<HTML>
<HEAD>
     <TITLE></TITLE>
</HEAD>
<BODY STYLE="font: 10pt Times New Roman, Times, Serif">

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 12pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><BR>
As filed with the Securities and Exchange Commission on March 19, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>Registration No. 333-__________&#9; </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES SECURITIES AND EXCHANGE
COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="text-transform: uppercase"><B>Form
S-1</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT UNDER</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>THE SECURITIES ACT OF 1933</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Spectrum Group International, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified in
its charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 29%; font-weight: bold; text-align: center">Delaware</TD>
    <TD STYLE="width: 2%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 40%; font-weight: bold; text-align: center">5094</TD>
    <TD STYLE="width: 3%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 26%; font-weight: bold; text-align: center">22-2365834</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(State or other jurisdiction of</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">(Primary Standard Industrial</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">(I.R.S. Employer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">incorporation or organization)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">Classification Code Number)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">Identification No.)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>1063 McGaw</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Irvine, CA 92614</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(949) 748-4800</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Address, including zip code, and telephone
number, including area code, of registrant&rsquo;s principal executive offices)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Carol Meltzer, Esq.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>General Counsel and Corporate Secretary</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Spectrum Group International, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>1063 McGaw</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Irvine, CA 92614</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(949) 748-4800</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Name, address, including zip code, and
telephone number, including area code, of agent for service)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Copies To:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Scott S. Rosenblum, Esq.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Kramer Levin Naftalis &amp; Frankel LLP</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>1177 Avenue of the Americas</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, New York 10036</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 715-9100</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Approximate date of commencement of proposed
sale to the public: As soon as practicable after the effective date of this Registration Statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following
box. <FONT STYLE="font-family: Wingdings 2">&#83;</FONT><FONT STYLE="font-family: Wingdings 2; color: black"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.<FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.<FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.<FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt/normal Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo;
in Rule 12b-2 of the Exchange Act. (Check one):</P>

<P STYLE="font: 10pt/normal Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse; margin-left: 0.25in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">Large accelerated filer <FONT STYLE="font-family: Wingdings">&uml;</FONT></TD>
    <TD STYLE="width: 50%">Accelerated filer <FONT STYLE="font-family: Wingdings">&uml;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Non-accelerated filer <FONT STYLE="font-family: Wingdings">&uml;</FONT></TD>
    <TD>Smaller reporting company <FONT STYLE="font-family: Wingdings 2">&#83;</FONT><FONT STYLE="font-family: Wingdings 2"></FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 12pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left"></P>

<!-- Field: Page; Sequence: 1; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Title of Each Class of <BR>Securities to be Registered</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount to be<BR> Registered</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="text-align: center; border-bottom: Black 1pt solid"><B>Proposed<BR> Maximum<BR> Offering Price</B>(1)</TD><TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed<BR> Maximum<BR> Aggregate</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD NOWRAP STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount of<BR> Registration<BR>
 Fee</TD><TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 48%; padding-bottom: 1pt; text-indent: -12pt; padding-left: 12pt">Common Stock, par value $0.01 per share (2)</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">19,717,023</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">1.90</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">37,462,343.70</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">4,293.18</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -12pt; padding-left: 12pt">Rights to purchase Common Stock, par value $0.01 per share (3)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 27pt">Total</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,293.18</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: left">Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the
Securities Act of 1933, based on a proposed aggregate offering price of $37.5 million.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>This registration statement relates to (a) the subscription rights to purchase common stock, $0.01 par value of the Registrant
(the &ldquo;Common Stock&rdquo;), and (b) the shares of Common Stock deliverable upon the exercise of the subscription rights pursuant
to the rights offering described in this Registration Statement on Form S-1.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>The subscription rights are being issued without consideration. Pursuant to Rule 457(g), no separate registration fee is payable
with respect to the subscription rights being offered hereby, because the subscription rights are being registered in the same
registration statement as the securities to be offered pursuant thereto.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>The Registrant
hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 60%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<!-- Field: Page; Sequence: 2 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left; color: Red"><B>The information in
this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; color: red">Subject to completion, dated
March 19, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>PRELIMINARY PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B><IMG SRC="logo.jpg"></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>Up to 19,717,023 Shares
of Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>Issuable Upon Exercise
of the Subscription Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Spectrum Group International, Inc. is distributing at no charge to the holders of our common stock, par
value $0.01 per share (other than Afinsa Bienes Tangibles, S.A. En Liquidacion, or &ldquo;Afinsa,&rdquo; and Auctentia, S.L., or
&ldquo;Auctentia&rdquo;), transferable subscription rights to purchase up to an aggregate of 19,717,023 shares of our common stock
at a subscription price of $1.90 per share, for up to an aggregate purchase price of $37.5 million. Each stockholder (other than
Afinsa or Auctentia) will receive one subscription right for each share of our common stock owned on [&#9679;], 2012, and each
subscription right will entitle its holder to purchase 1.4 shares of our common stock at the subscription price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The subscription rights
are transferable, and we anticipate that the subscription rights will be traded on the Pink OTC Markets Inc., or the &ldquo;Pink
Sheets,&rdquo; under the symbol &ldquo;[&#9679;].&rdquo; We expect that subscription rights may be purchased or sold through usual
investment channels until the close of business on the last trading day preceding the expiration date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The rights will expire
at 5:00 p.m., New York City time, [&#9679;], 2012, unless extended as described herein, which date we refer to as the &ldquo;expiration
date.&rdquo; We may extend the period for exercising the rights in our sole discretion. You will have no right to rescind your
subscriptions after receipt of your payment of the subscription price except as described in this prospectus. Rights that are not
exercised prior to the expiration date will expire and have no value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The purpose of this
rights offering is to raise capital that will be used to fund a portion of our obligations under a securities purchase agreement
that we have entered into with Afinsa and Auctentia. Pursuant to this securities purchase agreement, we have agreed, among other
things, to purchase 18,642,067 shares of our common stock that are owned by Afinsa and Auctentia. This rights offering allows us
to raise equity capital in a cost-effective manner that gives all of our stockholders the opportunity to participate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our shares of common
stock are traded on the Pink Sheets under the symbol &ldquo;SPGZ.PK.&rdquo; <B>The closing price of our shares of common stock
on March 16, 2012 was $2.25 per share.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are distributing
the rights and offering the underlying shares of common stock directly to you. We have not employed any brokers, dealers or underwriters
in connection with the solicitation or exercise of rights in this rights offering and no commissions, fees or discounts will be
paid in connection with this rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Per Share</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Total(1)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left; text-indent: 0in">Subscription Price</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1.900</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">37,462,344</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in; padding-bottom: 1pt">Estimated Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">0.017</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">$</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">340,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Net Proceeds to Spectrum</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.883</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">37,122,344</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 25%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0">(1) Assumes the offering
is fully subscribed</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>An investment in
our common stock involves risks. See &ldquo;Risk Factors&rdquo; beginning on page 12 of this prospectus.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>Neither the Securities
and Exchange Commission nor any state securities regulators have approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our securities are
not being offered in any jurisdiction where the offer is not permitted under applicable local laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">The date of this prospectus
is [&#9679;], 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"></P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 50%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;&nbsp;</P>

<!-- Field: Page; Sequence: 3 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><FONT STYLE="text-transform: uppercase">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><FONT STYLE="text-transform: uppercase"><B>Table
of Contents</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 92%; tab-stops: .5in right dotted 6.5in; text-transform: uppercase; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 7%; tab-stops: .5in right dotted 6.5in; text-transform: none; text-decoration: none; text-align: right; vertical-align: bottom; border-bottom: Black 1pt solid">Page</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">About This Prospectus</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom"><FONT STYLE="text-transform: none">iii</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Cautionary Note Regarding Forward-Looking Statements</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom"><FONT STYLE="text-transform: none">iii</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Prospectus Summary</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Spectrum Group International, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Purpose of the Rights Offering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">The Rights Offering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">3</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">6</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">RISK FACTORS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">12</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Risks Related to this Rights Offering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">12</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Risks Associated with an Investment in Our Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">15</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Use of Proceeds</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">16</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Determination of Offering Price</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">16</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Capitalization</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">17</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">18</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Background of and Purpose For the Rights Offering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">19</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Spectrum Group International, Inc.</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">19</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">The Proposed Transactions with Afinsa and Auctentia</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">19</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">The Rights Offering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">21</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Subscription Rights</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">21</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Expiration of the Rights Offering and Extensions, Amendments and Termination</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">22</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Conditions to this Rights Offering</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">23</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Method of Exercising Subscription Rights</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">23</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Method of Payment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">24</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Medallion Guarantee May Be Required</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">24</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Subscription Agent</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Delivery of Subscription Materials and Payment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Calculation of Subscription Rights Exercised</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Escrow Arrangements</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Notice to Beneficial Holders</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Beneficial Owners</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">26</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Method of Transferring and Selling Subscription Rights</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">26</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Determinations Regarding the Transfer or Exercise of Your Subscription Rights</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">27</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">No Revocation or Change</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">27</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Rights of Subscribers</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">27</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Foreign Stockholders and Stockholders with Army Post Office or Fleet Post Office Addresses</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">28</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">No Recommendation by Our Board of Directors or the Special Committee</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">28</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Fees and Expenses</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">28</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Questions About Exercising Subscription Rights</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">28</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Other Matters</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">28</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 4; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->i<!-- Field: /Sequence --> -</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 92%; tab-stops: .5in right dotted 6.5in; text-transform: uppercase">PLAN OF DISTRIBUTION</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 7%; tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">28</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Certain MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">29</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Description of Capital Stock</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">31</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">31</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Preferred Stock</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">31</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Anti-takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">31</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Limitation of Liability and Indemnification Matters</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">32</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Listing Symbol</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">33</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Transfer agent and registrar</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">33</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">LEGAL MATTERS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">33</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">EXPERTS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">33</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">INCORPORATION BY REFERENCE</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">33</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">WHERE YOU CAN FIND ADDITIONAL INFORMATION</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">34</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">Disclosure of Commission Position on Indemnification &nbsp;for Securities Act Liabilities</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">34</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase">INFORMATION NOT REQUIRED IN PROSPECTUS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: .5in right dotted 6.5in; text-transform: uppercase; text-align: right; vertical-align: bottom">II - 1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Item 13. Other Expenses of Issuance and Distribution.</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">II - 1</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Item 14. Indemnification of Directors and Officers.</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">II - 1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Item 15. Recent Sales of Unregistered Securities.</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">II - 1</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Item 16. Exhibits.</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">II - 1</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="padding-left: 36pt; tab-stops: 1.0in right dotted 6.5in">Item 17. Undertakings</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="tab-stops: 1.0in right dotted 6.5in; text-align: right; vertical-align: bottom">II - 2</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 5; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->ii<!-- Field: /Sequence --> -</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><B>About This
Prospectus</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You should rely only
on the information contained in this prospectus or any free writing prospectus we may authorize to be delivered to you. We have
not authorized anyone to provide you with different or additional information. We are not making an offer of securities in any
state or other jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus
is accurate as of any date other than the date on the front of this prospectus regardless of its time of delivery, and you should
not consider any information in this prospectus to be investment, legal or tax advice. We encourage you to consult your own counsel,
accountant and other advisors for legal, tax, business, financial and related advice regarding an investment in our securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Unless we otherwise
indicate or unless the context requires otherwise, all references in this registration statement to the &ldquo;Company,&rdquo;
&ldquo;we,&rdquo; &ldquo;us&rdquo; or &ldquo;our&rdquo; refer to Spectrum Group International, Inc. and its subsidiaries; all references
to &ldquo;Spectrum PMI&rdquo; refer to Spectrum PMI, Inc., a subsidiary in which we have an 80% ownership interest; and all references
to &ldquo;A-Mark&rdquo; refer to A-Mark Precious Metals, Inc., a subsidiary of Spectrum PMI.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"></P>

<!-- Field: Rule-Page --><DIV ALIGN="CENTER" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 40%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><B>Cautionary
Note Regarding Forward-Looking Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">This prospectus contains
certain forward-looking statements regarding, among other things, our anticipated financial and operating results. Investors are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake
no obligation to publicly release any modifications or revisions to these forward-looking statements to reflect events or circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated events. In connection with the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, we caution investors that actual financial and operating results may differ
materially from those projected in forward-looking statements made by, or on behalf of, us. Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be
materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The words &ldquo;anticipate,&rdquo;
&ldquo;believe,&rdquo; &ldquo;estimate,&rdquo; &ldquo;expect,&rdquo; &ldquo;intend,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo;
&ldquo;may,&rdquo; &ldquo;plan,&rdquo; and similar expressions, as they relate to us or our management, are intended to identify
forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain
risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected,
intended, or planned. We assume no obligation and do not intend to update these forward-looking statements.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: left">&nbsp;</P>

<!-- Field: Page; Sequence: 6; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->iii<!-- Field: /Sequence --> -</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><FONT STYLE="font-weight: normal">&nbsp;</FONT></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"><B>Prospectus
Summary</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>The following summary
provides an overview of certain information about us and this rights offering and may not contain all the information that is important
to you. This summary is qualified in its entirety by, and should be read together with, the information contained in other parts
of this prospectus. You should read this entire prospectus carefully before making a decision about whether to invest in our securities.</I></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Spectrum Group International, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are a global trading
and collectibles network. We are a trader of precious metals and an auctioneer of coins, stamps and wine, serving both collectors
and dealers. We are also a merchant/dealer of certain collectibles. Our collectibles offerings span the price spectrums from modest
to ultra-high end. Furthermore, we offer loans to coin dealers, collectors and investors backed by their precious metals, rare
coin and other collectibles as collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are a Delaware
company headquartered in California with 190 employees globally, as of December 31, 2011. Our executive offices are located at
1063 McGaw, Irvine, California 92614. Our telephone number is (949) 748-4800, and our website is www.spectrumgi.com. Information
contained on our web site does not constitute a part of this prospectus.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Purpose of the Rights Offering</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 6, 2012,
we entered into a securities purchase agreement, effective as of March 5, 2012, with Afinsa Bienes Tangibles, S.A. En Liquidacion,
or &ldquo;Afinsa,&rdquo; and Auctentia, S.L., or &ldquo;Auctentia,&rdquo; which we refer to as the &ldquo;securities purchase agreement.&rdquo;
Since February 2003, Afinsa and Auctentia have collectively owned a majority of our common stock and currently hold approximately
57% of our outstanding common stock. In addition, Auctentia owns 20% of Spectrum PMI, a subsidiary of ours that owns all of the
outstanding equity of A-Mark, our subsidiary through which we conduct our trading business. Afinsa has been in insolvency proceedings
in Spain since July 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Under the securities
purchase agreement, we have agreed to purchase all shares of our common stock currently held by Afinsa and Auctentia, which includes
271,514 shares held by Afinsa and 18,370,553 shares held by Auctentia, and all shares of common stock of Spectrum PMI held by Auctentia.
The aggregate purchase price under the securities purchase agreement is $58.25 million, payable in cash at the closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We anticipate financing
the purchase price, in part, through funds received from this rights offering. We expect to fund the balance of the purchase price
through our cash on hand. If we fail to consummate this rights offering, we may seek alternative sources of capital in order to
finance the purchase price; however, we are not obligated to do so under the securities purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The closing of the
securities purchase agreement is subject to satisfaction or waiver of a number of conditions, including, among others, that all
conditions to the consummation of this rights offering shall have been satisfied and that we have sufficient funds, together with
the net proceeds of this rights offering, to consummate the transactions contemplated by the securities purchase agreement, and
that each of Antonio Arenas and George Lumby, the representatives of Afinsa and Auctentia, shall have tendered his resignation
as a director of the Company effective as of the closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The securities purchase
agreement contains customary termination rights for us, Afinsa and Auctentia, including if the transaction has not been consummated
by July 15, 2012. If the securities purchase agreement is terminated because of our material breach or because we fail to have
the required financing to consummate the transaction by July 15, 2012, we must pay a termination fee of $2.9 million. However,
no termination fee will be payable if we have complied with our obligations under the securities purchase agreement, and the SEC
has not declared the registration statement of which this prospectus forms a part under the Securities Act of 1933 effective by
June 10, 2012. We will be required to pay Afinsa and Auctentia a termination fee of $3.5 million (in lieu of the aforementioned
$2.9 million termination fee) if the securities purchase agreement has been terminated as a result of a willful and material breach
of our obligations under the securities purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Through these transactions,
we will eliminate a controlling position that, we believe, has adversely affected the liquidity of our common stock and will unlock
value for our other stockholders.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 7; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; padding: 0; text-align: justify; text-indent: 0.25in">In order to avoid
potential conflicts relating to such the transactions contemplated by the securities purchase agreement, our board of directors
appointed a special committee comprised entirely of independent directors, which we refer to as the &ldquo;special committee,&rdquo;
to oversee the negotiations with the trustees of Afinsa and to evaluate and recommend a transaction to our board of directors.
The special committee consists of Jeffrey Benjamin (as chairman), Jess Ravich, Christopher Nolan and Jay Moorhead. Our board of
directors, acting on the unanimous recommendation of the special committee, has unanimously approved the transaction. The board
representatives of Afinsa and Auctentia abstained from the vote.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 8; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>



<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Rights Offering</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in; width: 25%">Issuer</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; width: 73%">Spectrum Group International, Inc.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Rights Granted</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">We will distribute to each stockholder of record on [&#9679;], 2012 (other than Afinsa and Auctentia)
at no charge, one transferable subscription right for each share of our common stock then owned by such stockholder. The rights
will be evidenced by transferable subscription rights certificates. If and to the extent that holders of the subscription rights
exercise their right to purchase our common stock we will issue up to 19,717,023 shares and receive net proceeds of up to $37.1
million.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Subscription Rights</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Through your basic subscription right, you are entitled to purchase 1.4 shares of our common stock for
each subscription right at the subscription price. We will not issue fractional shares, but rather will round down the aggregate
number of shares you are entitled to receive to the nearest whole number.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Subscription Price</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">$1.90 per share, which shall be paid in cash.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Shares of Common Stock Outstanding after the Offering</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in"><BR>33,800,611 shares, assuming full subscription.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Oversubscription Rights</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">We do not expect that all holders of the subscription rights will exercise all of their basic subscription rights. If you fully exercise your basic subscription right, the oversubscription right of each right entitles you to subscribe for additional shares of our common stock unclaimed by other holders of rights in this rights offering at the same subscription price per share, subject to certain ownership limitations. If an insufficient number of shares are available to fully satisfy all oversubscription right requests, the available shares will be distributed proportionately among stockholders who exercised their oversubscription rights based on the number of shares each stockholder subscribed for under its basic subscription rights. We reserve the right to reject any oversubscription and we will, in most cases, reject an oversubscription to the extent the stockholder together with its affiliates would own 20% or more of our common stock after the oversubscription is exercised. If we reject any oversubscription, then such person will be allocated only that number of shares for which the person is permitted to purchase, and the remaining shares of common stock will be allocated among all other persons exercising the oversubscription privilege on the same basis described above. The allocation process will be repeated until all shares of common stock have been allocated or all oversubscription requests have been satisfied, whichever occurs first. If there are not enough unsubscribed shares to honor all requests pursuant to the oversubscription privilege, a portion of requested shares will not be fulfilled. When you send in your subscription certificate, you must also send the full purchase price in cash for the number of additional shares that you have requested to purchase pursuant to oversubscription rights (in addition to the payment in cash due for shares purchased through your basic subscription right). The subscription agent will return any excess payments by mail without interest or deduction promptly after the expiration of the subscription period.</TD>

</TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 9; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 25%; text-align: left; text-indent: 0in">Transferability of Rights</TD>
    <TD STYLE="width: 2%; text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="width: 73%; text-align: justify; text-indent: 0in">The subscription rights are transferable, and we anticipate that the subscription rights will be traded on the Pink Sheets under the symbol &ldquo;[&#9679;].&rdquo; We expect that subscription rights may be purchased or sold through usual investment channels until the close of business on the last trading day preceding the expiration date. However, there has been no prior public market for the subscription rights, and we cannot assure you that a trading market for the subscription rights will develop or, if a market develops, that the market will remain available throughout the subscription period.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Record Date</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">As of 5:00 p.m., New York City time, on [&#9679;], 2012.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Expiration Date</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">As of 5:00 p.m., New York City time, on [&#9679;], 2012, subject to extension or earlier termination.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Amendment, Extension and Termination</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">We may extend the expiration date at any time after the record date or we may amend or modify the terms of this rights offering. We also reserve the right to terminate this rights offering at any time prior to the expiration date for any reason, in which event all funds received in connection with this rights offering will be returned without interest or deduction to those persons who exercised their subscription rights.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Fractional Shares</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">We will not issue fractional shares of our common stock, but rather will round down the aggregate number of shares you are entitled to receive to the nearest whole share.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Procedure for Exercising Rights</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">You may exercise your subscription rights by properly completing and executing your rights certificate and delivering it, together with the subscription price for each share of common stock for which you subscribe, to the subscription agent on or prior to the expiration date. If you use the mail, we recommend that you use insured, registered mail, return receipt requested.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">No Revocation</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Once you submit the form of rights certificate to exercise any subscription rights, you may not revoke or change your exercise or request a refund of monies paid. All exercises of rights are irrevocable, even if you subsequently learn information about us that you consider to be unfavorable.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Payment Adjustments</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">If you send a payment that is insufficient to purchase the number of shares requested, or if the number of shares requested is not specified in the rights certificate, the payment received will be applied to exercise your subscription rights to the extent of the payment. If the payment exceeds the amount necessary for the full exercise of your subscription rights, including any oversubscription rights exercised and permitted, the excess will be returned to you as soon as practicable. You will not receive interest or a deduction on any payments refunded to you under this rights offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">How Rights Holders Can Exercise Rights Through Others</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">If you hold our common stock through a broker, custodian bank or other nominee, we will ask your broker, custodian bank or other nominee to notify you of this rights offering. If you wish to exercise your rights, you will need to have your broker, custodian bank or other nominee act for you. To indicate your decision, you should complete and return to your broker, custodian bank or other nominee the form entitled &ldquo;Beneficial Owners Election Form.&rdquo; You should receive this form from your broker, custodian bank or other nominee with the other rights offering materials. You should contact your broker, custodian bank or other nominee if you believe you are entitled to participate in this rights offering but you have not received this form.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 10; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->4<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">

<TD STYLE="width: 25%; text-align: left; text-indent: 0in">How Foreign Stockholders and Other Stockholders Can Exercise Rights</TD>
    <TD STYLE="width: 2%; text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="width: 73%; text-align: justify; text-indent: 0in">The subscription agent will not mail rights certificates to you if you are a stockholder whose address is outside the United States or if you have an Army Post Office or a Fleet Post Office address. Instead, we will have the subscription agent hold the subscription rights certificates for your account. To exercise your rights, you must notify the subscription agent prior to 11:00 a.m., New York City time, at least three business days prior to the expiration date, and establish to the satisfaction of the subscription agent that you are permitted to exercise your subscription rights under applicable law. If you do not follow these procedures by such time, your rights will expire and will have no value.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Material U.S. Federal Income Tax Consequences</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">In general, you will not recognize income or loss for U.S. Federal income
    tax     purposes in connection with the receipt or exercise of subscription rights in this rights offering, but you may
    recognize taxable gain or loss upon a sale or other disposition of the subscription rights. For     a     detailed     discussion, see
    &ldquo;Certain     Material     U.S.     Federal     Income     Tax     Consequences&rdquo;     beginning on page
    29.     You should     consult     your tax     advisor as to     the     particular     consequences to you of this
    rights offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Issuance of Our Common Stock</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">We will issue certificates representing shares purchased in this rights offering as soon as practicable after the consummation of this rights offering.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Conditions</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">The completion of this rights offering is subject to the consummation of the transactions contemplated by the securities purchase agreement. In addition, we reserve the right to amend, extend, cancel, terminate or otherwise modify this rights offering at any time before completion of this rights offering for any reason.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">No Recommendation to Rights Holders</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">An investment in shares of our common stock must be made according to your evaluation of your own best interests and after considering all of the information herein, including the &ldquo;Risk Factors&rdquo; section of this prospectus. Neither we nor our board of directors are making any recommendation regarding whether you should exercise your subscription rights.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Use of Proceeds</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Assuming this rights offering is fully-subscribed, the net proceeds available to us from this rights offering
will be approximately $37.1 million. We will use the net proceeds received by us, together with our cash on hand, to fund the purchase
price under the securities purchase agreement. This rights offering allows us to raise equity capital in a cost-effective manner
that gives all of our stockholders the opportunity to participate.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Subscription Agent</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">American Stock Transfer &amp; Trust Company LLC</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For additional information
concerning this rights offering, see &ldquo;The Rights Offering,&rdquo; beginning on page 21.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Before investing in
our common stock, you should carefully read and consider the information set forth in &ldquo;Risk Factors&rdquo; beginning on page
12 of this prospectus and all other information appearing elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 11; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">QUESTIONS
AND ANSWERS ABOUT THE RIGHTS OFFERING</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What is a rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">A rights offering is an opportunity for you to purchase additional shares of our common stock at
a fixed price and in an amount at least proportional to your existing interest in us.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Why are we engaging in a rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">We have entered into the securities purchase agreement with Afinsa and Auctentia, pursuant to which
we have agreed to purchase all shares of our common stock held by Afinsa and Auctentia and all shares of common stock of Spectrum
PMI held by Auctentia. The aggregate purchase price for the securities is $58.25 million, payable in cash. We are engaging in this
rights offering to raise capital that will be used to fund a portion of our obligations under the securities purchase agreement.
This rights offering allows us to raise equity capital in a cost-effective manner that gives all of our stockholders the opportunity
to participate.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>How will we use the net proceeds from this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">The net proceeds of $37.1 million from this rights offering (assuming full subscription), together with
our cash on hand, will be used to fund the purchase price of the securities purchase agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>How was the $1.90 per share
subscription price established? </B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">In setting the subscription price, we reviewed and considered a number of factors, including the
amount of cash proceeds needed to consummate the transactions contemplated by the securities purchase agreement, alternatives available
to us for raising equity capital, the historic market price of our common stock, the liquidity and the historic volatility of the
market price of our common stock, the historic trading volume of our common stock, our business prospects, our recent and anticipated
operating results, the price at which our stockholders might be willing to participate in this rights offering, the desire to provide
an opportunity to our stockholders to participate in this rights offering on a pro rata basis and general conditions in the securities
market. The subscription price for this rights offering was proposed to, reviewed and approved by the special committee.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 0in">The subscription
price is not necessarily related to the book value of our assets, net worth, past operations, cash flows, losses, financial condition,
or any other established criteria for valuing us and may or may not be considered the fair value of our common stock to be offered
in this rights offering. You should not assume or expect that, after this rights offering, our common shares will trade at or above
the subscription price. We can give no assurance that our common shares will trade at or above the subscription price in any given
time period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Am I required to subscribe in this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">No.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What is the basic subscription right?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">Each subscription right evidences a right to purchase 1.4 shares of our common stock at a subscription
price of $1.90 per share.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<!-- Field: Page; Sequence: 12; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->6<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What is the oversubscription right?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">We do not expect that all holders of the subscription rights will exercise all of their basic subscription
rights. If you fully exercise your basic subscription right, the oversubscription right entitles you to subscribe for additional
shares of our common stock unclaimed by other holders of rights in this rights offering at the same subscription price per share,
subject to certain ownership limitations. If an insufficient number of shares are available to fully satisfy all oversubscription
right requests, the available shares will be distributed proportionately among stockholders who exercised their oversubscription
rights based on the number of shares each stockholder subscribed for under its basic subscription rights. We reserve the right
to reject any oversubscription and we will, in most cases, reject an oversubscription to the extent the stockholder together with
its affiliates would own 20% or more of our common stock after the oversubscription is exercised. If we reject any oversubscription,
then such person will be allocated only that number of shares for which the person is permitted to purchase, and the remaining
shares of common stock will be allocated among all other persons exercising the oversubscription privilege on the same basis described
above. The allocation process will be repeated until all shares of common stock have been allocated or all oversubscription requests
have been satisfied, whichever occurs first. If there are not enough unsubscribed shares to honor all requests pursuant to the
oversubscription privilege, a portion of requested shares will not be fulfilled. When you send in your subscription certificate,
you must also send the full purchase price in cash for the number of additional shares that you have requested to purchase pursuant
to oversubscription rights (in addition to the payment in cash due for shares purchased through your basic subscription right).
The subscription agent will return any excess payments by mail without interest or deduction promptly after the expiration of the
subscription period.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Who will receive subscription rights?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">Holders of our common stock (other than Afinsa and Auctentia) will receive one transferable subscription
right for each share of common stock owned as of [&#9679;], 2012, the record date.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>How many shares may I purchase if I exercise my subscription rights?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">You will receive one transferable subscription right for each share of our common stock that you owned
on [&#9679;], 2012, the record date. Each subscription right evidences a right to purchase 1.4 shares of our common stock at a
subscription price of $1.90 per share. You may exercise any number of your subscription rights.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Are there any limits on the number of shares I may purchase in this rights offering or own as
a result of this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">We reserve the right to reject any oversubscription and we will, in most cases, reject an oversubscription
to the extent the stockholder together with its affiliates would own 20% or more of the common stock after the oversubscription
is exercised.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What happens if I choose not to exercise my subscription rights?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">If you choose not to exercise your subscription rights you will retain your current number of shares
of common stock.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Do you need to achieve a certain participation level in order to complete this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">No. We may choose to consummate, amend, extend or terminate this rights offering regardless of
the number of shares actually purchased.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Can you terminate this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">Yes. Our board of directors may decide to terminate this rights offering at any time prior to the expiration
of this rights offering, for any reason. If we cancel this rights offering, any money received from subscribing stockholders will
be refunded as soon as practicable, but no later than 10 business days from the announcement that this rights offering is terminated,
without interest or a deduction on any payments refunded to you under this rights offering. See &ldquo;The Rights Offering &mdash;
Expiration of the Rights Offering and Extensions, Amendments and Termination&rdquo; at page 22.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<!-- Field: Page; Sequence: 13; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Is this rights offering conditioned upon anything?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">Yes. Consummation of this rights offering is conditioned upon consummation of the transactions contemplated
by the securities purchase agreement. See &ldquo;The Rights Offering &mdash; Conditions to this Rights Offering&rdquo; at page
23.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>May I transfer my subscription rights if I do not want to purchase any shares?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">Yes. The rights being distributed to our stockholders are transferable, and we anticipate that
they will be traded on the Pink Sheets until the close of business on the last trading day before the expiration date. However,
we cannot assure you that a trading market for the rights will develop.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>How may I sell my rights?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">We expect that subscription rights may be purchased or sold through usual investment channels until
the close of business on the last trading day preceding the expiration time. However, there has been no prior public market for
the subscription rights, and we cannot assure you that a trading market for the subscription rights will develop or, if a market
develops, that the market will remain available throughout the subscription period. You may transfer subscription rights in whole
by executing the rights transfer form on the back of the rights certificate and submitting it the subscription agent prior to [&#9679;].
Please follow the instructions for transfer included in the information sent to you with your subscription rights certificate.
Record holders (or subsequent holders of the rights) wishing to sell their rights on the Pink Sheets, should independently engage
a broker to execute this sale on their behalf. Each stockholder (or subsequent holder of the rights) will be responsible for all
fees associated with the sale of its rights. We cannot assure you that any person will be able to sell any rights on your behalf.
If we cancel this rights offering, we will be under no obligation to refund any consideration paid by a transferee in connection
with a transfer of the subscription rights. Please see &ldquo;The Rights Offering &mdash; Method of Transferring and Selling Subscription
Rights&rdquo; at page  26 for more information.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>When will this rights offering expire?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">The subscription rights will expire and will have no value, if not exercised prior thereto, at
5:00 p.m., New York City time, on [&#9679;], 2012, unless we decide to extend this rights offering expiration date until some later
time or terminate it earlier. See &ldquo;The Rights Offering &mdash; Expiration of the Rights Offering and Extensions, Amendments
and Termination&rdquo; at page 22. The subscription agent must actually receive all required documents and payments in cash
before the expiration date. There is no maximum duration for this rights offering.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>How do I exercise my subscription rights?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">You may exercise your subscription rights by properly completing and executing your rights certificate
and delivering it, together in full with the subscription price for each share of common stock you subscribe for, to the subscription
agent on or prior to the expiration date. When you send in your subscription certificate, you must also send the full purchase
price in cash for the number of additional shares that you have requested to purchase pursuant to oversubscription rights (in addition
to the payment in cash due for shares purchased through your basic subscription right). If you use the mail, we recommend that
you use insured, registered mail and return receipt requested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<!-- Field: Page; Sequence: 14; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->8<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What should I do if I want to participate in this rights offering but my shares of common stock
are held in the name of my broker, custodian bank or other nominee?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">If you hold our common stock through a broker, custodian bank or other nominee, we will ask your
broker, custodian bank or other nominee to notify you of this rights offering. If you wish to exercise your rights, you will need
to have your broker, custodian bank or other nominee act for you. To indicate your decision, you should complete and return to
your broker, custodian bank or other nominee the form entitled &ldquo;Beneficial Owner Election Form.&rdquo; You should receive
this form from your broker, custodian bank or other nominee with the other rights offering materials. You should contact your broker,
custodian bank or other nominee if you believe you are entitled to participate in this rights offering but you have not received
this form.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What should I do if I want to participate in this rights offering, but I am a stockholder with
a foreign address or a stockholder with an Army Post Office or Fleet Post Office address?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">The subscription agent will not mail rights certificates to you if you are a stockholder whose
address is outside the United States or if you have an Army Post Office or a Fleet Post Office address. To exercise your rights,
you must notify the subscription agent prior to 11:00 a.m., New York City time, at least three business days prior to the expiration
date, and establish to the satisfaction of the subscription agent that you are permitted to exercise your subscription rights under
applicable law. If you do not follow these procedures by such time, your rights will expire and will have no value.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Will I be charged a sales commission or a fee if I exercise my subscription rights?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">We will not charge a brokerage commission or a fee to rights holders for exercising their subscription
rights. However, if you exercise your subscription rights through a broker, dealer or nominee, you will be responsible for any
fees charged by your broker, dealer or nominee.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Has the board of directors or the special committee made a recommendation regarding this rights
offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">Neither we nor our board of directors or the special committee is making any recommendation as
to whether you should exercise your subscription rights. You are urged to make your decision based on your own assessment of this
rights offering, after considering all of the information herein, including the &ldquo;Risk Factors&rdquo; section of this prospectus,
and your best interests.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>May stockholders in all states participate in this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">Although we intend to distribute the rights to all stockholders, we reserve the right in some states
to require stockholders, if they wish to participate, to state and agree upon exercise of their respective rights that they are
acquiring the shares for investment purposes only, and that they have no present intention to resell or transfer any shares acquired.
Our securities are not being offered in any jurisdiction where the offer is not permitted under applicable local laws.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>Is the exercise of my subscription rights risky?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">The exercise of your subscription rights involves significant risks. Exercising your rights means
buying additional shares of our common stock and should be considered as carefully as you would consider any other equity investment.
Among other things, you should carefully consider the risks described under the heading &ldquo;Risk Factors,&rdquo; beginning on
page 12.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"></P>

<!-- Field: Page; Sequence: 15; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->9<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>How many shares of our common stock will be outstanding after this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">The number of shares of our common stock that will be outstanding after this rights offering will depend
on the number of shares of common stock that are purchased in this rights offering. If we sell all of the shares being offered
in this rights offering, then we will issue approximately 19,717,023 shares of common stock. However, immediately prior to consummating
this rights offering, we expect to consummate the transactions contemplated by the securities purchase agreement, pursuant to which
we will acquire into treasury 18,642,067 shares of common stock from Afinsa and Auctentia. As a result, assuming full subscription,
we will issue 1,074,956 new shares of common stock in connection with this rights offering, and there will be an increase in the
number of our shares of common stock outstanding.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What will be the proceeds of this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">If we sell all the shares being offered, we will receive net proceeds of approximately $37.1 million.
We are offering shares in this rights offering with no minimum purchase requirement. We will use the net proceeds received by us,
together with cash on hand, to fund the purchase price of the securities purchase agreement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>After I exercise my rights, can I change my mind and cancel my purchase?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">No. Once you exercise and send in your subscription rights certificate and payment, as provided herein,
you cannot revoke the exercise of your subscription rights, even if you later learn information about us that you consider to be
unfavorable and even if the market price of our common stock falls below the $1.90 per share subscription price. You should not
exercise your subscription rights unless you are certain that you wish to purchase additional shares of our common stock at a price
of $1.90 per share. See &ldquo;The Rights Offering &mdash; No Revocation or Change&rdquo; at page 27.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What are the material U.S. Federal income tax consequences of exercising or transferring
                                                                  my                                                                   subscription rights?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">In general, you will not recognize income or loss for U.S. Federal income tax purposes in
connection with the receipt or exercise of subscription rights in this rights offering, but you may
    recognize taxable gain or loss upon a sale or other disposition of the subscription rights. For a detailed discussion, see &ldquo;Certain
Material U.S. Federal Income Tax Consequences&rdquo; at page 29. You should consult your tax advisor as to the particular
consequences to you of this rights offering.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>If this rights offering is not completed, for any reason, will my subscription payment be refunded
to me?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">Yes. If this rights offering is not completed, for any reason, any cash received from subscribing
stockholders will be refunded as soon as practicable, without interest or deduction.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>If I exercise my subscription rights, when will I receive shares of common stock I purchased
in this rights offering?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">We will deliver certificates representing the shares of our common stock purchased in this rights
offering as soon as practicable after the expiration of this rights offering, after all pro rata allocations and adjustments have
been completed and the transactions contemplated by the securities purchase agreement have been consummated.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>To whom should I send my forms and payment?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">If your shares are held in the name of a broker, dealer or other nominee, then you should send
your subscription documents, rights certificate and payment in cash to that record holder. If you are the record holder, then you
should send your subscription documents, rights certificate and payment, as provided herein, by hand delivery, first class mail
or courier service to American Stock Transfer &amp; Trust Company LLC, the subscription agent. The address for delivery to the
subscription agent is as follows:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 16; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 95%; border-collapse: collapse; margin-left: 0.25in">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in; border-bottom: Black 0.5pt solid"><B>By
        mail:</B></P></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 49%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in; border-bottom: Black 0.5pt solid"><B>By
        hand or overnight delivery:</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">American Stock Transfer
        &amp; Trust Company, LLC</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Attn: Reorganization
        Department</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">P.O. Box 2042</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">New York, New York 10272-2042</P></TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">American Stock Transfer
        &amp; Trust Company, LLC</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Operations Center</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Attn: Reorganization
        Department</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">6201 15th Avenue</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Brooklyn, New York 11219</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 0in">Your delivery
to a different address or other than by the methods set forth above will not constitute valid delivery.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><B>Q:</B></TD><TD STYLE="text-align: justify"><B>What if I have other questions?</B></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">A:</TD><TD STYLE="text-align: justify">If you have other questions about this rights offering, please contact us at Spectrum Group International,
Inc., 1063 McGaw, Irvine, CA 92614, Attn: Paul Soth, Chief Financial Officer, or by telephone at (949) 748-4800.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<!-- Field: Page; Sequence: 17; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">RISK FACTORS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>Investing in our
common stock involves risks. You should carefully consider the risks described below and all of the other information contained
in this prospectus before you make a decision to participate in this rights offering and purchase shares of our common stock. If
any of these risks occur, our business, financial condition or results of operations could suffer, and you could lose part or all
of your investment. </I></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Related to this Rights Offering</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">We face risks and
uncertainties in connection with the bankruptcy proceedings of Afinsa, our majority stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In May 2011, Commercial
Court No. 6 (Mercantile Court) in Madrid, Spain issued an order approving the liquidation of a portion of the assets owned by Afinsa.
Afinsa, directly and through its wholly-owned subsidiary Auctentia, owns approximately 57% of our outstanding common stock and
20% of the equity in Spectrum PMI, through which we own A-Mark. Afinsa has been in insolvency proceedings in Spain since July 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 6, 2012, we entered into the securities purchase agreement with Afinsa and Auctentia. Pursuant
to the securities purchase agreement, we have agreed to purchase all shares of our common stock that are owned by Afinsa and Auctentia
and all shares of common stock of Spectrum PMI that are owned by Auctentia for $58.25 million. The closing of the securities purchase
agreement is subject to satisfaction or waiver of a number of conditions, including, among others, that all conditions to the consummation
of this proposed rights offering shall have been satisfied and that we have sufficient funds, together with the proceeds of this
rights offering, to consummate the transactions contemplated by the securities purchase agreement, and that each of Antonio Arenas
and George Lumby, the representatives of Afinsa and Auctentia, shall have tendered his resignation as a director of the Company
effective as of the closing. Assuming this rights offering is fully-subscribed, the net proceeds available to us from this rights
offering will be approximately $37.1 million from this rights offering, which, together with our cash on hand, will be used to
fund the purchase price of the securities purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There can be no assurance
that we will be successful in consummating this rights offering or that we will have sufficient cash on hand necessary, together
with the fund raised through this rights offering, to consummate the transactions contemplated by the securities purchase agreement.
If we are unable to close the transactions contemplated by the securities purchase agreement by July 15, 2012, because of a lack
of sufficient financing or because of our material breach of our obligations under the securities purchase agreement, we will be
required to pay a termination fee to Afinsa and Auctentia of $2.9 million. We will be required to pay Afinsa and Auctentia a termination
fee of $3.5 million (in lieu of the aforementioned $2.9 million termination fee) if the securities purchase agreement has been
terminated as a result of a willful and material breach of our obligations under the securities purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we are unsuccessful
in purchasing our common stock from Afinsa and Auctentia, they may sell the stock to a third party. A sale of all or a substantial
portion of the shares of our common stock held by Afinsa and Auctentia to a holder (or group of holders) other than us will cause
a change of control of us. A holder (or group of holders) of more than 50% of our issued and outstanding stock has sufficient voting
power to control the outcome of virtually all corporate matters submitted to a vote of our stockholders. These matters could include
the election of directors, amendments to our bylaws, changes in the size and composition of our board of directors, and mergers
and other business combinations involving us. Such a holder may promote policies or transactions that may not be favored by other
stockholders or impede policies or transactions that may be desirable for other stockholders. A change of control could also have
adverse tax consequences to us by limiting our ability to utilize our net operating loss carry-forwards and other related tax attributes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We and Auctentia are
parties to a registration rights agreement pursuant to which Auctentia may request that substantially all of the shares of our
common stock beneficially owned by it be registered by us at our expense. Unless and until such a registration statement is declared
effective, Auctentia would likely not be able to sell the shares publicly, and would have to dispose of those shares in one or
more private transactions. If and when the shares are registered, then they would be freely tradable immediately after any registration.
Sales of such shares in the public markets in one or more &ldquo;block&rdquo; transactions could have a negative effect on the
trading price of our common stock.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 18; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">If this rights offering
is not consummated, we may not have an immediate source of funds to satisfy our obligations under the securities purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There can be no assurance
that this rights offering will be consummated. If we fail to consummate this rights offering, we may seek alternative sources of
capital to finance the purchase price of the securities purchase agreement; however, we are not obligated under the securities
purchase agreement to do so. Any financings through equity investments could be dilutive to existing stockholders. In addition,
the terms of securities we may issue in an equity transaction could be more favorable for new investors. Newly issued securities
could include preferences, superior voting rights and the issuance of warrants or other derivative securities. Further, we could
incur substantial costs in pursuing capital and/or financing, including investment banking fees, legal fees, accounting fees, printing
and distribution expenses and other costs. We could also be required to recognize non-cash expenses in connection with certain
securities we could issue, such as convertible notes and warrants, which will adversely impact our financial condition and results
of operations. Our ability to obtain needed financing could be impaired by such factors as the condition of the economy and capital
markets, both generally and specifically in our industry.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Failure to complete
the securities purchase agreement in certain circumstances could require us to pay a termination fee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we are unable to
close the transactions contemplated by the securities purchase agreement by July 15, 2012, because of a lack of sufficient financing
or because of our material breach of our obligations under the securities purchase agreement, we will be required to pay a termination
fee to Afinsa and Auctentia of $2.9 million. We will be required to pay Afinsa and Auctentia a termination fee of $3.5 million
(in lieu of the aforementioned $2.9 million termination fee) if the securities purchase agreement has been terminated as a result
of a willful and material breach of our obligations under the securities purchase agreement. The payment of a termination fee by
us to Afinsa and Auctentia and the public announcement of the termination of the transactions contemplated by the securities purchase
agreement could have an adverse effect on our business, financial condition, results of operations, prospects, liquidity or market
price.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The subscription
price is not an indication of our value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The subscription price
does not necessarily bear any relationship to the book value of our assets, to our operations, cash flows or financial condition,
or to any other established criteria for value. You should not consider the subscription price an indication of our value or any
assurance of future value. After the date of this prospectus, our common stock may trade at prices above or below the subscription
price.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">This rights offering
may cause the price of our common stock to decrease.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The subscription price
per share is lower than the average of the closing sales prices of our common stock over the 30 trading day period ended [&#9679;],
2012. The subscription price, together with the number of shares of common stock we propose to issue and ultimately will issue
if this rights offering is completed, may result in an immediate decrease in the market value of our common stock. This decrease
may continue after the completion of this rights offering. If that occurs, you may have committed to buy shares of common stock
in this rights offering at a price greater than the prevailing market price. Further, if a substantial number of rights are exercised
and the holders of the shares received upon exercise of those rights choose to sell some or all of those shares, the resulting
sales could depress the market price of our common stock. There is no assurance that following the exercise of your rights you
will be able to sell your common stock at a price equal to or greater than the subscription price.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">You could be committed
to buying shares of common stock above the prevailing market price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Once you exercise your rights, you may not revoke such exercise even if you later learn information that
you consider to be unfavorable to the exercise of your rights. Our shares of common stock are traded on the Pink Sheets under the
symbol &ldquo;SPGZ.PK.&rdquo; On [&#9679;], 2012, the last trading day before the commencement of this rights offering, the closing
sales price of our shares of common stock was $1.90 per share. We cannot assure you that the market price of our shares of common
stock will not decline prior to the expiration of this rights offering or that, after shares of common stock are issued upon exercise
of rights, a subscribing rights holder will be able to sell shares of common stock purchased in this rights offering at a price
greater than or equal to the subscription price. You should not exercise your subscription rights unless you are certain that you
wish to purchase additional shares of our common stock at the subscription price.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 19; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">If you exercise
your subscription rights, you may be unable to sell any shares you purchase at a profit and your ability to sell may be delayed
by the time required to deliver the shares to you.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The public trading
price of our common stock may decline after you elect to exercise your subscription rights. If that occurs, you will have committed
to buy shares of common stock at a price above the prevailing market price and you will have an immediate unrealized loss. Moreover,
we cannot assure you that following the exercise of the subscription rights you will be able to sell your shares of common stock
at a price equal to or greater than the subscription price. Until shares are delivered after completion of this rights offering,
you may not be able to sell the shares of our common stock that you purchase in this rights offering. Shares of our common stock
purchased in this rights offering will be delivered as soon as practicable after completion of this rights offering. We will not
pay you interest on any funds delivered to the subscription agent pursuant to the exercise of subscription rights.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">We may cancel this
rights offering at any time. If we cancel this rights offering, neither we nor the subscription agent will have any obligation
to you except to return your subscription payments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may unilaterally
cancel this rights offering at any time in our sole discretion. If we cancel this rights offering, the subscription rights will
be void and will have no value, and neither we nor the subscription agent will have any obligation with respect to the subscription
rights except to return, without interest or penalty, any subscription payments actually received. Further, if we cancel this rights
offering, we will be under no obligation to refund any consideration paid by a transferee in connection with a transfer of the
subscription rights.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">To exercise your
subscription rights, you must act promptly and follow the subscription instructions carefully.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you desire to purchase
shares of our common stock in this rights offering, you must act promptly to ensure that all required forms and payments are actually
received by the subscription agent at or prior to 5:00 p.m., New York City time, on [&#9679;], 2012, the current expiration date
of this rights offering. If you fail to complete and sign the required subscription forms, send an incorrect payment amount, or
otherwise fail to follow the subscription procedures that apply to your desired transaction, the subscription agent may, depending
on the circumstances, reject your subscription or accept it to the extent of the payment received. Neither we nor the subscription
agent has any obligation to contact you concerning, or attempt to correct, an incomplete or incorrect subscription form or payment.
We have the sole discretion to determine whether a subscription exercise properly follows the subscription procedures. See &ldquo;The
Rights Offering&rdquo; for additional details regarding exercise of your subscription rights.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">This rights offering
and the transactions contemplated by the securities purchase agreement may limit our ability to use some or all of our net operating
loss carryforwards.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As a result of
prior operating losses, we have net operating loss, or &ldquo;NOL,&rdquo; carryforwards for federal income tax purposes. Our
ability to utilize our NOL carryforwards to reduce taxable income in future years could become subject to significant
limitations under Section 382 of the Internal Revenue Code if we undergo an ownership change. We would undergo an ownership
change if, among other things, the stockholders who own, directly or indirectly, 5% or more of our common stock, or are
otherwise treated as &ldquo;5% shareholders&rdquo; under Section 382 of the U.S. Internal Revenue Code and the regulations
promulgated thereunder, increase their aggregate percentage ownership of our stock by more than 50 percentage points over the
lowest percentage of the stock owned by these stockholders at any time during the testing period, which is generally the
three-year period preceding the potential ownership change. In the event of an ownership change, Section 382 of the U.S.
Internal Revenue Code imposes an annual limitation on the amount of taxable income a corporation may offset with NOL
carryforwards. The annual limitation is equal to the value of the stock of the corporation immediately before the ownership
change, multiplied by the long-term tax-exempt rate for the month in which the ownership change occurs (the long-term
tax-exempt rate for the April 2012 is 3.26%). Any unused annual limitation may be carried over to later years until the NOL
carryforwards expire.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 20; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->14<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">It is possible that
this rights offering and the transactions contemplated by the securities purchase agreement could trigger an ownership change for
purposes of Section 382 of the U.S. Internal Revenue Code, which would limit our ability to use any NOL carryforwards as described
above and could result in a write-down of those assets on our consolidated balance sheet and a charge against earnings. Even if
this rights offering and the transactions contemplated by the securities purchase agreement do not trigger an ownership change,
they will increase the likelihood that we may undergo an ownership change for purposes of Section 382 of the U.S. Internal Revenue
Code in the future.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Risks Associated with an Investment
in Our Common Stock</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Our common stock
is currently traded on the Pink Sheets and an investor&rsquo;s ability to trade our common stock may be limited by trading volume.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In early 2007, our stock was de-listed from the NASDAQ National Market because of our failure to comply
with our financial reporting obligations under the Exchange Act. Since then, our stock has traded on the Pink Sheets. As a result,
our stock is thinly traded, which in turn affects the ability of holders of our stock to resell the shares they purchase, and they
may not be able to resell at prices at or above the prices they paid. The trading volume in our common stock has been relatively
limited. A consistently active trading market for our common stock may not continue on the Pink Sheets. The average daily trading
volume of our common stock for our fiscal year ended June 30, 2011 was approximately 13,200 shares.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Our stock price
may fluctuate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The market price of
our common stock dropped dramatically following May 9, 2006, when Spanish judicial authorities began an investigation related to
alleged criminal wrongdoing by Afinsa and certain of its executives. In the past, the market price of our common stock has fluctuated
and may continue to fluctuate significantly due to a number of factors, some of which may be beyond our control, including:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">sales of our common stock by stockholders, including Afinsa and Auctentia;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">actual or anticipated fluctuations in our operating results;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the operating and stock price performance of other comparable companies;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">developments and publicity regarding the Spanish criminal investigation;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">general economic conditions; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">lack of liquidity for our common stock based, in part, on our shares not being traded on a national
exchange.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, the stock
market in general has experienced volatility that has often been unrelated to the operating performance of individual companies.
These broad market fluctuations may adversely affect the trading price of our common stock, regardless of our actual performance,
and could enhance the effect of any fluctuations that do relate to our operating results.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">We have not paid
dividends on our common stock in the past and do not anticipate paying dividends on our common stock in the foreseeable future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have not paid common
stock dividends since our inception and do not anticipate paying dividends in the foreseeable future. Our current business plan
provides for the reinvestment of earnings, with the goal of increasing sales and long-term profitability and value. Therefore,
an investor in our common stock will obtain an economic benefit from the common stock only after an increase in its trading price
and only by selling the common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 21; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->15<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">Use of Proceeds</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Assuming this rights
offering is fully-subscribed, the net proceeds available to us from this rights offering, after deducting estimated offering expenses
of $0.3 million payable by us, will be approximately $37.1 million. The net proceeds of this rights offering, together with our
cash on hand, will be used to fund the purchase price of the securities purchase agreement. The purpose of this rights offering
is to raise capital in a cost-effective manner that gives all of our stockholders the opportunity to participate.&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">Determination
of Offering Price</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In setting the subscription
price, we reviewed and considered a number of factors, including the amount of proceeds needed to satisfy the purchase price of
the securities purchase agreement, alternatives available to us for raising equity capital, the historic market price, the liquidity
and the historic volatility of the market price of our common stock, the historic trading volume of our common stock, our business
prospects, our recent and anticipated operating results, the price at which our stockholders might be willing to participate in
this rights offering, the desire to provide an opportunity to our stockholders to participate in this rights offering on a pro
rata basis and general conditions in the securities market. The subscription price for this rights offering was proposed to, reviewed
and approved by the special committee. The subscription price is not necessarily related to the book value of our assets, net worth,
past operations, cash flows, losses, financial condition, or any other established criteria for valuing us and may or may not be
considered the fair value of our common stock to be offered in this rights offering. You should not assume or expect that, after
this rights offering, our common shares will trade at or above the subscription price. We can give no assurance that our common
shares will trade at or above the subscription price in any given time period.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 22; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">Capitalization</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following table sets forth our historical and pro forma capitalization as of December 31, 2011. The
pro forma information gives effect to an assumed $37.1 million in net proceeds raised from this rights offering and consummation
of the transactions contemplated by the securities purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For purposes of this table, we have assumed that this rights offering is fully subscribed, resulting in
$37.1 million in net proceeds. However, it is not possible to predict how many shares of common stock will be subscribed for in
this rights offering, and therefore, how much gross proceeds will actually be raised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">This table should
be read in conjunction with our consolidated financial statements and the notes thereto included in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 95%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">December 31, 2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Actual</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Pro-forma</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 74%; text-align: left; padding-bottom: 2.5pt">Cash and cash equivalents</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">34,541</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 2.5pt double; text-align: right">13,413</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Debt outstanding</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,783</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,783</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Stockholders&rsquo; equity (deficit):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 19.65pt">Preferred stock, $.01 par value, authorized 10,000 shares; issued and outstanding: none</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 19.65pt">Common stock, $0.01 par value, authorized 40,000 shares; issued and outstanding: 32,638 and 33,713 on an actual and pro forma basis, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">326</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">337</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 19.65pt">Additional paid in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">242,227</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">221,089</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 19.65pt">Accumulated other comprehensive income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,330</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,330</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 19.65pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(158,660</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(158,660</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 37.65pt">Total Spectrum Group International, Inc. stockholders&rsquo; equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">91,223</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">70,097</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 37.65pt">Non-controlling interest</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">13,366</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,407</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -0.25in; padding-left: 37.65pt">Total Stockholders&rsquo; Equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">104,589</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">73,503</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Total Capitalization</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">111,372</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">80,286</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 23; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">PRICE RANGE
OF COMMON STOCK AND DIVIDEND POLICY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our common stock is
traded on the Pink Sheets under the symbol &ldquo;SPGZ.PK.&rdquo; Prior to January 2007, our common stock was traded on NASDAQ&rsquo;s
National Market under the symbol &ldquo;ESCL.&rdquo; In January 2007, our common stock was de-listed from the NASDAQ National Market
because of our failure to comply with our financial reporting obligations under the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of March <FONT STYLE="font: 10pt Times New Roman, Times, Serif">16, 2012, there were 1,087 stockholders
of record of our common stock.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The closing sales price of our stock, as reported by the Pink Sheets on March 16, 2012, the last full
trading prior to the date of this prospectus, was $<FONT STYLE="font: 10pt Times New Roman, Times, Serif">2.25.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The closing sales
price of our common stock, as reported by the Pink Sheets on March 6, 2012, the last full trading immediately prior our announcement
of the execution of the securities purchase agreement, was $2.20.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following tables
set forth the range of high and low closing prices for our common stock, for each of the periods indicated, as reported by the
Pink Sheets. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 80%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Period</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">High</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; border-bottom: Black 1pt solid; text-align: center">Low</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic">Year Ended June 30, 2010</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; text-align: left; padding-left: 18.2pt">First Quarter</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2.99</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">2.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 18.2pt">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.30</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.81</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 18.2pt">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.95</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.67</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 18.2pt">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.20</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.70</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic">Year Ending June 30, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 18.2pt">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.10</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.61</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 18.2pt">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.60</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.61</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 18.2pt">Third Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.22</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.97</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 18.2pt">Fourth Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.02</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.30</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 18.2pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-style: italic">Year Ending June 30, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 18.2pt">First Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3.10</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.61</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 18.2pt">Second Quarter</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.50</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 18.2pt">Third Quarter (through March 16)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"></TD><TD STYLE="text-align: right">2.68</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left"></TD><TD STYLE="text-align: right">2.14</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Dividend Policy</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have never declared
or paid any cash dividends on our stock. We currently anticipate that any future earnings will be retained by us to support our
growth strategy. The payment of any future dividends will be at the discretion of our board of directors and will depend upon,
among other things, future earnings, operations, capital requirements, our general financial condition, contractual restrictions
and general business conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, A-Mark&rsquo;s
credit facility has certain restrictive financial covenants which require A-Mark and the Company to maintain a minimum tangible
net worth (as defined in the credit facility) of $20.0 million and $50.0 million, respectively. The Company&rsquo;s ability to
pay dividends, if it were to desire to do so, could be limited as a result of these restrictions.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<!-- Field: Page; Sequence: 24; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">Background
of and Purpose For the Rights Offering</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Spectrum Group International, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are a global trading
and collectibles network. We are a trader of precious metals and an auctioneer of coins, stamps and wine, serving both collectors
and dealers. We are also a merchant/dealer of certain collectibles. Our collectibles offerings span the price spectrums from modest
to ultra-high end. Furthermore, we offer loans to coin dealers, collectors and investors backed by their precious metals, rare
coin and other collectibles as collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are a Delaware
company headquartered in California with 190 employees globally, as of December 31, 2011. Our executive offices are located at
1063 McGaw, Irvine, California 92614. Our telephone number is (949) 748-4800, and our website is www.spectrumgi.com. Information
contained on our web site does not constitute a part of this prospectus.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Proposed Transactions with Afinsa
and Auctentia</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Approximately 57%
of our common stock is owned by Afinsa, either directly or through its wholly owned subsidiary, Auctentia. Since September 2003,
Afinsa and Auctentia have collectively owned a majority of our common stock and have had two representatives on our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Afinsa was placed
into insolvency proceedings in May 2006. Thereafter, in May 2011, Commercial Court No. 6 (Mercantile Court) in Madrid, Spain issued
an order approving the liquidation of a portion of the assets owned by Afinsa. Under the terms of the order, the trustees of Afinsa
were directed to sell the shares of our common stock held by it and Auctentia. In June 2011, we entered into an exclusive negotiating
agreement with Afinsa, pursuant to which the Afinsa trustees agreed to negotiate exclusively with us for the sale (or &ldquo;buy-back&rdquo;)
of all or a portion of the shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In order to avoid
potential conflicts relating to such a transaction, our board of directors appointed a special committee in July 2011, comprised
entirely of independent directors, to oversee negotiations with the trustees of Afinsa and evaluate and recommend a transaction
to our board of directors. The special committee consists of Jeffrey Benjamin (as chairman), Jess Ravich, Christopher Nolan and
Jay Moorhead.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We, through the special
committee, have negotiated with the trustees of Afinsa. On March 6, 2012, we entered into the securities purchase agreement, effective
as of March 5, 2012, with Afinsa and Auctentia, pursuant to which we have agreed to purchase 18,642,067 shares of our common stock
owned by Afinsa and Auctentia and all shares of common stock of Spectrum PMI owned by Auctentia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Through these transactions,
we will eliminate a controlling position that, we believe, has adversely affected the liquidity of our common stock and will unlock
value for our other stockholders. In addition, a sale by Afinsa and Auctentia of our common stock to an unrelated third party could
cause a change of control of us and would give a holder (or group of holders) sufficient voting power to control the outcome of
virtually all corporate matters submitted to a vote of our stockholders. Such a holder may promote policies or transactions that
may not be favored by other stockholders or impede policies or transactions that may be desirable for other stockholders. Sales
of our common stock owned by Afinsa and Auctentia in the public markets in one or more &ldquo;block&rdquo; transactions could also
have a negative effect on the trading price of our common stock.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Securities Purchase
Agreement</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 6, 2012,
we entered into the securities purchase agreement, effective as of March 5, 2012, with Afinsa and Auctentia. Pursuant to the securities
purchase agreement we have agreed to purchase 271,514 shares of our common stock from Afinsa, 18,370,553 shares of our common stock
from Auctentia and <FONT STYLE="color: black">all shares of common stock of Spectrum PMI owned by Auctentia, </FONT>for an aggregate
purchase price of $58.25 million. The purchase price payable to Afinsa and Auctentia under the securities purchase agreement is
payable in cash at closing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We expect to consummate
the transactions contemplated by the securities purchase agreement simultaneous with the closing of this rights offering. If the
closing of the transactions contemplated by the securities purchase agreement does not occur by July 15, 2012, or the &ldquo;outside
date,&rdquo; the securities purchase agreement may be terminated by either us or Afinsa and Auctentia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>&nbsp;</I></P>

<!-- Field: Page; Sequence: 25; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>Financing</I>.
We anticipate financing a portion of the purchase price through funds received from this rights offering. If we fail to consummate
this rights offering or if this rights offering is not fully subscribed, we may seek alternative sources of capital in order to
finance the purchase price; however, we are not obligated to do so under the securities purchase agreement. This may include the
issuance of equity or debt securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>Closing Conditions</I>.
The closing of the securities purchase agreement is subject to satisfaction or waiver of a number of conditions, which include,
among others, the following:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">receipt of any approvals, authorizations and clearances needed from any governmental or regulatory
authority or any other person required for consummation of the transactions;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the approval by the Commercial Court No. 6 (Mercantile Court) in Madrid, Spain of the transactions
contemplated by the securities purchase agreement shall not have been modified, reversed, vacated, stayed, restrained, or enjoined
on the closing date to the extent affecting the consummation of the transactions contemplated by the securities purchase agreement;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">no provision of any applicable law shall prohibit the consummation of the transactions contemplated
by the securities purchase agreement;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">compliance with covenants and the accuracy of representations and warranties provided for in the
securities purchase agreement;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">delivery of appropriate legal opinions from counsel to Afinsa and Auctentia;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">delivery of resignations or agreements not to stand for re-election by Afinsa&rsquo;s representatives
on our board of directors;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">all conditions to the consummation of this rights offering (other than any condition of this rights
offering relating to the consummation of the transactions contemplated by the securities purchase agreement) will have been satisfied,
and we shall have received at least $37.3 million in aggregate net proceeds from this rights offering, and we shall have the necessary
funds, together with net proceeds of at least $37.3 million from this rights offering, to pay in full the purchase price of the
securities purchase agreement;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">we shall have received a cash dividend in the amount of $2.75 million from Central de Compras Coleccionables,
S.L., one of our wholly owned subsidiaries; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">we shall not have notice of an adverse
claim on the securities to be acquired under the securities purchase agreement within the meaning of Section 8-105 of the Delaware
Uniform Commercial Code. </FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>Termination</I>.
The securities purchase agreement may be terminated and the transactions abandoned at any time prior to closing as follows:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">by the mutual written consent of us, Afinsa and Auctentia;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">by us if:</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">Afinsa or Auctentia breach any of the representations, warranties, covenants or agreements in the
securities purchase agreement, which results in the failure of the conditions to the closing of the securities purchase agreement
relating to their compliance with their obligations under the securities purchase agreement, the accuracy of their representations
and warranties, and such breach is not cured within 10 business days or, by its nature, cannot be cured by July 15, 2012;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 26; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->20<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>



<P STYLE="margin: 0"></P>
<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">any of the conditions to our obligation to consummate the transactions in the securities purchase
agreement have not been, or if it becomes apparent that any of such conditions will not be, fulfilled by July 15, 2012;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">by Afinsa and Auctentia if:</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">we breach any of the representations, warranties, covenants or agreements in the securities purchase
agreement, which results in the failure of the conditions to the closing of the securities purchase agreement relating to our compliance
with our obligations under the securities purchase agreement, the accuracy of our representations and warranties, and such breach
is not cured within 10 business days or, by its nature, cannot be cured by July 15, 2012;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 1.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 1in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">-</FONT></TD><TD STYLE="text-align: justify">any of the conditions to our obligation to consummate the transactions in the securities purchase
agreement have not been, or if it becomes apparent that any of such conditions will not be, fulfilled by July 15, 2012; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">by either us and Afinsa and Auctentia if: (1) there shall be any law that makes consummation of
the transactions contemplated by the securities purchase agreement illegal or otherwise prohibited; (2) any governmental authority
shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions
contemplated by the securities purchase agreement, and such order, decree, injunction or other action shall have become final and
non-appealable; (3) the closing of the transactions contemplated by the securities purchase agreement shall not have occurred on
or prior to July 15, 2012; or (4) the registration statement of which this prospectus forms a part shall not have been declared
effective by the SEC by June 10, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>Termination Fee</I>.
If the securities purchase agreement is terminated because of our material breach or because we fail to have the required financing
to consummate the transaction by July 15, 2012, we must pay a termination fee of $2.9 million. However, no termination fee will
be payable if we have complied with our obligations under the securities purchase agreement, and the SEC has not declared the registration
statement of which this prospectus forms a part effective by June 10, 2012. We will be required to pay Afinsa and Auctentia a termination
fee of $3.5 million (in lieu of the aforementioned $2.9 million termination fee) if the securities purchase agreement has been
terminated as a result of a willful and material breach of our obligations under the securities purchase agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>Specific Performance
of the Securities Purchase Agreement</I>. We, Afinsa and Auctentia are entitled to injunctive relief to prevent or restrain breaches
or threatened breaches of the securities purchase agreement and to enforce specifically compliance with covenants and obligations
contained in the securities purchase agreement. We, Afinsa and Auctentia have each agreed not to raise any objections on the availability
of the equitable remedy of specific performance.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">The Rights
Offering</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subscription Rights</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Basic Subscription
Rights</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We will distribute
to each holder of our common stock who is a record holder of our common stock on the record date, which is [&#9679;], 2012 (other
than Afinsa and Auctentia), at no charge, one transferable subscription right for each share of common stock owned as of the record
date. As of the record date, an aggregate of 32,725,655 shares of our common stock were outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The subscription rights will be evidenced by transferable subscription rights certificates. Each subscription
right will entitle the rights holder to purchase 1.4 shares of our common stock at a price of $1.90 per share, the subscription
price. We will not issue fractional shares, but rather will round down the aggregate number of shares you are entitled to receive
to the nearest whole share. Any excess payment will be returned to you promptly without interest or deduction. If rights holders
wish to exercise their subscription rights, they must do so prior to 5:00 p.m., New York City time, on [&#9679;], 2012, the expiration
date for this rights offering, subject to extension. After the expiration date, the subscription rights will expire and will have
no value. See below &ldquo;&mdash; Expiration of the Rights Offering and Extensions, Amendments and Termination.&rdquo; You are
not required to exercise any or all of your subscription rights.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 27; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->21<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Oversubscription
Rights</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Subject to the allocation
described below, each subscription right also grants the holder an oversubscription right to purchase additional shares of our
common stock that are not purchased by other rights holders pursuant to their basic subscription rights. You are entitled to exercise
your oversubscription right only if you exercise your basic subscription right in full. When you send in your subscription certificate,
you must also send the full purchase price in cash for the number of additional shares that you have requested to purchase pursuant
to oversubscription rights (in addition to the payment in cash due for shares purchased through your basic subscription right).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you fully exercise
your basic subscription right, the oversubscription right of each right entitles you to subscribe for additional shares of our
common stock unclaimed by other holders of rights in this rights offering at the same subscription price per share. If sufficient
shares of common stock are available, we will seek to honor your oversubscription request in full.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If an insufficient
number of shares are available to fully satisfy all oversubscription right requests, the available shares will be distributed proportionately
among stockholders who exercised their oversubscription rights based on the number of shares each stockholder subscribed for under
its basic subscription rights. We reserve the right to reject any oversubscription and we will, in most cases, reject an oversubscription
to the extent the stockholder together with its affiliates would own 20% or more of the common stock after the oversubscription
is exercised. If we reject any oversubscription, then such person will be allocated only that number of shares for which the person
is permitted to purchase, and the remaining shares of common stock will be allocated among all other persons exercising the oversubscription
privilege on the same basis described above. The allocation process will be repeated until all shares of common stock have been
allocated or all oversubscription requests have been satisfied, whichever occurs first. If there are not enough unsubscribed shares
to honor all requests pursuant to the oversubscription privilege, a portion of requested shares will not be fulfilled.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As soon as practicable
after the expiration date, the subscription agent will determine the number of shares of common stock that you may purchase pursuant
to the oversubscription right. We will issue certificates representing your shares of our common stock, or credit your account
at your broker, custodian bank or other nominee with shares of our common stock, electronically in registered, book-entry form
only on our records or on the records of our transfer agent, American Stock Transfer &amp; Trust Company LLC, that you purchased
pursuant to your basic subscription and oversubscription rights as soon as practicable after this rights offering has expired and
all proration calculations, reductions, and additions contemplated by the terms of this rights offering have been effected. If
you request and pay for more shares than are allocated to you, we will refund the overpayment, without interest or deduction. In
connection with the exercise of the oversubscription right, banks, brokers and other nominee holders of subscription rights who
act on behalf of beneficial owners will be required to certify to us and to the subscription agent as to the aggregate number of
subscription rights exercised, and the number of shares of common stock requested through the oversubscription right, by each beneficial
owner on whose behalf the nominee holder is acting.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Expiration of the Rights Offering
and Extensions, Amendments and Termination</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You may exercise your
subscription rights at any time prior to 5:00 p.m., New York City time, on [&#9679;], 2012, the expiration date for this rights
offering. If you do not exercise your subscription rights before the expiration date of this rights offering, your subscription
rights will expire and will have no value. We will not be required to issue shares of our common stock to you if the subscription
agent receives your rights certificate or payment, after the expiration date, regardless of when you sent the rights certificate
and payment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may, in our sole
discretion, extend the time for exercising the subscription rights. We may extend the expiration date at any time after the record
date. If the commencement of this rights offering is delayed for a period of time, the expiration date of this rights offering
may be similarly extended. We will extend the duration of this rights offering as required by applicable law, and may choose to
extend the duration of this rights offering for any reason. We may extend the expiration date of this rights offering by giving
oral or written notice to the subscription agent on or before the scheduled expiration date. If we elect to extend the expiration
date of this rights offering, we will publicly announce such extension no later than 9:00 a.m., New York City time, on the next
business day after the most recently announced expiration date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 28; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We reserve the right,
in our sole discretion, to amend or modify the terms of this rights offering. We also reserve the right to terminate this rights
offering at any time prior to the expiration date for any reason, in which event all funds received in connection with this rights
offering will be returned without interest or deduction to those persons who exercised their subscription rights as soon as practicable.
If we cancel this rights offering, we will be under no obligation to refund any consideration paid by a transferee of subscription
rights.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Conditions to this Rights Offering</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">While we reserve the
right to terminate this rights offering at any time prior to the expiration date for any reason, consummation of this rights offering
is subject to consummation of the transactions contemplated by the securities purchase agreement. If, for any reason, the transactions
contemplated by the securities purchase agreement are not consummated, then we will not consummate this rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, we may
terminate this rights offering, in whole or in part, if at any time before completion of this rights offering there is any judgment,
order, decree, injunction, statute, law or regulation entered, enacted, amended or held to be applicable to this rights offering
that in the sole judgment of our board of directors would or might make this rights offering or its completion, whether in whole
or in part, illegal or otherwise restrict or prohibit completion of this rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may waive any of
these conditions and choose to proceed with this rights offering even if one or more of these events occur. If we terminate this
rights offering, in whole or in part, all affected subscription rights will expire without value and all subscription payments
in the form in which received by the subscription agent will be returned, without interest or deduction, as soon as practicable.
See also &ldquo;&mdash; Expiration of the Rights Offering and Extensions, Amendments and Termination.&rdquo;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Method of Exercising Subscription
Rights</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The exercise of subscription
rights is irrevocable and may not be cancelled or modified. Your subscription rights will not be considered exercised unless the
subscription agent receives from you, your broker, custodian or nominee, as the case may be, all of the required documents properly
completed and executed and your full subscription price payment in cash prior to 5:00 p.m., New York City time, on [&#9679;], 2012,
the expiration date of this rights offering. Rights holders may exercise their rights as follows:</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Subscription by
Registered Holders</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Rights holders who
are registered holders of our common stock may exercise their subscription privilege by properly completing and executing the rights
certificate together with any required signature guarantees and forwarding it, together with payment in full of the subscription
price for each share of the common stock for which they subscribe, to the subscription agent at the address set forth under the
subsection entitled &ldquo;&mdash;Delivery of Subscription Materials and Payment,&rdquo; on or before the expiration date.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Subscription by
DTC Participants</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Banks, trust companies,
securities dealers and brokers that hold shares of our common stock on the rights offering record date as nominee for more than
one beneficial owner may, upon proper showing to the subscription agent, exercise their subscription privilege on the same basis
as if the beneficial owners were record holders on the rights offering record date through the Depository Trust Company, or &ldquo;DTC.&rdquo;
Such holders may exercise these rights through DTC&rsquo;s PSOP Function on the &ldquo;agents subscription over PTS&rdquo; procedure
and instruct DTC to charge their applicable DTC account for the subscription payment for the new shares and deliver such amount
to the subscription agent. DTC must receive the subscription instructions and payment for the new shares by the rights expiration
date.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 29; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Subscription by
Beneficial Owners</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Rights holders who
are beneficial owners of shares of our common stock and whose shares are registered in the name of a broker, custodian bank or
other nominee, and rights holders who hold common stock certificates and would prefer to have an institution conduct the transaction
relating to the rights on their behalf, should instruct their broker, custodian bank or other nominee or institution to exercise
their rights and deliver all documents and payment on their behalf, before the expiration date. A rights holder&rsquo;s subscription
rights will not be considered exercised unless the subscription agent receives from such rights holder, its broker, custodian,
nominee or institution, as the case may be, all of the required documents and such holder&rsquo;s full subscription price payment.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Method of Payment</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Payments must be made
in full in U.S. currency by:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">check or bank draft drawn on a U.S. bank payable to &ldquo;American Stock Transfer &amp; Trust
Company LLC, as Subscription Agent&rdquo;; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">wire transfer of immediately available funds directly to the account maintained by American Stock
Transfer &amp; Trust Company LLC, as Subscription Agent, for purposes of accepting subscriptions in this rights offering at [&#9679;],
ABA #[&#9679;], Account #[&#9679;] FBO Spectrum Subscription, with reference to the rights holder&rsquo;s name.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Rights certificates
received after 5:00 p.m., New York City time, on [&#9679;], 2012, the expiration date of this rights offering, will not be honored,
and we will return your payment to you as soon as practicable, without interest or deduction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The subscription agent
will be deemed to receive payment upon:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">clearance of any uncertified check deposited by the subject agent;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">receipt by the subscription agent of any certified bank check draft drawn upon a U.S. bank; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">receipt by the subscription agent of immediately available funds by wire transfer.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You should read the
instruction letter accompanying the rights certificate carefully and strictly follow it. DO NOT SEND RIGHTS CERTIFICATES OR PAYMENTS
TO US. We will not consider your subscription received until the subscription agent has received delivery of a properly completed
and duly executed rights certificate and payment of the full subscription amount. When you send in your subscription certificate,
you must also send the full purchase price in cash for the number of additional shares that you have requested to purchase pursuant
to oversubscription rights (in addition to the payment in cash due for shares purchased through your basic subscription right).
The risk of delivery of all documents and payments is on you or your nominee, not us or the subscription agent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The method of delivery
of rights certificates and payment of the subscription amount to the subscription agent will be at the risk of the holders of rights,
but, if sent by mail, we recommend that you send those certificates and payments by overnight courier or by registered mail, properly
insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the subscription
agent and clearance of payment before the expiration of the subscription period.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Medallion Guarantee May Be Required</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Your signature on
each subscription rights certificate must be guaranteed by an eligible institution, such as a member firm of a registered national
securities exchange or a member of the Financial Industry Regulatory Authority, Inc., or a commercial bank or trust company having
an office or correspondent in the United States, subject to standards and procedures adopted by the subscription agent, unless:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 30; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->24<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">your subscription rights certificate provides that shares are to be delivered to you as record
holder of those subscription rights; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">you are an eligible institution.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subscription Agent</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The subscription agent
for this rights offering is American Stock Transfer &amp; Trust Company LLC. We will pay all fees and expenses of the subscription
agent related to this rights offering and have also agreed to indemnify the subscription agent from certain liabilities that it
may incur in connection with this rights offering.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Delivery of Subscription Materials
and Payment</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You should deliver
your subscription rights certificate and payment of the subscription to the subscription agent at the following address:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 95%; border-collapse: collapse; font-family: Times New Roman, Times, Serif; margin-left: 0.28in">
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in; border-bottom: Black 0.5pt solid"><B>By
        mail:</B></P></TD>
    <TD>
</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in; border-bottom: Black 0.5pt solid"><B>By
        hand or overnight delivery:</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">American Stock Transfer &amp; Trust Company, LLC</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">American Stock Transfer &amp; Trust Company, LLC</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">Attn: Reorganization Department</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">Operations Center</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">P.O. Box 2042</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">Attn: Reorganization Department</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">New York, New York 10272-2042</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">6201 15th Avenue</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">Brooklyn, New York 11219</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Your delivery to an
address or by any method other than as set forth above will not constitute valid delivery and we may not honor the exercise of
your subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You should direct
any questions or requests for assistance concerning the method of subscribing for the shares of common stock or for additional
copies of this prospectus to us at Spectrum Group International, Inc., 1063 McGaw, Irvine, CA 92614, Attn: Paul Soth, Chief Financial
Officer, or by telephone at (949) 748-4800.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Calculation of Subscription Rights
Exercised</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you do not indicate
the number of subscription rights being exercised, or do not forward full payment, as provided herein, of the total subscription
price payment for the number of subscription rights that you indicate are being exercised, then you will be deemed to have exercised
your subscription right with respect to the maximum number of subscription rights that may be exercised with the aggregate subscription
price payment, as provided herein, that you delivered to the subscription agent. If we do not apply your full subscription price
payment to your purchase of shares of our common stock, we or the subscription agent will return the excess amount to you by mail,
without interest or deduction, as soon as practicable after the expiration date of this rights offering.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Escrow Arrangements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The subscription agent
will hold funds received in payment of the subscription price in a segregated account until this rights offering is completed or
withdrawn and terminated.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Notice to Beneficial Holders</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you are a broker,
a trustee or a depositary for securities who holds shares of our common stock for the account of others as of the record date,
you should notify the respective beneficial owners of such shares of this rights offering as soon as possible to find out their
intentions with respect to exercising their subscription rights. You should obtain instructions from the beneficial owners with
respect to their subscription rights, as set forth in the instructions we have provided to you for your distribution to beneficial
owners. If a beneficial owner so instructs, you should complete the appropriate subscription rights certificates and submit them
to the subscription agent with the proper payment. If you hold shares of our common stock for the account(s) of more than one beneficial
owner, you may exercise the number of subscription rights to which all such beneficial owners in the aggregate otherwise would
have been entitled had they been direct record holders of our common stock on the record date, provided that you, as a nominee
record holder, make a proper showing to the subscription agent by submitting the form entitled &ldquo;Nominee Holder Certification&rdquo;
that we will provide to you with your rights offering materials. If you did not receive this form, you should contact the subscription
agent to request a copy.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 31; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Beneficial Owners</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you are a beneficial
owner of shares of our common stock or will receive subscription rights through a broker, custodian bank or other nominee, we will
ask your broker, custodian bank or other nominee to notify you of this rights offering. If you wish to exercise your subscription
rights, you will need to have your broker, custodian bank or other nominee act for you. If you hold certificates of our common
stock directly and would prefer to have your broker, custodian bank or other nominee act for you, you should contact your nominee
and request it to effect the transactions for you. To indicate your decision with respect to your subscription rights, you should
complete and return to your broker, custodian bank or other nominee the form entitled &ldquo;Beneficial Owners Election Form&rdquo;.
You should receive the &ldquo;Beneficial Owners Election Form&rdquo; from your broker, custodian bank or other nominee with the
other rights offering materials. If you wish to obtain a separate subscription rights certificate, you should contact the nominee
as soon as possible and request that a separate subscription rights certificate be issued to you. You should contact your broker,
custodian bank or other nominee if you do not receive this form but you believe you are entitled to participate in this rights
offering. We are not responsible if you do not receive this form from your broker, custodian bank or nominee or if you receive
it without sufficient time to respond.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Method of Transferring and Selling
Subscription Rights</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The rights are transferable.
You may sell or otherwise transfer them to others. If you are one of our affiliates, you may transfer your rights only if there
is an effective registration statement for such transfer or exemption covering such transfer under the U.S. securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We anticipate that
the subscription rights will be traded on the Pink Sheets under the symbol &ldquo;[&#9679;].&rdquo; We expect that subscription
rights may be purchased or sold through usual investment channels until the close of business on the last trading day preceding
the expiration time. However, there has been no prior public market for the subscription rights, and we cannot assure you that
a trading market for the subscription rights will develop or, if a market develops, that the market will remain available throughout
the subscription period. We also cannot assure you of the prices at which the subscription rights will trade, if at all. If you
do not exercise or sell your subscription rights you will lose any value inherent in the rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You may transfer subscription rights in whole by executing the rights transfer form on the back of the
rights certificate and submitting it the subscription agent no later than 5:00 p.m., New York City time, on [&#9679;], 2012, five
business days before the expiration date. Please follow the instructions for transfer included in the information sent to you with
your subscription rights certificate. If you wish to transfer only a portion of the subscription rights, you should deliver your
properly endorsed rights certificate to the subscription agent and include instructions to register such portion of the subscription
rights evidenced thereby in the name of the transferee (and to issue a new subscription rights certificate to the transferee evidencing
such transferred subscription rights). You may only transfer whole subscription rights and not fractions of a subscription right.
If there is sufficient time before the expiration of this rights offering, the subscription agent will send you a new subscription
rights certificate evidencing the balance of the subscription rights issued to you but not transferred to the transferee. You may
also instruct the subscription agent to send the subscription rights certificate to one or more additional transferees. If you
wish to sell your remaining subscription rights, you may request that the subscription agent send you certificates representing
your remaining (whole) subscription rights so that you may sell them through your broker or dealer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you wish to transfer
all or a portion of your subscription rights, you should allow a sufficient amount of time prior to the time the subscription rights
expire for the subscription agent to:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">receive and process your transfer instructions; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">issue and transmit a new rights certificate to your transferee or transferees with respect to transferred
rights, and to you with respect to any subscription rights you retained.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Record holders wishing
to sell their rights on the Pink Sheets, should independently engage a broker to execute this sale on their behalf.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 32; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->26<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you wish to transfer
your subscription rights to any person other than a bank or broker, the signatures on your subscription rights certificate must
be guaranteed by an eligible institution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The amount of time
needed by your transferee to exercise or sell its subscription rights depends upon the method by which the transferor delivers
the subscription rights certificates, the method of payment made by the transferee and the number of transactions which the holder
instructs the subscription agent to effect. You should also allow up to ten business days for your transferee to exercise or sell
the subscription rights transferred to it. Neither we nor the subscription agent will be liable to a transferee or transferor of
subscription rights if subscription rights certificates or any other required documents are not received in time for exercise or
sale prior to the expiration date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You will receive a
new subscription rights certificate upon a partial exercise, transfer or sale of subscription rights only if the subscription agent
receives your properly endorsed subscription rights certificate no later than 5:00 p.m., New York City time, on [&#9679;], 2012,
five business days before the expiration date. The subscription agent will not issue a new subscription rights certificate if your
subscription rights certificate is received after that time and date. If your instructions and subscription rights certificate
are received by the subscription agent after that time and date, you will not receive a new subscription rights certificate and
therefore will not be able to sell or exercise your remaining subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You are responsible
for all commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the
purchase, sale or exercise of your subscription rights, except that we will pay all fees of the subscription agent associated with
the exercise of subscription rights. If we cancel this rights offering, we will be under no obligation to refund any consideration
paid by a transferee in connection with a transfer of subscription rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you do not exercise
your subscription rights before the expiration date, your subscription rights will expire and will no longer be exercisable.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Determinations Regarding the Transfer
or Exercise of Your Subscription Rights</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We will decide all
questions concerning the timeliness, validity, form and eligibility of the transfer or exercise of your subscription rights and
any such determinations by us will be final and binding. We, in our sole discretion, may waive, in any particular instance, any
defect or irregularity, or permit, in any particular instance, a defect or irregularity to be corrected within such time as we
may determine. We will not be required to make uniform determinations in all cases. We may reject the transfer or exercise of any
of your subscription rights because of any defect or irregularity. We will not accept any transfer or exercise of subscription
rights until all irregularities have been waived by us or cured by you within such time as we decide, in our sole discretion. Our
interpretations of the terms and conditions of this rights offering will be final and binding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Neither we, nor the
subscription agent, will be under any duty to notify you of any defect or irregularity in connection with your submission of subscription
rights certificates and we will not be liable for failure to notify you of any defect or irregularity. We reserve the right to
reject your transfer or exercise of subscription rights if your transfer or exercise is not in accordance with the terms of this
rights offering or in proper form. We will also not accept the transfer or exercise of your subscription rights if the transfer
of the subscription rights or the issuance of shares of our common stock to you could be deemed unlawful under applicable law.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No Revocation or Change</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Once you submit the
form of rights certificate to exercise any subscription rights, you may not revoke or change your exercise or request a refund
of monies paid. All exercises of rights are irrevocable, even if you subsequently learn information about us that you consider
to be unfavorable. You should not exercise your rights unless you are certain that you wish to purchase additional shares of our
common stock at the subscription price.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Rights of Subscribers</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You will have no rights
as a stockholder with respect to shares you subscribe for in this rights offering until certificates representing shares of common
stock are issued to you. You will have no right to revoke your subscriptions after you deliver your completed rights certificate,
payment as provided herein, and any other required documents to the subscription agent.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<!-- Field: Page; Sequence: 33; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Foreign Stockholders and Stockholders
with Army Post Office or Fleet Post Office Addresses</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The subscription agent
will not mail rights certificates to you if you are a stockholder whose address is outside the United States or if you have an
Army Post Office or a Fleet Post Office address. Instead, we will have the subscription agent hold the subscription rights certificates
for your account. To exercise your rights, you must notify the subscription agent prior to 11:00 a.m., New York City time, at least
three business days prior to the expiration date, and establish to the satisfaction of the subscription agent that it is permitted
to exercise your subscription rights under applicable law. If you do not follow these procedures by such time, your rights will
expire and will have no value.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No Recommendation by Our Board of
Directors or the Special Committee</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">An investment in shares
of our common stock must be made according to your evaluation of your own best interests and after considering all of the information
herein, including the &ldquo;Risk Factors&rdquo; section of this prospectus. Neither we nor our board of directors or the special
committee are making any recommendation regarding whether you should exercise your subscription rights.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fees and Expenses</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Neither we nor the
subscription agent will charge a brokerage commission or a fee to subscription rights holders for exercising their rights. However,
if you exercise your subscription rights through a broker, dealer or nominee, you will be responsible for any fees charged by your
broker, dealer or nominee.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Questions About Exercising Subscription
Rights</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you have any questions
or require assistance regarding the method of exercising your subscription rights or requests for additional copies of this document
or any document mentioned herein, you should contact the subscription agent at the address and telephone number set forth above
under &ldquo;&mdash; Delivery of Subscription Materials and Payment.&rdquo;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other Matters</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are not making
this rights offering in any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting
any offers to purchase any shares of our common stock from subscription rights holders who are residents of those states or of
other jurisdictions or who are otherwise prohibited by federal or state laws or regulations to accept or exercise the subscription
rights. We may delay the commencement of this rights offering in those states or other jurisdictions, or change the terms of this
rights offering, in whole or in part, in order to comply with the securities law or other legal requirements of those states or
other jurisdictions. Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution
of any shares you may elect to purchase by exercise of your subscription rights in order to comply with state securities laws.
We may decline to make modifications to the terms of this rights offering requested by those states or other jurisdictions, in
which case, if you are a resident in one of those states or jurisdictions or if you are otherwise prohibited by federal or state
laws or regulations from accepting or exercising the subscription rights you will not be eligible to participate in this rights
offering.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">PLAN OF
DISTRIBUTION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On or about [&#9679;],
2012, we will distribute the rights, rights certificates and copies of this prospectus to individuals who owned shares of common
stock on the record date. We have not employed any brokers, dealers or underwriters in connection with the solicitation or exercise
of rights in this rights offering and no commissions, fees or discounts will be paid in connection with this rights offering. While
certain of our directors, officers and other employees may solicit responses from you, those directors, officers and other employees
will not receive any commissions or compensation for their services other than their normal compensation. If you wish to exercise
your subscription rights and purchase shares of common stock, you should complete the subscription rights certificate and return
it with payment as provided herein for the shares of common stock, to the subscription agent, American Stock Transfer &amp; Trust
Company, LLC, at the following address:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 34; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 95%; border-collapse: collapse; font-family: Times New Roman, Times, Serif; margin-left: 0.28in">
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in; border-bottom: Black 0.5pt solid"><B>By
        mail:</B></P></TD>
    <TD>
</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in; border-bottom: Black 0.5pt solid"><B>By
        hand or overnight delivery:</B></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">American Stock Transfer
        &amp; Trust Company, LLC</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Attn: Reorganization
        Department</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">P.O. Box 2042</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">New York, New York 10272-2042</P></TD>
    <TD STYLE="text-align: justify; text-indent: 0in; font-size: 10pt">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">American Stock Transfer
        &amp; Trust Company, LLC</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Operations Center</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Attn: Reorganization
        Department</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">6201 15th Avenue</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Brooklyn, New York 11219</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If this rights offering
is not fully subscribed, holders of rights who exercise all of their rights pursuant to their basic subscription privilege will
have the opportunity to subscribe for unsubscribed rights pursuant to the oversubscription privilege. See &ldquo;The Rights Offering.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have not entered
into any agreements regarding stabilization activities with respect to our securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We anticipate that
the subscription rights will be traded on the Pink Sheets under the symbol &ldquo;[&#9679;].&rdquo; Our shares of common stock
are traded on the Pink Sheets under the symbol &ldquo;SPGZ.PK.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you have any questions,
you should contact us at Spectrum Group International, Inc., 1063 McGaw, Irvine, CA 92614, Attn: Paul Soth, Chief Financial Officer,
or by telephone at (949) 748-4800. We have agreed to pay the subscription agent a fee plus certain expenses, which we estimate
will total approximately $40 thousand. We estimate that our total expenses in connection with this rights offering will be approximately
$0.3 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Other than as described
herein, we do not know of any existing agreements between any stockholder, broker, dealer, underwriter or agent relating to the
sale or distribution of the shares of our common stock.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">Certain
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The
following discussion is a summary of certain material U.S. Federal income tax consequences of this rights offering to holders
of our common stock. This discussion assumes that the holders of our common stock hold such common stock as a capital asset
for U.S. Federal income tax purposes. This discussion is based on the Internal Revenue Code of 1986, as amended, Treasury
Regulations promulgated thereunder, Internal Revenue Service rulings and pronouncements and judicial decisions in effect on
the date hereof, all of which are subject to change (possibly with retroactive effect) and to differing interpretations. The
following summary does not purport to be a complete analysis of all of the potential U.S. Federal income tax considerations,
applies only to holders that are United States persons and does not address all aspects of U.S. Federal income taxation that
may be relevant to holders in light of their particular circumstances or to holders who may be subject to special tax
treatment under the Internal Revenue Code, including, without limitation, holders who are dealers in securities or foreign
currency, insurance companies, tax-exempt organizations, banks, financial institutions, broker-dealers, holders who hold our
common stock as part of a hedge, straddle, conversion or other risk reduction transaction, who acquired our common stock
pursuant to the exercise of compensatory stock options or otherwise as compensation or who did not acquire their subscription
rights in this rights offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">This summary is of
a general nature only and is not intended to constitute a complete analysis of all tax consequences relating to the receipt, exercise,
disposition and expiration of the subscription rights and the ownership and disposition of our common shares. It is not intended
to constitute, and should not be construed to constitute, legal or tax advice to any particular holder. Holders should consult
their own tax advisors as to the tax consequences in their particular circumstances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We intend to treat
the distribution of subscription rights pursuant to this rights offering as a non-taxable transaction for U.S. Federal income tax
purposes and the remaining portion of this summary describes the U.S. Federal income tax consequences of such treatment. However,
there can be no assurance that the Internal Revenue Service will take a similar view or would agree with the tax consequences described
below. We have not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service regarding the
U.S. Federal income tax consequences of this rights offering or the related share issuance. The following summary does not address
the tax consequences of this rights offering or the related share issuance under foreign, state, or local tax laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 35; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><B>Accordingly, each
holder of our common stock should consult its tax advisor with respect to the particular tax consequences of this rights offering
and the related share issuance to such holder</B>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The U.S. Federal income
tax consequences to a holder of our common stock of the receipt, transfer and exercise of subscription rights under this rights
offering will be as follows:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">A holder will not recognize taxable income for U.S. Federal income tax purposes in connection with
the receipt of subscription rights in this rights offering.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">A holder&rsquo;s tax basis in its subscription rights will depend on the relative fair
                                                                                                              market                                                                                                               value
                                                                                                              of                                                                                                               the
                                                                                                              subscription rights received by such holder and the common stock owned by such holder at the time the
                                                                                                              subscription rights are distributed. If either (i) the fair market value of the subscription rights on the date such
                                                                                                              subscription rights are distributed is equal to at least 15% of the fair market value on such date of the common stock with
                                                                                                              respect to which the subscription rights are received or (ii) the holder elects, in a statement attached to its U.S. Federal
                                                                                                              income tax return for the taxable year in which the subscription rights are received, to allocate part of its tax basis in
                                                                                                              such common stock to the subscription rights, then upon exercise or sale or other disposition of the subscription rights,
                                                                                                              the
                                                                                                              holder&rsquo;s
                                                                                                              tax                                                                                                               basis
                                                                                                              in the                                                                                                               common
                                                                                                              stock will be allocated between the common stock and the subscription rights in proportion to their respective
                                                                                                              fair market values on the date the subscription rights are distributed. If the subscription rights received by a holder have
                                                                                                              a fair market value that is less than 15% of the fair market value of the common stock owned by such holder at the time the
                                                                                                              subscription rights are distributed, the holder&rsquo;s tax basis in its subscription rights will be zero unless the holder
                                                                                                              elects to allocate its adjusted tax basis in the common stock owned by such holder in the manner described in the previous
                                                                                                              sentence. A holder&rsquo;s tax basis in the common stock will be reduced to the extent any of such tax basis is allocated to
                                                                                                              the
                                                                                                              subscription rights.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">A holder which allows the subscription rights received in this rights offering to expire will not
recognize any gain or loss, and no portion of the tax basis in the common stock owned by such holder with respect to which such
subscription rights were distributed will be allocated to the unexercised subscription rights.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">A holder will not recognize any gain or loss upon the exercise of the subscription rights received
in this rights offering. The tax basis in the common stock acquired through exercise of the subscription rights will equal the
sum of the subscription price for the common stock and the holder&rsquo;s tax basis, if any, in the rights as described above.
The holding period for the common stock acquired through exercise of the subscription rights will begin on the date the subscription
rights are exercised. A gain or loss recognized upon a sale of such common stock will be a capital gain or loss if the common stock
is held as a capital asset at the time of sale. Such capital gain or loss will be long-term capital gain or loss if the holding
period for the common stock exceeds one year at the time of sale.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">If a holder exercises the subscription rights received in this rights offering after disposing
                                                                                                              of the shares of the common stock with respect to which the subscription rights were received, then certain aspects of the
                                                                                                              tax treatment of the exercise of the subscription rights are unclear, including (1) the allocation of tax basis between the
                                                                                                              common stock previously sold and the subscription rights, (2) the effect of such allocation on the amount and timing of gain
                                                                                                              or loss recognized with respect to the common stock previously sold, and (3) the effect of such allocation on the tax basis
                                                                                                              of common stock acquired through exercise of the subscription rights. A holder that exercises subscription rights received in
                                                                                                              this rights offering after disposing of the common stock with respect to which the subscription rights were received should
                                                                                                              consult its tax advisor.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">A holder which sells or otherwise transfers the rights received in this rights offering in a
                                                                                                              taxable transaction, will recognize capital gain or loss in an amount equal to the difference between its basis, if any,
                                                                                                              in the rights (as described above) and the amount of cash plus the fair market value of any other property received in
                                                                                                              exchange for the rights. Such gain or loss will be long term capital gain or loss, as the case may be, if the holding period
                                                                                                              for the rights is more
                                                                                                              than                                                                                                               one
                                                                                                              year at the time of the sale. A holder&rsquo;s holding period in the rights received in this offering will include its
                                                                                                              holding period in the common stock with respect to which such rights are received.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 36; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">A holder may be subject to backup withholding with respect to the proceeds received on the
                                                                                                              sale or other taxable transfer of rights or common stock acquired through the exercise of such rights. Backup withholding is
                                                                                                              not                                                                                                               an
                                                                                                              additional
                                                                                                              tax.                                                                                                               The
                                                                                                              amount                                                                                                                  of
                                                                                                              any                                                                                                               backup
                                                                                                              withholding
                                                                                                              will be allowed as a credit against the holder&rsquo;s tax liability and may entitle it to a refund, provided that the
                                                                                                              required
                                                                                                              information is furnished to the Internal Revenue Service. In general, a holder will be subject to backup withholding unless
                                                                                                              (1)                                                                                                               it is an
                                                                                                              entity (including a corporation or a tax-exempt entity) that is exempt from withholding and, when required,
                                                                                                              demonstrates this fact or (2) it provides its Taxpayer Identification Number (&ldquo;TIN&rdquo;) and certifies that the TIN
                                                                                                              provided is correct, it is exempt from backup withholding, has not been notified by the Internal Revenue Service that
                                                                                                              it is subject to backup withholding due to underreporting of interest or dividends, and  otherwise complies with the
                                                                                                              applicable requirements of the backup withholding rules. The amounts subject to backup withholding will also be subject to
                                                                                                              information reporting requirements if the holder is not an exempt recipient.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">Description
of Capital Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Set forth below is
a summary of the terms of our capital stock. This summary is qualified in its entirety by reference to our certificate of incorporation
and bylaws and to the applicable provisions of the Delaware General Corporation Law, or the &ldquo;DGCL.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our authorized capital
stock currently consists of 40,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock,
par value $0.01 per share.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Common Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Each stockholder is
entitled to cast one vote for each share of our common stock held. Dividends may be declared by the board of directors. We do not
expect to pay any cash dividends on our common stock in the foreseeable future. Upon our liquidation, dissolution or winding up,
the holders of shares of our common stock would be entitled to receive all remaining assets of our company, distributed ratably
on the basis of the number of shares of common stock held by each of them. The holders of our common stock have no preemptive or
other subscription rights to purchase shares of our capital stock. All of the outstanding shares of our common stock are, and the
shares issuable upon exercise of outstanding options will be, when issued, fully paid and nonassessable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of March 16, 2012,
we had 32,637,655 shares of common stock outstanding, exclusive of existing options.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Preferred Stock</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors
is authorized, subject to the limitations prescribed by Delaware law and our certificate of incorporation, to issue 10,000,000
shares of preferred stock and to determine the terms and conditions of the preferred stock, including whether the shares of preferred
stock will be issued in one or more series, the number of shares to be issued in each series and the rights, preferences and priorities
of such shares. We have no current plan to issue any shares of preferred stock following the consummation of this rights offering.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Anti-takeover Effects of Delaware
Law and Our Certificate of Incorporation and Bylaws</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The provisions of
Delaware law, our certificate of incorporation and our bylaws described below may have the effect of delaying, deferring or discouraging
another party from acquiring control of us.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Delaware law</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are subject to
the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, those provisions prohibit a Delaware corporation
from engaging in any business combination with any interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder, unless:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the business combination or the transaction that resulted in the stockholder becoming an interested
stockholder is approved by our board of directors before the date the interested stockholder attained that status;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 37; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced;
or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">on or after the date the business combination is approved by our board of directors, the business
combination is authorized at a meeting of stockholders, and not by written consent, by at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In general, Section
203 defines &ldquo;business combination&rdquo; to include the following:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any merger or consolidation involving the corporation and the interested stockholder;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation
involving the interested stockholder;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">subject to certain exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any transaction involving the corporation that has the effect of increasing the proportionate share
of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges
or other financial benefits provided by or through the corporation.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In general, Section
203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of
the corporation and any entity or person affiliated with or controlling or controlled by any such entity or person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">A Delaware corporation
may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate
of incorporation or bylaws approved by its stockholders; however we have not opted out of, and we do not currently intend to opt
out of, this provision. The statute could prohibit or delay mergers or other takeover or change of control attempts and, accordingly,
may discourage attempts to acquire us.</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Certificate of Incorporation
and Bylaws</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: 0in">Our certificate
of incorporation and bylaws provide:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">for the classification of our board of directors so that only a portion of our directors is elected
each year, with each director serving a three-year term;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">that our board of directors will be expressly authorized to adopt, amend or repeal our bylaws;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">that stockholders must provide notice of nominations of directors or the proposal of business to
be voted on at an annual meeting;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">that our board of directors will be authorized to issue preferred stock without stockholder approval,
as described above; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">that we will indemnify officers and directors against losses that they may incur in investigations
and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Limitation of Liability and Indemnification
Matters</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have adopted provisions
in our certificate of incorporation that limit the liability of our directors for monetary damages for breach of their fiduciary
duty as directors, except for liability that cannot be eliminated under the DGCL. Accordingly, our directors will not be personally
liable for monetary damages for breach of their fiduciary duty as directors, except for liabilities for:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 38; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any breach of the director&rsquo;s duty of loyalty to us or our stockholders;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">acts or omissions not in good faith or which involve intentional misconduct or a knowing violation
of law;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">unlawful payments of dividends or unlawful stock repurchases or redemptions, as provided under
Section 174 of the DGCL; or</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">any transaction from which the director derived an improper personal benefit.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our bylaws provide
that we shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to any action,
suit or proceeding, whether criminal, civil, administrative or investigative (a &ldquo;legal action&rdquo;), whether such legal
action be by or in the right of the corporation or otherwise, by reason of the fact that such person is or was a director or officer
of us, or serves or served at our request as a director or officer, of another corporation, partnership, joint venture, trust or
any other enterprise. Notwithstanding this, no indemnification will be permitted if a judgment or other final adjudication adverse
to that person establishes that either (a) his or her acts were committed in bad faith, or were the result of active and deliberate
dishonesty, and were material to the cause of action so adjudicated, or (b) that he or she personally gained in fact a financial
profit or other advantage to which he or she was not legally entitled. Our indemnification obligation in our bylaws is permitted
under Section 145 of the DGCL.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Listing Symbol</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our common stock is
traded on the Pink Sheets under the symbol &ldquo;SPGZ.PK&rdquo;.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Transfer agent and registrar</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The transfer agent
and registrar for our common stock is American Stock Transfer &amp; Trust Company LLC.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">LEGAL MATTERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The validity of the
rights and shares of common stock offered by this prospectus have been passed upon for us by <FONT STYLE="color: black">Kramer
Levin Naftalis &amp; Frankel LLP, New York, New York</FONT>.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">EXPERTS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The consolidated financial
statements as of June 30, 2011 and 2010 and for each of the two years in the period ended June 30, 2011 incorporated by reference
in this Prospectus and in the Registration Statement have been so incorporated in reliance on the report of BDO USA, LLP, an independent
registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing
and accounting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The consolidated financial
statements as of June 30, 2011 and 2010 and for each of the two years in the period ended June 30, 2011 incorporated by reference
in this Prospectus and in the Registration Statement have been so incorporated in reliance on the report of Fabregas/Mercade, an
independent registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts
in auditing and accounting.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">INCORPORATION
BY REFERENCE</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We incorporate by
reference into this prospectus information we file with the SEC, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference is deemed to be part of this prospectus. This prospectus
incorporates by reference the documents set forth below, that we have previously filed with the SEC. These documents contain important
information about us and our financial condition. We are incorporating by reference the following documents:</P>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 39; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our Annual Report on Form 10-K for the year ended June 30, 2011, filed on September 23, 2011;</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our Quarterly Reports on Form 10-Q for the quarter ended September 30, 2011, filed on November
10, 2011, and for the quarter ended December 31, 2011, filed on February 13, 2012; and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 66.6pt; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our Current Reports on Form 8-K filed on August 4, 2011, August 18, 2011, October 17, 2011, November
16, 2011 and March 7, 2012.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The information relating
to us contained in this prospectus should be read together with the information in the documents incorporated by reference. Documents
incorporated by reference are available from us without charge, excluding any exhibits to those documents, unless the exhibit is
specifically incorporated by reference as an exhibit in this document. You can obtain documents incorporated by reference in this
document, at no cost, from our website at www.spectrumgi.com or by requesting them in writing or by telephone from us at the following
address or telephone number:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">Spectrum Group International,
Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">1063 McGaw</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">Irvine, CA 92614,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">Attn: Paul Soth, Chief
Financial Officer</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">Telephone: (949) 748-4800</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">WHERE YOU
CAN FIND ADDITIONAL INFORMATION</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We file reports, proxy
statements and other information with the SEC. Information filed with the SEC can be inspected and copied at the public reference
facilities maintained by the SEC at Headquarters Office, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain
copies of this information by mail from the Public Reference Section of the SEC, Headquarters Office, 100 F Street, N.E., Room
1580, Washington, D.C. 20549, at prescribed rates. Further information on the operation of the SEC&rsquo;s public reference room
in Washington, D.C. can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains reports,
proxy statements and other information about issuers, such as us, who file electronically with the SEC. The address of that website
is www.sec.gov.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We filed a registration
statement on Form S-1 to register with the SEC the securities offered by this prospectus. This prospectus is a part of that registration
statement. As allowed by the rules of the SEC, this prospectus does not contain all of the information you can find in our registration
statement or the exhibits to the registration statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our website is located
at www.spectrumgi.com. The information on our website, however, is not, and should not be deemed to be, a part of this prospectus.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">Disclosure
of Commission Position<BR>
on Indemnification for Securities Act Liabilities</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable. In addition, indemnification may be
limited by state securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<!-- Field: Page; Sequence: 40; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">- <!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence -->-</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Up to 19,717,023 Shares of Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Issuable Upon Exercise of the Subscription
Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><IMG SRC="logo1.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">[&#9679;], 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Until [&#9679;] 2012, 25 days after the
date of this prospectus, all dealers that buy, sell or trade our common shares, whether or not participating in this offering,
may be required to deliver a prospectus. This requirement is in addition to the dealers&rsquo; obligation to deliver a prospectus
when acting as underwriters and with respect to unsold allotments or subscriptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<!-- Field: Page; Sequence: 41 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-transform: uppercase; text-align: center">INFORMATION
NOT REQUIRED IN PROSPECTUS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Item 13. Other Expenses of Issuance
and Distribution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following table
sets forth the costs and expenses payable by the registrant in connection with the sale of the common stock being registered. All
of the amounts shown are estimates except the SEC registration fee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 87%; text-align: left; text-indent: 0in">SEC Registration Fee</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">4,293</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Subscription Agent Fees and Expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Legal Fees and Expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">195,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in">Costs of Printing</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">30,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in">Accounting Fees and Expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: 0in; padding-bottom: 1pt">Miscellaneous Expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 1pt solid">&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 1pt solid">20,000</TD><TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; text-indent: 0in; padding-bottom: 2.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$&nbsp;</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">340,000</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>




<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Item 14. Indemnification of Directors
and Officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our certificate of
incorporation provides that a director shall not be liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, our bylaws
provide that we shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to any
action, suit or proceeding, whether criminal, civil, administrative or investigative (a &ldquo;legal action&rdquo;), whether such
legal action be by or in the right of the corporation or otherwise, by reason of the fact that such person is or was a director
or officer of us, or serves or served at our request as a director or officer, of another corporation, partnership, joint venture,
trust or any other enterprise. Notwithstanding this, no indemnification will be permitted if a judgment or other final adjudication
adverse to that person establishes that either (a) his or her acts were committed in bad faith, or were the result of active and
deliberate dishonesty, and were material to the cause of action so adjudicated, or (b) that he or she personally gained in fact
a financial profit or other advantage to which he or she was not legally entitled. The indemnification obligation of us in our
bylaws is permitted under Section 145 of the General Corporation Law of the State of Delaware.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable. In addition, indemnification may be
limited by state securities laws.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Item 15. Recent Sales of Unregistered
Securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As part of the settlement
of a securities class action lawsuit commenced in the United States District Court for the Southern District of New York, <I>In
re Escala Group, Inc. Securities Litigation</I>, we were required to contribute an aggregate of $6.0 million in cash and 4,000,000
newly issued shares of our common stock to a settlement fund for the benefit of the class members. On January 14, 2009, we issued
772,430 shares of our common stock as part of the settlement. On October 1, 2009, we issued the remaining 3,277,770 shares of common
stock to the settlement fund. All of these shares were issued pursuant to the Section 3(a)(10) exemption from the Securities Act.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Item 16. Exhibits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following exhibits
are filed herewith or incorporated by reference herein:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 15%; text-align: justify; text-indent: 0in; font-weight: bold; border-bottom: Black 1pt solid">Exhibit<BR>
Number</TD>
    <TD STYLE="width: 2%; text-align: left; text-indent: 0in; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 83%; text-align: left; text-indent: 0in; font-weight: bold; border-bottom: Black 1pt solid; vertical-align: bottom">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">4.1</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Form of Subscription Rights Certificate</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">5.1</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Opinion of Kramer Levin Naftalis &amp; Frankel LLP*</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 42; Options: NewSection; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">II - <!-- Field: Sequence; Type: Arabic; Name: PageNo -->1<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 15%; text-align: justify; text-indent: 0in; font-weight: bold; border-bottom: Black 1pt solid">Exhibit<BR>
Number</TD>
    <TD STYLE="width: 2%; text-align: left; text-indent: 0in; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 83%; text-align: left; text-indent: 0in; font-weight: bold; border-bottom: Black 1pt solid; vertical-align: bottom">Description</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">23.1</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Consent of BDO USA, LLP, Independent Registered Public Accounting Firm</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">23.2</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Consent of Fabregas/Mercade, Independent Registered Public Accounting Firm</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">23.3</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Consent of Kramer Levin Naftalis &amp; Frankel LLP (contained in Exhibit 5.1)*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">24.1</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Powers of Attorney (contained on signature page)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">99.1</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Form of Instruction for Use of Registrant&rsquo;s Subscription Rights Certificates</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">99.2</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Form of Letter to Stockholders</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">99.3</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Form of Letter to Brokers, Dealers, Trust Companies and Other Nominees</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">99.4</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Form of Letter to Clients</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">99.5</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Form of Nominee Holder Certification</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify; text-indent: 0in">99.6</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: justify; text-indent: 0in">Form of Beneficial Owner Election</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

<HR ALIGN="LEFT" NOSHADE STYLE="height: 1pt; color: Black; width: 30%">
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27.35pt">*</TD><TD STYLE="text-align: justify">To be filed by amendment.</TD></TR></TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Item 17. Undertakings</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">(a) &#9;The undersigned
registrant hereby undertakes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify">To file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 81pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 27pt">(i)</TD><TD STYLE="text-align: justify">To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the &ldquo;Act&rdquo;);</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 81pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 27pt">(ii)</TD><TD STYLE="text-align: justify">To reflect in the prospectus any facts or events arising after the effective date of this registration
statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental
change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the &ldquo;Calculation of Registration Fee&rdquo; table in the effective registration statement; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 81pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 27pt">(iii)</TD><TD STYLE="text-align: justify">To include any material information with respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such information in this registration statement.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify">That, for the purpose of determining any liability under the Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD STYLE="text-align: justify">To remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 43; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">II - <!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(4)</TD><TD STYLE="text-align: justify">That, for the purpose of determining liability under the Act to any purchaser, each prospectus
filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is a part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, superseded or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in">(5)</TD><TD STYLE="text-align: justify">That, for the purpose of determining liability of the registrant under the Act to any purchaser
in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 81pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 27pt">(i)</TD><TD STYLE="text-align: justify">Any preliminary prospectus or prospectus of an undersigned registrant relating to this offering
required to be filed pursuant to Rule 424;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 81pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 27pt">(ii)</TD><TD STYLE="text-align: justify">Any free writing prospectus relating to this offering prepared by, or on behalf of, the undersigned
registrant or used or referred to by the undersigned registrant;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 81pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 27pt">(iii)</TD><TD STYLE="text-align: justify">The portion of any other free writing prospectus relating to this offering containing material
information about an undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 81pt; text-align: justify; text-indent: -27pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 27pt">(iv)</TD><TD STYLE="text-align: justify">Any other communication that is an offer in this offering made by the undersigned registrant to
the purchaser.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(c)</TD><TD STYLE="text-align: justify">The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration
of the subscription period, to set forth the results of the subscription offer and the amount of unsubscribed securities to be
offered to the public. If any public offering of the securities is to be made on terms differing from those set forth on the cover
page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Insofar as indemnification
for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<!-- Field: Page; Sequence: 44; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">II - <!-- Field: Sequence; Type: Arabic; Name: PageNo -->3<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Pursuant to the requirements
of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Irvine, State of California, on March 19, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 225pt; text-align: left; text-indent: 0in"><FONT STYLE="text-transform: uppercase"><B>&nbsp;</B></FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left; text-indent: 0in; font-weight: bold">SPECTRUM GROUP INTERNATIONAL, INC.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; font-weight: bold; width: 50%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 3%">By:</TD>
    <TD STYLE="width: 47%; text-align: left; border-bottom: Black 1pt solid">/s/ Gregory N. Roberts</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left">Name: Gregory N. Roberts</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: left">Title: President, Chief Executive Officer and Director</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 225pt; text-align: left; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in"><B>POWER OF ATTORNEY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">KNOW ALL MEN BY THESE
PRESENTS, that each person whose signature appears below constitutes and appoints Gregory N. Roberts and Carol Meltzer, his true
and lawful attorneys-in-fact and agents with full power of substitution and re-substitution, for him/her and in his name, place
and stead, in any and all capacities to sign any or all amendments (including, without limitation, post-effective amendments) to
this Registration Statement, any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act of 1933
and any or all pre- or post-effective amendments thereto, and to file the same, with all exhibits thereto, and all other documents
in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully
for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that said attorneys-in-fact
and agents, or any substitute or substitutes for him, may lawfully do or cause to be done by virtue hereof.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the
dates stated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 31%; text-align: left; text-indent: 0in; font-weight: bold; border-bottom: Black 1pt solid">Signatures</TD>
    <TD STYLE="width: 1%; text-align: center; text-indent: 0in; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 48%; text-align: center; text-indent: 0in; font-weight: bold; border-bottom: Black 1pt solid">Title</TD>
    <TD STYLE="width: 1%; text-align: center; text-indent: 0in; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 19%; text-align: center; text-indent: 0in; font-weight: bold; border-bottom: Black 1pt solid">Date</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in; font-weight: bold">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; font-weight: bold">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: left; text-indent: 0in; vertical-align: bottom">/s/ &nbsp;Gregory N. Roberts</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">President, Chief Executive Officer and Director</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">March 19, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Gregory N. Roberts</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in"></TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: left; text-indent: 0in">/s/ Paul Soth&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">Chief Financial Officer</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;March 19, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Paul Soth</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">Director</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">March 19, 2012&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Antonio Arenas</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">Director</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;March 19, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Jeffrey D. Benjamin</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">Director</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;March 19, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">George Lumby</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: left; text-indent: 0in">/s/ John Moorhead&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">Director</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;March 19, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">John Moorhead</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: left; text-indent: 0in">/s/ Christopher W. Nolan, Sr.&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">Director</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;March 19, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Christopher W. Nolan, Sr.</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: windowtext 1pt solid; text-align: left; text-indent: 0in">/s/ Jess M. Ravich&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">Director</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;March 19, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: left; text-indent: 0in">Jess M. Ravich</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD>
    <TD STYLE="text-align: center; text-indent: 0in">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>



<P STYLE="margin: 0"></P>

<!-- Field: Page; Sequence: 45; Options: Last -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="margin: 0"></P>

</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "v306407_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 413513}]
{"company-data": {"conformed-name": "SPECTRUM GROUP INTERNATIONAL, INC.", "cik": "0000895516", "assigned-sic": "5094", "irs-number": "222365834", "state-of-incorporation": "DE", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-180214", "film-number": "12701325"}, "business-address": {"street1": "18061 FITCH", "city": "IRVINE", "state": "CA", "zip": "92614", "phone": "949-955-1250"}, "mail-address": {"street1": "18061 FITCH", "city": "IRVINE", "state": "CA", "zip": "92614"}, "former-company": [{"former-conformed-name": "ESCALA GROUP INC", "date-changed": "20050927"}, {"former-conformed-name": "GREG MANNING AUCTIONS INC", "date-changed": "19941104"}]}
As filed with the Securities and Exchange Commission on March 19, 2012
Registration No. 333-__________
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
Form
S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Spectrum Group International, Inc.
(Exact name of registrant as specified in
its charter)
Delaware
5094
22-2365834
(State or other jurisdiction of
(Primary Standard Industrial
(I.R.S. Employer
incorporation or organization)
Classification Code Number)
Identification No.)
1063 McGaw
Irvine, CA 92614
(949) 748-4800
(Address, including zip code, and telephone
number, including area code, of registrant's principal executive offices)
Carol Meltzer, Esq.
General Counsel and Corporate Secretary
Spectrum Group International, Inc.
1063 McGaw
Irvine, CA 92614
(949) 748-4800
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Copies To:
Scott S. Rosenblum, Esq.
Kramer Levin Naftalis & Frankel LLP
1177 Avenue of the Americas
New York, New York 10036
(212) 715-9100
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following
box.
S
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company"
in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
Smaller reporting company
S
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be Registered
Amount to be
Registered
Proposed
Maximum
Offering Price
(1)
Proposed
Maximum
Aggregate
Amount of
Registration
Fee
Common Stock, par value $0.01 per share (2)
19,717,023
$
1.90
$
37,462,343.70
$
4,293.18
Rights to purchase Common Stock, par value $0.01 per share (3)
Total
$
4,293.18
(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the
Securities Act of 1933, based on a proposed aggregate offering price of $37.5 million.
(2)
This registration statement relates to (a) the subscription rights to purchase common stock, $0.01 par value of the Registrant
(the "Common Stock"), and (b) the shares of Common Stock deliverable upon the exercise of the subscription rights pursuant
to the rights offering described in this Registration Statement on Form S-1.
(3)
The subscription rights are being issued without consideration. Pursuant to Rule 457(g), no separate registration fee is payable
with respect to the subscription rights being offered hereby, because the subscription rights are being registered in the same
registration statement as the securities to be offered pursuant thereto.
The Registrant
hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in
this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated
March 19, 2012
PRELIMINARY PROSPECTUS
Up to 19,717,023 Shares
of Common Stock
Issuable Upon Exercise
of the Subscription Rights
Spectrum Group International, Inc. is distributing at no charge to the holders of our common stock, par
value $0.01 per share (other than Afinsa Bienes Tangibles, S.A. En Liquidacion, or "Afinsa," and Auctentia, S.L., or
"Auctentia"), transferable subscription rights to purchase up to an aggregate of 19,717,023 shares of our common stock
at a subscription price of $1.90 per share, for up to an aggregate purchase price of $37.5 million. Each stockholder (other than
Afinsa or Auctentia) will receive one subscription right for each share of our common stock owned on [●], 2012, and each
subscription right will entitle its holder to purchase 1.4 shares of our common stock at the subscription price.
The subscription rights
are transferable, and we anticipate that the subscription rights will be traded on the Pink OTC Markets Inc., or the "Pink
Sheets," under the symbol "[●]." We expect that subscription rights may be purchased or sold through usual
investment channels until the close of business on the last trading day preceding the expiration date.
The rights will expire
at 5:00 p.m., New York City time, [●], 2012, unless extended as described herein, which date we refer to as the "expiration
date." We may extend the period for exercising the rights in our sole discretion. You will have no right to rescind your
subscriptions after receipt of your payment of the subscription price except as described in this prospectus. Rights that are not
exercised prior to the expiration date will expire and have no value.
The purpose of this
rights offering is to raise capital that will be used to fund a portion of our obligations under a securities purchase agreement
that we have entered into with Afinsa and Auctentia. Pursuant to this securities purchase agreement, we have agreed, among other
things, to purchase 18,642,067 shares of our common stock that are owned by Afinsa and Auctentia. This rights offering allows us
to raise equity capital in a cost-effective manner that gives all of our stockholders the opportunity to participate.
Our shares of common
stock are traded on the Pink Sheets under the symbol "SPGZ.PK."
The closing price of our shares of common stock
on March 16, 2012 was $2.25 per share.
We are distributing
the rights and offering the underlying shares of common stock directly to you. We have not employed any brokers, dealers or underwriters
in connection with the solicitation or exercise of rights in this rights offering and no commissions, fees or discounts will be
paid in connection with this rights offering.
Per Share
Total(1)
Subscription Price
$
1.900
$
37,462,344
Estimated Expenses
$
0.017
$
340,000
Net Proceeds to Spectrum
$
1.883
$
37,122,344
(1) Assumes the offering
is fully subscribed
An investment in
our common stock involves risks. See "Risk Factors" beginning on page 12 of this prospectus.
Neither the Securities
and Exchange Commission nor any state securities regulators have approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Our securities are
not being offered in any jurisdiction where the offer is not permitted under applicable local laws.
The date of this prospectus
is [●], 2012.
Table
of Contents
Page
About This Prospectus
iii
Cautionary Note Regarding Forward-Looking Statements
iii
Prospectus Summary
1
Spectrum Group International, Inc.
1
Purpose of the Rights Offering
1
The Rights Offering
3
QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING
6
RISK FACTORS
12
Risks Related to this Rights Offering
12
Risks Associated with an Investment in Our Common Stock
15
Use of Proceeds
16
Determination of Offering Price
16
Capitalization
17
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
18
Background of and Purpose For the Rights Offering
19
Spectrum Group International, Inc.
19
The Proposed Transactions with Afinsa and Auctentia
19
The Rights Offering
21
Subscription Rights
21
Expiration of the Rights Offering and Extensions, Amendments and Termination
22
Conditions to this Rights Offering
23
Method of Exercising Subscription Rights
23
Method of Payment
24
Medallion Guarantee May Be Required
24
Subscription Agent
25
Delivery of Subscription Materials and Payment
25
Calculation of Subscription Rights Exercised
25
Escrow Arrangements
25
Notice to Beneficial Holders
25
Beneficial Owners
26
Method of Transferring and Selling Subscription Rights
26
Determinations Regarding the Transfer or Exercise of Your Subscription Rights
27
No Revocation or Change
27
Rights of Subscribers
27
Foreign Stockholders and Stockholders with Army Post Office or Fleet Post Office Addresses
28
No Recommendation by Our Board of Directors or the Special Committee
28
Fees and Expenses
28
Questions About Exercising Subscription Rights
28
Other Matters
28
-
i
-
PLAN OF DISTRIBUTION
28
Certain MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
29
Description of Capital Stock
31
Common Stock
31
Preferred Stock
31
Anti-takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws
31
Limitation of Liability and Indemnification Matters
32
Listing Symbol
33
Transfer agent and registrar
33
LEGAL MATTERS
33
EXPERTS
33
INCORPORATION BY REFERENCE
33
WHERE YOU CAN FIND ADDITIONAL INFORMATION
34
Disclosure of Commission Position on Indemnification  for Securities Act Liabilities
34
INFORMATION NOT REQUIRED IN PROSPECTUS
II - 1
Item 13. Other Expenses of Issuance and Distribution.
II - 1
Item 14. Indemnification of Directors and Officers.
II - 1
Item 15. Recent Sales of Unregistered Securities.
II - 1
Item 16. Exhibits.
II - 1
Item 17. Undertakings
II - 2
-
ii
-
About This
Prospectus
You should rely only
on the information contained in this prospectus or any free writing prospectus we may authorize to be delivered to you. We have
not authorized anyone to provide you with different or additional information. We are not making an offer of securities in any
state or other jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus
is accurate as of any date other than the date on the front of this prospectus regardless of its time of delivery, and you should
not consider any information in this prospectus to be investment, legal or tax advice. We encourage you to consult your own counsel,
accountant and other advisors for legal, tax, business, financial and related advice regarding an investment in our securities.
Unless we otherwise
indicate or unless the context requires otherwise, all references in this registration statement to the "Company,"
"we," "us" or "our" refer to Spectrum Group International, Inc. and its subsidiaries; all references
to "Spectrum PMI" refer to Spectrum PMI, Inc., a subsidiary in which we have an 80% ownership interest; and all references
to "A-Mark" refer to A-Mark Precious Metals, Inc., a subsidiary of Spectrum PMI.
Cautionary
Note Regarding Forward-Looking Statements
This prospectus contains
certain forward-looking statements regarding, among other things, our anticipated financial and operating results. Investors are
cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake
no obligation to publicly release any modifications or revisions to these forward-looking statements to reflect events or circumstances
occurring after the date hereof or to reflect the occurrence of unanticipated events. In connection with the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995, we caution investors that actual financial and operating results may differ
materially from those projected in forward-looking statements made by, or on behalf of, us. Such forward-looking statements involve
known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be
materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements.
The words "anticipate,"
"believe," "estimate," "expect," "intend," "will," "should,"
"may," "plan," and similar expressions, as they relate to us or our management, are intended to identify
forward-looking statements. Such statements reflect our current views with respect to future events and are subject to certain
risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected,
intended, or planned. We assume no obligation and do not intend to update these forward-looking statements.
-
iii
-
Prospectus
Summary
The following summary
provides an overview of certain information about us and this rights offering and may not contain all the information that is important
to you. This summary is qualified in its entirety by, and should be read together with, the information contained in other parts
of this prospectus. You should read this entire prospectus carefully before making a decision about whether to invest in our securities.
Spectrum Group International, Inc.
We are a global trading
and collectibles network. We are a trader of precious metals and an auctioneer of coins, stamps and wine, serving both collectors
and dealers. We are also a merchant/dealer of certain collectibles. Our collectibles offerings span the price spectrums from modest
to ultra-high end. Furthermore, we offer loans to coin dealers, collectors and investors backed by their precious metals, rare
coin and other collectibles as collateral.
We are a Delaware
company headquartered in California with 190 employees globally, as of December 31, 2011. Our executive offices are located at
1063 McGaw, Irvine, California 92614. Our telephone number is (949) 748-4800, and our website is www.spectrumgi.com. Information
contained on our web site does not constitute a part of this prospectus.
Purpose of the Rights Offering
On March 6, 2012,
we entered into a securities purchase agreement, effective as of March 5, 2012, with Afinsa Bienes Tangibles, S.A. En Liquidacion,
or "Afinsa," and Auctentia, S.L., or "Auctentia," which we refer to as the "securities purchase agreement."
Since February 2003, Afinsa and Auctentia have collectively owned a majority of our common stock and currently hold approximately
57% of our outstanding common stock. In addition, Auctentia owns 20% of Spectrum PMI, a subsidiary of ours that owns all of the
outstanding equity of A-Mark, our subsidiary through which we conduct our trading business. Afinsa has been in insolvency proceedings
in Spain since July 2006.
Under the securities
purchase agreement, we have agreed to purchase all shares of our common stock currently held by Afinsa and Auctentia, which includes
271,514 shares held by Afinsa and 18,370,553 shares held by Auctentia, and all shares of common stock of Spectrum PMI held by Auctentia.
The aggregate purchase price under the securities purchase agreement is $58.25 million, payable in cash at the closing.
We anticipate financing
the purchase price, in part, through funds received from this rights offering. We expect to fund the balance of the purchase price
through our cash on hand. If we fail to consummate this rights offering, we may seek alternative sources of capital in order to
finance the purchase price; however, we are not obligated to do so under the securities purchase agreement.
The closing of the
securities purchase agreement is subject to satisfaction or waiver of a number of conditions, including, among others, that all
conditions to the consummation of this rights offering shall have been satisfied and that we have sufficient funds, together with
the net proceeds of this rights offering, to consummate the transactions contemplated by the securities purchase agreement, and
that each of Antonio Arenas and George Lumby, the representatives of Afinsa and Auctentia, shall have tendered his resignation
as a director of the Company effective as of the closing.
The securities purchase
agreement contains customary termination rights for us, Afinsa and Auctentia, including if the transaction has not been consummated
by July 15, 2012. If the securities purchase agreement is terminated because of our material breach or because we fail to have
the required financing to consummate the transaction by July 15, 2012, we must pay a termination fee of $2.9 million. However,
no termination fee will be payable if we have complied with our obligations under the securities purchase agreement, and the SEC
has not declared the registration statement of which this prospectus forms a part under the Securities Act of 1933 effective by
June 10, 2012. We will be required to pay Afinsa and Auctentia a termination fee of $3.5 million (in lieu of the aforementioned
$2.9 million termination fee) if the securities purchase agreement has been terminated as a result of a willful and material breach
of our obligations under the securities purchase agreement.
Through these transactions,
we will eliminate a controlling position that, we believe, has adversely affected the liquidity of our common stock and will unlock
value for our other stockholders.
-
1
-
In order to avoid
potential conflicts relating to such the transactions contemplated by the securities purchase agreement, our board of directors
appointed a special committee comprised entirely of independent directors, which we refer to as the "special committee,"
to oversee the negotiations with the trustees of Afinsa and to evaluate and recommend a transaction to our board of directors.
The special committee consists of Jeffrey Benjamin (as chairman), Jess Ravich, Christopher Nolan and Jay Moorhead. Our board of
directors, acting on the unanimous recommendation of the special committee, has unanimously approved the transaction. The board
representatives of Afinsa and Auctentia abstained from the vote.
-
2
-
The Rights Offering
Issuer
Spectrum Group International, Inc.
Rights Granted
We will distribute to each stockholder of record on [●], 2012 (other than Afinsa and Auctentia)
at no charge, one transferable subscription right for each share of our common stock then owned by such stockholder. The rights
will be evidenced by transferable subscription rights certificates. If and to the extent that holders of the subscription rights
exercise their right to purchase our common stock we will issue up to 19,717,023 shares and receive net proceeds of up to $37.1
million.
Subscription Rights
Through your basic subscription right, you are entitled to purchase 1.4 shares of our common stock for
each subscription right at the subscription price. We will not issue fractional shares, but rather will round down the aggregate
number of shares you are entitled to receive to the nearest whole number.
Subscription Price
$1.90 per share, which shall be paid in cash.
Shares of Common Stock Outstanding after the Offering
33,800,611 shares, assuming full subscription.
Oversubscription Rights
We do not expect that all holders of the subscription rights will exercise all of their basic subscription rights. If you fully exercise your basic subscription right, the oversubscription right of each right entitles you to subscribe for additional shares of our common stock unclaimed by other holders of rights in this rights offering at the same subscription price per share, subject to certain ownership limitations. If an insufficient number of shares are available to fully satisfy all oversubscription right requests, the available shares will be distributed proportionately among stockholders who exercised their oversubscription rights based on the number of shares each stockholder subscribed for under its basic subscription rights. We reserve the right to reject any oversubscription and we will, in most cases, reject an oversubscription to the extent the stockholder together with its affiliates would own 20% or more of our common stock after the oversubscription is exercised. If we reject any oversubscription, then such person will be allocated only that number of shares for which the person is permitted to purchase, and the remaining shares of common stock will be allocated among all other persons exercising the oversubscription privilege on the same basis described above. The allocation process will be repeated until all shares of common stock have been allocated or all oversubscription requests have been satisfied, whichever occurs first. If there are not enough unsubscribed shares to honor all requests pursuant to the oversubscription privilege, a portion of requested shares will not be fulfilled. When you send in your subscription certificate, you must also send the full purchase price in cash for the number of additional shares that you have requested to purchase pursuant to oversubscription rights (in addition to the payment in cash due for shares purchased through your basic subscription right). The subscription agent will return any excess payments by mail without interest or deduction promptly after the expiration of the subscription period.
-
3
-
Transferability of Rights
The subscription rights are transferable, and we anticipate that the subscription rights will be traded on the Pink Sheets under the symbol "[●]." We expect that subscription rights may be purchased or sold through usual investment channels until the close of business on the last trading day preceding the expiration date. However, there has been no prior public market for the subscription rights, and we cannot assure you that a trading market for the subscription rights will develop or, if a market develops, that the market will remain available throughout the subscription period.
Record Date
As of 5:00 p.m., New York City time, on [●], 2012.
Expiration Date
As of 5:00 p.m., New York City time, on [●], 2012, subject to extension or earlier termination.
Amendment, Extension and Termination
We may extend the expiration date at any time after the record date or we may amend or modify the terms of this rights offering. We also reserve the right to terminate this rights offering at any time prior to the expiration date for any reason, in which event all funds received in connection with this rights offering will be returned without interest or deduction to those persons who exercised their subscription rights.
Fractional Shares
We will not issue fractional shares of our common stock, but rather will round down the aggregate number of shares you are entitled to receive to the nearest whole share.
Procedure for Exercising Rights
You may exercise your subscription rights by properly completing and executing your rights certificate and delivering it, together with the subscription price for each share of common stock for which you subscribe, to the subscription agent on or prior to the expiration date. If you use the mail, we recommend that you use insured, registered mail, return receipt requested.
No Revocation
Once you submit the form of rights certificate to exercise any subscription rights, you may not revoke or change your exercise or request a refund of monies paid. All exercises of rights are irrevocable, even if you subsequently learn information about us that you consider to be unfavorable.
Payment Adjustments
If you send a payment that is insufficient to purchase the number of shares requested, or if the number of shares requested is not specified in the rights certificate, the payment received will be applied to exercise your subscription rights to the extent of the payment. If the payment exceeds the amount necessary for the full exercise of your subscription rights, including any oversubscription rights exercised and permitted, the excess will be returned to you as soon as practicable. You will not receive interest or a deduction on any payments refunded to you under this rights offering.
How Rights Holders Can Exercise Rights Through Others
If you hold our common stock through a broker, custodian bank or other nominee, we will ask your broker, custodian bank or other nominee to notify you of this rights offering. If you wish to exercise your rights, you will need to have your broker, custodian bank or other nominee act for you. To indicate your decision, you should complete and return to your broker, custodian bank or other nominee the form entitled "Beneficial Owners Election Form." You should receive this form from your broker, custodian bank or other nominee with the other rights offering materials. You should contact your broker, custodian bank or other nominee if you believe you are entitled to participate in this rights offering but you have not received this form.
-
4
-
How Foreign Stockholders and Other Stockholders Can Exercise Rights
The subscription agent will not mail rights certificates to you if you are a stockholder whose address is outside the United States or if you have an Army Post Office or a Fleet Post Office address. Instead, we will have the subscription agent hold the subscription rights certificates for your account. To exercise your rights, you must notify the subscription agent prior to 11:00 a.m., New York City time, at least three business days prior to the expiration date, and establish to the satisfaction of the subscription agent that you are permitted to exercise your subscription rights under applicable law. If you do not follow these procedures by such time, your rights will expire and will have no value.
Material U.S. Federal Income Tax Consequences
In general, you will not recognize income or loss for U.S. Federal income
    tax     purposes in connection with the receipt or exercise of subscription rights in this rights offering, but you may
    recognize taxable gain or loss upon a sale or other disposition of the subscription rights. For     a     detailed     discussion, see
    "Certain     Material     U.S.     Federal     Income     Tax     Consequences"     beginning on page
    29.     You should     consult     your tax     advisor as to     the     particular     consequences to you of this
    rights offering.
Issuance of Our Common Stock
We will issue certificates representing shares purchased in this rights offering as soon as practicable after the consummation of this rights offering.
Conditions
The completion of this rights offering is subject to the consummation of the transactions contemplated by the securities purchase agreement. In addition, we reserve the right to amend, extend, cancel, terminate or otherwise modify this rights offering at any time before completion of this rights offering for any reason.
No Recommendation to Rights Holders
An investment in shares of our common stock must be made according to your evaluation of your own best interests and after considering all of the information herein, including the "Risk Factors" section of this prospectus. Neither we nor our board of directors are making any recommendation regarding whether you should exercise your subscription rights.
Use of Proceeds
Assuming this rights offering is fully-subscribed, the net proceeds available to us from this rights offering
will be approximately $37.1 million. We will use the net proceeds received by us, together with our cash on hand, to fund the purchase
price under the securities purchase agreement. This rights offering allows us to raise equity capital in a cost-effective manner
that gives all of our stockholders the opportunity to participate.
Subscription Agent
American Stock Transfer & Trust Company LLC
For additional information
concerning this rights offering, see "The Rights Offering," beginning on page 21.
Before investing in
our common stock, you should carefully read and consider the information set forth in "Risk Factors" beginning on page
12 of this prospectus and all other information appearing elsewhere in this prospectus.
-
5
-
QUESTIONS
AND ANSWERS ABOUT THE RIGHTS OFFERING
Q:
What is a rights offering?
A:
A rights offering is an opportunity for you to purchase additional shares of our common stock at
a fixed price and in an amount at least proportional to your existing interest in us.
Q:
Why are we engaging in a rights offering?
A:
We have entered into the securities purchase agreement with Afinsa and Auctentia, pursuant to which
we have agreed to purchase all shares of our common stock held by Afinsa and Auctentia and all shares of common stock of Spectrum
PMI held by Auctentia. The aggregate purchase price for the securities is $58.25 million, payable in cash. We are engaging in this
rights offering to raise capital that will be used to fund a portion of our obligations under the securities purchase agreement.
This rights offering allows us to raise equity capital in a cost-effective manner that gives all of our stockholders the opportunity
to participate.
Q:
How will we use the net proceeds from this rights offering?
A:
The net proceeds of $37.1 million from this rights offering (assuming full subscription), together with
our cash on hand, will be used to fund the purchase price of the securities purchase agreement.
Q:
How was the $1.90 per share
subscription price established?
A:
In setting the subscription price, we reviewed and considered a number of factors, including the
amount of cash proceeds needed to consummate the transactions contemplated by the securities purchase agreement, alternatives available
to us for raising equity capital, the historic market price of our common stock, the liquidity and the historic volatility of the
market price of our common stock, the historic trading volume of our common stock, our business prospects, our recent and anticipated
operating results, the price at which our stockholders might be willing to participate in this rights offering, the desire to provide
an opportunity to our stockholders to participate in this rights offering on a pro rata basis and general conditions in the securities
market. The subscription price for this rights offering was proposed to, reviewed and approved by the special committee.
The subscription
price is not necessarily related to the book value of our assets, net worth, past operations, cash flows, losses, financial condition,
or any other established criteria for valuing us and may or may not be considered the fair value of our common stock to be offered
in this rights offering. You should not assume or expect that, after this rights offering, our common shares will trade at or above
the subscription price. We can give no assurance that our common shares will trade at or above the subscription price in any given
time period.
Q:
Am I required to subscribe in this rights offering?
A:
No.
Q:
What is the basic subscription right?
A:
Each subscription right evidences a right to purchase 1.4 shares of our common stock at a subscription
price of $1.90 per share.
-
6
-
Q:
What is the oversubscription right?
A:
We do not expect that all holders of the subscription rights will exercise all of their basic subscription
rights. If you fully exercise your basic subscription right, the oversubscription right entitles you to subscribe for additional
shares of our common stock unclaimed by other holders of rights in this rights offering at the same subscription price per share,
subject to certain ownership limitations. If an insufficient number of shares are available to fully satisfy all oversubscription
right requests, the available shares will be distributed proportionately among stockholders who exercised their oversubscription
rights based on the number of shares each stockholder subscribed for under its basic subscription rights. We reserve the right
to reject any oversubscription and we will, in most cases, reject an oversubscription to the extent the stockholder together with
its affiliates would own 20% or more of our common stock after the oversubscription is exercised. If we reject any oversubscription,
then such person will be allocated only that number of shares for which the person is permitted to purchase, and the remaining
shares of common stock will be allocated among all other persons exercising the oversubscription privilege on the same basis described
above. The allocation process will be repeated until all shares of common stock have been allocated or all oversubscription requests
have been satisfied, whichever occurs first. If there are not enough unsubscribed shares to honor all requests pursuant to the
oversubscription privilege, a portion of requested shares will not be fulfilled. When you send in your subscription certificate,
you must also send the full purchase price in cash for the number of additional shares that you have requested to purchase pursuant
to oversubscription rights (in addition to the payment in cash due for shares purchased through your basic subscription right).
The subscription agent will return any excess payments by mail without interest or deduction promptly after the expiration of the
subscription period.
Q:
Who will receive subscription rights?
A:
Holders of our common stock (other than Afinsa and Auctentia) will receive one transferable subscription
right for each share of common stock owned as of [●], 2012, the record date.
Q:
How many shares may I purchase if I exercise my subscription rights?
A:
You will receive one transferable subscription right for each share of our common stock that you owned
on [●], 2012, the record date. Each subscription right evidences a right to purchase 1.4 shares of our common stock at a
subscription price of $1.90 per share. You may exercise any number of your subscription rights.
Q:
Are there any limits on the number of shares I may purchase in this rights offering or own as
a result of this rights offering?
A:
We reserve the right to reject any oversubscription and we will, in most cases, reject an oversubscription
to the extent the stockholder together with its affiliates would own 20% or more of the common stock after the oversubscription
is exercised.
Q:
What happens if I choose not to exercise my subscription rights?
A:
If you choose not to exercise your subscription rights you will retain your current number of shares
of common stock.
Q:
Do you need to achieve a certain participation level in order to complete this rights offering?
A:
No. We may choose to consummate, amend, extend or terminate this rights offering regardless of
the number of shares actually purchased.
Q:
Can you terminate this rights offering?
A:
Yes. Our board of directors may decide to terminate this rights offering at any time prior to the expiration
of this rights offering, for any reason. If we cancel this rights offering, any money received from subscribing stockholders will
be refunded as soon as practicable, but no later than 10 business days from the announcement that this rights offering is terminated,
without interest or a deduction on any payments refunded to you under this rights offering. See "The Rights Offering —
Expiration of the Rights Offering and Extensions, Amendments and Termination" at page 22.
-
7
-
Q:
Is this rights offering conditioned upon anything?
A:
Yes. Consummation of this rights offering is conditioned upon consummation of the transactions contemplated
by the securities purchase agreement. See "The Rights Offering — Conditions to this Rights Offering" at page
23.
Q:
May I transfer my subscription rights if I do not want to purchase any shares?
A:
Yes. The rights being distributed to our stockholders are transferable, and we anticipate that
they will be traded on the Pink Sheets until the close of business on the last trading day before the expiration date. However,
we cannot assure you that a trading market for the rights will develop.
Q:
How may I sell my rights?
A:
We expect that subscription rights may be purchased or sold through usual investment channels until
the close of business on the last trading day preceding the expiration time. However, there has been no prior public market for
the subscription rights, and we cannot assure you that a trading market for the subscription rights will develop or, if a market
develops, that the market will remain available throughout the subscription period. You may transfer subscription rights in whole
by executing the rights transfer form on the back of the rights certificate and submitting it the subscription agent prior to [●].
Please follow the instructions for transfer included in the information sent to you with your subscription rights certificate.
Record holders (or subsequent holders of the rights) wishing to sell their rights on the Pink Sheets, should independently engage
a broker to execute this sale on their behalf. Each stockholder (or subsequent holder of the rights) will be responsible for all
fees associated with the sale of its rights. We cannot assure you that any person will be able to sell any rights on your behalf.
If we cancel this rights offering, we will be under no obligation to refund any consideration paid by a transferee in connection
with a transfer of the subscription rights. Please see "The Rights Offering — Method of Transferring and Selling Subscription
Rights" at page  26 for more information.
Q:
When will this rights offering expire?
A:
The subscription rights will expire and will have no value, if not exercised prior thereto, at
5:00 p.m., New York City time, on [●], 2012, unless we decide to extend this rights offering expiration date until some later
time or terminate it earlier. See "The Rights Offering — Expiration of the Rights Offering and Extensions, Amendments
and Termination" at page 22. The subscription agent must actually receive all required documents and payments in cash
before the expiration date. There is no maximum duration for this rights offering.
Q:
How do I exercise my subscription rights?
A:
You may exercise your subscription rights by properly completing and executing your rights certificate
and delivering it, together in full with the subscription price for each share of common stock you subscribe for, to the subscription
agent on or prior to the expiration date. When you send in your subscription certificate, you must also send the full purchase
price in cash for the number of additional shares that you have requested to purchase pursuant to oversubscription rights (in addition
to the payment in cash due for shares purchased through your basic subscription right). If you use the mail, we recommend that
you use insured, registered mail and return receipt requested.
-
8
-
Q:
What should I do if I want to participate in this rights offering but my shares of common stock
are held in the name of my broker, custodian bank or other nominee?
A:
If you hold our common stock through a broker, custodian bank or other nominee, we will ask your
broker, custodian bank or other nominee to notify you of this rights offering. If you wish to exercise your rights, you will need
to have your broker, custodian bank or other nominee act for you. To indicate your decision, you should complete and return to
your broker, custodian bank or other nominee the form entitled "Beneficial Owner Election Form." You should receive
this form from your broker, custodian bank or other nominee with the other rights offering materials. You should contact your broker,
custodian bank or other nominee if you believe you are entitled to participate in this rights offering but you have not received
this form.
Q:
What should I do if I want to participate in this rights offering, but I am a stockholder with
a foreign address or a stockholder with an Army Post Office or Fleet Post Office address?
A:
The subscription agent will not mail rights certificates to you if you are a stockholder whose
address is outside the United States or if you have an Army Post Office or a Fleet Post Office address. To exercise your rights,
you must notify the subscription agent prior to 11:00 a.m., New York City time, at least three business days prior to the expiration
date, and establish to the satisfaction of the subscription agent that you are permitted to exercise your subscription rights under
applicable law. If you do not follow these procedures by such time, your rights will expire and will have no value.
Q:
Will I be charged a sales commission or a fee if I exercise my subscription rights?
A:
We will not charge a brokerage commission or a fee to rights holders for exercising their subscription
rights. However, if you exercise your subscription rights through a broker, dealer or nominee, you will be responsible for any
fees charged by your broker, dealer or nominee.
Q:
Has the board of directors or the special committee made a recommendation regarding this rights
offering?
A:
Neither we nor our board of directors or the special committee is making any recommendation as
to whether you should exercise your subscription rights. You are urged to make your decision based on your own assessment of this
rights offering, after considering all of the information herein, including the "Risk Factors" section of this prospectus,
and your best interests.
Q:
May stockholders in all states participate in this rights offering?
A:
Although we intend to distribute the rights to all stockholders, we reserve the right in some states
to require stockholders, if they wish to participate, to state and agree upon exercise of their respective rights that they are
acquiring the shares for investment purposes only, and that they have no present intention to resell or transfer any shares acquired.
Our securities are not being offered in any jurisdiction where the offer is not permitted under applicable local laws.
Q:
Is the exercise of my subscription rights risky?
A:
The exercise of your subscription rights involves significant risks. Exercising your rights means
buying additional shares of our common stock and should be considered as carefully as you would consider any other equity investment.
Among other things, you should carefully consider the risks described under the heading "Risk Factors," beginning on
page 12.
-
9
-
Q:
How many shares of our common stock will be outstanding after this rights offering?
A:
The number of shares of our common stock that will be outstanding after this rights offering will depend
on the number of shares of common stock that are purchased in this rights offering. If we sell all of the shares being offered
in this rights offering, then we will issue approximately 19,717,023 shares of common stock. However, immediately prior to consummating
this rights offering, we expect to consummate the transactions contemplated by the securities purchase agreement, pursuant to which
we will acquire into treasury 18,642,067 shares of common stock from Afinsa and Auctentia. As a result, assuming full subscription,
we will issue 1,074,956 new shares of common stock in connection with this rights offering, and there will be an increase in the
number of our shares of common stock outstanding.
Q:
What will be the proceeds of this rights offering?
A:
If we sell all the shares being offered, we will receive net proceeds of approximately $37.1 million.
We are offering shares in this rights offering with no minimum purchase requirement. We will use the net proceeds received by us,
together with cash on hand, to fund the purchase price of the securities purchase agreement.
Q:
After I exercise my rights, can I change my mind and cancel my purchase?
A:
No. Once you exercise and send in your subscription rights certificate and payment, as provided herein,
you cannot revoke the exercise of your subscription rights, even if you later learn information about us that you consider to be
unfavorable and even if the market price of our common stock falls below the $1.90 per share subscription price. You should not
exercise your subscription rights unless you are certain that you wish to purchase additional shares of our common stock at a price
of $1.90 per share. See "The Rights Offering — No Revocation or Change" at page 27.
Q:
What are the material U.S. Federal income tax consequences of exercising or transferring
                                                                  my                                                                   subscription rights?
A:
In general, you will not recognize income or loss for U.S. Federal income tax purposes in
connection with the receipt or exercise of subscription rights in this rights offering, but you may
    recognize taxable gain or loss upon a sale or other disposition of the subscription rights. For a detailed discussion, see "Certain
Material U.S. Federal Income Tax Consequences" at page 29. You should consult your tax advisor as to the particular
consequences to you of this rights offering.
Q:
If this rights offering is not completed, for any reason, will my subscription payment be refunded
to me?
A:
Yes. If this rights offering is not completed, for any reason, any cash received from subscribing
stockholders will be refunded as soon as practicable, without interest or deduction.
Q:
If I exercise my subscription rights, when will I receive shares of common stock I purchased
in this rights offering?
A:
We will deliver certificates representing the shares of our common stock purchased in this rights
offering as soon as practicable after the expiration of this rights offering, after all pro rata allocations and adjustments have
been completed and the transactions contemplated by the securities purchase agreement have been consummated.
Q:
To whom should I send my forms and payment?
A:
If your shares are held in the name of a broker, dealer or other nominee, then you should send
your subscription documents, rights certificate and payment in cash to that record holder. If you are the record holder, then you
should send your subscription documents, rights certificate and payment, as provided herein, by hand delivery, first class mail
or courier service to American Stock Transfer & Trust Company LLC, the subscription agent. The address for delivery to the
subscription agent is as follows:
-
10
-
By
        mail:
By
        hand or overnight delivery:
American Stock Transfer
        & Trust Company, LLC
Attn: Reorganization
        Department
P.O. Box 2042
New York, New York 10272-2042
American Stock Transfer
        & Trust Company, LLC
Operations Center
Attn: Reorganization
        Department
6201 15th Avenue
Brooklyn, New York 11219
Your delivery
to a different address or other than by the methods set forth above will not constitute valid delivery.
Q:
What if I have other questions?
A:
If you have other questions about this rights offering, please contact us at Spectrum Group International,
Inc., 1063 McGaw, Irvine, CA 92614, Attn: Paul Soth, Chief Financial Officer, or by telephone at (949) 748-4800.
-
11
-
RISK FACTORS
Investing in our
common stock involves risks. You should carefully consider the risks described below and all of the other information contained
in this prospectus before you make a decision to participate in this rights offering and purchase shares of our common stock. If
any of these risks occur, our business, financial condition or results of operations could suffer, and you could lose part or all
of your investment.
Risks Related to this Rights Offering
We face risks and
uncertainties in connection with the bankruptcy proceedings of Afinsa, our majority stockholder.
In May 2011, Commercial
Court No. 6 (Mercantile Court) in Madrid, Spain issued an order approving the liquidation of a portion of the assets owned by Afinsa.
Afinsa, directly and through its wholly-owned subsidiary Auctentia, owns approximately 57% of our outstanding common stock and
20% of the equity in Spectrum PMI, through which we own A-Mark. Afinsa has been in insolvency proceedings in Spain since July 2006.
On March 6, 2012, we entered into the securities purchase agreement with Afinsa and Auctentia. Pursuant
to the securities purchase agreement, we have agreed to purchase all shares of our common stock that are owned by Afinsa and Auctentia
and all shares of common stock of Spectrum PMI that are owned by Auctentia for $58.25 million. The closing of the securities purchase
agreement is subject to satisfaction or waiver of a number of conditions, including, among others, that all conditions to the consummation
of this proposed rights offering shall have been satisfied and that we have sufficient funds, together with the proceeds of this
rights offering, to consummate the transactions contemplated by the securities purchase agreement, and that each of Antonio Arenas
and George Lumby, the representatives of Afinsa and Auctentia, shall have tendered his resignation as a director of the Company
effective as of the closing. Assuming this rights offering is fully-subscribed, the net proceeds available to us from this rights
offering will be approximately $37.1 million from this rights offering, which, together with our cash on hand, will be used to
fund the purchase price of the securities purchase agreement.
There can be no assurance
that we will be successful in consummating this rights offering or that we will have sufficient cash on hand necessary, together
with the fund raised through this rights offering, to consummate the transactions contemplated by the securities purchase agreement.
If we are unable to close the transactions contemplated by the securities purchase agreement by July 15, 2012, because of a lack
of sufficient financing or because of our material breach of our obligations under the securities purchase agreement, we will be
required to pay a termination fee to Afinsa and Auctentia of $2.9 million. We will be required to pay Afinsa and Auctentia a termination
fee of $3.5 million (in lieu of the aforementioned $2.9 million termination fee) if the securities purchase agreement has been
terminated as a result of a willful and material breach of our obligations under the securities purchase agreement.
If we are unsuccessful
in purchasing our common stock from Afinsa and Auctentia, they may sell the stock to a third party. A sale of all or a substantial
portion of the shares of our common stock held by Afinsa and Auctentia to a holder (or group of holders) other than us will cause
a change of control of us. A holder (or group of holders) of more than 50% of our issued and outstanding stock has sufficient voting
power to control the outcome of virtually all corporate matters submitted to a vote of our stockholders. These matters could include
the election of directors, amendments to our bylaws, changes in the size and composition of our board of directors, and mergers
and other business combinations involving us. Such a holder may promote policies or transactions that may not be favored by other
stockholders or impede policies or transactions that may be desirable for other stockholders. A change of control could also have
adverse tax consequences to us by limiting our ability to utilize our net operating loss carry-forwards and other related tax attributes.
We and Auctentia are
parties to a registration rights agreement pursuant to which Auctentia may request that substantially all of the shares of our
common stock beneficially owned by it be registered by us at our expense. Unless and until such a registration statement is declared
effective, Auctentia would likely not be able to sell the shares publicly, and would have to dispose of those shares in one or
more private transactions. If and when the shares are registered, then they would be freely tradable immediately after any registration.
Sales of such shares in the public markets in one or more "block" transactions could have a negative effect on the
trading price of our common stock.
-
12
-
If this rights offering
is not consummated, we may not have an immediate source of funds to satisfy our obligations under the securities purchase agreement.
There can be no assurance
that this rights offering will be consummated. If we fail to consummate this rights offering, we may seek alternative sources of
capital to finance the purchase price of the securities purchase agreement; however, we are not obligated under the securities
purchase agreement to do so. Any financings through equity investments could be dilutive to existing stockholders. In addition,
the terms of securities we may issue in an equity transaction could be more favorable for new investors. Newly issued securities
could include preferences, superior voting rights and the issuance of warrants or other derivative securities. Further, we could
incur substantial costs in pursuing capital and/or financing, including investment banking fees, legal fees, accounting fees, printing
and distribution expenses and other costs. We could also be required to recognize non-cash expenses in connection with certain
securities we could issue, such as convertible notes and warrants, which will adversely impact our financial condition and results
of operations. Our ability to obtain needed financing could be impaired by such factors as the condition of the economy and capital
markets, both generally and specifically in our industry.
Failure to complete
the securities purchase agreement in certain circumstances could require us to pay a termination fee.
If we are unable to
close the transactions contemplated by the securities purchase agreement by July 15, 2012, because of a lack of sufficient financing
or because of our material breach of our obligations under the securities purchase agreement, we will be required to pay a termination
fee to Afinsa and Auctentia of $2.9 million. We will be required to pay Afinsa and Auctentia a termination fee of $3.5 million
(in lieu of the aforementioned $2.9 million termination fee) if the securities purchase agreement has been terminated as a result
of a willful and material breach of our obligations under the securities purchase agreement. The payment of a termination fee by
us to Afinsa and Auctentia and the public announcement of the termination of the transactions contemplated by the securities purchase
agreement could have an adverse effect on our business, financial condition, results of operations, prospects, liquidity or market
price.
The subscription
price is not an indication of our value.
The subscription price
does not necessarily bear any relationship to the book value of our assets, to our operations, cash flows or financial condition,
or to any other established criteria for value. You should not consider the subscription price an indication of our value or any
assurance of future value. After the date of this prospectus, our common stock may trade at prices above or below the subscription
price.
This rights offering
may cause the price of our common stock to decrease.
The subscription price
per share is lower than the average of the closing sales prices of our common stock over the 30 trading day period ended [●],
2012. The subscription price, together with the number of shares of common stock we propose to issue and ultimately will issue
if this rights offering is completed, may result in an immediate decrease in the market value of our common stock. This decrease
may continue after the completion of this rights offering. If that occurs, you may have committed to buy shares of common stock
in this rights offering at a price greater than the prevailing market price. Further, if a substantial number of rights are exercised
and the holders of the shares received upon exercise of those rights choose to sell some or all of those shares, the resulting
sales could depress the market price of our common stock. There is no assurance that following the exercise of your rights you
will be able to sell your common stock at a price equal to or greater than the subscription price.
You could be committed
to buying shares of common stock above the prevailing market price.
Once you exercise your rights, you may not revoke such exercise even if you later learn information that
you consider to be unfavorable to the exercise of your rights. Our shares of common stock are traded on the Pink Sheets under the
symbol "SPGZ.PK." On [●], 2012, the last trading day before the commencement of this rights offering, the closing
sales price of our shares of common stock was $1.90 per share. We cannot assure you that the market price of our shares of common
stock will not decline prior to the expiration of this rights offering or that, after shares of common stock are issued upon exercise
of rights, a subscribing rights holder will be able to sell shares of common stock purchased in this rights offering at a price
greater than or equal to the subscription price. You should not exercise your subscription rights unless you are certain that you
wish to purchase additional shares of our common stock at the subscription price.
-
13
-
If you exercise
your subscription rights, you may be unable to sell any shares you purchase at a profit and your ability to sell may be delayed
by the time required to deliver the shares to you.
The public trading
price of our common stock may decline after you elect to exercise your subscription rights. If that occurs, you will have committed
to buy shares of common stock at a price above the prevailing market price and you will have an immediate unrealized loss. Moreover,
we cannot assure you that following the exercise of the subscription rights you will be able to sell your shares of common stock
at a price equal to or greater than the subscription price. Until shares are delivered after completion of this rights offering,
you may not be able to sell the shares of our common stock that you purchase in this rights offering. Shares of our common stock
purchased in this rights offering will be delivered as soon as practicable after completion of this rights offering. We will not
pay you interest on any funds delivered to the subscription agent pursuant to the exercise of subscription rights.
We may cancel this
rights offering at any time. If we cancel this rights offering, neither we nor the subscription agent will have any obligation
to you except to return your subscription payments.
We may unilaterally
cancel this rights offering at any time in our sole discretion. If we cancel this rights offering, the subscription rights will
be void and will have no value, and neither we nor the subscription agent will have any obligation with respect to the subscription
rights except to return, without interest or penalty, any subscription payments actually received. Further, if we cancel this rights
offering, we will be under no obligation to refund any consideration paid by a transferee in connection with a transfer of the
subscription rights.
To exercise your
subscription rights, you must act promptly and follow the subscription instructions carefully.
If you desire to purchase
shares of our common stock in this rights offering, you must act promptly to ensure that all required forms and payments are actually
received by the subscription agent at or prior to 5:00 p.m., New York City time, on [●], 2012, the current expiration date
of this rights offering. If you fail to complete and sign the required subscription forms, send an incorrect payment amount, or
otherwise fail to follow the subscription procedures that apply to your desired transaction, the subscription agent may, depending
on the circumstances, reject your subscription or accept it to the extent of the payment received. Neither we nor the subscription
agent has any obligation to contact you concerning, or attempt to correct, an incomplete or incorrect subscription form or payment.
We have the sole discretion to determine whether a subscription exercise properly follows the subscription procedures. See "The
Rights Offering" for additional details regarding exercise of your subscription rights.
This rights offering
and the transactions contemplated by the securities purchase agreement may limit our ability to use some or all of our net operating
loss carryforwards.
As a result of
prior operating losses, we have net operating loss, or "NOL," carryforwards for federal income tax purposes. Our
ability to utilize our NOL carryforwards to reduce taxable income in future years could become subject to significant
limitations under Section 382 of the Internal Revenue Code if we undergo an ownership change. We would undergo an ownership
change if, among other things, the stockholders who own, directly or indirectly, 5% or more of our common stock, or are
otherwise treated as "5% shareholders" under Section 382 of the U.S. Internal Revenue Code and the regulations
promulgated thereunder, increase their aggregate percentage ownership of our stock by more than 50 percentage points over the
lowest percentage of the stock owned by these stockholders at any time during the testing period, which is generally the
three-year period preceding the potential ownership change. In the event of an ownership change, Section 382 of the U.S.
Internal Revenue Code imposes an annual limitation on the amount of taxable income a corporation may offset with NOL
carryforwards. The annual limitation is equal to the value of the stock of the corporation immediately before the ownership
change, multiplied by the long-term tax-exempt rate for the month in which the ownership change occurs (the long-term
tax-exempt rate for the April 2012 is 3.26%). Any unused annual limitation may be carried over to later years until the NOL
carryforwards expire.
-
14
-
It is possible that
this rights offering and the transactions contemplated by the securities purchase agreement could trigger an ownership change for
purposes of Section 382 of the U.S. Internal Revenue Code, which would limit our ability to use any NOL carryforwards as described
above and could result in a write-down of those assets on our consolidated balance sheet and a charge against earnings. Even if
this rights offering and the transactions contemplated by the securities purchase agreement do not trigger an ownership change,
they will increase the likelihood that we may undergo an ownership change for purposes of Section 382 of the U.S. Internal Revenue
Code in the future.
Risks Associated with an Investment
in Our Common Stock
Our common stock
is currently traded on the Pink Sheets and an investor's ability to trade our common stock may be limited by trading volume.
In early 2007, our stock was de-listed from the NASDAQ National Market because of our failure to comply
with our financial reporting obligations under the Exchange Act. Since then, our stock has traded on the Pink Sheets. As a result,
our stock is thinly traded, which in turn affects the ability of holders of our stock to resell the shares they purchase, and they
may not be able to resell at prices at or above the prices they paid. The trading volume in our common stock has been relatively
limited. A consistently active trading market for our common stock may not continue on the Pink Sheets. The average daily trading
volume of our common stock for our fiscal year ended June 30, 2011 was approximately 13,200 shares.
Our stock price
may fluctuate.
The market price of
our common stock dropped dramatically following May 9, 2006, when Spanish judicial authorities began an investigation related to
alleged criminal wrongdoing by Afinsa and certain of its executives. In the past, the market price of our common stock has fluctuated
and may continue to fluctuate significantly due to a number of factors, some of which may be beyond our control, including:
·
sales of our common stock by stockholders, including Afinsa and Auctentia;
·
actual or anticipated fluctuations in our operating results;
·
the operating and stock price performance of other comparable companies;
·
developments and publicity regarding the Spanish criminal investigation;
·
general economic conditions; and
·
lack of liquidity for our common stock based, in part, on our shares not being traded on a national
exchange.
In addition, the stock
market in general has experienced volatility that has often been unrelated to the operating performance of individual companies.
These broad market fluctuations may adversely affect the trading price of our common stock, regardless of our actual performance,
and could enhance the effect of any fluctuations that do relate to our operating results.
We have not paid
dividends on our common stock in the past and do not anticipate paying dividends on our common stock in the foreseeable future.
We have not paid common
stock dividends since our inception and do not anticipate paying dividends in the foreseeable future. Our current business plan
provides for the reinvestment of earnings, with the goal of increasing sales and long-term profitability and value. Therefore,
an investor in our common stock will obtain an economic benefit from the common stock only after an increase in its trading price
and only by selling the common stock.
-
15
-
Use of Proceeds
Assuming this rights
offering is fully-subscribed, the net proceeds available to us from this rights offering, after deducting estimated offering expenses
of $0.3 million payable by us, will be approximately $37.1 million. The net proceeds of this rights offering, together with our
cash on hand, will be used to fund the purchase price of the securities purchase agreement. The purpose of this rights offering
is to raise capital in a cost-effective manner that gives all of our stockholders the opportunity to participate.
Determination
of Offering Price
In setting the subscription
price, we reviewed and considered a number of factors, including the amount of proceeds needed to satisfy the purchase price of
the securities purchase agreement, alternatives available to us for raising equity capital, the historic market price, the liquidity
and the historic volatility of the market price of our common stock, the historic trading volume of our common stock, our business
prospects, our recent and anticipated operating results, the price at which our stockholders might be willing to participate in
this rights offering, the desire to provide an opportunity to our stockholders to participate in this rights offering on a pro
rata basis and general conditions in the securities market. The subscription price for this rights offering was proposed to, reviewed
and approved by the special committee. The subscription price is not necessarily related to the book value of our assets, net worth,
past operations, cash flows, losses, financial condition, or any other established criteria for valuing us and may or may not be
considered the fair value of our common stock to be offered in this rights offering. You should not assume or expect that, after
this rights offering, our common shares will trade at or above the subscription price. We can give no assurance that our common
shares will trade at or above the subscription price in any given time period.
-
16
-
Capitalization
The following table sets forth our historical and pro forma capitalization as of December 31, 2011. The
pro forma information gives effect to an assumed $37.1 million in net proceeds raised from this rights offering and consummation
of the transactions contemplated by the securities purchase agreement.
For purposes of this table, we have assumed that this rights offering is fully subscribed, resulting in
$37.1 million in net proceeds. However, it is not possible to predict how many shares of common stock will be subscribed for in
this rights offering, and therefore, how much gross proceeds will actually be raised.
This table should
be read in conjunction with our consolidated financial statements and the notes thereto included in this prospectus.
December 31, 2011
Actual
Pro-forma
Cash and cash equivalents
$
34,541
$
13,413
Debt outstanding
$
6,783
$
6,783
Stockholders' equity (deficit):
Preferred stock, $.01 par value, authorized 10,000 shares; issued and outstanding: none
—
—
Common stock, $0.01 par value, authorized 40,000 shares; issued and outstanding: 32,638 and 33,713 on an actual and pro forma basis, respectively
326
337
Additional paid in capital
242,227
221,089
Accumulated other comprehensive income
7,330
7,330
Accumulated deficit
(158,660
)
(158,660
)
Total Spectrum Group International, Inc. stockholders' equity
91,223
70,097
Non-controlling interest
13,366
3,407
Total Stockholders' Equity
104,589
73,503
Total Capitalization
$
111,372
$
80,286
-
17
-
PRICE RANGE
OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is
traded on the Pink Sheets under the symbol "SPGZ.PK." Prior to January 2007, our common stock was traded on NASDAQ's
National Market under the symbol "ESCL." In January 2007, our common stock was de-listed from the NASDAQ National Market
because of our failure to comply with our financial reporting obligations under the Exchange Act.
As of March
16, 2012, there were 1,087 stockholders
of record of our common stock.
The closing sales price of our stock, as reported by the Pink Sheets on March 16, 2012, the last full
trading prior to the date of this prospectus, was $
2.25.
The closing sales
price of our common stock, as reported by the Pink Sheets on March 6, 2012, the last full trading immediately prior our announcement
of the execution of the securities purchase agreement, was $2.20.
The following tables
set forth the range of high and low closing prices for our common stock, for each of the periods indicated, as reported by the
Pink Sheets. These quotations below reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
Period
High
Low
Year Ended June 30, 2010
First Quarter
$
2.99
$
2.00
Second Quarter
3.30
1.81
Third Quarter
1.95
1.67
Fourth Quarter
2.20
1.70
Year Ending June 30, 2011
First Quarter
$
2.10
$
1.61
Second Quarter
2.60
1.61
Third Quarter
3.22
1.97
Fourth Quarter
3.02
2.30
Year Ending June 30, 2012
First Quarter
$
3.10
$
2.61
Second Quarter
3.00
2.50
Third Quarter (through March 16)
2.68
2.14
Dividend Policy
We have never declared
or paid any cash dividends on our stock. We currently anticipate that any future earnings will be retained by us to support our
growth strategy. The payment of any future dividends will be at the discretion of our board of directors and will depend upon,
among other things, future earnings, operations, capital requirements, our general financial condition, contractual restrictions
and general business conditions.
In addition, A-Mark's
credit facility has certain restrictive financial covenants which require A-Mark and the Company to maintain a minimum tangible
net worth (as defined in the credit facility) of $20.0 million and $50.0 million, respectively. The Company's ability to
pay dividends, if it were to desire to do so, could be limited as a result of these restrictions.
-
18
-
Background
of and Purpose For the Rights Offering
Spectrum Group International, Inc.
We are a global trading
and collectibles network. We are a trader of precious metals and an auctioneer of coins, stamps and wine, serving both collectors
and dealers. We are also a merchant/dealer of certain collectibles. Our collectibles offerings span the price spectrums from modest
to ultra-high end. Furthermore, we offer loans to coin dealers, collectors and investors backed by their precious metals, rare
coin and other collectibles as collateral.
We are a Delaware
company headquartered in California with 190 employees globally, as of December 31, 2011. Our executive offices are located at
1063 McGaw, Irvine, California 92614. Our telephone number is (949) 748-4800, and our website is www.spectrumgi.com. Information
contained on our web site does not constitute a part of this prospectus.
The Proposed Transactions with Afinsa
and Auctentia
Approximately 57%
of our common stock is owned by Afinsa, either directly or through its wholly owned subsidiary, Auctentia. Since September 2003,
Afinsa and Auctentia have collectively owned a majority of our common stock and have had two representatives on our board of directors.
Afinsa was placed
into insolvency proceedings in May 2006. Thereafter, in May 2011, Commercial Court No. 6 (Mercantile Court) in Madrid, Spain issued
an order approving the liquidation of a portion of the assets owned by Afinsa. Under the terms of the order, the trustees of Afinsa
were directed to sell the shares of our common stock held by it and Auctentia. In June 2011, we entered into an exclusive negotiating
agreement with Afinsa, pursuant to which the Afinsa trustees agreed to negotiate exclusively with us for the sale (or "buy-back")
of all or a portion of the shares.
In order to avoid
potential conflicts relating to such a transaction, our board of directors appointed a special committee in July 2011, comprised
entirely of independent directors, to oversee negotiations with the trustees of Afinsa and evaluate and recommend a transaction
to our board of directors. The special committee consists of Jeffrey Benjamin (as chairman), Jess Ravich, Christopher Nolan and
Jay Moorhead.
We, through the special
committee, have negotiated with the trustees of Afinsa. On March 6, 2012, we entered into the securities purchase agreement, effective
as of March 5, 2012, with Afinsa and Auctentia, pursuant to which we have agreed to purchase 18,642,067 shares of our common stock
owned by Afinsa and Auctentia and all shares of common stock of Spectrum PMI owned by Auctentia.
Through these transactions,
we will eliminate a controlling position that, we believe, has adversely affected the liquidity of our common stock and will unlock
value for our other stockholders. In addition, a sale by Afinsa and Auctentia of our common stock to an unrelated third party could
cause a change of control of us and would give a holder (or group of holders) sufficient voting power to control the outcome of
virtually all corporate matters submitted to a vote of our stockholders. Such a holder may promote policies or transactions that
may not be favored by other stockholders or impede policies or transactions that may be desirable for other stockholders. Sales
of our common stock owned by Afinsa and Auctentia in the public markets in one or more "block" transactions could also
have a negative effect on the trading price of our common stock.
The Securities Purchase
Agreement
On March 6, 2012,
we entered into the securities purchase agreement, effective as of March 5, 2012, with Afinsa and Auctentia. Pursuant to the securities
purchase agreement we have agreed to purchase 271,514 shares of our common stock from Afinsa, 18,370,553 shares of our common stock
from Auctentia and
all shares of common stock of Spectrum PMI owned by Auctentia,
for an aggregate
purchase price of $58.25 million. The purchase price payable to Afinsa and Auctentia under the securities purchase agreement is
payable in cash at closing.
We expect to consummate
the transactions contemplated by the securities purchase agreement simultaneous with the closing of this rights offering. If the
closing of the transactions contemplated by the securities purchase agreement does not occur by July 15, 2012, or the "outside
date," the securities purchase agreement may be terminated by either us or Afinsa and Auctentia.
-
19
-
Financing
.
We anticipate financing a portion of the purchase price through funds received from this rights offering. If we fail to consummate
this rights offering or if this rights offering is not fully subscribed, we may seek alternative sources of capital in order to
finance the purchase price; however, we are not obligated to do so under the securities purchase agreement. This may include the
issuance of equity or debt securities.
Closing Conditions
.
The closing of the securities purchase agreement is subject to satisfaction or waiver of a number of conditions, which include,
among others, the following:
·
receipt of any approvals, authorizations and clearances needed from any governmental or regulatory
authority or any other person required for consummation of the transactions;
·
the approval by the Commercial Court No. 6 (Mercantile Court) in Madrid, Spain of the transactions
contemplated by the securities purchase agreement shall not have been modified, reversed, vacated, stayed, restrained, or enjoined
on the closing date to the extent affecting the consummation of the transactions contemplated by the securities purchase agreement;
·
no provision of any applicable law shall prohibit the consummation of the transactions contemplated
by the securities purchase agreement;
·
compliance with covenants and the accuracy of representations and warranties provided for in the
securities purchase agreement;
·
delivery of appropriate legal opinions from counsel to Afinsa and Auctentia;
·
delivery of resignations or agreements not to stand for re-election by Afinsa's representatives
on our board of directors;
·
all conditions to the consummation of this rights offering (other than any condition of this rights
offering relating to the consummation of the transactions contemplated by the securities purchase agreement) will have been satisfied,
and we shall have received at least $37.3 million in aggregate net proceeds from this rights offering, and we shall have the necessary
funds, together with net proceeds of at least $37.3 million from this rights offering, to pay in full the purchase price of the
securities purchase agreement;
·
we shall have received a cash dividend in the amount of $2.75 million from Central de Compras Coleccionables,
S.L., one of our wholly owned subsidiaries; and
·
we shall not have notice of an adverse
claim on the securities to be acquired under the securities purchase agreement within the meaning of Section 8-105 of the Delaware
Uniform Commercial Code.
Termination
.
The securities purchase agreement may be terminated and the transactions abandoned at any time prior to closing as follows:
·
by the mutual written consent of us, Afinsa and Auctentia;
·
by us if:
-
Afinsa or Auctentia breach any of the representations, warranties, covenants or agreements in the
securities purchase agreement, which results in the failure of the conditions to the closing of the securities purchase agreement
relating to their compliance with their obligations under the securities purchase agreement, the accuracy of their representations
and warranties, and such breach is not cured within 10 business days or, by its nature, cannot be cured by July 15, 2012;
-
20
-
-
any of the conditions to our obligation to consummate the transactions in the securities purchase
agreement have not been, or if it becomes apparent that any of such conditions will not be, fulfilled by July 15, 2012;
·
by Afinsa and Auctentia if:
-
we breach any of the representations, warranties, covenants or agreements in the securities purchase
agreement, which results in the failure of the conditions to the closing of the securities purchase agreement relating to our compliance
with our obligations under the securities purchase agreement, the accuracy of our representations and warranties, and such breach
is not cured within 10 business days or, by its nature, cannot be cured by July 15, 2012;
-
any of the conditions to our obligation to consummate the transactions in the securities purchase
agreement have not been, or if it becomes apparent that any of such conditions will not be, fulfilled by July 15, 2012; or
·
by either us and Afinsa and Auctentia if: (1) there shall be any law that makes consummation of
the transactions contemplated by the securities purchase agreement illegal or otherwise prohibited; (2) any governmental authority
shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions
contemplated by the securities purchase agreement, and such order, decree, injunction or other action shall have become final and
non-appealable; (3) the closing of the transactions contemplated by the securities purchase agreement shall not have occurred on
or prior to July 15, 2012; or (4) the registration statement of which this prospectus forms a part shall not have been declared
effective by the SEC by June 10, 2012.
Termination Fee
.
If the securities purchase agreement is terminated because of our material breach or because we fail to have the required financing
to consummate the transaction by July 15, 2012, we must pay a termination fee of $2.9 million. However, no termination fee will
be payable if we have complied with our obligations under the securities purchase agreement, and the SEC has not declared the registration
statement of which this prospectus forms a part effective by June 10, 2012. We will be required to pay Afinsa and Auctentia a termination
fee of $3.5 million (in lieu of the aforementioned $2.9 million termination fee) if the securities purchase agreement has been
terminated as a result of a willful and material breach of our obligations under the securities purchase agreement.
Specific Performance
of the Securities Purchase Agreement
. We, Afinsa and Auctentia are entitled to injunctive relief to prevent or restrain breaches
or threatened breaches of the securities purchase agreement and to enforce specifically compliance with covenants and obligations
contained in the securities purchase agreement. We, Afinsa and Auctentia have each agreed not to raise any objections on the availability
of the equitable remedy of specific performance.
The Rights
Offering
Subscription Rights
Basic Subscription
Rights
We will distribute
to each holder of our common stock who is a record holder of our common stock on the record date, which is [●], 2012 (other
than Afinsa and Auctentia), at no charge, one transferable subscription right for each share of common stock owned as of the record
date. As of the record date, an aggregate of 32,725,655 shares of our common stock were outstanding.
The subscription rights will be evidenced by transferable subscription rights certificates. Each subscription
right will entitle the rights holder to purchase 1.4 shares of our common stock at a price of $1.90 per share, the subscription
price. We will not issue fractional shares, but rather will round down the aggregate number of shares you are entitled to receive
to the nearest whole share. Any excess payment will be returned to you promptly without interest or deduction. If rights holders
wish to exercise their subscription rights, they must do so prior to 5:00 p.m., New York City time, on [●], 2012, the expiration
date for this rights offering, subject to extension. After the expiration date, the subscription rights will expire and will have
no value. See below "— Expiration of the Rights Offering and Extensions, Amendments and Termination." You are
not required to exercise any or all of your subscription rights.
-
21
-
Oversubscription
Rights
Subject to the allocation
described below, each subscription right also grants the holder an oversubscription right to purchase additional shares of our
common stock that are not purchased by other rights holders pursuant to their basic subscription rights. You are entitled to exercise
your oversubscription right only if you exercise your basic subscription right in full. When you send in your subscription certificate,
you must also send the full purchase price in cash for the number of additional shares that you have requested to purchase pursuant
to oversubscription rights (in addition to the payment in cash due for shares purchased through your basic subscription right).
If you fully exercise
your basic subscription right, the oversubscription right of each right entitles you to subscribe for additional shares of our
common stock unclaimed by other holders of rights in this rights offering at the same subscription price per share. If sufficient
shares of common stock are available, we will seek to honor your oversubscription request in full.
If an insufficient
number of shares are available to fully satisfy all oversubscription right requests, the available shares will be distributed proportionately
among stockholders who exercised their oversubscription rights based on the number of shares each stockholder subscribed for under
its basic subscription rights. We reserve the right to reject any oversubscription and we will, in most cases, reject an oversubscription
to the extent the stockholder together with its affiliates would own 20% or more of the common stock after the oversubscription
is exercised. If we reject any oversubscription, then such person will be allocated only that number of shares for which the person
is permitted to purchase, and the remaining shares of common stock will be allocated among all other persons exercising the oversubscription
privilege on the same basis described above. The allocation process will be repeated until all shares of common stock have been
allocated or all oversubscription requests have been satisfied, whichever occurs first. If there are not enough unsubscribed shares
to honor all requests pursuant to the oversubscription privilege, a portion of requested shares will not be fulfilled.
As soon as practicable
after the expiration date, the subscription agent will determine the number of shares of common stock that you may purchase pursuant
to the oversubscription right. We will issue certificates representing your shares of our common stock, or credit your account
at your broker, custodian bank or other nominee with shares of our common stock, electronically in registered, book-entry form
only on our records or on the records of our transfer agent, American Stock Transfer & Trust Company LLC, that you purchased
pursuant to your basic subscription and oversubscription rights as soon as practicable after this rights offering has expired and
all proration calculations, reductions, and additions contemplated by the terms of this rights offering have been effected. If
you request and pay for more shares than are allocated to you, we will refund the overpayment, without interest or deduction. In
connection with the exercise of the oversubscription right, banks, brokers and other nominee holders of subscription rights who
act on behalf of beneficial owners will be required to certify to us and to the subscription agent as to the aggregate number of
subscription rights exercised, and the number of shares of common stock requested through the oversubscription right, by each beneficial
owner on whose behalf the nominee holder is acting.
Expiration of the Rights Offering
and Extensions, Amendments and Termination
You may exercise your
subscription rights at any time prior to 5:00 p.m., New York City time, on [●], 2012, the expiration date for this rights
offering. If you do not exercise your subscription rights before the expiration date of this rights offering, your subscription
rights will expire and will have no value. We will not be required to issue shares of our common stock to you if the subscription
agent receives your rights certificate or payment, after the expiration date, regardless of when you sent the rights certificate
and payment.
We may, in our sole
discretion, extend the time for exercising the subscription rights. We may extend the expiration date at any time after the record
date. If the commencement of this rights offering is delayed for a period of time, the expiration date of this rights offering
may be similarly extended. We will extend the duration of this rights offering as required by applicable law, and may choose to
extend the duration of this rights offering for any reason. We may extend the expiration date of this rights offering by giving
oral or written notice to the subscription agent on or before the scheduled expiration date. If we elect to extend the expiration
date of this rights offering, we will publicly announce such extension no later than 9:00 a.m., New York City time, on the next
business day after the most recently announced expiration date.
-
22
-
We reserve the right,
in our sole discretion, to amend or modify the terms of this rights offering. We also reserve the right to terminate this rights
offering at any time prior to the expiration date for any reason, in which event all funds received in connection with this rights
offering will be returned without interest or deduction to those persons who exercised their subscription rights as soon as practicable.
If we cancel this rights offering, we will be under no obligation to refund any consideration paid by a transferee of subscription
rights.
Conditions to this Rights Offering
While we reserve the
right to terminate this rights offering at any time prior to the expiration date for any reason, consummation of this rights offering
is subject to consummation of the transactions contemplated by the securities purchase agreement. If, for any reason, the transactions
contemplated by the securities purchase agreement are not consummated, then we will not consummate this rights offering.
In addition, we may
terminate this rights offering, in whole or in part, if at any time before completion of this rights offering there is any judgment,
order, decree, injunction, statute, law or regulation entered, enacted, amended or held to be applicable to this rights offering
that in the sole judgment of our board of directors would or might make this rights offering or its completion, whether in whole
or in part, illegal or otherwise restrict or prohibit completion of this rights offering.
We may waive any of
these conditions and choose to proceed with this rights offering even if one or more of these events occur. If we terminate this
rights offering, in whole or in part, all affected subscription rights will expire without value and all subscription payments
in the form in which received by the subscription agent will be returned, without interest or deduction, as soon as practicable.
See also "— Expiration of the Rights Offering and Extensions, Amendments and Termination."
Method of Exercising Subscription
Rights
The exercise of subscription
rights is irrevocable and may not be cancelled or modified. Your subscription rights will not be considered exercised unless the
subscription agent receives from you, your broker, custodian or nominee, as the case may be, all of the required documents properly
completed and executed and your full subscription price payment in cash prior to 5:00 p.m., New York City time, on [●], 2012,
the expiration date of this rights offering. Rights holders may exercise their rights as follows:
Subscription by
Registered Holders
Rights holders who
are registered holders of our common stock may exercise their subscription privilege by properly completing and executing the rights
certificate together with any required signature guarantees and forwarding it, together with payment in full of the subscription
price for each share of the common stock for which they subscribe, to the subscription agent at the address set forth under the
subsection entitled "—Delivery of Subscription Materials and Payment," on or before the expiration date.
Subscription by
DTC Participants
Banks, trust companies,
securities dealers and brokers that hold shares of our common stock on the rights offering record date as nominee for more than
one beneficial owner may, upon proper showing to the subscription agent, exercise their subscription privilege on the same basis
as if the beneficial owners were record holders on the rights offering record date through the Depository Trust Company, or "DTC."
Such holders may exercise these rights through DTC's PSOP Function on the "agents subscription over PTS" procedure
and instruct DTC to charge their applicable DTC account for the subscription payment for the new shares and deliver such amount
to the subscription agent. DTC must receive the subscription instructions and payment for the new shares by the rights expiration
date.
-
23
-
Subscription by
Beneficial Owners
Rights holders who
are beneficial owners of shares of our common stock and whose shares are registered in the name of a broker, custodian bank or
other nominee, and rights holders who hold common stock certificates and would prefer to have an institution conduct the transaction
relating to the rights on their behalf, should instruct their broker, custodian bank or other nominee or institution to exercise
their rights and deliver all documents and payment on their behalf, before the expiration date. A rights holder's subscription
rights will not be considered exercised unless the subscription agent receives from such rights holder, its broker, custodian,
nominee or institution, as the case may be, all of the required documents and such holder's full subscription price payment.
Method of Payment
Payments must be made
in full in U.S. currency by:
·
check or bank draft drawn on a U.S. bank payable to "American Stock Transfer & Trust
Company LLC, as Subscription Agent"; or
·
wire transfer of immediately available funds directly to the account maintained by American Stock
Transfer & Trust Company LLC, as Subscription Agent, for purposes of accepting subscriptions in this rights offering at [●],
ABA #[●], Account #[●] FBO Spectrum Subscription, with reference to the rights holder's name.
Rights certificates
received after 5:00 p.m., New York City time, on [●], 2012, the expiration date of this rights offering, will not be honored,
and we will return your payment to you as soon as practicable, without interest or deduction.
The subscription agent
will be deemed to receive payment upon:
·
clearance of any uncertified check deposited by the subject agent;
·
receipt by the subscription agent of any certified bank check draft drawn upon a U.S. bank; or
·
receipt by the subscription agent of immediately available funds by wire transfer.
You should read the
instruction letter accompanying the rights certificate carefully and strictly follow it. DO NOT SEND RIGHTS CERTIFICATES OR PAYMENTS
TO US. We will not consider your subscription received until the subscription agent has received delivery of a properly completed
and duly executed rights certificate and payment of the full subscription amount. When you send in your subscription certificate,
you must also send the full purchase price in cash for the number of additional shares that you have requested to purchase pursuant
to oversubscription rights (in addition to the payment in cash due for shares purchased through your basic subscription right).
The risk of delivery of all documents and payments is on you or your nominee, not us or the subscription agent.
The method of delivery
of rights certificates and payment of the subscription amount to the subscription agent will be at the risk of the holders of rights,
but, if sent by mail, we recommend that you send those certificates and payments by overnight courier or by registered mail, properly
insured, with return receipt requested, and that a sufficient number of days be allowed to ensure delivery to the subscription
agent and clearance of payment before the expiration of the subscription period.
Medallion Guarantee May Be Required
Your signature on
each subscription rights certificate must be guaranteed by an eligible institution, such as a member firm of a registered national
securities exchange or a member of the Financial Industry Regulatory Authority, Inc., or a commercial bank or trust company having
an office or correspondent in the United States, subject to standards and procedures adopted by the subscription agent, unless:
-
24
-
·
your subscription rights certificate provides that shares are to be delivered to you as record
holder of those subscription rights; or
·
you are an eligible institution.
Subscription Agent
The subscription agent
for this rights offering is American Stock Transfer & Trust Company LLC. We will pay all fees and expenses of the subscription
agent related to this rights offering and have also agreed to indemnify the subscription agent from certain liabilities that it
may incur in connection with this rights offering.
Delivery of Subscription Materials
and Payment
You should deliver
your subscription rights certificate and payment of the subscription to the subscription agent at the following address:
By
        mail:
By
        hand or overnight delivery:
American Stock Transfer & Trust Company, LLC
American Stock Transfer & Trust Company, LLC
Attn: Reorganization Department
Operations Center
P.O. Box 2042
Attn: Reorganization Department
New York, New York 10272-2042
6201 15th Avenue
Brooklyn, New York 11219
Your delivery to an
address or by any method other than as set forth above will not constitute valid delivery and we may not honor the exercise of
your subscription rights.
You should direct
any questions or requests for assistance concerning the method of subscribing for the shares of common stock or for additional
copies of this prospectus to us at Spectrum Group International, Inc., 1063 McGaw, Irvine, CA 92614, Attn: Paul Soth, Chief Financial
Officer, or by telephone at (949) 748-4800.
Calculation of Subscription Rights
Exercised
If you do not indicate
the number of subscription rights being exercised, or do not forward full payment, as provided herein, of the total subscription
price payment for the number of subscription rights that you indicate are being exercised, then you will be deemed to have exercised
your subscription right with respect to the maximum number of subscription rights that may be exercised with the aggregate subscription
price payment, as provided herein, that you delivered to the subscription agent. If we do not apply your full subscription price
payment to your purchase of shares of our common stock, we or the subscription agent will return the excess amount to you by mail,
without interest or deduction, as soon as practicable after the expiration date of this rights offering.
Escrow Arrangements
The subscription agent
will hold funds received in payment of the subscription price in a segregated account until this rights offering is completed or
withdrawn and terminated.
Notice to Beneficial Holders
If you are a broker,
a trustee or a depositary for securities who holds shares of our common stock for the account of others as of the record date,
you should notify the respective beneficial owners of such shares of this rights offering as soon as possible to find out their
intentions with respect to exercising their subscription rights. You should obtain instructions from the beneficial owners with
respect to their subscription rights, as set forth in the instructions we have provided to you for your distribution to beneficial
owners. If a beneficial owner so instructs, you should complete the appropriate subscription rights certificates and submit them
to the subscription agent with the proper payment. If you hold shares of our common stock for the account(s) of more than one beneficial
owner, you may exercise the number of subscription rights to which all such beneficial owners in the aggregate otherwise would
have been entitled had they been direct record holders of our common stock on the record date, provided that you, as a nominee
record holder, make a proper showing to the subscription agent by submitting the form entitled "Nominee Holder Certification"
that we will provide to you with your rights offering materials. If you did not receive this form, you should contact the subscription
agent to request a copy.
-
25
-
Beneficial Owners
If you are a beneficial
owner of shares of our common stock or will receive subscription rights through a broker, custodian bank or other nominee, we will
ask your broker, custodian bank or other nominee to notify you of this rights offering. If you wish to exercise your subscription
rights, you will need to have your broker, custodian bank or other nominee act for you. If you hold certificates of our common
stock directly and would prefer to have your broker, custodian bank or other nominee act for you, you should contact your nominee
and request it to effect the transactions for you. To indicate your decision with respect to your subscription rights, you should
complete and return to your broker, custodian bank or other nominee the form entitled "Beneficial Owners Election Form".
You should receive the "Beneficial Owners Election Form" from your broker, custodian bank or other nominee with the
other rights offering materials. If you wish to obtain a separate subscription rights certificate, you should contact the nominee
as soon as possible and request that a separate subscription rights certificate be issued to you. You should contact your broker,
custodian bank or other nominee if you do not receive this form but you believe you are entitled to participate in this rights
offering. We are not responsible if you do not receive this form from your broker, custodian bank or nominee or if you receive
it without sufficient time to respond.
Method of Transferring and Selling
Subscription Rights
The rights are transferable.
You may sell or otherwise transfer them to others. If you are one of our affiliates, you may transfer your rights only if there
is an effective registration statement for such transfer or exemption covering such transfer under the U.S. securities laws.
We anticipate that
the subscription rights will be traded on the Pink Sheets under the symbol "[●]." We expect that subscription
rights may be purchased or sold through usual investment channels until the close of business on the last trading day preceding
the expiration time. However, there has been no prior public market for the subscription rights, and we cannot assure you that
a trading market for the subscription rights will develop or, if a market develops, that the market will remain available throughout
the subscription period. We also cannot assure you of the prices at which the subscription rights will trade, if at all. If you
do not exercise or sell your subscription rights you will lose any value inherent in the rights.
You may transfer subscription rights in whole by executing the rights transfer form on the back of the
rights certificate and submitting it the subscription agent no later than 5:00 p.m., New York City time, on [●], 2012, five
business days before the expiration date. Please follow the instructions for transfer included in the information sent to you with
your subscription rights certificate. If you wish to transfer only a portion of the subscription rights, you should deliver your
properly endorsed rights certificate to the subscription agent and include instructions to register such portion of the subscription
rights evidenced thereby in the name of the transferee (and to issue a new subscription rights certificate to the transferee evidencing
such transferred subscription rights). You may only transfer whole subscription rights and not fractions of a subscription right.
If there is sufficient time before the expiration of this rights offering, the subscription agent will send you a new subscription
rights certificate evidencing the balance of the subscription rights issued to you but not transferred to the transferee. You may
also instruct the subscription agent to send the subscription rights certificate to one or more additional transferees. If you
wish to sell your remaining subscription rights, you may request that the subscription agent send you certificates representing
your remaining (whole) subscription rights so that you may sell them through your broker or dealer.
If you wish to transfer
all or a portion of your subscription rights, you should allow a sufficient amount of time prior to the time the subscription rights
expire for the subscription agent to:
·
receive and process your transfer instructions; and
·
issue and transmit a new rights certificate to your transferee or transferees with respect to transferred
rights, and to you with respect to any subscription rights you retained.
Record holders wishing
to sell their rights on the Pink Sheets, should independently engage a broker to execute this sale on their behalf.
-
26
-
If you wish to transfer
your subscription rights to any person other than a bank or broker, the signatures on your subscription rights certificate must
be guaranteed by an eligible institution.
The amount of time
needed by your transferee to exercise or sell its subscription rights depends upon the method by which the transferor delivers
the subscription rights certificates, the method of payment made by the transferee and the number of transactions which the holder
instructs the subscription agent to effect. You should also allow up to ten business days for your transferee to exercise or sell
the subscription rights transferred to it. Neither we nor the subscription agent will be liable to a transferee or transferor of
subscription rights if subscription rights certificates or any other required documents are not received in time for exercise or
sale prior to the expiration date.
You will receive a
new subscription rights certificate upon a partial exercise, transfer or sale of subscription rights only if the subscription agent
receives your properly endorsed subscription rights certificate no later than 5:00 p.m., New York City time, on [●], 2012,
five business days before the expiration date. The subscription agent will not issue a new subscription rights certificate if your
subscription rights certificate is received after that time and date. If your instructions and subscription rights certificate
are received by the subscription agent after that time and date, you will not receive a new subscription rights certificate and
therefore will not be able to sell or exercise your remaining subscription rights.
You are responsible
for all commissions, fees and other expenses (including brokerage commissions and transfer taxes) incurred in connection with the
purchase, sale or exercise of your subscription rights, except that we will pay all fees of the subscription agent associated with
the exercise of subscription rights. If we cancel this rights offering, we will be under no obligation to refund any consideration
paid by a transferee in connection with a transfer of subscription rights.
If you do not exercise
your subscription rights before the expiration date, your subscription rights will expire and will no longer be exercisable.
Determinations Regarding the Transfer
or Exercise of Your Subscription Rights
We will decide all
questions concerning the timeliness, validity, form and eligibility of the transfer or exercise of your subscription rights and
any such determinations by us will be final and binding. We, in our sole discretion, may waive, in any particular instance, any
defect or irregularity, or permit, in any particular instance, a defect or irregularity to be corrected within such time as we
may determine. We will not be required to make uniform determinations in all cases. We may reject the transfer or exercise of any
of your subscription rights because of any defect or irregularity. We will not accept any transfer or exercise of subscription
rights until all irregularities have been waived by us or cured by you within such time as we decide, in our sole discretion. Our
interpretations of the terms and conditions of this rights offering will be final and binding.
Neither we, nor the
subscription agent, will be under any duty to notify you of any defect or irregularity in connection with your submission of subscription
rights certificates and we will not be liable for failure to notify you of any defect or irregularity. We reserve the right to
reject your transfer or exercise of subscription rights if your transfer or exercise is not in accordance with the terms of this
rights offering or in proper form. We will also not accept the transfer or exercise of your subscription rights if the transfer
of the subscription rights or the issuance of shares of our common stock to you could be deemed unlawful under applicable law.
No Revocation or Change
Once you submit the
form of rights certificate to exercise any subscription rights, you may not revoke or change your exercise or request a refund
of monies paid. All exercises of rights are irrevocable, even if you subsequently learn information about us that you consider
to be unfavorable. You should not exercise your rights unless you are certain that you wish to purchase additional shares of our
common stock at the subscription price.
Rights of Subscribers
You will have no rights
as a stockholder with respect to shares you subscribe for in this rights offering until certificates representing shares of common
stock are issued to you. You will have no right to revoke your subscriptions after you deliver your completed rights certificate,
payment as provided herein, and any other required documents to the subscription agent.
-
27
-
Foreign Stockholders and Stockholders
with Army Post Office or Fleet Post Office Addresses
The subscription agent
will not mail rights certificates to you if you are a stockholder whose address is outside the United States or if you have an
Army Post Office or a Fleet Post Office address. Instead, we will have the subscription agent hold the subscription rights certificates
for your account. To exercise your rights, you must notify the subscription agent prior to 11:00 a.m., New York City time, at least
three business days prior to the expiration date, and establish to the satisfaction of the subscription agent that it is permitted
to exercise your subscription rights under applicable law. If you do not follow these procedures by such time, your rights will
expire and will have no value.
No Recommendation by Our Board of
Directors or the Special Committee
An investment in shares
of our common stock must be made according to your evaluation of your own best interests and after considering all of the information
herein, including the "Risk Factors" section of this prospectus. Neither we nor our board of directors or the special
committee are making any recommendation regarding whether you should exercise your subscription rights.
Fees and Expenses
Neither we nor the
subscription agent will charge a brokerage commission or a fee to subscription rights holders for exercising their rights. However,
if you exercise your subscription rights through a broker, dealer or nominee, you will be responsible for any fees charged by your
broker, dealer or nominee.
Questions About Exercising Subscription
Rights
If you have any questions
or require assistance regarding the method of exercising your subscription rights or requests for additional copies of this document
or any document mentioned herein, you should contact the subscription agent at the address and telephone number set forth above
under "— Delivery of Subscription Materials and Payment."
Other Matters
We are not making
this rights offering in any state or other jurisdiction in which it is unlawful to do so, nor are we distributing or accepting
any offers to purchase any shares of our common stock from subscription rights holders who are residents of those states or of
other jurisdictions or who are otherwise prohibited by federal or state laws or regulations to accept or exercise the subscription
rights. We may delay the commencement of this rights offering in those states or other jurisdictions, or change the terms of this
rights offering, in whole or in part, in order to comply with the securities law or other legal requirements of those states or
other jurisdictions. Subject to state securities laws and regulations, we also have the discretion to delay allocation and distribution
of any shares you may elect to purchase by exercise of your subscription rights in order to comply with state securities laws.
We may decline to make modifications to the terms of this rights offering requested by those states or other jurisdictions, in
which case, if you are a resident in one of those states or jurisdictions or if you are otherwise prohibited by federal or state
laws or regulations from accepting or exercising the subscription rights you will not be eligible to participate in this rights
offering.
PLAN OF
DISTRIBUTION
On or about [●],
2012, we will distribute the rights, rights certificates and copies of this prospectus to individuals who owned shares of common
stock on the record date. We have not employed any brokers, dealers or underwriters in connection with the solicitation or exercise
of rights in this rights offering and no commissions, fees or discounts will be paid in connection with this rights offering. While
certain of our directors, officers and other employees may solicit responses from you, those directors, officers and other employees
will not receive any commissions or compensation for their services other than their normal compensation. If you wish to exercise
your subscription rights and purchase shares of common stock, you should complete the subscription rights certificate and return
it with payment as provided herein for the shares of common stock, to the subscription agent, American Stock Transfer & Trust
Company, LLC, at the following address:
-
28
-
By
        mail:
By
        hand or overnight delivery:
American Stock Transfer
        & Trust Company, LLC
Attn: Reorganization
        Department
P.O. Box 2042
New York, New York 10272-2042
American Stock Transfer
        & Trust Company, LLC
Operations Center
Attn: Reorganization
        Department
6201 15th Avenue
Brooklyn, New York 11219
If this rights offering
is not fully subscribed, holders of rights who exercise all of their rights pursuant to their basic subscription privilege will
have the opportunity to subscribe for unsubscribed rights pursuant to the oversubscription privilege. See "The Rights Offering."
We have not entered
into any agreements regarding stabilization activities with respect to our securities.
We anticipate that
the subscription rights will be traded on the Pink Sheets under the symbol "[●]." Our shares of common stock
are traded on the Pink Sheets under the symbol "SPGZ.PK."
If you have any questions,
you should contact us at Spectrum Group International, Inc., 1063 McGaw, Irvine, CA 92614, Attn: Paul Soth, Chief Financial Officer,
or by telephone at (949) 748-4800. We have agreed to pay the subscription agent a fee plus certain expenses, which we estimate
will total approximately $40 thousand. We estimate that our total expenses in connection with this rights offering will be approximately
$0.3 million.
Other than as described
herein, we do not know of any existing agreements between any stockholder, broker, dealer, underwriter or agent relating to the
sale or distribution of the shares of our common stock.
Certain
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The
following discussion is a summary of certain material U.S. Federal income tax consequences of this rights offering to holders
of our common stock. This discussion assumes that the holders of our common stock hold such common stock as a capital asset
for U.S. Federal income tax purposes. This discussion is based on the Internal Revenue Code of 1986, as amended, Treasury
Regulations promulgated thereunder, Internal Revenue Service rulings and pronouncements and judicial decisions in effect on
the date hereof, all of which are subject to change (possibly with retroactive effect) and to differing interpretations. The
following summary does not purport to be a complete analysis of all of the potential U.S. Federal income tax considerations,
applies only to holders that are United States persons and does not address all aspects of U.S. Federal income taxation that
may be relevant to holders in light of their particular circumstances or to holders who may be subject to special tax
treatment under the Internal Revenue Code, including, without limitation, holders who are dealers in securities or foreign
currency, insurance companies, tax-exempt organizations, banks, financial institutions, broker-dealers, holders who hold our
common stock as part of a hedge, straddle, conversion or other risk reduction transaction, who acquired our common stock
pursuant to the exercise of compensatory stock options or otherwise as compensation or who did not acquire their subscription
rights in this rights offering.
This summary is of
a general nature only and is not intended to constitute a complete analysis of all tax consequences relating to the receipt, exercise,
disposition and expiration of the subscription rights and the ownership and disposition of our common shares. It is not intended
to constitute, and should not be construed to constitute, legal or tax advice to any particular holder. Holders should consult
their own tax advisors as to the tax consequences in their particular circumstances.
We intend to treat
the distribution of subscription rights pursuant to this rights offering as a non-taxable transaction for U.S. Federal income tax
purposes and the remaining portion of this summary describes the U.S. Federal income tax consequences of such treatment. However,
there can be no assurance that the Internal Revenue Service will take a similar view or would agree with the tax consequences described
below. We have not sought, and will not seek, an opinion of counsel or a ruling from the Internal Revenue Service regarding the
U.S. Federal income tax consequences of this rights offering or the related share issuance. The following summary does not address
the tax consequences of this rights offering or the related share issuance under foreign, state, or local tax laws.
-
29
-
Accordingly, each
holder of our common stock should consult its tax advisor with respect to the particular tax consequences of this rights offering
and the related share issuance to such holder
.
The U.S. Federal income
tax consequences to a holder of our common stock of the receipt, transfer and exercise of subscription rights under this rights
offering will be as follows:
·
A holder will not recognize taxable income for U.S. Federal income tax purposes in connection with
the receipt of subscription rights in this rights offering.
·
A holder's tax basis in its subscription rights will depend on the relative fair
                                                                                                              market                                                                                                               value
                                                                                                              of                                                                                                               the
                                                                                                              subscription rights received by such holder and the common stock owned by such holder at the time the
                                                                                                              subscription rights are distributed. If either (i) the fair market value of the subscription rights on the date such
                                                                                                              subscription rights are distributed is equal to at least 15% of the fair market value on such date of the common stock with
                                                                                                              respect to which the subscription rights are received or (ii) the holder elects, in a statement attached to its U.S. Federal
                                                                                                              income tax return for the taxable year in which the subscription rights are received, to allocate part of its tax basis in
                                                                                                              such common stock to the subscription rights, then upon exercise or sale or other disposition of the subscription rights,
                                                                                                              the
                                                                                                              holder's
                                                                                                              tax                                                                                                               basis
                                                                                                              in the                                                                                                               common
                                                                                                              stock will be allocated between the common stock and the subscription rights in proportion to their respective
                                                                                                              fair market values on the date the subscription rights are distributed. If the subscription rights received by a holder have
                                                                                                              a fair market value that is less than 15% of the fair market value of the common stock owned by such holder at the time the
                                                                                                              subscription rights are distributed, the holder's tax basis in its subscription rights will be zero unless the holder
                                                                                                              elects to allocate its adjusted tax basis in the common stock owned by such holder in the manner described in the previous
                                                                                                              sentence. A holder's tax basis in the common stock will be reduced to the extent any of such tax basis is allocated to
                                                                                                              the
                                                                                                              subscription rights.
·
A holder which allows the subscription rights received in this rights offering to expire will not
recognize any gain or loss, and no portion of the tax basis in the common stock owned by such holder with respect to which such
subscription rights were distributed will be allocated to the unexercised subscription rights.
·
A holder will not recognize any gain or loss upon the exercise of the subscription rights received
in this rights offering. The tax basis in the common stock acquired through exercise of the subscription rights will equal the
sum of the subscription price for the common stock and the holder's tax basis, if any, in the rights as described above.
The holding period for the common stock acquired through exercise of the subscription rights will begin on the date the subscription
rights are exercised. A gain or loss recognized upon a sale of such common stock will be a capital gain or loss if the common stock
is held as a capital asset at the time of sale. Such capital gain or loss will be long-term capital gain or loss if the holding
period for the common stock exceeds one year at the time of sale.
·
If a holder exercises the subscription rights received in this rights offering after disposing
                                                                                                              of the shares of the common stock with respect to which the subscription rights were received, then certain aspects of the
                                                                                                              tax treatment of the exercise of the subscription rights are unclear, including (1) the allocation of tax basis between the
                                                                                                              common stock previously sold and the subscription rights, (2) the effect of such allocation on the amount and timing of gain
                                                                                                              or loss recognized with respect to the common stock previously sold, and (3) the effect of such allocation on the tax basis
                                                                                                              of common stock acquired through exercise of the subscription rights. A holder that exercises subscription rights received in
                                                                                                              this rights offering after disposing of the common stock with respect to which the subscription rights were received should
                                                                                                              consult its tax advisor.
·
A holder which sells or otherwise transfers the rights received in this rights offering in a
                                                                                                              taxable transaction, will recognize capital gain or loss in an amount equal to the difference between its basis, if any,
                                                                                                              in the rights (as described above) and the amount of cash plus the fair market value of any other property received in
                                                                                                              exchange for the rights. Such gain or loss will be long term capital gain or loss, as the case may be, if the holding period
                                                                                                              for the rights is more
                                                                                                              than                                                                                                               one
                                                                                                              year at the time of the sale. A holder's holding period in the rights received in this offering will include its
                                                                                                              holding period in the common stock with respect to which such rights are received.
-
30
-
·
A holder may be subject to backup withholding with respect to the proceeds received on the
                                                                                                              sale or other taxable transfer of rights or common stock acquired through the exercise of such rights. Backup withholding is
                                                                                                              not                                                                                                               an
                                                                                                              additional
                                                                                                              tax.                                                                                                               The
                                                                                                              amount                                                                                                                  of
                                                                                                              any                                                                                                               backup
                                                                                                              withholding
                                                                                                              will be allowed as a credit against the holder's tax liability and may entitle it to a refund, provided that the
                                                                                                              required
                                                                                                              information is furnished to the Internal Revenue Service. In general, a holder will be subject to backup withholding unless
                                                                                                              (1)                                                                                                               it is an
                                                                                                              entity (including a corporation or a tax-exempt entity) that is exempt from withholding and, when required,
                                                                                                              demonstrates this fact or (2) it provides its Taxpayer Identification Number ("TIN") and certifies that the TIN
                                                                                                              provided is correct, it is exempt from backup withholding, has not been notified by the Internal Revenue Service that
                                                                                                              it is subject to backup withholding due to underreporting of interest or dividends, and  otherwise complies with the
                                                                                                              applicable requirements of the backup withholding rules. The amounts subject to backup withholding will also be subject to
                                                                                                              information reporting requirements if the holder is not an exempt recipient.
Description
of Capital Stock
Set forth below is
a summary of the terms of our capital stock. This summary is qualified in its entirety by reference to our certificate of incorporation
and bylaws and to the applicable provisions of the Delaware General Corporation Law, or the "DGCL."
Our authorized capital
stock currently consists of 40,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock,
par value $0.01 per share.
Common Stock
Each stockholder is
entitled to cast one vote for each share of our common stock held. Dividends may be declared by the board of directors. We do not
expect to pay any cash dividends on our common stock in the foreseeable future. Upon our liquidation, dissolution or winding up,
the holders of shares of our common stock would be entitled to receive all remaining assets of our company, distributed ratably
on the basis of the number of shares of common stock held by each of them. The holders of our common stock have no preemptive or
other subscription rights to purchase shares of our capital stock. All of the outstanding shares of our common stock are, and the
shares issuable upon exercise of outstanding options will be, when issued, fully paid and nonassessable.
As of March 16, 2012,
we had 32,637,655 shares of common stock outstanding, exclusive of existing options.
Preferred Stock
Our board of directors
is authorized, subject to the limitations prescribed by Delaware law and our certificate of incorporation, to issue 10,000,000
shares of preferred stock and to determine the terms and conditions of the preferred stock, including whether the shares of preferred
stock will be issued in one or more series, the number of shares to be issued in each series and the rights, preferences and priorities
of such shares. We have no current plan to issue any shares of preferred stock following the consummation of this rights offering.
Anti-takeover Effects of Delaware
Law and Our Certificate of Incorporation and Bylaws
The provisions of
Delaware law, our certificate of incorporation and our bylaws described below may have the effect of delaying, deferring or discouraging
another party from acquiring control of us.
Delaware law
We are subject to
the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, those provisions prohibit a Delaware corporation
from engaging in any business combination with any interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder, unless:
·
the business combination or the transaction that resulted in the stockholder becoming an interested
stockholder is approved by our board of directors before the date the interested stockholder attained that status;
-
31
-
·
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced;
or
·
on or after the date the business combination is approved by our board of directors, the business
combination is authorized at a meeting of stockholders, and not by written consent, by at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.
In general, Section
203 defines "business combination" to include the following:
·
any merger or consolidation involving the corporation and the interested stockholder;
·
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation
involving the interested stockholder;
·
subject to certain exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder;
·
any transaction involving the corporation that has the effect of increasing the proportionate share
of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
·
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges
or other financial benefits provided by or through the corporation.
In general, Section
203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of
the corporation and any entity or person affiliated with or controlling or controlled by any such entity or person.
A Delaware corporation
may opt out of this provision by express provision in its original certificate of incorporation or by amendment to its certificate
of incorporation or bylaws approved by its stockholders; however we have not opted out of, and we do not currently intend to opt
out of, this provision. The statute could prohibit or delay mergers or other takeover or change of control attempts and, accordingly,
may discourage attempts to acquire us.
Certificate of Incorporation
and Bylaws
Our certificate
of incorporation and bylaws provide:
·
for the classification of our board of directors so that only a portion of our directors is elected
each year, with each director serving a three-year term;
·
that our board of directors will be expressly authorized to adopt, amend or repeal our bylaws;
·
that stockholders must provide notice of nominations of directors or the proposal of business to
be voted on at an annual meeting;
·
that our board of directors will be authorized to issue preferred stock without stockholder approval,
as described above; and
·
that we will indemnify officers and directors against losses that they may incur in investigations
and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures.
Limitation of Liability and Indemnification
Matters
We have adopted provisions
in our certificate of incorporation that limit the liability of our directors for monetary damages for breach of their fiduciary
duty as directors, except for liability that cannot be eliminated under the DGCL. Accordingly, our directors will not be personally
liable for monetary damages for breach of their fiduciary duty as directors, except for liabilities for:
-
32
-
·
any breach of the director's duty of loyalty to us or our stockholders;
·
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation
of law;
·
unlawful payments of dividends or unlawful stock repurchases or redemptions, as provided under
Section 174 of the DGCL; or
·
any transaction from which the director derived an improper personal benefit.
Our bylaws provide
that we shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to any action,
suit or proceeding, whether criminal, civil, administrative or investigative (a "legal action"), whether such legal
action be by or in the right of the corporation or otherwise, by reason of the fact that such person is or was a director or officer
of us, or serves or served at our request as a director or officer, of another corporation, partnership, joint venture, trust or
any other enterprise. Notwithstanding this, no indemnification will be permitted if a judgment or other final adjudication adverse
to that person establishes that either (a) his or her acts were committed in bad faith, or were the result of active and deliberate
dishonesty, and were material to the cause of action so adjudicated, or (b) that he or she personally gained in fact a financial
profit or other advantage to which he or she was not legally entitled. Our indemnification obligation in our bylaws is permitted
under Section 145 of the DGCL.
Listing Symbol
Our common stock is
traded on the Pink Sheets under the symbol "SPGZ.PK".
Transfer agent and registrar
The transfer agent
and registrar for our common stock is American Stock Transfer & Trust Company LLC.
LEGAL MATTERS
The validity of the
rights and shares of common stock offered by this prospectus have been passed upon for us by
Kramer
Levin Naftalis & Frankel LLP, New York, New York
.
EXPERTS
The consolidated financial
statements as of June 30, 2011 and 2010 and for each of the two years in the period ended June 30, 2011 incorporated by reference
in this Prospectus and in the Registration Statement have been so incorporated in reliance on the report of BDO USA, LLP, an independent
registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing
and accounting.
The consolidated financial
statements as of June 30, 2011 and 2010 and for each of the two years in the period ended June 30, 2011 incorporated by reference
in this Prospectus and in the Registration Statement have been so incorporated in reliance on the report of Fabregas/Mercade, an
independent registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts
in auditing and accounting.
INCORPORATION
BY REFERENCE
We incorporate by
reference into this prospectus information we file with the SEC, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference is deemed to be part of this prospectus. This prospectus
incorporates by reference the documents set forth below, that we have previously filed with the SEC. These documents contain important
information about us and our financial condition. We are incorporating by reference the following documents:
-
33
-
·
our Annual Report on Form 10-K for the year ended June 30, 2011, filed on September 23, 2011;
·
our Quarterly Reports on Form 10-Q for the quarter ended September 30, 2011, filed on November
10, 2011, and for the quarter ended December 31, 2011, filed on February 13, 2012; and
·
our Current Reports on Form 8-K filed on August 4, 2011, August 18, 2011, October 17, 2011, November
16, 2011 and March 7, 2012.
The information relating
to us contained in this prospectus should be read together with the information in the documents incorporated by reference. Documents
incorporated by reference are available from us without charge, excluding any exhibits to those documents, unless the exhibit is
specifically incorporated by reference as an exhibit in this document. You can obtain documents incorporated by reference in this
document, at no cost, from our website at www.spectrumgi.com or by requesting them in writing or by telephone from us at the following
address or telephone number:
Spectrum Group International,
Inc.
1063 McGaw
Irvine, CA 92614,
Attn: Paul Soth, Chief
Financial Officer
Telephone: (949) 748-4800
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We file reports, proxy
statements and other information with the SEC. Information filed with the SEC can be inspected and copied at the public reference
facilities maintained by the SEC at Headquarters Office, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain
copies of this information by mail from the Public Reference Section of the SEC, Headquarters Office, 100 F Street, N.E., Room
1580, Washington, D.C. 20549, at prescribed rates. Further information on the operation of the SEC's public reference room
in Washington, D.C. can be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains reports,
proxy statements and other information about issuers, such as us, who file electronically with the SEC. The address of that website
is www.sec.gov.
We filed a registration
statement on Form S-1 to register with the SEC the securities offered by this prospectus. This prospectus is a part of that registration
statement. As allowed by the rules of the SEC, this prospectus does not contain all of the information you can find in our registration
statement or the exhibits to the registration statement.
Our website is located
at www.spectrumgi.com. The information on our website, however, is not, and should not be deemed to be, a part of this prospectus.
Disclosure
of Commission Position
on Indemnification for Securities Act Liabilities
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable. In addition, indemnification may be
limited by state securities laws.
-
34
-
Up to 19,717,023 Shares of Common Stock
Issuable Upon Exercise of the Subscription
Rights
PROSPECTUS
[●], 2012
Until [●] 2012, 25 days after the
date of this prospectus, all dealers that buy, sell or trade our common shares, whether or not participating in this offering,
may be required to deliver a prospectus. This requirement is in addition to the dealers' obligation to deliver a prospectus
when acting as underwriters and with respect to unsold allotments or subscriptions.
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance
and Distribution.
The following table
sets forth the costs and expenses payable by the registrant in connection with the sale of the common stock being registered. All
of the amounts shown are estimates except the SEC registration fee.
SEC Registration Fee
$
4,293
Subscription Agent Fees and Expenses
40,000
Legal Fees and Expenses
195,000
Costs of Printing
30,000
Accounting Fees and Expenses
50,000
Miscellaneous Expenses
20,000
Total
$
340,000
Item 14. Indemnification of Directors
and Officers.
Our certificate of
incorporation provides that a director shall not be liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director.
In addition, our bylaws
provide that we shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to any
action, suit or proceeding, whether criminal, civil, administrative or investigative (a "legal action"), whether such
legal action be by or in the right of the corporation or otherwise, by reason of the fact that such person is or was a director
or officer of us, or serves or served at our request as a director or officer, of another corporation, partnership, joint venture,
trust or any other enterprise. Notwithstanding this, no indemnification will be permitted if a judgment or other final adjudication
adverse to that person establishes that either (a) his or her acts were committed in bad faith, or were the result of active and
deliberate dishonesty, and were material to the cause of action so adjudicated, or (b) that he or she personally gained in fact
a financial profit or other advantage to which he or she was not legally entitled. The indemnification obligation of us in our
bylaws is permitted under Section 145 of the General Corporation Law of the State of Delaware.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and is therefore unenforceable. In addition, indemnification may be
limited by state securities laws.
Item 15. Recent Sales of Unregistered
Securities.
As part of the settlement
of a securities class action lawsuit commenced in the United States District Court for the Southern District of New York,
In
re Escala Group, Inc. Securities Litigation
, we were required to contribute an aggregate of $6.0 million in cash and 4,000,000
newly issued shares of our common stock to a settlement fund for the benefit of the class members. On January 14, 2009, we issued
772,430 shares of our common stock as part of the settlement. On October 1, 2009, we issued the remaining 3,277,770 shares of common
stock to the settlement fund. All of these shares were issued pursuant to the Section 3(a)(10) exemption from the Securities Act.
Item 16. Exhibits.
The following exhibits
are filed herewith or incorporated by reference herein:
Exhibit
Number
Description
4.1
Form of Subscription Rights Certificate
5.1
Opinion of Kramer Levin Naftalis & Frankel LLP*
II -
1
Exhibit
Number
Description
23.1
Consent of BDO USA, LLP, Independent Registered Public Accounting Firm
23.2
Consent of Fabregas/Mercade, Independent Registered Public Accounting Firm
23.3
Consent of Kramer Levin Naftalis & Frankel LLP (contained in Exhibit 5.1)*
24.1
Powers of Attorney (contained on signature page)
99.1
Form of Instruction for Use of Registrant's Subscription Rights Certificates
99.2
Form of Letter to Stockholders
99.3
Form of Letter to Brokers, Dealers, Trust Companies and Other Nominees
99.4
Form of Letter to Clients
99.5
Form of Nominee Holder Certification
99.6
Form of Beneficial Owner Election
*
To be filed by amendment.
Item 17. Undertakings
(a) 	The undersigned
registrant hereby undertakes:
(1)
To file, during any period in which offers or sales are being made, a post-effective amendment
to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933 (the "Act");
(ii)
To reflect in the prospectus any facts or events arising after the effective date of this registration
statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental
change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and
(iii)
To include any material information with respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such information in this registration statement.
(2)
That, for the purpose of determining any liability under the Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
II -
2
(4)
That, for the purpose of determining liability under the Act to any purchaser, each prospectus
filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying
on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement
or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference
into the registration statement or prospectus that is a part of the registration statement will, as to a purchaser with a time
of contract of sale prior to such first use, superseded or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
(5)
That, for the purpose of determining liability of the registrant under the Act to any purchaser
in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of
the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities
to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of an undersigned registrant relating to this offering
required to be filed pursuant to Rule 424;
(ii)
Any free writing prospectus relating to this offering prepared by, or on behalf of, the undersigned
registrant or used or referred to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to this offering containing material
information about an undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in this offering made by the undersigned registrant to
the purchaser.
(c)
The undersigned registrant hereby undertakes to supplement the prospectus, after the expiration
of the subscription period, to set forth the results of the subscription offer and the amount of unsubscribed securities to be
offered to the public. If any public offering of the securities is to be made on terms differing from those set forth on the cover
page of the prospectus, a post-effective amendment will be filed to set forth the terms of such offering.
Insofar as indemnification
for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II -
3
SIGNATURES
Pursuant to the requirements
of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Irvine, State of California, on March 19, 2012.
SPECTRUM GROUP INTERNATIONAL, INC.
By:
/s/ Gregory N. Roberts
Name: Gregory N. Roberts
Title: President, Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE
PRESENTS, that each person whose signature appears below constitutes and appoints Gregory N. Roberts and Carol Meltzer, his true
and lawful attorneys-in-fact and agents with full power of substitution and re-substitution, for him/her and in his name, place
and stead, in any and all capacities to sign any or all amendments (including, without limitation, post-effective amendments) to
this Registration Statement, any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act of 1933
and any or all pre- or post-effective amendments thereto, and to file the same, with all exhibits thereto, and all other documents
in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully
for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming that said attorneys-in-fact
and agents, or any substitute or substitutes for him, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the
dates stated.
Signatures
Title
Date
/s/  Gregory N. Roberts
President, Chief Executive Officer and Director
March 19, 2012
Gregory N. Roberts
/s/ Paul Soth
Chief Financial Officer
March 19, 2012
Paul Soth
Director
March 19, 2012
Antonio Arenas
Director
March 19, 2012
Jeffrey D. Benjamin
Director
March 19, 2012
George Lumby
/s/ John Moorhead
Director
March 19, 2012
John Moorhead
/s/ Christopher W. Nolan, Sr.
Director
March 19, 2012
Christopher W. Nolan, Sr.
/s/ Jess M. Ravich
Director
March 19, 2012
Jess M. Ravich