<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
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 of (I.R.S. Employer Identification No.)
incorporation or organization)
201 Third St., NW, Suite 1750, Albuquerque, NM 87102
-----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (505) 766-9955
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 November 13, 1998: 21,905,488
<PAGE>
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION:
ITEM 1. Condensed Financial Statements:
Balance Sheets - September 30, 1998 and
December 31, 1997 3
Statements of Operations - Three and nine months ended
September 30, 1998 and 1997 4
Statements of Cash Flows -
Nine months ended September 30, 1998 and 1997 5
Notes to Condensed Financial Statements 6-10
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11-13
PART II. OTHER INFORMATION:
ITEM 1-5. Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K 14
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED BALANCE SHEETS
(Unaudited)
(In Thousands)
ASSETS
------
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,322 $ 12,581
Accounts receivable 40 29
Prepaid expenses 152 166
-------- --------
TOTAL CURRENT ASSETS 7,514 12,776
INVESTMENTS IN AND ADVANCES TO SRL 32,764 34,649
INVESTMENTS IN AND ADVANCES TO NORD PACIFIC 5,806 5,404
INVESTMENTS IN NORD MANATEE -- 965
PROPERTY, PLANT AND EQUIPMENT, net 207 150
OTHER ASSETS 6,046 6,150
-------- --------
$52,337 $60,094
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 142 $ 93
Accrued expenses 141 869
Unearned revenue -- 1,500
-------- --------
TOTAL CURRENT LIABILITIES 283 2,462
RETIREMENT BENEFITS 7,058 8,047
STOCKHOLDERS' EQUITY:
Common stock 219 219
Additional paid-in capital 78,108 78,100
Cumulative foreign currency
translation adjustment 281 281
Accumulated other comprehensive loss-
minimum pension liability (724) (724)
Accumulated deficit (32,888) (28,291)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 44,996 49,585
-------- --------
$52,337 $60,094
-------- --------
-------- --------
</TABLE>
See notes to condensed financial statements
3
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
1998 1997 1998 1997
------- ------- ------- -------
<S> <C> <C> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES $ (881) $ (1,020) $(2,418) $(3,559)
OTHER INCOME (EXPENSE):
Interest income 269 338 683 947
Interest expense (15) (31) (68) (94)
Equity in net loss of affiliates (333) (1,782) (2,794) (6,144)
------- ------- ------- -------
TOTAL OTHER INCOME (EXPENSE) (79) (1,475) (2,179) (5,291)
------- ------- ------- -------
LOSS FROM CONTINUING OPERATIONS (960) (2,495) (4,597) (8,850)
GAIN FROM DISCONTINUED OPERATIONS -- -- -- 225
------- ------- ------- -------
NET LOSS $ (960) $(2,495) $(4,597) $(8,625)
------- ------- ------- -------
------- ------- ------- -------
LOSS PER SHARE:
From continuing operations $ (.04) $ (.11) $ (.21) $ (.40)
From discontinued operations -- -- -- .01
------- ------- ------- -------
Net loss $ (.04) $ (.11) $ (.21) $ (.39)
------- ------- ------- -------
------- ------- ------- -------
WEIGHTED AVERAGE SHARES OUTSTANDING 21,905 21,901 21,905 21,866
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See notes to condensed financial statements
4
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF
CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1998 1997
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,597) $ (8,625)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Payment of retirement benefits (989) --
Changes in assets and liabilities (675) 1,042
Stock compensation 8 --
Gain from discontinued operations -- (225)
Depreciation and amortization 24 22
Equity in net loss of affiliates 2,794 6,144
Forgiveness of related party receivables 100 --
Net cash used in discontinued operations -- (930)
--------- --------
Net cash (used in) operating activities (3,335) (2,572)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (80) (40)
Decrease (increase) in other assets 4 (1,154)
Proceeds from sale of investments -- 2,619
Proceeds from sale of discontinued operations -- 10,921
Proceeds from insurance settlement 14,205 --
(Increase) in investment in SRL (16,846) (8,117)
(Increase) in investments in and advances to Nord Pacific (212) (594)
Decrease in investment in Nord Manatee 1,005 --
--------- --------
Net cash provided (used) by investing activities (1,924) 3,635
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised -- 151
--------- --------
Net cash provided by (used in) financing activities -- 151
--------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (5,259) 1,214
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 12,581 15,583
--------- --------
CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 7,322 $ 16,797
--------- --------
--------- --------
Non-Cash Transaction-Conversion of
Advances to affiliate into common stock $ -- $ 1,748
--------- --------
--------- --------
</TABLE>
See notes to condensed financial statements
5
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
1. FINANCIAL STATEMENTS
These interim financial statements are unaudited. In the opinion of
management, all adjustments, which consist of normal recurring accruals
necessary to present fairly the financial position and results of
operations for the interim periods presented, have been made. The
results shown for the three and nine months ended September 30, 1998 are
not necessarily indicative of the results that may be expected for the
entire year.
In June 1998, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS
No. 133 establishes standards for derivative instruments, including
certain derivative instruments imbedded in other contracts, and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This
statement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company has not yet determined the effect of
SFAS No. 133 on its financial statements but does not expect it to be
significant.
The Accounting Standards Executive Committee ("AcSEC") of the AICPA has
issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of
Start-Up Activities" effective for financial statements for fiscal years
beginning after December 31, 1998. SOP 98-5 requires that the costs of
start-up activities, including organization costs, be expensed as
incurred. The Company has not yet determined the effect of SOP 98-5 on
its financial statements but does not expect it to be significant.
The Company has adopted SFAS No. 129 "Disclosure of Information about
Capital Structure", which was effective for financial statements for
periods ending after December 15, 1997 and established standards for
disclosing information about an entity's capital structure. The
adoption of SFAS No. 129 had no significant effect on the Company's
disclosures about its capital structure.
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income",
which was effective for financial statements for periods beginning after
December 15, 1997 and established standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and
losses) in a full set of general-purpose financial statements.
The Company has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which was effective for fiscal
years beginning after December 15, 1997 and established standards for
the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and
services, geographic areas and major customers. The Company operates in
one business segment and the Company's adoption of FASB No. 131 has not
had a material impact on its financial statement presentation or related
disclosures.
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, 1997 annual report to shareholders.
6
<PAGE>
2. BASIS OF PRESENTATION
These condensed financial statements include the accounts of Nord
Resources Corporation, its 50% equity interest in a rutile mining
operation Sierra Rutile Limited ("SRL") and its 28.5% equity interest in
+ a mineral exploration and production company Nord Pacific Limited ("Nord
Pacific") (collectively the "Company"). All significant intercompany
transactions and balances are eliminated.
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% interest in SRL is now
carried on the equity method.
Investments in 20% to 50% owned affiliates and joint ventures are accounted
for using the equity method.
Certain reclassifications have been made to the September 30, 1997 and
December 31, 1997 financial statements to conform to the classifications
used in 1998.
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. In February, 1998 the democratically elected
government of Sierra Leone was restored to power and conditions for
resumption of operations at the minesite continue to improve. However,
the resumption of operations is dependent upon numerous conditions
including (1) a continued acceptable political environment in Sierra
Leone within which to operate, (2) adequate levels of security in and
around the minesite area, (3) an accurate assessment by SRL of the cost
of resuming operations, (4) the successful renegotiation of operating
agreements between SRL and the government of Sierra Leone and (5) SRL
obtaining adequate financing at acceptable terms. Costs of resuming
operations include repair or replacement of assets which have incurred
damage and deterioration during the period of suspension of operations
and costs to re-establish and train a workforce, replenish supplies and
restore and recommission facilities. The Company is not 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 be required 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 and through September 30, 1997, the Company used the
cost method of accounting for its investment in SRL on the basis that
the mine was no longer under the control of SRL. Under the cost method,
the Company's investment included original cost plus undistributed
earnings through December 31, 1994 plus SRL's obligations to various
lending institutions (the "Lenders") payment of which was guaranteed by
the Company, plus funds advanced since January 1, 1995 to fund SRL's
operations, less any related restricted cash and provisions for
impairment of assets.
Subsequent to September 30, 1997, SRL regained control of the mine.
The Company then changed its method of accounting for its investment in
SRL from the cost method to the equity method. In accordance with
Accounting Principles Board ("APB") Opinion No. 18, "The Equity Method
of Accounting for Investments In Common Stock", the Company's financial
statements for September 30,
7
<PAGE>
1997 have been restated to reflect this change. Under the equity
method, the Company reports its share of SRL's net loss in the
statements of operations as equity in net loss of SRL. The result of
this change was to increase the Company's net loss for the three and
nine months ended September 30, 1997 by $1,948,000 and $6,243,000
respectively and net loss per share by $.09 and $.29 per share
respectively.
The Company intends to resume proportional consolidation for its 50%
share in each of the assets, liabilities and operations of SRL once SRL
re-establishes its mining operations.
During the nine months ended September 30, 1998 the Company contributed
$16,846,000 to SRL as its 50% share of funding for SRL's cash needs,
primarily to satisfy debt obligations, vendor payments and the ongoing
operating cash requirements of SRL.
Summarized financial data for the Company's 50% share of SRL's
operations are as follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1998 1997
------ ------
(in thousands)
<S> <C> <C>
Revenues $ -- $ 1,392
Less costs and expenses:
Cost of sales -- 571
Selling, general and administrative 2,017 4,557
Other expense 1,008 2,468
Income tax expense -- 39
------- -------
Net (loss) $(3,025) $(6,243)
------- -------
------- -------
</TABLE>
An impairment reserve of $3,000,000 was recorded in the first quarter of
1995 as the Company's 50% share of the estimated damage to SRL's assets.
In 1996, the Company received a $1,500,000 preliminary payment from the
carrier of the civil strife insurance policy owned by the Company. On
May 15, 1998, the Company received the $14,204,500 balance of the
proceeds from this policy. Proceeds totaling $5,627,500 were advanced to
SRL, $5,513,000 was deposited into a collateral account as security for
SRL's September 30, 1998 debt payment, and $3,064,000 was retained for
general corporate purposes.
Costs to restart the mine have been estimated at $90,000,000. If SRL
cannot finance these restart costs or cannot maintain adequate security
in or around the minesite, the Company may be required to record an
impairment reserve against a significant portion or possibly all of its
remaining investment in SRL.
4. INDEBTEDNESS
Under the terms of SRL's financial agreements, the Company has
guaranteed 50% of SRL's debts to SRL's lenders ("the Lenders") . On May
15, 1998, in conjunction with the receipt of the balance of the proceeds
from the civil strife insurance policy owned by the Company, the Company
advanced SRL $5,627,500 which was used to reduce the Company's share of
SRL's existing indebtedness. Concurrent with this payment, SRL's debt
agreements were amended. The amendment provided for a reduction in the
interest rate on SRL's debt, the deferral of interest payments and the
rescheduling of principal and
8
<PAGE>
interest payments. The Company's share of the remaining debt of SRL
totaled $6,054,000 at September 30, 1998 and is scheduled to be paid 25%
on September 30, 1999, 25% on September 30, 2000 and 50% on September
30, 2001. The Company believes that it is in full compliance with the
terms of these 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
accrued liabilities assumed by the purchaser. The purchaser also
assumed certain lease obligations of NKC. Proceeds received from this
transaction to September 30, 1997 totaled $10,921,000 (including
collection of accounts receivable and less payment of NKC's liabilities
and other liabilities incurred as a result of the transaction).
6. BASIC LOSS PER COMMON SHARE
Basic loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding during the period.
9
<PAGE>
7. EQUITY IN NET (LOSS) OF NORD PACIFIC
The Company had a 28.5% interest in Nord Pacific Limited ("Nord Pacific")
at September 30, 1998 and a 30.0% interest in Nord Pacific at
September 30, 1997. Summary financial data for the operations of Nord
Pacific are as follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30
------------------------------
1998 1997
-------- --------
(in thousands)
<S> <C> <C>
Sales $ 10,447 $ 12,526
Less costs and expenses (9,925) (9,781)
Foreign currency transaction gain (loss) (261) 212
Loss on forward currency exchange contracts (1,180) (1,053)
Gain on copper contracts -- 281
Other income (loss) 19 (241)
Income tax benefit (expense) 1,200 (1,900)
-------- --------
Net income $ 300 $ 44
-------- --------
-------- --------
</TABLE>
The Company's share of the net income for the nine months ended
September 30, 1998 was $85,000. Due to a change in the Company's
ownership percentage on July 3, 1997 from 35% to 30%, the Company
experienced a net loss in the equity of Nord Pacific for the nine months
ended September 30, 1997 of $6,000. Amortization of the difference
between the Company's investment in Nord Pacific and its share of the
underlying net assets of Nord Pacific was $105,000 for the nine months
ended September 30, 1998 and 1997.
10
<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 1998 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
Unrestricted cash and cash equivalents decreased $5,259,000 for the nine
months ended September 30, 1998 compared to an increase of $1,214,000 for
the same period in 1997. Cash used by operations was $3,335,000 for the nine
months ended September 30, 1998 compared to $2,572,000 for the same period in
1997. The Company received $14,205,000 during the nine months ended
September 30, 1998 as settlement from its civil strife insurance policy.
$16,846,000 was advanced to Sierra Rutile Limited ("SRL") during the nine
months ended September 30, 1998 compared to $8,117,000 for the same period
in 1997. During the nine months ended September 30, 1998, $212,000 was
advanced to Nord Pacific Limited ("Nord Pacific") and the Company received
$1,005,000 for its interest in Nord Manatee Ltd. Funds totaling $80,000 was
used for capital expenditures during the nine months ended September 30, 1998
compared to $40,000 for the same period in 1997.
11
<PAGE>
On April 23, 1997, the Company completed the sale of substantially all of its
kaolin assets. Proceeds from the sale totaled $10,921,000 at September 30,
1997. Further, the sale allowed the liquidation of previously restricted
investments which provided cash of $2,619,000 during the nine months ended
September 30, 1997. With the sale of the kaolin operations, the Company's
business consists of a 50% ownership interest in SRL and a 28.5% ownership
interest in Nord Pacific. The Company anticipates that its cash balances at
September 30, 1998 will be sufficient to fund its administrative activities
for the foreseeable future, subject to the financial requirements of SRL as set
forth below.
Due to the suspension of its operations, SRL has relied on 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 debt
service, maintenance of a limited workforce, payments to vendors and costs of
security at the mine. It is the Company's and SRL's intention to continue
with plans for resumption of SRL's operations. However, the resumption of
operations is dependent upon numerous conditions including (1) a continued
acceptable political environment in Sierra Leone within which to operate, (2)
adequate levels of security in and around the minesite area, (3) an accurate
assessment by SRL of the cost of resuming operations, (4) the successful
renegotiation of operating agreements between SRL and the government of
Sierra Leone and (5) SRL obtaining adequate financing at acceptable terms.
SRL's preliminary projections indicate that it may require approximately
$90,000,000 in 1999 and 2000 for asset rehabilitation, completion of a new
powerhouse and dredge, mine development and working capital. SRL has held
discussions with its current lenders (the "Lenders") and other lending
sources to determine if funds would be available from these sources to fund
the above requirements. The Company cannot determine if additional funding
will be available at terms that will be acceptable to SRL and the Company.
To the extent funds are not available from these or other sources, the
Company will be required to contribute its 50% share of SRL's cash
requirements. The Company will not be able to fund a significant portion of
these requirements without obtaining capital from other sources. In July
1998, the Company engaged a major investment bank to assist in obtaining
funds for the SRL project.
Under the terms of SRL's financial agreements, the Company has guaranteed 50%
of SRL's debts to the Lenders. On May 15, 1998, in conjunction with the
receipt of the $14,204,500 balance of the proceeds from the civil strife
insurance policy owned by the Company, the Company advanced SRL $5,627,500
which was used to reduce the Company's share of SRL's existing indebtedness,
deposited $5,513,000 into a collateral account as security for the Company's
share of SRL's September 30, 1998 debt payment and $3,064,000 was retained by
the Company for general corporate use. Concurrent with this transaction,
SRL's debt agreements were amended. The amendment provided for a reduction
in the interest rate on SRL's debt, the deferral of interest and the
rescheduling of principal and interest payments. The Company's share of the
remaining debt of SRL totaled $6,054,000 at September 30, 1998 and is
scheduled to be paid 25% on September 30, 1999, 25% on September 30, 2000 and
50% on September 30, 2001. The Company believes that it is in full
compliance with the amended agreements.
RESULTS OF OPERATIONS
The Company incurred a net loss from continuing operations of $960,000 and
$4,597,000 for the three and nine months ended September 30, 1998
respectively and $2,495,000 and $8,850,000 for the corresponding periods in
1997. General and administrative ("G & A") expenses decreased by $139,000
and $1,141,000 for the three and nine months ended September 30, 1998 due
primarily to decreases in auditing and accounting expenses, office rent,
payroll and related expenses, public relations and travel. Reductions in
office rent and payroll and related expenses are directly related to the
closing of the Company's Dayton office and the reduction in administrative
staff. The reduction in G & A would have been greater but for non-recurring
moving costs and the cost of compiling and submitting the civil strife insurance
claim described above.
12
<PAGE>
Interest income decreased for the three and nine months ended September 30,
1998 compared to 1997 due to a reduction in cash available for investment.
Equity in net loss of affiliates relates to the Company's equity in the
income or loss of SRL, Nord Pacific and Nord Manatee Limited. Due primarily
to reduced interest expense from debt reduction and to decreased levels of
activity at SRL, the equity in net loss of SRL was $800,000 and $3,025,000
for the three and nine months ended September 30, 1998 respectively, compared
to $1,949,000 and $6,243,000 for the comparable periods in 1997. Equity in
the net income of Nord Pacific was $426,000 and $190,000 during the three and
nine months ended September 30, 1998 respectively, compared to $167,000 and
$99,000 for the same periods in 1997. The Company recorded a gain in the
equity of Nord Manatee Limited of $41,000 for the three and nine months ended
September 30, 1998.
YEAR 2000 UPDATE
In January 1998, the Company initiated the Year 2000 project to address the
issue of computer programs and embedded computer chips being unable to
distinguish between the year 1900 and the year 2000. The project involves
converting to Year 2000 compliant accounting software, testing existing
software, hardware and operational systems and communicating with third-party
customers and external services to ensure that they are taking appropriate
action to remedy their Year 2000 issues.
The Company is in the process of purchasing Year 2000 compliant accounting
software. The Company believes the purchase and installation of this software
will be completed by September 30, 1999. The Company's local area network
and PC hardware and non-accounting software, such as spreadsheets and word
processing, have been tested and, to the best of the Company's knowledge, are
Year 2000 compliant. Other non-information technology systems, such as the
telephone system and other office equipment, are currently being assessed for
Year 2000 readiness. Management expects to have substantially all of the
system and application changes except for the accounting software, completed
by January 1999 and expects to complete testing of substantially all systems
and applications by June 30, 1999.
The Company believes that the computer systems and applications it maintains
would not have a material impact on the operations of the Company or it's
revenues in the event that the systems fail to operate in the Year 2000. A
contingency plan to replace any non-compliant systems has been developed. If
the conversion to Year 2000 compliant accounting software is not complete by
December 31, 1999, the Company may be able to use compliant spreadsheet
software until the accounting software is operational. A decision regarding
the contingency plan will be made by June 30, 1999.
The Company is maintaining communications with material third parties and
has received notification from its building manager, its bank and other
external services indicating their expectation to be Year 2000 compliant.
Further, the Company is preparing surveys for distribution to its customers,
major vendors and other material external service providers to ascertain
their state of Year 2000 readiness. It is anticipated that these surveys
will be completed and distributed on or about December 15, 1998. Due to the
general uncertainty inherent in the Year 2000 problem, resulting in part from
the uncertainty of the Year 2000 readiness of third-party suppliers and
customers, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the
Company's results of operations or financial condition.
The estimated total cost of Year 2000 testing and compliance is expected to
be approximately $50,000, which includes costs related to the purchase and
conversion to Year 2000 compliant accounting software. No costs directly
related to the Year 2000 issue have been incurred to date. The costs of the
project and the expected completion dates are based on management's best
estimates.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1-5
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
(b) There were no reports filed under Form 8-K filed during the quarter
ended September 30, 1998.
14
<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)
By: /s/ Ray W. Jenner
---------------------------------
Ray W. Jenner
Vice President - Finance
(Principal Financial Officer
and Authorized Officer)
Date: November 13, 1998
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORD
RESOURCES CORPORATION FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
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