<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
-------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-6202-2
--------
Nord Resources Corporation
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 85-0212139
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
8150 Washington Village Drive, Dayton Ohio 45458
- ------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (937) 433-6307
--------------
Not Applicable
--------------
Former name, former address and former fiscal
year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding twelve months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
YES X NO
---- ----
Common shares outstanding as of August 7, 1997: 21,876,288
<PAGE>
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION:
ITEM 1. Condensed Financial Statements:
Balance Sheets - June 30, 1997 and
December 31, 1996 1
Statements of Operations - Quarter and Two
Quarters ended June 30, 1997 and 1996 2
Statements of Cash Flows -
Quarter and Two Quarters ended
June 30, 1997 and 1996 3
Notes to Condensed Financial Statements 4-9
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10-12
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings 13
ITEM 2-5. Inapplicable 13
ITEM 6. Exhibits and Reports on Form 8-K 13
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(In Thousands)
ASSETS
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(Unaudited)
CURRENT ASSETS:
Cash and Cash Equivalents $ 17,618 $ 15,583
Restricted Cash 496
Restricted Investments - available for sale 2,376
Accounts Receivable 1,517 179
Prepaid Expenses 465 163
Net Assets of Discontinued Operations 9,766
-------- --------
TOTAL CURRENT ASSETS 20,096 28,067
INVESTMENTS IN AND ADVANCES TO AFFILIATES 11,166 9,840
INVESTMENT IN SRL 73,025 67,552
PROPERTY, PLANT AND EQUIPMENT, net 58 27
OTHER ASSETS 5,931 4,817
-------- --------
$110,276 $110,303
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 721 $ 77
Accrued Expenses 1,112 539
Unearned Revenue 1,500 1,500
Obligations to Lenders - SRL 21,265 21,620
-------- --------
TOTAL CURRENT LIABILITIES 24,598 23,736
RETIREMENT BENEFITS 7,518 6,987
STOCKHOLDERS' EQUITY:
Common Stock 219 218
Additional Paid-in Capital 78,035 77,950
Retained Earnings (Deficit) (231) 1,274
Cumulative Foreign Currency
Translation Adjustment 281 281
Minimum Pension Liability (143) (143)
-------- --------
78,161 79,580
-------- --------
$110,276 $110,303
-------- --------
-------- --------
See notes to condensed financial statements
1
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
QUARTER ENDED TWO QUARTERS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES $(1,584) $(1,162) $(2,538) $(2,100)
OTHER INCOME (EXPENSE):
Interest Income 530 234 939 378
Interest Expense (31) (36) (63) (71)
Litigation Recoveries 150
Equity in Net Earnings (Loss) of Affiliate (88) 85 (68) 88
------- ------- ------- -------
TOTAL OTHER INCOME (EXPENSE) 411 283 808 545
------- ------- ------- -------
(LOSS) FROM CONTINUING OPERATIONS (1,173) (879) (1,730) (1,555)
GAIN (LOSS) FROM DISCONTINUED OPERATIONS 225 (1,467) 225 (2,909)
------- ------- ------- -------
NET (LOSS) $ (948) $(2,346) $(1,505) $(4,464)
------- ------- ------- -------
------- ------- ------- -------
GAIN (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
From Continuing Operations $ (.05) $ (.05) $ (.08) $ (.09)
From Discontinued Operations .01 (.08) .01 (.17)
------- ------- ------- -------
Net (Loss) $ (.04) $ (.13) $ (.07) $ (.26)
------- ------- ------- -------
------- ------- ------- -------
AVERAGE SHARES 21,854 18,718 21,847 17,278
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See notes to condensed financial statements
2
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF
CASH FLOWS
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
TWO QUARTERS ENDED
JUNE 30,
---------------------------
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $(1,505) $(4,464)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Changes in Assets and Liabilities 778 164
(Gain) Loss from Discontinued Operations (225) 2,909
Depreciation and Amortization 15 20
Equity in Net (Earnings) Loss of Affiliate 67 (88)
Net Cash (Used in) Discontinued Operations (690) (3,277)
------- -------
Net Cash (Used In) Operating Activities (1,560) (4,736)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Cash from Sale of Fixed Assets 134
Capital Expenditures (40)
Additions to Other Assets (155) (445)
Sale (Purchase) of Short Term Investments 2,376 (6,820)
Proceeds from Sale of Investment 243
Proceeds from Sale of Discontinued Operations 9,453
Increase in Investments in and Advances to Affiliates (2,539) (58)
Increase in Investment in SRL (5,828) (887)
------- -------
Net Cash Provided By (Used In) Investing Activities 3,510 (8,076)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock Option Activity 85
Restricted Cash and Investments (4)
Issuance of Common Stock 10,000
------- -------
Net Cash Provided by Financing Activities 85 9,996
------- -------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS 2,035 (2,816)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 15,583 6,026
------- -------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $17,618 $ 3,210
------- -------
------- -------
</TABLE>
See notes to condensed financial statements
3
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
QUARTERS ENDED JUNE 30, 1997 AND 1996
1. FINANCIAL STATEMENTS
The balance sheet at December 31, 1996 presents condensed financial
information taken from the financial statements, which are audited, but
the independent auditors report included a disclaimer of opinion for an
uncertainty relating to the ability of the Company to continue as a going
concern. The interim financial statements are unaudited. In the opinion
of management, all adjustments, which consist of normal recurring
adjustments necessary to present fairly the financial position and results
of operations for the interim periods presented have been made. The
results shown for the first two quarters of 1997 are not necessarily
indicative of the results that may be expected for the entire year.
In February 1997, the Financial Accounting Standard Board issued SFAS No.
128, "Earnings Per Share," which is effective for the Company at December
31, 1997. SFAS No. 128 establishes standards for computing and presenting
earnings per share. It replaces the presentation of primary earnings per
share with a presentation of basic earnings per share. It also requires
dual presentation of basic and diluted earnings per share for entities
with complex capital structures. As the Company incurred a loss in the
first two quarters of 1997 and 1996, the adoption of SFAS No. 128 will
have no effect on the Company's financial statements for the period ended
June 30, 1997 and 1996.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which will require disclosure in the financial statements of all
the changes in equity during a period from transactions and other events
and circumstances from non-owner sources. Items included in comprehensive
income will include separate classification of items based upon their
nature. The Statement requires that comparative information for prior
years to be restated. SFAS No. 130 is effective for financial statements
for fiscal years beginning after December 15, 1997. The effect on the
Corporation's financial statements has not yet been determined.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's December 31, 1996
annual report to shareholders.
2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Nord
Resources Corporation and its 50% interest in a rutile mining operation
("SRL") (collectively the "Company"). All significant intercompany
transactions and balances are eliminated.
4
<PAGE>
SRL as used in these financial statements includes Sierra Rutile Holdings,
Sierra Rutile Limited (the mining operation) and other subsidiaries of the
Company and Sierra Rutile Holdings that are economically dependent on the
mining operation. As a result of the situation described in Note 3, the
Company's 50% investment in SRL is carried at the cost basis of accounting
in the balance sheet.
Investments in 20% to 40%-owned affiliates and joint ventures are carried
using the equity method.
On an interim basis, all costs subject to recurring year-end adjustments
have been estimated and allocated ratably to the quarters. Income taxes,
if necessary, have been provided based on the estimated tax rate for the
respective years after excluding infrequently occurring items whose
specific tax effect is reported during the same interim period as the
related transaction.
The financial statements have been prepared on a going concern basis,
which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The financial statements do
not contain any adjustments that might be necessary should the Company be
unable to continue as a going concern.
Certain reclassifications have been made to the June 30, 1996 and December
31, 1996 financial statements to conform to the classifications used in
1997.
3. INVESTMENT IN SRL
In January 1995, the Company's 50% owned rutile mining operation in Sierra
Leone was attacked by non-government forces. As a result, SRL was forced
to suspend mining operations and subsequently terminated all nonessential
personnel. The resumption of operations by SRL is dependent upon many
conditions including (1) Sierra Leone having an acceptable political
environment within which to operate, (2) having adequate levels of
security in and around the minesite area, (3) completing an accurate
assessment of the cost of resuming operations, (4) successfully
renegotiating SRL's operating agreements with the government of Sierra
Leone and (5) obtaining adequate levels of financing at acceptable
terms. Cost of resuming operations includes repair or replacement of
assets which have incurred damage and deterioration during the period of
suspension of operations and costs to reestablish and train a workforce,
replenish supplies and restore and recommission facilities. Until SRL
personnel can complete a detailed
5
<PAGE>
assessment of the condition of SRL's assets, it is not possible to
accurately estimate these costs. There is no certainty that adequate
financing would be available to fund the above noted costs, although
management of the Company, SRL and the other 50% owner of SRL are
engaged in advanced discussions with potential financing sources. The
Company is not yet able to determine when operations will resume at the
Sierra Leone mine. If the above noted conditions for resuming
operations in Sierra Leone are not satisfied, the Company may have to
record an impairment reserve against a significant portion or possibly
all of its investment in SRL.
Prior to December 31, 1994, the Company proportionately consolidated its
share in each of the assets, liabilities and operations of SRL. As of
December 31, 1994, the Company adopted the cost basis of accounting for
its investment in SRL because the mine was no longer controlled by SRL.
The Company's investment includes original cost plus undistributed
earnings through December 31, 1994 plus SRL obligations to lenders,
payment of which is guaranteed by the Company, less any related restricted
cash.
The Company intends to resume proportional consolidation for its 50% share
in each of the assets, liabilities and operations of SRL once SRL
reestablishes its operations. At that time, the Company will recognize
its share of SRL's operating results since January 1, 1995 in its
statement of operations. If the Company had resumed proportional
consolidation at June 30, 1997, it would have recognized $16,022,000 as
its share of SRL's operating loss since January 1, 1995.
During the two quarters ended June 30, 1997 the Company contributed
$5,828,000 as its 50% share of funding for SRL's cash needs, primarily to
satisfy vendor payments, to fund costs for the ongoing operational needs
of SRL and for certain costs related to the SRL mine rehabilitation
program.
Summarized financial data for the Company's 50% share of SRL's operations
are as follows:
Two Quarters Ended
June 30,
------------------------
1997 1996
------- -------
(in thousands)
Revenues $ 1,216 $ 1,052
Less Costs and Expenses:
Cost of Sales 539 255
Selling, General and Administrative 3,373 1,777
Other Expense 1,566 1,000
Income Tax Expense 32 24
------- -------
Net (Loss) $(4,294) $(2,004)
------- -------
------- -------
6
<PAGE>
Included in revenues for 1996 is $409,000 received in an insurance
settlement from claims made for costs related to the evacuation of the SRL
operations in Sierra Leone. The increase in selling, general and
administrative costs in 1997 compared to 1996 is primarily related to
security costs incurred in 1997 and increased activity related to
commencement of the mine rehabilitation program. An impairment reserve of
$3,000,000 was recorded in the first quarter of 1995 as the Company's 50%
share of damage to assets. The Company will likely record an additional
impairment reserve when a more extensive damage assessment can be
performed. Although SRL will incur costs to restart the operations, the
amount of an additional impairment and costs to restart the operations
cannot be estimated currently.
4. INDEBTEDNESS
The suspension of its mining operations has resulted in SRL not being in
compliance with certain financial and operational covenants under its bank
financing agreements. The lenders had agreed to forebear from
accelerating the maturities of the loans or enforcing their rights against
any collateral until July 1, 1997 to allow SRL time to determine the
damage to the mining operations, assess the political situation in Sierra
Leone and develop and present a plan for refinancing, rehabilitating and
reopening the mining operation. This forebearance period was extended
through September 30, 1997 by the lenders in exchange for a prepayment of
interest due during the extension period and payment of 50% of the next
principal payment due each lender. The Company's share of this payment
was $1,492,000. The forebearance agreement would terminate if there is a
material change in circumstances. As of June 30, 1997 and December 31,
1996, amounts due the lenders by SRL have been classified in the balance
sheet as a current liability.
The financing agreements contain restrictive covenants relating to SRL
including requirements to maintain minimum current and debt coverage
ratios and a limit on indebtedness compared to net worth and a limit on
the amount of dividends. Additional covenants under these agreements
include restrictions on change of control of SRL and limitations on
additional indebtedness at SRL.
7
<PAGE>
Separately, as a condition to the forebearance and as security for its
guarantee, the Company has pledged proceeds it may receive from claims
made under a political risk insurance policy issued by an agency of the
United States government. The Company will be able to retain the first
$2.7 million of the proceeds. Any additional proceeds will be held in
trust and funds will be released from the trust when the Company's 50%
share of the deferred principal payments have been made and no events of
default exist under the financing agreements.
5. DISCONTINUED OPERATIONS
On April 23, 1997 the Company sold substantially all the assets (except
cash and accounts receivable) of its 80% owned subsidiary, Nord Kaolin
Company ("NKC"), for $20 million less $735,000 relating to certain
accruals assumed by the purchaser. Under the sale agreement, the Company
is responsible for the payment of a majority of the liabilities of NKC.
At December 31, 1996 the Company recorded a loss on disposal of
$18,912,000 and a provision for operating losses to disposal date of
$2,500,000. Through June 30, 1997 the Company received $9.5 million
in cash as a result of this transaction (including collection of accounts
receivable and payment of a majority of NKC's liabilities and other
liabilities incurred as a result of the transaction). The Company
received an additional $1.1 million in July 1997 which the Company
estimates to be substantially all of the cash it will receive as a result
of this transaction.
Sales of $8.6 million and $16.8 million for the two quarters ended June
30, 1997, and 1996, respectively, and the respective cost of sales,
selling, general and administrative expenses and interest expense, have
been reclassified from continuing operations in the statement of
operations and are included in the loss from discontinued operations.
During the first two quarters of 1997, the Company charged $2,275,000
against the provision for operating losses to disposal date. At June 30,
1997 the Company has determined that the remaining provision is not
required, has eliminated the remaining accrual for loss on disposition and
has recorded a $225,000 gain in the second quarter of 1997.
6. NET (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net (loss) per common share and common equivalent share is computed by
dividing net (loss) by the weighted average number of common shares
8
<PAGE>
outstanding during the period adjusted for the dilutive effect of common
share equivalents when applicable.
7. EQUITY IN NET (LOSS) OF AFFILIATE
The Company has a 35% interest in Nord Pacific Limited at June 30, 1997.
Summary financial data for the operations of Nord Pacific Limited for the
periods are as follows:
Two Quarters Ended June 30
--------------------------
1997 1996
------- -------
(in thousands)
Sales $ 8,125 $ 7,079
Less costs and expenses (6,752) (6,135)
Foreign currency transaction gain (loss) 88 (22)
Forward currency exchange contracts
gain (loss) (579) 379
Copper contracts gain (loss) 382 (265)
Other income (expense) (257) (146)
Provision for taxes (1,400) (835)
------- -------
Net income (loss) $ (393) $ 55
------- -------
------- -------
The Company's share of the net (loss) for the two quarters ended June 30,
1997 and 1996 was $(138,216) and $19,379, respectively.
In connection with a public offering of stock by Nord Pacific Limited
("Pacific"), on July 31, 1997, the Company used $1,748,000 of the amount
owed it by Pacific to purchase 349,549 Units in a private placement at
$5.00 per unit, the same price received by Pacific in its public offering.
A Unit consists of one common share and one-half of one purchase warrant.
The warrant can be exercised at a price of $9.00 (Canadian) or currently
$6.50 (U.S.) per share at any time prior to July 3, 1998. As a result of
the above transaction the Company's ownership interest in Pacific
decreased to 30%.
8. LITIGATION
The Company has reached settlements with all defendants in SRL's action
against those allegedly responsible for certain allegedly improper and
fraudulent transactions against SRL which occurred prior to 1991. The
financial statements of the Company for the two quarters ended June 30,
1996 include a final payment of $150,000 in other income in connection
with these settlements.
9
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION ACT OF
1995. The statements contained in this report which are not historical fact
are "forward looking statements" that involve various important risks,
uncertainties and other factors which could cause the Company's actual
results for 1997 and beyond to differ materially from those expressed in such
forward looking statements. These factors include, without limitation, the
risks and factors set forth below as well as other risks previously disclosed
in the Company's securities filings.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased from $15.6 million at December 31, 1996 to $18.1 million at
June 30, 1997. The Company's administrative activities required $1.1 million
in cash during the first two quarters of 1997 while $690,000 was used to fund
the discontinued kaolin segment. Cash of $155,000 was used for additions to
other assets, $5.8 million was advanced to SRL and $2.3 million was advanced
to Nord Pacific during the first two quarters of 1997.
The Company made available two demand loans for up to $1 million each to Nord
Pacific Limited ("Pacific"), one for operating needs and one for funding an
escrow account required by a lender to Pacific. During the first two
quarters of 1997 the Company advanced $2.3 million to Pacific and at June 30,
1997 the Company was owed $3.3 million by Pacific. In connection with a
public offering of Units by Pacific, on July 3, 1997 the Company used
$1,748,000 of the amount owed it by Pacific to purchase 349,549 Units in
a private placement at $5.00 per Unit, the same price received by Pacific in
its public offering. A Unit consists of one common share and one-half
of one purchase warrant. As a result of the above transactions, the
Company's ownership interest in Pacific decreased to 30%. In July
Pacific repaid $800,000 owed to the Company from the proceeds of its
public offering with the balance scheduled for repayment in August, 1997.
On April 23, 1997, the Company completed the sale of substantially all of the
assets of Nord Kaolin Company ("NKC"). Including collection of NKC's
accounts receivable and settlement of NKC's liabilities and other liabilities
incurred as a result of this transaction, the Company received $9.5 million
during the second quarter of 1997. In July, 1997 the Company received the
final proceeds from this transaction of $1.1 million. In addition, the
restriction on use of $2.4 million of investments, previously used to secure
payment of certain of NKC's liabilities, has been removed.
10
<PAGE>
The Company's business consists of a 50% ownership in SRL and a 30%
ownership in Pacific. The Company anticipates that its cash balances will be
sufficient to fund its administrative activities for the foreseeable future.
The Company does not anticipate that it will be requested to provide any
additional funding to Pacific for the foreseeable future. However, the
Company expects to be required to fund SRL's cash needs as described below.
During the suspension of its operations, SRL has relied and will
continue to rely on funds from the Company and its other 50% owner to sustain
its operations. Funds are expected to continue to be required by SRL for
maintaining a limited workforce, payment of vendors, costs of security at the
mine and payment of interest on loans outstanding. The Company has
sufficient funds to continue funding SRL for these purposes for the
foreseeable future; however, it is the Company's and SRL's intention to
continue with plans for resumption of SRL's operations. Among other key
factors in that process is the availability of adequate levels of funding.
SRL's preliminary projections indicate that it may require approximately
$90 million through 1998 for asset rehabilitation, completion of a new
powerhouse and dredge, mine development and working capital. SRL has held
advanced discussions with its current lenders and other lending sources to
determine if funds would be available from these sources to fund the major
portion of the above requirements. The Company cannot determine if any
additional funding will be available, and if available whether the terms
thereof would be acceptable to the Company and the other shareholder of SRL.
To the extent funds are not available from these or other sources, the
Company would be required to contribute its 50% share of SRL's cash
requirements. However, the Company would likely not be able to fund a
significant amount to SRL without obtaining capital from other sources. One
source of cash could be from the payment of claims which have been and will
be made by the Company under an insurance policy covering damage to assets at
SRL due to political violence, as described below. SRL began various aspects
of its planned rehabilitation program in early 1997. However, in late May
1997, a military coup renewed civil disturbances in Sierra Leone caused SRL
to suspend its mine rehabilitation efforts and evacuate all expatriate
personnel from Sierra Leone. Neither SRL nor the Company is able to project
when political conditions in Sierra Leone will improve to allow resumption of
the mine rehabilitation efforts.
The suspension of its operations has resulted in SRL not being in
compliance with certain financial and operational covenants under its bank
financing agreements. At June 30, 1997, the Company's 50% share of SRL's
obligations to the lenders is $21.3 million, payment of which has been
guaranteed by the Company. The lenders have agreed to forebear through
September 30, 1997 (extended from January 1, and July 1, 1997) from
accelerating payment of the outstanding indebtedness, to enable SRL to assess
its future operating alternatives. The forebearance would terminate if a
material change in conditions occurs, as determined by the lenders, and
requires SRL to expend at least $500,000 each quarter to pay for its
liabilities and purchases. In
11
<PAGE>
addition to discussing the availability of additional financing from these
lenders, SRL has discussed revision of the terms of the present financing
agreements, including deferral of payments to beyond 1999. SRL and the
Company are not able to determine the willingness of the lenders to approve
any modification of the present loan terms beyond September 30, 1997, at
which date payment of the entire amount of the loans outstanding could be
demanded by the lenders. The Company presently does not have sufficient
funds to repay the entire amount of SRL's obligations to lenders for which it
has guaranteed payment. If the lenders were to request full payment at the
end of the forebearance period, the Company would likely have to seek funding
from other sources, including funds which may be available from the political
risk insurance policy described below.
The Company has filed a claim for damage due to political violence at
SRL under a political risk insurance policy which has a coverage limit of
$15.7 million. Additional documents and proof of loss are required to be
filed as more information becomes available as to damage at the mine and the
cost to repair equipment. The Company has received a $1.5 million
provisional payment from the insurer; however, it is not able to estimate the
total amount or timing of any future payments which may be received from
claims under this policy. The Company is obligated to return any or all of
this payment if the final amount of damage is less than that amount. The
Company has pledged any proceeds in excess of $2.7 million it may receive
under this policy as security under the bank financing agreements.
RESULTS OF OPERATIONS
The Company incurred a net loss from continuing operations of $1,730,000 and
$1,173,000 in the two quarters and quarter ended June 30, 1997 and $1,555,000
and $879,000 for the same periods in 1996. Since the Company has adopted the
cost basis of accounting for its investment in the rutile segment, the
results do not include any amounts relating to its operations. The increase
in selling general and administrative expense in 1997 compared to 1996 was
primarily due to forgiveness of $300,000 of loans to two executives as part
of an employment agreements and an additional $300,000 accrued for severance
of other employees. Overall costs were lower due to a reduction in
administrative staff and activities. Interest income increased in 1997
compared to 1996 due primarily to a higher level of funds available for
investment in 1997.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEMS 2-5.
Inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
(b) The Company filed a report on Form 8-K on May 8, 1997 reporting the sale
of substantially all the assets of its 80% owned subsidiary, Nord Kaolin
Company.
13
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORD RESOURCES CORPORATION
(Registrant)
/s/ Terence H. Lang
-------------------------------------
Terence H. Lang
Senior Vice President - Finance
(Principal Financial Officer and
Authorized Officer)
DATE: August 14, 1997
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORD
RESOURCES CORPORATION FORM 10-Q FOR THE TWO QUARTERS ENDED JUNE 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 17,618
<SECURITIES> 0
<RECEIVABLES> 1,517
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20,096
<PP&E> 596
<DEPRECIATION> 538
<TOTAL-ASSETS> 110,276
<CURRENT-LIABILITIES> 24,598
<BONDS> 0
0
0
<COMMON> 219
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<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 2,538
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<INCOME-PRETAX> (1,505)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,730)
<DISCONTINUED> 225
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,505)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>
