Item 8.01 Other Events
Spin-off
On
October 5, 2020 the Company announced that its board of directors has authorized senior management to pursue the
spin-off of its Nevada Mining Unit, creating two independent publicly-traded companies: Gold Resource Corp., an established junior
mining company producing precious and base metals at its underground mining operation in Oaxaca, Mexico, and Spinco, an up-start
gold producer and exploration company in Nevada, U.S.A. focused on gold extraction at its open pit heap-leach project and
developing future precious metal projects along the Walker Lane Mineral Belt. The spin-off is expected to be completed during
the fourth quarter of 2020, subject to the satisfaction of a number of conditions, including final approval of the
Company’s board of directors, the effectiveness of a registration statement to be filed with the SEC, and other
customary matters. There can be no assurance regarding the ultimate timing of the proposed spin-off or that it will be
completed.
Upon
completion of the spin-off, Mr. Reid, 47, is expected to assume the role of chief executive officer and president of
Spinco and cease serving in those capacities for the company. Mr. Reid is presently serving as a director of both
entities and will remain on the board of directors of Spinco following the closing of the transaction.
Bill Conrad,
64, Chairman of the Board , is presently serving as a director of both entities and will step down as Chairman of the company
and serve as a Chairman od Spinco and will continue to serve as a director for both companies following the spin-off.
Alex Morrison,
57, will continue as a director of the Company and assume the role of Chairman of the Board.
As stated above, the Company has commenced
a search for candidates to serve as chief executive officer of GRC as well as an additional independent director.
Risk Factors
The following risk factors are provided
to update the Risk Factors previously disclosed in the Prospectus dated June 3, 2020 and the Form 10-K for the year ended
December 31, 2019 filed with the SEC.
There could
be significant liability if the distribution is determined to be a taxable transaction. There is no guarantee that the
requirements for tax-free treatment under Section 355 of the Code will be satisfied with respect to the spin-off
transaction. We have evaluated the requisite criteria, however, determination of taxability relies on certain facts, assumptions,
representations and undertakings from the Company and Spinco regarding the past and future conduct of the companies’ respective
businesses and other matters and the IRS may disagree with ours and our advisors’ assessments. If any of these facts,
assumptions, representations or undertakings is determined to be incorrect or not satisfied, the Company and its shareholders could
be subject to significant tax liabilities following the distribution.
There currently exists no public trading
market for the common stock of Spinco and you will not be able to sell your shares of common stock if an active trading market
does not develop. Although we expect that a public trading market will develop after the spin-off has been completed, there
can be no assurance that a public trading market will develop at that time or be sustained in the future. Without an active public
trading market, you may not be able to sell your shares without considerable delay, if at all. If a market does develop, the price
for Spinco’s common stock may be highly volatile and may bear no relationship to its actual financial condition or results
of operations. Unless Spinco’s common stock is listed on a national securities exchange or the NASDAQ, many brokerage firms
may not be willing to sell its common stock on your behalf.
Safe Harbor for Forward-Looking
Statements
Any statements contained in this
communication that do not describe historical facts may constitute forward-looking statements as that term is defined in the
Private Securities Litigation Reform Act of 1995. Such forward looking statements may include statements with respect to
the Company’s potential separation of Spinco from the Company and the distribution of Spinco shares to the
Company’s shareholders, the expected financial and operational results of the Company and Spinco after the separation
and distribution, and changes to the Company’s management. Any forward-looking statements contained herein are
based on Company management’s current beliefs and expectations, but are subject to a number of risks, uncertainties and
changes in circumstances, which may cause actual results or company actions to differ materially from what is expressed or
implied by these statements. Such risks, uncertainties and changes in circumstances include, but are not limited
to: uncertainties as to the timing of the spin-off or whether it will be completed, the failure to satisfy any
conditions to complete the spin-off, the expected tax treatment of the spin-off, and the impact of the spin-off on the
businesses of the Company. Economic, competitive, governmental, technological and other factors and risks that may
affect the Company’s operations or financial results are discussed in the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2019, and in subsequent filings with the U.S. Securities and
Exchange Commission. The Company disclaims any obligation to update these forward-looking statements other than as required
by law.