<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
JUNE 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-19182
NORD PACIFIC LIMITED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
BERMUDA NOT APPLICABLE
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22 Church St.
Hamilton HM11 Bermuda N/A
- ---------------------------------------- ----------
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code (441) 292-2363
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal
year, if changed since last report)
Indicated 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
--- ---
The number of shares of Common Stock outstanding as of August 12, 1997 was
12,360,803.
<PAGE>
NORD PACIFIC LIMITED
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
ITEM 1. Condensed Consolidated Financial Statements:
Balance Sheets - June 30, 1997
and December 31, 1996 2-3
Statements of Operations - Quarters
ended June 30, 1997 and 1996 and
Two Quarters ended June 30, 1997
and 1996 4
Statements of Cash Flows - Two
Quarters ended June 30, 1997 and
1996 5
Notes to Condensed Consolidated Financial
Statements 6-9
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10-11
PART II. OTHER INFORMATION:
ITEM 1-3. Not Applicable 12
ITEM 4. Submission of Matters to a Vote of Security Holders 12-13
ITEM 5. Not Applicable 13
ITEM 6. Exhibits and Reports on Form 8-K 13
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NORD PACIFIC LIMITED
BALANCE SHEETS
ASSETS
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 294 $ 439
Accounts receivable:
Trade 1,252 1,868
Affiliates 159 21
Other 37 43
------- -------
1,448 1,932
Inventories:
Copper 324 131
Supplies 180 195
------- -------
504 326
Forward currency exchange contracts 76
Premium on copper contracts 765 1,193
Deferred loss on copper contracts 304
Prepaid expenses 4 96
------- -------
TOTAL CURRENT ASSETS 3,319 4,062
FORWARD CURRENCY EXCHANGE CONTRACTS 18
PREMIUM ON COPPER CONTRACTS 250 311
DEFERRED COSTS ASSOCIATED WITH ORE UNDER
LEACH, net of accumulated amortization of
$10,002 in 1997 and $8,569 in 1996 8,479 7,897
PROPERTY, PLANT AND EQUIPMENT -
at cost less accumulated depreciation of
$4,964 in 1997 and $4,450 in 1996 5,143 5,411
DEFERRED EXPLORATION AND DEVELOPMENT
COSTS: Girilambone, net of accumulated
amortization of $1,576 in 1997 and $1,199
in 1996 4,302 4,471
Other projects 20,649 17,307
OTHER 889 264
------- -------
$43,031 $39,741
------- -------
------- -------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
<PAGE>
NORD PACIFIC LIMITED
BALANCE SHEETS
LIABILITIES AND
SHAREHOLDERS' EQUITY
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
--------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable:
Trade $ 1,546 $ 1,595
Affiliates 135 276
------- -------
1,681 1,871
Note payable - Nord Resources Corporation 3,717 947
Accrued expenses 966 1,067
Deferred gain on copper contracts 1,565
Payable on copper contracts 1,058
Forward currency exchange contracts 473
Current maturities of long-term debt 1,700 1,700
------- -------
TOTAL CURRENT LIABILITIES 9,595 7,150
LONG-TERM LIABILITIES:
Long-term debt 3,081 3,334
Payable on copper contracts 250 311
Deferred income tax liability 5,140 3,740
Obligation under purchase agreement 754 795
Retirement benefits 212 202
------- -------
9,437 8,382
SHAREHOLDERS' EQUITY:
Common stock 476 476
Additional paid-in capital 31,650 31,467
Accumulated deficit (8,925) (8,532)
Foreign currency translation adjustment 798 798
------- -------
23,999 24,209
------- -------
$43,031 $39,741
------- -------
------- -------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
NORD PACIFIC LIMITED
STATEMENTS OF OPERATIONS
(In Thousands of U.S. Dollars, except share and per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED TWO QUARTERS ENDED
JUNE 30, JUNE 30,
----------------- ------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES $ 4,189 $ 3,869 $ 8,125 $ 7,079
COSTS AND EXPENSES:
Cost of sales 2,246 2,293 4,233 4,254
Abandoned projects 199 12 396 113
General and administrative 1,046 870 2,123 1,768
------- ------- ------- -------
TOTAL COSTS AND EXPENSES 3,491 3,175 6,752 6,135
------- ------- ------- -------
OPERATING EARNINGS 698 694 1,373 944
OTHER INCOME (EXPENSE):
Interest and other income 30 31 67 96
Interest and debt issuance costs (176) (100) (324) (242)
Forward currency exchange
contracts gain (loss) (409) (5) (579) 379
Copper contracts gain (loss) 150 36 382 (265)
Foreign currency transaction
gain (loss) 57 21 88 (22)
------- ------- ------- -------
TOTAL OTHER INCOME (EXPENSE) (348) (17) (366) (54)
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES 350 677 1,007 890
PROVISION FOR INCOME TAXES (700) (535) (1,400) (835)
------- ------- ------- -------
NET EARNINGS (LOSS) $ (350) $ 142 $ (393) $ 55
------- ------- ------- -------
------- ------- ------- -------
NET EARNINGS (LOSS) PER COMMON
AND COMMON EQUIVALENT
SHARE $ (.04) $ .01 $ (.04) $ .01
------- ------- ------- -------
------- ------- ------- -------
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES
(In thousands) 9,518 10,245 9,517 9,976
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
NORD PACIFIC LIMITED
STATEMENTS OF CASH FLOWS
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
TWO QUARTERS ENDED JUNE 30,
---------------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (393) $ 55
Adjustment for non-cash items except
depreciation and amortization 493 1,150
Depreciation and amortization 2,271 1,980
-------- --------
Net cash provided by operating activities 2,371 3,185
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (280) (548)
Deferred exploration and development costs (3,945) (5,128)
-------- --------
Net cash (used in) investing activities (4,225) (5,676)
CASH FLOWS FROM FINANCING ACTIVITIES:
Addition to long-term debt 3,071
Payments of long-term debt (3,324) (1,185)
Restricted cash 80
Net borrowings - Nord Resources Corporation 2,320
Costs associated with Canadian common stock offering (539)
Stock option activity 183 25
-------- --------
Net cash provided by (used in) financing activities 1,711 (1,080)
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (2) 83
-------- --------
(DECREASE) IN CASH AND CASH EQUIVALENTS (145) (3,488)
CASH AND CASH EQUIVALENTS - beginning of period 439 3,656
-------- --------
CASH AND CASH EQUIVALENTS - end of period $ 294 $ 168
-------- --------
-------- --------
CASH PAID FOR INTEREST $ 214 $ 184
-------- --------
-------- --------
NON-CASH TRANSACTIONS:
Purchase of Derivative Financial Instruments $ 448
--------
--------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
NORD PACIFIC LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED JUNE 30, 1997 AND 1996
A. FINANCIAL STATEMENTS
The balance sheet at December 31, 1996 contains financial information taken
from the audited consolidated financial statements. The interim consolidated
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 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. SFAS
No. 130 is effective for financial statements for fiscal years beginning
after December 15, 1997. The adoption of SFAS No. 130 has no effect on the
Company's financial statements for the periods ended June 30, 1997 and 1996.
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 second
quarter and the first two quarters of 1997, the adoption of SFAS No. 128 will
have no effect on the Company's financial statements for those periods and is
not expected to have a material effect on the same periods in 1996.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.
Certain reclassifications have been made in the 1996 financial statements to
conform to the classification used in 1997. These reclassifications had no
effect on results of operations or shareholders' equity as previously
reported.
B. TAXATION
Under current Bermuda law, the Company is not required to pay any taxes in
Bermuda on either income or capital gains. The Company has received an
undertaking from the Minister of Finance in Bermuda that in the event of any
such taxes being imposed, the Company will be exempted from taxation until
the year 2016. Although the Company is not subject to income taxes, it has
subsidiaries which are subject to income taxes in their respective foreign
countries.
The provision for deferred income taxes represents estimated taxes due on the
profitable operations of the Girilambone Copper Property in Australia. The
effective tax rate differs from the statutory tax rate primarily because
losses in other countries cannot be used to offset taxable earnings in
Australia.
6
<PAGE>
C. GIRILAMBONE
The Company is a 40% joint venturer in the Girilambone Copper Property and a
50% joint venturer in the Girilambone North Copper Property (collectively
"Girilambone") in Australia. All costs incurred during mine development have
been capitalized and are being amortized using the units of production method
over the estimated reserves. Following is summarized combined balance sheet
information of 100% of Girilambone:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(In Thousands of U.S. Dollars)
<S> <C> <C>
Current assets $ 1,935 $ 2,260
Deferred costs associated with ore under leach, net 19,590 18,648
Property, plant and equipment, net 11,614 12,494
Deferred exploration and development costs, net 12,962 13,688
-------- --------
Total assets 46,101 47,090
Current liabilities 3,444 3,412
-------- --------
Partners' equity $ 42,657 $ 43,678
-------- --------
-------- --------
Company's share of equity $ 18,288 $ 18,535
Less: Eliminations (1,630) (1,671)
-------- --------
Net assets recorded by Company $ 16,658 $ 16,864
-------- --------
-------- --------
</TABLE>
Debt incurred related to Girilambone is the separate responsibility of each
venturer and is not included in the joint ventures' financial statements.
Copper production is distributed to each venturer based on its respective
ownership interest. Sale of copper is the responsibility of each venturer.
Cost and expense information related to operation of the mine is as follows:
<TABLE>
<CAPTION>
QUARTER ENDED TWO QUARTERS ENDED
JUNE 30, JUNE 30,
----------------- ------------------
1997 1996 1997 1996
-------- -------- -------- --------
(In Thousands of U.S. Dollars)
<S> <C> <C> <C> <C>
Cost of copper sales $ 5,453 $ 5,733 $ 10,355 $ 10,635
General and administrative expense $ 118 $ 65 $ 243 $ 128
</TABLE>
D. INDEBTEDNESS
In February 1997, the Company finalized the restructuring of its financing
agreement with the Girilambone lender. The restructuring provided additional
financing of $980,000, and bears interest at Singapore Interbank Offered Rates
("SIBOR") plus 1-1/2%. Principal payments are to be made quarterly at the
greater of $425,000 or 50% of available cash flow. The amount available of
$980,000 was borrowed in February 1997 and the funds were used to repay a loan
payable previously outstanding. In April 1997, the
7
<PAGE>
Girilambone lender approved an additional drawing of $2,000,000 under the
restructured financing agreement, which was borrowed in May 1997, bringing
the debt outstanding at June 30, 1997 to $4,781,000. The agreement also
contains certain debt coverage ratio requirements.
During the period the loan is outstanding, the Company is required to
maintain a reserve account with the lender sufficient to meet the next
quarterly principal repayment. All cash proceeds generated from Girilambone
operations are required to be deposited with the lender and must be used to
pay any project costs, bank fees, interest, principal, and funding required
in the reserve account before any cash is available to the Company.
Beginning in July, subsequent to the closing of the Canadian Offering (as
defined below), the Company is maintaining this account at $1,000,000.
E. FINANCIAL INSTRUMENTS
The Company utilizes certain financial instruments, primarily copper hedging
agreements and forward currency exchange contracts. These financial
instruments are utilized to reduce the risk associated with the volatility of
commodity prices and fluctuations in foreign currency exchange rates,
particularly the Australian dollar. The Company does not hold or issue
financial instruments for trading purposes.
COPPER AGREEMENTS
To mitigate the effect of price changes on substantially all of its expected
copper sales through December 31, 1998, the Company has entered into both
swap and call option agreements for 1997 and put options for all of 1998.
The Company has outstanding both swap and call option agreements with a
single counterparty on a total of 6.6 million pounds of copper which settle
ratably each month through December 31, 1997. The swap agreements lock in a
fixed forward price as a floor, with the purchase of call options above the
floor permitting the Company to benefit from an increase in copper price
above the call price. The copper swap agreements are designated as hedges up
to the level of anticipated copper sales, with gains and losses deferred and
reflected as a component of sales when each contract settles. The swap
agreements with contract amounts in excess of the anticipated copper sales
and call options do not qualify as hedges and are recorded at market. Under
this combination swap and call option arrangement, at the settlement date for
each copper contract during 1997, the Company will receive $1.02 per pound
plus the excess of market price (as determined by the London Metals
Exchange) over $1.11 per pound.
In November 1996, the Company purchased put options at a cost of $.08 per
pound of copper for 4.0 million pounds of copper maturing ratably each month
from January through March 1998. In April 1997, the Company purchased put
options at a cost of $.05 per pound of copper for 4.0 million pounds of
copper maturing ratably each month from April through June 1998. In June
1997, the Company purchased additional put options at a cost of $.03 per
pound of copper for 4.0 million pounds of copper maturing ratable each month
from July through September 1998, and at a cost of $.04 per pound of copper
for 4.0 million pounds of copper maturing ratably each month from October
through December 1998. This hedging program guarantees that the Company will
receive a minimum of $.90 per pound of copper, and will benefit from any
copper price above $.90 per pound. The premiums are payable upon the
expiration of each contract.
Sales for the two quarters ended June 30, 1997, include losses of $527,000
that were realized in settlement of copper hedging contracts compared to a
loss of $50,000 in the first two quarters of 1996.
8
<PAGE>
FORWARD CURRENCY EXCHANGE CONTRACTS
The Company has entered into forward exchange contracts to protect against
Australian currency fluctuations related to payment of a portion of the
expected operating costs of Girilambone. Realized and unrealized gains and
losses on these contracts are included in the results of operations.
Outstanding contracts at June 30, 1997 total $12 million and mature in
monthly installments of $800,000 at an average exchange rate of A$1.00 =
U.S.$.786.
The Company is exposed to copper price fluctuations and currency risks in the
event of nonperformance by the counterparties to the various agreements
described above but has no off balance sheet risk of accounting loss. The
Company anticipates, however, that the counterparties will be able to fully
satisfy their obligations under the agreements. The Company does not obtain
collateral or other security to support financial instruments subject to
credit risk.
F. NORD RESOURCES CORPORATION ("RESOURCES")
In October 1996, Resources agreed to make available to the Company, at
Resources' discretion, an operating loan payable upon demand and bearing
interest at the prime rate plus 1%. During the first two quarters of 1997,
Resources advanced the Company $2,320,000 and the Company owed Resources
$3,700,000 at June 30, 1997. In July 1997, the Company repaid $800,000 of
the outstanding loan payable. Concurrent with the closing of the Company's
Canadian Offering (Note G) on July 3, 1997, Resources, which previously owned
35% of the outstanding Common Stock of the Company, purchased 349,549 Units
in a private placement at $5.00 per Unit (as defined below). Resources now
owns 30% of the outstanding Common Shares of the Company.
G. SUBSEQUENT EVENT
On July 3, 1997, the Company completed the initial closing of its offering in
Canada ("Canadian Offering"), no subsequent closings occurred and the
Canadian Offering has been concluded. The Company received gross proceeds of
$12,300,000 (C$16,974,000). Net proceeds totalled $11,500,000 (C$15,900,000)
after payment of commissions and certain legal fees. The Canadian Offering
consisted of the sale of 2,460,000 Units consisting of one Common Share and
one-half of one Purchase Warrant (the "Purchase Warrant"). Each Purchase
Warrant entitles the holder to purchase one Common Share at C$9.00 ($6.50 at
current exchange rate) prior to July 3, 1998.
H. DIFFERENCE BETWEEN U.S. AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.
The condensed consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
("U.S. GAAP"), which differ in certain respects from accounting principles
generally accepted in Canada ("Canadian GAAP"). The Company noted only one
material difference as it pertains to these condensed consolidated financial
statements. U.S. GAAP under SFAS No. 123 requires options issued to
non-employees to be valued and a corresponding expense recorded in the
financial statements. Canadian GAAP has no similar requirement. The net
result of this difference is that under Canadian GAAP, earnings before income
taxes and net earnings would be increased at June 30, 1997, by $29,000 and
general and administrative expense would be reduced by the same amount.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nord Pacific Limited (the "Company") recorded a net loss for the two quarters
ended June 30, 1997 of $393,000 compared to net earnings of $55,000 for the
same period of 1996. The Company recorded operating earnings of $1,373,000
for the two quarters ended June 30, 1997, compared to $944,000 for the same
period of 1996. The Company's share of copper sold in the first two quarters
of 1997 totaled 7,512,000 pounds compared to 6,120,000 pounds sold in the
same period in 1996. Copper production increased 26% during the first two
quarters of 1997 compared to the 1996 first two quarters due to the
introduction of heap aeration into the production process. During 1997, the
Company received $1.15 per pound of copper sold compared to $1.16 per pound
received in 1996. The copper hedging programs established by the Company
resulted in a decrease in sales of $527,000 in 1997 and $50,000 in 1996.
Including the impact of the copper hedging programs, the Company realized a
net average selling price per pound of $1.08 in 1997 compared to $1.16 in
1996. Cost of sales per pound of copper declined to $.56 in 1997 compared to
$.70 in 1996, and cost of sales as a percentage of sales decreased to 52% in
1997 compared to 60% in 1996, due to increased production and efficiencies
resulting from the introduction of heap aeration into the production
process. While cost of sales amounts are currently low due to level of
reserves at the current pit, costs will increase as mining increases at the
Girilambone North pits. Adversely affecting operating earnings in the first
two quarters of 1997 was the write-off of an abandoned property of $396,000.
Also contributing to lower operating earnings was a 20% increase in general
and administrative expense, due to an increase in exploration expense of the
Company, increased public relations costs, and a nonrecurring tax expense
relating to withholding on intercompany interest. The Company recorded a
gain of $382,000 in the first two quarters of 1997 on marking its copper
contracts to market compared to a loss of $265,000 in the same period of
1996. A loss of $579,000 on forward exchange contracts was recorded in 1997
compared to a gain of $379,000 in 1996. Fluctuations in gains and losses in
the forward currency exchange contracts and in foreign currency transactions
are primarily a result of changes in the relative strength of the U.S.
currency compared to the Australian currency. During the first two quarters
of 1997, the Australian dollar weakened compared to the U.S. dollar, while it
strengthened in the first two quarters of 1996.
Adversely affecting net earnings in the 1997 first two quarters was a
provision for income taxes of $1,400,000 compared to $835,000 in the 1996
first two quarters due to the increase in operating earnings at Girilambone.
The effective tax rate differs from the statutory tax rate primarily because
losses in other countries cannot be used to offset taxable earnings in
Australia.
The Company recorded a net loss of $350,000 during the second quarter of 1997
compared to net earnings of $142,000 during the same period in 1996. Operating
earnings during the second quarter increased slightly from $694,000 in the
second quarter of 1996 to $698,000 in the second quarter of 1997. The
Company's share of copper sold in the second quarter of 1997 totaled 3,776,000
pounds compared to 3,387,000 pounds in the second quarter of 1996. Copper
production increased 16% in the second quarter of 1997 compared to the second
quarter of 1996. During the second quarter of 1997, the Company received $1.18
per pound of copper sold compared to $1.16 per pound of copper sold in the
second quarter of 1996. The copper hedging programs established by the Company
resulted in a decrease in sales of $271,000 in the second quarter of 1997
compared to $50,000 in the second quarter of 1996. Including the impact of the
copper hedging programs, the Company realized a net average selling price per
pound of $1.11 in 1997 and $1.14 in 1996. Cost of sales per pound of copper
declined to $.59 in the second quarter of 1997 compared to $.68
10
<PAGE>
in the second quarter of 1996, and cost of sales as a percentage of sales
decreased to 54% in the second quarter of 1997 compared to 59% in the second
quarter of 1996. Adversely affecting operating earnings in the second quarter
of 1997 was the write-off of an abandoned project in Mexico of $199,000.
Also contributing to lower operating earnings was a 20% increase in general
and administrative expense caused largely by an overall increase in
exploration activity and an increase in public relations expense of the
company. The Company recorded a gain of $150,000 in the second quarter of
1997 on marking its copper contracts to market compared to $36,000 in the
second quarter of 1996. Adversely affecting net earnings was the $409,000
loss on forward currency exchange contracts in the second quarter of 1997
which was caused by weakening of the Australian dollar compared to the U.S.
dollar. Also reducing net earnings for the 1997 second quarter was the
$700,000 provision for income taxes compared to $535,000 in the 1996 second
quarter due to continued improvement in operating earnings at Girilambone.
LIQUIDITY AND CAPITAL RESOURCES
Cash at June 30, 1997 was $294,000 compared to $439,000 at December 31, 1996.
Cash of $2,371,000 was provided during the two quarters ended June 30, 1997,
by the Company's operating activities. During the first two quarters of
1997, the Company expended cash to fund exploration and development activity
totaling $3,945,000, of which $1,025,000 related to properties near
Girilambone and $1,955,000 related to the Tabar gold project with the
remaining $965,000 expended for other projects. The Company expended
$2,016,000 for its share of deferred costs associated with ore under leach at
Girilambone. The Company borrowed $3,071,000 from two lenders and expended
$2,444,000 for principal payments under the Girilambone financing
agreement, and paid $880,000 against a general credit line.
In October 1996, Resources agreed to make available to the Company, at
Resources' discretion, an operating loan payable upon demand and bearing
interest at the prime rate plus 1%. During the first two quarters of 1997,
Resources advanced the Company $2,320,000 and the Company owed Resources
$3,700,000 at June 30, 1997. In July 1997, the Company repaid $800,000 of the
outstanding loan payable. Concurrent with the closing of the Company's
Canadian Offering (Note G) on July 3, 1997, Resources, which previously owned
35% of the outstanding Common Stock of the Company, purchased 349,549 Units
in a private placement at $5.00 per Unit (as defined below). Resources now
owns 30% of the outstanding Common Shares of the Company.
On July 3, 1997, the Company completed the initial closing of its offering in
Canada ("Canadian Offering"), no subsequent closings occurred and the
Canadian Offering has been concluded. The Company received gross proceeds of
$12,300,000 (C$16,974,000). Net proceeds totalled $11,500,000 (C$15,900,000)
after payment of commissions and certain legal fees. The Canadian Offering
consisted of the sale of 2,460,000 Units consisting of one Common Share and
one-half of one Purchase Warrant (the "Purchase Warrant"). Each Purchase
Warrant entitles the holder to purchase one Common Share at C$9.00 ($6.50 at
current exchange rate) prior to July 3, 1998.
In April 1997, the Girilambone lender approved an additional drawing of
$2,000,000 under the restructured financing agreement. Proceeds were used
for exploration and working capital needs of the Company. No additional
line of credit is currently available under this financing agreement.
The Company is in the exploration phase of all its projects except
Girilambone. Additional efforts on all exploration projects will be required
to determine the extent to which they will be commercially viable and whether
the deferred exploration costs ultimately will be realized. If commercially
viable resources are identified, the Company will likely have to seek
external sources of financing to fund development of these resources.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1-3. NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual General Meeting of the stockholders was held on June
17, 1997. The following matters were acted upon and passed at
the meeting:
1. Election of eight Directors.
2. Abolish outside date by which to consummate Canadian
Offering.
3. Amend the Corporation's Memorandum of Association to clarify
the authorized share capital.
4. Amend the Corporation's Bye-Laws with respect to quorum
requirements to allow non-members holding proxies to be counted
for a quorum.
5. Amend the Corporation's Bye-Laws regarding indemnification of
directors, officers and other specified persons.
6. Ratify the appointment of auditors and authorize the Board to
set their compensation.
VOTE TABULATION
<TABLE>
<CAPTION>
BROKER
1. Directors FOR AGAINST ABSTAIN NON-VOTE
--------- --- ------- ------- --------
<S> <C> <C> <C> <C>
Edgar F. Cruft 7,414,276 29,534 -- --
W. Pierce Carson 7,420,340 23,470 -- --
Terence H. Lang 7,420,340 23,470 -- --
Leonard L. Lichter 7,420,340 23,470 -- --
John C. R. Collis 7,420,340 23,470 -- --
Michel J. Drew 7,420,340 23,470 -- --
Lucile Lansing 7,420,340 23,470 -- --
John B. Roberts 7,420,340 23,470 -- --
2. Abolish Outside
Date for Canadian
Offering 5,550,367 13,205 -- --
3. Clarify Share
Capital 7,239,696 40,343 -- --
12
<PAGE>
<CAPTION>
VOTE TABULATION (Continued)
BROKER
FOR AGAINST ABSTAIN NON-VOTE
--- ------- ------- --------
<S> <C> <C> <C> <C>
4. Quorum Requirements
for Proxy 5,540,473 36,492 -- --
5. Indemnification
of Directors and
Officers 7,180,823 94,419 -- --
6. Auditors 7,420,794 5,234 -- --
</TABLE>
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No Reports on Form 8-K were filed during the quarter ended
June 30, 1997.
EXHIBIT 27. FINANCIAL DATA SCHEDULE - filed herewith as part of
this Report on Form 10-Q.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORD PACIFIC LIMITED
August 13, 1997 By:s/Terence H. Lang
-----------------
Terence H. Lang,
Treasurer, Principal
Financial Officer and
Authorized Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORD
PACIFIC LIMITED FORM 10-Q FOR THE QUARTER 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> 294
<SECURITIES> 0
<RECEIVABLES> 1,252
<ALLOWANCES> 0
<INVENTORY> 504
<CURRENT-ASSETS> 3,319
<PP&E> 10,107
<DEPRECIATION> 4,964
<TOTAL-ASSETS> 43,031
<CURRENT-LIABILITIES> 9,595
<BONDS> 3,081
0
0
<COMMON> 476
<OTHER-SE> 23,523
<TOTAL-LIABILITY-AND-EQUITY> 43,031
<SALES> 8,125
<TOTAL-REVENUES> 8,125
<CGS> 4,233
<TOTAL-COSTS> 4,233
<OTHER-EXPENSES> 396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 324
<INCOME-PRETAX> 1,007
<INCOME-TAX> 1,400
<INCOME-CONTINUING> (393)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (393)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
