principal amount of the then outstanding debt securities of that series may declare
all the debt securities to be due and payable immediately.
The holders of a majority in aggregate principal
amount of the debt securities then outstanding by notice to the trustee may on behalf of the holders of all of the debt securities
of that series waive any existing default or event of default and its consequences under the applicable indenture except a continuing
default or event of default in the payment of interest on, or the principal of, the debt securities of that series.
Each indenture requires the trustee to,
within 90 days after the occurrence of a default known to it with respect to any outstanding series of debt securities, give
the holders of that class or series notice of the default if uncured or not waived. However, the trustee may withhold this notice
if it determines in good faith that the withholding of this notice is in the interest of those holders, except that the trustee
may not withhold this notice in the case of a payment default. The term “default” for the purpose of this provision
means any event that is, or after notice or lapse of time or both would become, an event of default with respect to debt securities
of that series.
Other than the duty to act with the required
standard of care during an event of default, a trustee is not obligated to exercise any of its rights or powers under the applicable
indenture at the request or direction of any of the holders of debt securities, unless the holders have offered to the trustee
reasonable security and indemnity. Each indenture provides that the holders of a majority in principal amount of outstanding debt
securities of any series may direct the time, method and place of conducting any proceeding for any remedy available to the trustee,
or exercising any trust or other power conferred on the trustee if the direction would not conflict with any rule of law or with
the indenture. However, the trustee may take any other action that it deems proper which is not inconsistent with any direction
and may decline to follow any direction if it in good faith determines that the directed action would involve it in personal liability.
Each indenture includes a covenant that
we will file annually with the trustee a certificate of no default, or specifying any default that exists.
Modification of the Indentures
We and the applicable trustee may modify
an indenture without the consent of the holders for limited purposes, including adding to our covenants or events of default, establishing
forms or terms of debt securities, curing ambiguities and other purposes which do not adversely affect the holders in any material
respect.
We and the applicable trustee may make modifications
and amendments to an indenture with the consent of the holders of a majority in principal amount of the outstanding debt securities
of all affected series. However, without the consent of each affected holder, no modification may:
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change the stated maturity of any debt security;
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reduce the principal, premium, if any, or rate of interest on any debt security;
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change any place of payment or the currency in which any debt security is payable;
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impair the right to enforce any payment after the stated maturity or redemption date;
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adversely affect the terms of any conversion right;
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reduce the percentage of holders of outstanding debt securities of any series required to consent to any modification, amendment or waiver under the indenture;
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change any of our obligations, with respect to outstanding debt securities of a series, to maintain an office or agency in the places and for the purposes specified in the indenture for the series; or
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change the provisions in the indenture that relate to its modification or amendment other than to increase the percentage of outstanding debt securities of any series required to consent to any modification or waiver under the indenture.
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Meetings
The indentures will contain provisions for
convening meetings of the holders of debt securities of a series. A meeting may be called at any time by the trustee and also,
upon request, by our company or the holders of at least 25% in principal amount of the outstanding debt securities of a series,
in any case upon notice given in accordance with “Notices” below. Persons holding a majority in principal amount of
the outstanding debt securities of a series will constitute a quorum at a meeting. A meeting called by our company or the trustee
that does not have a quorum may be adjourned for not less than 10 days. If there is not a quorum at the adjourned meeting,
the meeting may be further adjourned for not less than 10 days. Any resolution presented at a meeting at which a quorum is
present may be adopted by the affirmative vote of the holders of a majority in principal amount of the outstanding debt securities
of that series, except for any consent which must be given by the holders of each debt security affected by the modifications or
amendments of an indenture described above under “Modification of the Indentures.” However, a resolution with respect
to any request, demand, authorization, direction, notice, consent, waiver, or other action which may be made, given, or taken by
the holders of a specified percentage, which is equal to or less than a majority, in principal amount of outstanding debt securities
of a series may be adopted at a meeting at which a quorum is present by the affirmative vote of the holders of the specified percentage
in principal amount of the outstanding debt securities of that series. Any resolution passed or decision taken at any meeting of
holders of debt securities of any series duly held in accordance with an indenture will be binding on all holders of debt securities
of that series and the related coupons. The indentures will provide that specified consents, waivers and other actions may be given
by the holders of a specified percentage of outstanding debt securities of all series affected by the modification or amendment,
acting as one class. For purposes of these consents, waivers and actions, only the principal amount of outstanding debt securities
of any series represented at a meeting at which a quorum is present and voting in favor of the action will be counted for purposes
of calculating the aggregate principal amount of outstanding debt securities of all series affected by the modification or amendment
favoring the action.
Notices
In most instances, notices to holders of
bearer debt securities will be given by publication at least once in a daily newspaper in New York, New York and in London, England
and in other cities as may be specified in the bearer debt securities and will be mailed to those persons whose names and addresses
were previously filed with the applicable trustee, within the time prescribed for the giving of the notice. Notice to holders of
registered debt securities will be given by mail to the addresses of those holders as they appear in the security register.
Title
Title to any bearer debt securities and
any related coupons will pass by delivery. We, the trustee, and any agent of ours or the trustee may treat the holder of any bearer
debt security or related coupon and, prior to due presentment for registration of transfer, the registered owner of any registered
debt security as the absolute owner of that debt security for the purpose of making payment and for all other purposes, regardless
of whether or not that debt security or coupon shall be overdue and notwithstanding any notice to the contrary.
Replacement of Securities Coupons
Debt securities or coupons that have been
mutilated will be replaced by us at the expense of the holder upon surrender of the mutilated debt security or coupon to the security
registrar. Debt securities or coupons that become destroyed, stolen, or lost will be replaced by us at the expense of the holder
upon delivery to the security registrar of evidence of its destruction, loss, or theft satisfactory to our company and the security
registrar. In the case of a destroyed, lost, or stolen debt security or coupon, the holder of the debt security or coupon may be
required to provide reasonable security or indemnity to the trustee and our company before a replacement debt security will be
issued.
Governing Law
The indentures, the debt securities and
the coupons will be governed by, and construed under, the laws of the State of New York.
Concerning the Trustees
We may from time to time maintain lines
of credit, and have other customary banking relationships, with any of the trustees.
Senior Debt Securities
The senior debt securities will rank equally
with all of our company’s other unsecured and non-subordinated debt.
Certain Covenants in the Senior Indenture
The prospectus supplement relating to a
series of senior debt securities will describe any material covenants in respect of that series of senior debt securities.
Subordinated Debt Securities
The subordinated debt securities will be
unsecured. The subordinated debt securities will be subordinate in right of payment to all senior indebtedness. In addition, claims
of creditors generally will have priority with respect to the assets and earnings of our subsidiaries over the claims of our creditors,
including holders of the subordinated debt securities, even though those obligations may not constitute senior indebtedness. The
subordinated debt securities, therefore, will be effectively subordinated to creditors, including trade creditors with regard to
the assets of our subsidiaries. Creditors of our subsidiaries include trade creditors, secured creditors and creditors holding
guarantees issued by our subsidiaries.
Unless otherwise specified in a prospectus
supplement, senior indebtedness shall mean the principal of, premium, if any, and interest on, all indebtedness for money borrowed
by our company and any deferrals, renewals, or extensions of any senior indebtedness. Indebtedness for money borrowed by our company
includes all indebtedness of another person for money borrowed that we guarantee, other than the subordinated debt securities,
whether outstanding on the date of execution of the subordinated indenture or created, assumed or incurred after the date of the
subordinated indenture. However, senior indebtedness will not include any indebtedness that expressly states to have the same rank
as the subordinated debt securities or to rank junior to the subordinated debt securities. Senior indebtedness will also not include:
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any of our obligations to our subsidiaries; and
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any liability for federal, state, local or other taxes owed or owing by our company.
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The senior debt securities constitute senior
indebtedness under the subordinated indenture. A prospectus supplement will describe the relative ranking among different series
of subordinated debt securities.
Unless otherwise specified in a prospectus
supplement, we may not make any payment on the subordinated debt securities and may not purchase, redeem, or retire any subordinated
debt securities if any senior indebtedness is not paid when due or the maturity of any senior indebtedness is accelerated as a
result of a default, unless the default has been cured or waived and the acceleration has been rescinded or the senior indebtedness
has been paid in full. We may, however, pay the subordinated debt securities without regard to these limitations if the subordinated
trustee and our company receive written notice approving the payment from the representatives of the holders of senior indebtedness
with respect to which either of the events set forth above has occurred and is continuing. Unless otherwise specified in a prospectus
supplement, during the continuance of any default with respect to any designated senior indebtedness under which its maturity may
be accelerated immediately without further notice or the expiration of any applicable grace periods, we may not pay the subordinated
debt securities for 90 days after the receipt by the subordinated trustee of written notice of a default from the representatives
of the holders of designated senior indebtedness. If the holders of designated senior indebtedness or the representatives of those
holders have not accelerated the maturity of the designated senior indebtedness at the end of the 90 day period, we may resume
payments on the subordinated debt securities. Only one notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to designated senior indebtedness during that period.
In the event that we pay or distribute our
company’s assets to creditors upon a total or partial liquidation, dissolution or reorganization of our company or our company’s
property, the holders of senior indebtedness will be entitled to receive payment in full of the senior indebtedness before the
holders of subordinated debt securities are entitled to receive any payment. Until the senior indebtedness is paid in full, any
payment or distribution to which holders of subordinated debt securities would be entitled but for the subordination provisions
of the subordinated indenture will be made to holders of the senior indebtedness as their interests may appear. However, holders
of subordinated debt securities will be permitted to receive distributions of shares and debt securities subordinated to the senior
indebtedness. If a distribution is made to holders of subordinated debt securities that, due to the subordination provisions, should
not have been made to them, the holders of subordinated debt securities are required to hold it in trust for the holders of senior
indebtedness, and pay it over to them as their interests may appear.
If payment of the subordinated debt securities
is accelerated because of an event of default, either we or the subordinated trustee will promptly notify the holders of senior
indebtedness or the representatives of the holders of the acceleration. We may not pay the subordinated debt securities until five
business days after the holders or the representatives of the senior indebtedness receive notice of the acceleration. Afterwards,
we may pay the subordinated debt securities only if the subordination provisions of the subordinated indenture otherwise permit
payment at that time.
As a result of the subordination provisions
contained in the subordinated indenture, in the event of insolvency, our creditors who are holders of senior indebtedness may recover
more, ratably, than the holders of subordinated debt securities. In addition, our creditors who are not holders of senior indebtedness
may recover less, ratably, than holders of senior indebtedness and may recover more, ratably, than the holders of subordinated
indebtedness.
The prospectus supplement relating to a
series of subordinated debt securities will describe any material covenants in respect of any series of subordinated debt securities.
Conversion or Exchange
We may issue debt securities that we may
convert or exchange into common stock or other securities, property or assets. If so, we will describe the specific terms on which
the debt securities may be converted or exchanged in the applicable prospectus supplement. The conversion or exchange may be mandatory,
at your option, or at our option. The applicable prospectus supplement will describe the manner in which the shares of common stock
or other securities, property or assets you would receive would be issued or delivered.
DESCRIPTION
OF COMMON STOCK
We are authorized to issue 200,000,000 shares
of common stock, par value $0.0001 per share, and 50,000,000 shares of preferred stock. As of June 3, 2016, we have issued and
outstanding securities:
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26,106,654 shares of common stock (including 256,869 shares of restricted stock granted under our equity incentive plans that have not yet vested);
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9,274 shares of Series E Convertible Preferred Stock, which are convertible into 2,825,007 shares of common stock;
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Warrants to purchase 5,057,598 shares of common stock;
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Options to purchase 1,802,787 shares of common stock;
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Restricted stock units, which entitle the holders to receive 842,770 shares of common stock upon vesting and upon the satisfaction of certain specified conditions.
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The holders of our common stock are entitled
to one vote per share. In addition, the holders of our common stock will be entitled to receive ratably such dividends, if any,
as may be declared by our Board of Directors out of legally available funds; however, the current policy of our Board of Directors
is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of our common
stock will be entitled to share ratably in all assets that are legally available for distribution. The holders of our common stock
will have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our
common stock will be subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock,
which may be designated solely by action of our Board of Directors.
The transfer agent for our common stock
is Action Stock Transfer Corp. located at 2469 E. Fort Union Blvd., Ste 214, Salt Lake City, UT 84121.
DESCRIPTION
OF PREFERRED STOCK
We are authorized to issue up to 50,000,000
shares of preferred stock, par value $0.0001 per share. As of the date of this prospectus, there are 9,274 shares of Series E
Convertible Preferred Stock outstanding. Additional shares of preferred stock are issuable in such series as determined by the
board of directors, who have the authority to determine the relative rights and preferences of each such series without further
action by stockholders.
The issuance of preferred stock could adversely
affect the voting power of holders of our common stock, and the likelihood that preferred holders will receive dividend and liquidation
preferences may have the effect of delaying, deferring or preventing a change in control of the Company, which could depress the
market price of our common stock. Unless otherwise indicated in the prospectus supplement, all shares of preferred stock to be
issued from time to time under this prospectus will be fully paid and nonassessable.
The prospectus supplement relating to the
preferred stock offered will contain a description of the specific terms of that series as fixed by our board of directors, including,
as applicable:
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the number of shares of preferred stock offered and the offering price of the preferred stock;
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the title and stated value of the preferred stock;
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the dividend rate(s), period(s) and/or payment date(s) or method(s) of calculation of such rates, periods or dates applicable to the preferred stock;
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the date from which dividends on the preferred stock will accumulate, if applicable;
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the liquidation rights of the preferred stock;
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the procedures for auction and remarketing, if any, of the preferred stock;
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the sinking fund provisions, if applicable, for the preferred stock;
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the redemption provisions, if applicable, for the preferred stock;
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whether the preferred stock will be convertible into or exchangeable for other securities and, if so, the terms and conditions of the conversion or exchange, including the conversion price or exchange ratio and the conversion or exchange period (or the method of determining the same);
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whether the preferred stock will have voting rights and the terms of such voting rights, if any;
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whether the preferred stock will be listed on any securities exchange;
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whether the preferred stock will be issued with any other securities and, if so, the amount and terms of these securities; and
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any other specific terms, preferences or rights of, or limitations or restrictions on, the preferred stock.
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DESCRIPTION
OF WARRANTS
We may issue warrants for the purchase of
debt securities, common stock, preferred stock or other securities. Warrants may be issued independently or together with debt
securities, common stock, preferred stock or other securities offered by any prospectus supplement and may be attached to or separate
from any such offered securities. Series of warrants may be issued under a separate warrant agreement entered into between us and
a bank or trust company, as warrant agent, all as will be set forth in the prospectus supplement relating to the particular issue
of warrants. The warrant agent would act solely as our agent in connection with the warrants and would not assume any obligation
or relationship of agency or trust for or with any holders of warrants or beneficial owners of warrants.
We currently have issued and outstanding
warrants to purchase 5,057,598 shares of common stock, all currently exercisable, as follows:
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Warrants to purchase 194,445 shares at $7.20 per share, expiring February 23, 2017;
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Warrants to purchase 22,223 shares at $8.10 per share, expiring March 6, 2022;
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Warrants to purchase 746,432 shares at $7.20 per share, expiring on August 1, 2016;
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Warrants to purchase 590,658 shares at $8.10 per share, expiring January 2, 2017;
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Warrants to purchase 104,675 shares at $6.12 per share, expiring January 2, 2017;
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Warrants to purchase 54,710 shares at $8.10 per share, expiring January 14, 2017;
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Warrants to purchase 13,403 shares at $6.12 per share, expiring January 14, 2017;
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Warrants to purchase 151,419 shares at $8.10 per share, expiring January 30, 2017;
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Warrants to purchase 19,048 shares at $6.12 per share, expiring January 30, 2017;
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Warrants to purchase 8,334 shares at $5.40 per share, expiring November 7, 2018;
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Warrants to purchase 660,934 shares at $7.92 per share, expiring April 10, 2017;
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Warrants to purchase 89,164 shares at $5.85 per share, expiring October 10, 2017;
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Warrants to purchase 124,111 shares at $7.92 per share, expiring April 21, 2017;
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Warrants to purchase 31,023 shares at $5.85 per share, expiring October 21, 2017;
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Warrants to purchase 1,060,429 shares at $5.06 per share, expiring August 25, 2018;
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Warrants to purchase 261,590 shares at $5.06 per share, expiring August 25, 2018; and
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Warrants to purchase 925,000 shares at $4.35 per share, expiring September 28, 2018.
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You should refer to the provisions of the
warrant agreement that will be filed with the SEC in connection with the offering of warrants for the complete terms of the warrant
agreement.
Prior to the exercise of any warrants, holders
of such warrants will not have any rights of holders of the securities purchasable upon such exercise, including the right to receive
payments of dividends, or the right to vote such underlying securities.
DESCRIPTION
OF RIGHTS
We may issue rights to purchase debt securities,
preferred stock or common stock. These rights may be issued independently or together with any other security offered hereby and
may or may not be transferable by the stockholder receiving the rights in such offering. In connection with any offering of such
rights, we may enter into a standby arrangement with one or more underwriters or other purchasers pursuant to which the underwriters
or other purchasers may be required to purchase any securities remaining unsubscribed for after such offering.
Each series of rights will be issued under
a separate rights agreement which we will enter into with a bank or trust company, as rights agent, all as set forth in the applicable
prospectus supplement. The rights agent will act solely as our agent in connection with the certificates relating to the rights
and will not assume any obligation or relationship of agency or trust with any holders of rights certificates or beneficial owners
of rights. We will file the rights agreement and the rights certificates relating to each series of rights with the SEC, and incorporate
them by reference as an exhibit to the registration statement of which this prospectus is a part on or before the time we issue
a series of rights.
The applicable prospectus supplement will
describe the specific terms of any offering of rights for which this prospectus is being delivered, including the following:
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the date of determining the stockholders entitled to the rights distribution;
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the number of rights issued or to be issued to each stockholder;
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the exercise price payable for each share of debt securities, preferred stock, common stock or other securities issued upon the exercise of the rights;
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the number and terms of the shares of debt securities, preferred stock, common stock or other securities which may be purchased per each right;
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the extent to which the rights are transferable;
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the date on which the holder’s ability to exercise the rights shall commence, and the date on which the rights shall expire;
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the extent to which the rights may include an over-subscription privilege with respect to unsubscribed securities;
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if applicable, the material terms of any standby underwriting or purchase arrangement entered into by us in connection with the offering of such rights; and
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any other terms of the rights, including the terms, procedures, conditions and limitations relating to the exchange and exercise of the rights.
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The description in the applicable prospectus
supplement of any rights that we may offer will not necessarily be complete and will be qualified in its entirety by reference
to the applicable rights certificate, which will be filed with the SEC.
DESCRIPTION
OF UNITS
As specified in the applicable prospectus
supplement, we may issue units consisting of one or more debt securities, shares of common stock or preferred stock, warrants or
any combination of such securities. In addition, the prospectus supplement relating to units will describe the terms of any units
we issue, including as applicable:
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the designation and terms of the units and the securities included in the units;
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any provision for the issuance, payment, settlement, transfer or exchange of the units;
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the date, if any, on and after which the units may be transferable separately;
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whether we will apply to have the units traded on a securities exchange or securities quotation system;
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any material United States federal income tax consequences; and
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how, for United States federal income tax purposes, the purchase price paid for the units is to be allocated among the component securities.
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LEGAL
MATTERS
Davis Graham & Stubbs LLP of Denver,
Colorado has provided its opinion on the validity of the securities offered by this prospectus.
EXPERTS
The financial statements incorporated by
reference herein have been so included in reliance on the report of KBL, LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
You should rely only on the information
incorporated by reference or provided in this prospectus or any supplement to this prospectus. We have authorized no one to provide
you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus is accurate as of any date other than the date on the front of this prospectus.
PERSHING GOLD
CORPORATION
$100,000,000
Senior Debt Securities
Subordinated Debt
Securities
Common Stock
Preferred Stock
Warrants
Rights
Units
PROSPECTUS
June 29, 2016
Shares of Common Stock
Warrants to
Purchase Common Stock
Pershing Gold
Corporation
PROSPECTUS
SUPPLEMENT
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Joint Book-Running Managers
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Canaccord Genuity
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BMO Capital Markets
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Cantor Fitzgerald
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December , 2017
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