-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TDHB9C2GrgoHygmLZXRXenHE9MtNhZMZ1ty9E2/RiGarjSaqGpxY/VoYJKVIGala HKIG98yZ0QROKQjv3rGo0Q== 0000950129-04-001835.txt : 20040402 0000950129-04-001835.hdr.sgml : 20040402 20040402163652 ACCESSION NUMBER: 0000950129-04-001835 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040227 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040402 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENDEAVOUR INTERNATIONAL CORP CENTRAL INDEX KEY: 0001112412 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 880448389 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-33439 FILM NUMBER: 04714464 BUSINESS ADDRESS: STREET 1: 1001 FANNIN STREET 2: SUITE 1700 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 713-307-8700 MAIL ADDRESS: STREET 1: 1001 FANNIN STREET 2: SUITE 1700 CITY: HOUSTON STATE: TX ZIP: 77002 FORMER COMPANY: FORMER CONFORMED NAME: CONTINENTAL SOUTHERN RESOURCES INC DATE OF NAME CHANGE: 20020816 FORMER COMPANY: FORMER CONFORMED NAME: EXPRESSIONS GRAPHICS INC DATE OF NAME CHANGE: 20000419 8-K/A 1 h14218ae8vkza.txt ENDEAVOUR INTERNATIONAL CORPORATION 2/27/2004 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) FEBRUARY 27, 2004 COMMISSION FILE NUMBER: 1-13463 ENDEAVOUR INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Nevada 88-0448389 ------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1001 FANNIN, SUITE 1700, HOUSTON, TEXAS 77002 (Address of principal executive offices) (Zip code) (713) 307-8700 (Registrant's telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) ================================================================================ AMENDMENT We hereby amend the following items, financial statements, exhibits or other portions of our Current Report on Form 8-K dated February 27, 2004 as set forth below. The audited financial statements of NSNV, Inc. and the unaudited pro forma financial statements were both previously filed with our Form 10-KSB for the fiscal year ended December 31, 2003. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements. The audited financial statements of NSNV, Inc. for the period from October 16, 2003 (Inception) through December 31, 2003 are incorporated by reference to Exhibit 99.1 hereto. (b) Pro Forma Financial Information. The pro forma financial statements giving effect to the Offering, Merger and Restructuring are incorporated by reference to Exhibit 99.2 hereto. (c) Exhibits. 99.1 The audited financial statements of NSNV, Inc. for the period from October 16, 2003 (Inception) through December 31, 2003 are filed herewith. 99.2 The pro forma financial statements giving effect to the offering, merger and restructuring are filed herewith. 1 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ENDEAVOUR INTERNATIONAL CORPORATION By: /s/ Robert L. Thompson ------------------------------------ Robert L. Thompson Vice President, Chief Accounting Officer and Planning Date: April 2, 2004 INDEX TO EXHIBITS Exhibit Number Description ------- ----------- 99.1 The audited financial statements of NSNV, Inc. for the period from October 16, 2003 (Inception) through December 31, 2003 are filed herewith. 99.2 The pro forma financial statements giving effect to the offering, merger and restructuring are filed herewith. EX-99.1 3 h14218aexv99w1.txt AUDITED FINANCIAL STATEMENTS EXHIBIT 99.1 AUDITED FINANCIAL STATEMENTS OF NSNV, INC. (A DEVELOPMENT STAGE ENTITY) FOR THE PERIOD OCTOBER 16, 2003 (INCEPTION) TO DECEMBER 31, 2003 INDEPENDENT AUDITOR'S REPORT Board of Directors and Shareholders NSNV, Inc. Houston, Texas We have audited the accompanying balance sheet of NSNV, Inc. (a development stage entity), and the related statements of operations, shareholders' equity, and cash flows for the period October 16, 2003 (date of inception) through December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NSNV, Inc. as of December 31, 2003, and the results of operations, changes in shareholders' equity and its cash flows for the period October 16, 2003 (date of inception) through December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. L J SOLDINGER ASSOCIATES LLC Deer Park, Illinois March 26, 2004 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) STATEMENT OF OPERATIONS
October 16, 2003 (Inception) to December 31, 2003 ----------------------- Revenues $ - Costs of Operations: Amortization of Intangible Assets 5,181 General and Administrative Expenses 130,450 --------- Total Expenses 135,631 --------- Net Loss to Common Shareholders (135,631) ========= Loss per Share - Basic and Diluted $ (1.36) ========= Weighted Average Shares Outstanding - Basic and Diluted 100,000 =========
The accompanying notes are an integral part of these financial statements. 2 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) BALANCE SHEET
December 31, 2003 ----------------- ASSETS Current Assets: Cash and Cash Equivalents $ 1,000 Deferred Current Assets 1,000,000 ----------- Total Current Assets 1,001,000 Intangible Assets, Net of Amortization 1,238,335 Other Assets 3,500,000 ----------- Total Assets $ 5,739,335 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 146,745 Accounts Payable - Related Parties 2,000,000 ----------- Total Current Liabilities 2,146,745 Long-term Liabilities - Related Party 3,500,000 ----------- Total Liabilities 5,646,745 Shareholders' Equity: Common Stock, $0.01 par value; 100,000 shares authorized and outstanding 1,000 Paid In Capital 1,227,221 Less: Subscription Receivable (1,000,000) Deficit Accumulated During the Development Stage (135,631) ----------- Total Shareholders' Equity 92,590 ----------- Total Liabilities and Shareholders' Equity $ 5,739,335 ===========
The accompanying notes are an integral part of these financial statements. 3 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) STATEMENT OF CASH FLOWS
October 16, 2003 (Inception) to December 31, 2003 ----------------------- OPERATING ACTIVITIES: Net loss $ (135,631) Amortization of Intangible Assets 5,181 Adjustments to reconcile net loss to net cash used in operating activities: Change in Deferred Current Assets (1,000,000) Change in Accounts Payable 130,450 Change in Accounts Payable - Related Party 1,000,000 --------------- Net Cash Provided By Operating Activities - FINANCING ACTIVITIES: Contributions by Shareholders' 1,000 --------------- Net Cash Provided By Financing Activities 1,000 --------------- Net Increase in Cash and Cash Equivalents 1,000 Cash and Cash Equivalents at the Beginning of the Period - --------------- Cash and Cash Equivalents at the End of the Period $ 1,000 ===============
The accompanying notes are an integral part of these financial statements. 4 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) STATEMENT OF SHAREHOLDERS' EQUITY
Deficit Accumulated Common Stock During the Total ----------------- Paid In Subscription Development Shareholders' Shares Amount Capital Receivable Stage Equity ------- ---------------------------------------------------- ------------- Initial Contribution by Shareholders 81,500 $ 815 $ 1,000,185 $ (1,000,000) $ - $ 1,000 Purchase of Intangible Asset 18,500 185 227,036 $ - - 227,221 Net Loss - - - - (135,631) (135,631) ------- -------- ------------ ------------ ------------ ------------ Balance, December 31, 2003 100,000 $ 1,000 $ 1,227,221 $ (1,000,000) $ (135,631) $ 92,590 ======= ======== ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements. 5 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF BUSINESS NSNV, Inc., a Texas corporation (the "Company" or "NSNV") was formed on October 16, 2003 as a wholly owned subsidiary of North Sea New Ventures, L.L.C. We are presently engaged in the business of acquiring, exploring, and developing natural gas and oil properties with a initial focus on the North Sea. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP"). DEVELOPMENT STAGE ENTERPRISE The Company is a Development Stage Enterprise, as defined in Statement of Financial Accounting Standards ("SFAS") No. 7, Accounting and Reporting for Development Stage Enterprises. Under SFAS No. 7, certain additional financial information is required to be included in the financial statements for the period from inception of the Company to the current balance sheet date. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 6 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS CASH AND CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits at financial institutions or unsecured loans. At various times during the year, the Company may exceed the federally insured limits. To mitigate this risk, the Company places its cash deposits only with high credit quality institutions. Management believes the risk of loss is minimal. INTANGIBLES ASSETS The Company accounts for intangible assets in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets." Intangible assets with a finite useful life are amortized over the useful life. Additionally, intangible assets that are being amortized are reviewed for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, whenever the events or circumstances (as specified in SFAS No. 144) indicate that the carrying amount may not be recoverable. INCOME TAXES The Company uses the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as part of the provision for income taxes in the period that includes the enactment date. 7 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS LOSS PER SHARE Loss per common share is calculated in accordance with SFAS No. 128, Earnings Per Share. Basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding. Diluted loss per share is computed similarly to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued and if the additional common shares were dilutive. The Company currently has no potentially dilutive common shares outstanding. SEGMENT INFORMATION The Company has determined it has one reportable operating segment as defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. NOTE 3 - LIQUIDITY AND CAPITAL RESOURCES The Company is in the development stage and has significant obligations to pay in future years and its liabilities exceed its assets. The Company will be required to raise funds through additional offerings of its securities or issuance of debt in order to have the funds necessary to complete these acquisitions and continue its operations. See Note 9 - Subsequent Events for discussion of the merger and acquisitions that occurred in 2004. NOTE 4 - INTANGIBLE ASSETS On December 16, 2003, NSNV and PGS Exploration (UK) Limited ("PGS"), a United Kingdom corporation that is a provider of geophysical services, entered into an agreement where, in exchange for certain consideration including, among other things, a cash payment of $ 1,000,000 paid in January 2004 and 18.5% of the outstanding stock of NSNV, PGS granted NSNV the right to use 79,200 square kilometers of 3-D seismic and related data in the North Sea region. Under the agreement, PGS may not license all or part of the data on a non-cash basis for a period of two to three years, depending on the area the data covers. In connection with 8 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS this, the Company recorded an intangible asset of approximately $1.2 million. The intangible asset is being amortized over its estimated useful life of 10 years on a straight-line basis, with no residual value. While we have a license to the seismic data in perpetuity, the seismic data will become part of the public domain in the United Kingdom in 10 years. The unamortized balance of the intangible asset as of December 31, 2003 is as follows: License fee $ 1,243,516 Less accumulated amortization (5,181) ----------- $ 1,238,335 ===========
The Company recorded amortization expense of $5,181 for 2003. Estimated amortization expense for each of the five years through December 31, 2008 is $124,352. See Note 8 related to NSNV's purchase commitment of services from PGS. NOTE 5 - INCOME TAXES Deferred income taxes result from the net tax effects of temporary timing differences between the carrying amounts of assets and liabilities reflected on the financial statements and the amounts recognized for income tax purposes. The tax effects of temporary differences and net operating loss carryforwards that give rise to significant portions of deferred tax assets and liabilities are as follows at December 31:
2003 --------- Deferred tax asset: Tax benefit arising from net operating loss carryforward $ 46,000 Less valuation allowance (46,000) --------- Net deferred tax asset $ - =========
9 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS Income tax benefit consists of the following:
December 31, 2003 ----------------- Deferred: Federal $ 46,000 State - ----------- Federal and state benefit of net operating loss carryforward 46,000 Less valuation allowance (46,000) ----------- Net deferred tax asset $ - ===========
As of December 31, 2003, the Company had losses which resulted in net operating loss carryforwards for tax purposes amounting to approximately $46,000 that may be offset against future taxable income. These NOL carryforwards expire in 2024. However, these carryforwards may be significantly limited due to changes in the ownership of the Company as a result of future equity offerings. Recognition of the benefits of the deferred tax assets and liabilities will require that the Company generate future taxable income. There can be no assurance that the Company will generate any earnings or any specific level of earning in future years. Therefore, the Company has established a valuation allowance for deferred tax assets (net of liabilities) of approximately $46,000 as of December 31, 2003. The following table presents the principal reasons for the difference between the Company's effective tax rates and of United States federal statutory income tax rate of 34%. 10 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS
Period From Inception December 31, 2003 --------------------- Federal income tax benefit at statutory rate $ 46,000 State income tax benefit (net of effect of federal benefit) - Less valuation allowance (46,000) ---------- Income Tax Benefit $ - ========== Effective Income Tax Rate 0% ==========
NOTE 6 - SHAREHOLDERS' EQUITY The Company has 100,000 shares of its common stock outstanding with a par value of $0.01 per share. The common stockholders are entitled to one vote per share and have the right to elect all directors. On December 16, 2003, the Company issued 81,500 shares of its common stock to North Sea New Ventures, L.L.C., a Texas Limited Partnership owned by William L. Transier and John N. Seitz. The Company received $1,000 cash and promissory notes aggregating $1,000,000. The promissory notes were paid in full, with accrued interest, in January 2004. As discussed previously, in December 2003, the Company also issued 18,500 shares of its common stock to PGS in connection with the acquisition of the certain seismic data. NOTE 7 - SUPPLEMENTARY CASH FLOW DISCLOSURES During 2003, the Company had no cash payments for interest or income taxes. The Company acquired an intangible asset through issuing 18,500 shares of common stock valued at $227,221 and recording a payable due to PGS of $1,000,000 plus a payable for legal fees of $16,295. 11 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS NOTE 8 - COMMITMENTS AND CONTINGENCIES GENERAL The oil and gas industry is subject to regulation by federal, state and local authorities. In particular, gas and oil production operations and economics are affected by environmental protection statutes, tax statutes and other laws and regulations relating to the petroleum industry. The Company believes it is in compliance with all federal, state and local laws, regulations applicable to the Company and its properties and operations, the violation of which would have a material adverse effect on the Company or its financial condition. COMMITMENTS Related Party As a part of the Agreement entered into with PGS on December 16, 2003, the Company has an obligation to purchase products and services from PGS or its affiliates for a period of three years commencing on December 16, 2003 as follows: Year 1 $ 1,000,000 Year 2 1,500,000 Year 3 2,000,000 ------------ $ 4,500,000 ============
PGS has agreed to provide NSNV with product discounts and certain consulting services during the term of the agreement. Unrelated Party The Company has contracted with an unrelated party to provide engineering and other services related to acquisition of oil and gas assets, development and production business in the North Sea for a maximum consideration of $400,000 cash and shares and options, to be valued at $400,000 per year, to purchase shares in NSNV's successor company. The contract may be terminated with six months notice by the Company or three months notice by the other party. In addition, both parties may elect to participate in the 12 NSNV, INC. (A DEVELOPMENT STAGE ENTITY) NOTES TO FINANCIAL STATEMENTS acquisition of any exploration or development projects initiated by the other party, up to 15% of the asset to be acquired. NOTE 9 - SUBSEQUENT EVENTS On January 5, 2004, the Company issued two 4.0% promissory notes for $50,000 each to two members of North Sea New Ventures, L.L.C. The notes were repaid on February 26, 2004 with the accrued interest. On January 27, 2004, the Company issued two 4.0% promissory notes for $75,000 each to two members of North Sea New Ventures, L.L.C. The notes were repaid on February 26, 2004 with the accrued interest. On February 24, 2044, the Company (the "Surviving Company") merged with North Sea New Ventures, L.L.C. (the "Merged Company"). The 81,500 shares of the Company's common stock owned by North Sea New Ventures, L.L.C. were equally distributed to two members, each member had a 50% interest in North Sea New Ventures, L.L.C. On February 27, 2004, the Company was acquired (the "Merger") by Continental Southern Resources, Inc., a Nevada corporation, ("CSOR") through a merger with newly created subsidiary of CSOR resulting in NSNV becoming a wholly-owned subsidiary of the Company. The former shareholders of NSNV received an aggregate of 12.5 million common shares of CSOR in the merger, representing 18.9% of CSOR's outstanding common stock immediately after the closing of the merger. The Merger is intended to provide the expanded company with the following competitive advantages: (i) a pre-eminent seismic and geological database of the North Sea region and (ii) a proven and experienced management team comprised of Messrs. Transier and Seitz, each pursuant to three-year employment agreements, and certain other former executives of Ocean Energy, Inc. and Anadarko Petroleum Corporation. 13 EX-99.2 4 h14218aexv99w2.txt PRO FORMA FINANCIAL STATEMENTS EXHIBIT 99.2 UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS OF ENDEAVOUR INTERNATIONAL CORPORATION (FORMERLY CONTINENTAL SOUTHERN RESOURCES, INC.) TO REFLECT THE OFFERING, MERGER AND RESTRUCTURING UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS OF ENDEAVOUR INTERNATIONAL CORPORATION (FORMERLY CONTINENTAL SOUTHERN RESOURCES, INC.) The accompanying pro forma financial statements are presented in accordance with Article 11 of Regulation S-X. The following unaudited pro forma condensed combined financial information reflects adjustments to give affect to the following: - The issuance by Continental Southern Resources, Inc. (the "Company" or "CSOR") of 25 million shares of common stock at $2.00 per share in a private placement (the "Offering"). - The Company's restructuring of various financial and shareholder related items (the "Restructuring") as follows: - Repayment of $1,500,000 principal amount of our outstanding convertible notes; - Issuance of 1,026,624 shares of our common stock in exchange for the $1,550,000 principal balance and accrued interest due under the Michael P. Marcus convertible debenture at a conversion price of $1.75; - Issuance of 375,000 shares of our common stock in exchange for the $600,000 principal balance and accrued interest due under the Trident convertible debenture at a conversion price of $1.60; - Issuance of 2,808,824 shares of our common stock upon conversion of all of the outstanding Series C Preferred Stock, and accrued dividends, at a conversion price of $1.70 per share; - Purchase of all outstanding shares of Series A Preferred Stock and 20,212.86 shares of Series B Preferred Stock in exchange for certain of our non-core assets ; - Purchase of 14.1 million shares of common stock and 103,500.07 shares of Series B Preferred Stock from RAM Trading, Ltd. for $5,330,948 in cash; and - Sale of the Company's entire limited partnership interest in Knox Miss. Partners, L.P. for $500,000 in cash and a $4.5 million short-term note. - The acquisition (the "Merger") of NSNV, Inc. ("NSNV"), whereby the former shareholders of NSNV received an aggregate of 12.5 million common shares of the Company. Subsequent to the Merger, the Company was renamed Endeavour International Corporation ("Endeavour"). - The income statement data assume that the Offering and Restructuring transactions were consummated on January 1, 2003. The income statement data assume that the Merger transactions were consummated on October 16, 2003, the inception of NSNV. The balance sheet data assume that all transactions were consummated on December 31, 2003. The unaudited pro forma condensed combining financial data are not necessarily indicative of the results of operations or the financial position which would have occurred had the transactions been consummated at January 1, 2003, nor are they necessarily indicative of future results of operations or financial position. The unaudited pro forma combined financial data should be read in conjunction with the historical consolidated financial statements and related notes thereto of CSOR and NSNV. 2 ENDEAVOUR INTERNATIONAL CORPORATION (FORMERLY CONTINENTAL SOUTHERN RESOURCES, INC.) UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET AS OF DECEMBER 31, 2003
Historical Continental Pro Forma Southern Pro Forma The for the Resources, The Offering for the Restructuring Restructuring Inc. Adjustments Offering Adjustments and Offering ----------- ------------ ----------- ------------- ------------- ASSETS CURRENT ASSETS: Cash $ 56,680 $ 46,250,000 (A) $46,306,680 $ (5,943,007)(B), (D), (E) $40,363,673 Notes Receivable 847,928 847,928 3,652,072 (C), (D) 4,500,000 Marketable Securities 719,480 719,480 (719,480)(C) - Interest Receivables 225,186 225,186 (225,186)(C), (D) - Other Current Assets 1,471,470 1,471,470 (1,338,401)(B), (E) 133,069 ----------- ------------ ----------- ------------- ----------- Total Current Assets 3,320,744 46,250,000 49,570,744 (4,574,002) 44,996,742 Oil and Gas Properties, Costs Not Being Amortized 6,428,227 6,428,227 (6,428,227)(C), (D) - Equity Interests in Entities with Oil and Gas Properties 2,838,536 2,838,536 2,838,536 Intangible Assets - - - Goodwill - - - Other Assets 80,407 80,407 (71,037)(E) 9,370 ----------- ------------ ----------- ------------- ----------- Total Assets $12,667,914 $ 46,250,000 $58,917,914 $ (11,073,266) $47,844,648 =========== ============ =========== ============= =========== Endeavour - Pro Forma for the Offering, Historical The Merger Restructuring, NSNV Adjustments and Merger ---------- ----------- -------------- ASSETS CURRENT ASSETS: Cash $ 1,000 $ $ 40,364,673 Notes Receivable - 4,500,000 Marketable Securities - - Interest Receivables - - Other Current Assets 1,000,000 (87,640) (M) 1,045,429 ----------- ----------- ------------ Total Current Assets 1,001,000 (87,640) 45,910,102 Oil and Gas Properties, Costs Not Being Amortized - - Equity Interests in Entities with Oil and Gas Properties - 2,838,536 Intangible Assets 1,238,335 7,686,665 (H) 8,925,000 Goodwill - 16,745,745 (H) 16,745,745 Other Assets 3,500,000 3,509,370 ----------- ----------- ------------ Total Assets $5,739,335 $24,344,770 $ 77,928,753 =========== =========== ============
3 ENDEAVOUR INTERNATIONAL CORPORATION (FORMERLY CONTINENTAL SOUTHERN RESOURCES, INC.) UNAUDITED PRO FORMA CONDENSED COMBINING BALANCE SHEET AS OF DECEMBER 31, 2003
Historical Continental Pro Forma Southern Pro Forma The for the Resources, The Offering for the Restructuring Restructuring Inc. Adjustments Offering Adjustments and Offering ----------- ------------ ----------- ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable and Accrued Expenses $ 5,235,725 $ 250,000 (A) $ 5,485,725 $ (4,168,329)(B), (C), (E), (F) $ 1,317,396 Convertible Debentures 3,242,654 3,242,654 (3,242,654)(B) - Deferred Equity Option 870,000 870,000 (870,000)(G) - Other Current Liabilities 23,643 23,643 (23,643)(C), (D) - ------------ ------------ ----------- ------------- ----------- Total Current Liabilities 9,372,022 250,000 9,622,022 (8,304,626) 1, 317,396 Other Liabilities - - - ------------ ------------ ----------- ------------- ----------- Total Liabilities 9,372,022 250,000 9,622,022 (8,304,626) 1,317,396 Minority Interest 29,505 29,505 29,505 STOCKHOLDERS' EQUITY: Preferred Stock, Series A, B and C 4,713 4,713 (4,693)(C), (E), (F) 20 Common Stock 37,145 25,000 (A) 62,145 (8,752)(B), (E), (F), (G) 53,393 Additional Paid In Capital 50,175,898 45,975,000 (A) 96,150,898 (4,430,960)(B), (E), (F), (G) 91,719,938 Less: Stock Subscription Receivables (425,000) (425,000) 425,000 (C) - Other Equity (490,036) (490,036) 489,036 (C) (1,000) Deficit Accumulated During the Development Stage (46,036,333) (46,036,333) 761,729 (B), (C), (D) (45,274,604) ------------ ------------ ----------- ------------- ----------- Total Stockholders' Equity 3,266,387 46,000,000 49,266,387 (2,768,640) 46,497,747 ------------ ------------ ----------- ------------- ----------- Total Liabilities and Stockholders' Equity $ 12,667,914 $ 46,250,000 $58,917,914 $ (11,073,266) $47,844,648 ============ ============ =========== ============= =========== Endeavour - Pro Forma for the Offering, Historical The Merger Restructuring, NSNV Adjustments and Merger ---------- ----------- -------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable and Accrued Expenses $2,146,745 $ 337,360 (H) $ 3,801,501 Convertible Debentures - - Deferred Equity Option - - Other Current Liabilities - - ---------- ----------- ------------ Total Current Liabilities 2,146,745 337,360 3,801,501 Other Liabilities 3,500,000 3,500,000 ---------- ----------- ------------ Total Liabilities 5,646,745 337,360 7,301,501 Minority Interest - 29,505 STOCKHOLDERS' EQUITY: Preferred Stock, Series A, B and C - 20 Common Stock 1,000 11,675 (H) 66,068 Additional Paid In Capital 1,227,221 23,860,104 (H) 116,807,263 Less: Stock Subscription Receivables (1,000,000) (1,000,000) Other Equity - (1,000) Deficit Accumulated During the Development Stage (135,631) 135,631 (H) (45,274,604) ---------- ----------- ------------ Total Stockholders' Equity 92,590 24,007,410 70,597,747 ---------- ----------- ------------ Total Liabilities and Stockholders' Equity $5,739,335 $24,344,770 $ 77,928,753 ========== =========== ============
4 ENDEAVOUR INTERNATIONAL CORPORATION (FORMERLY CONTINENTAL SOUTHERN RESOURCES, INC.) UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2003
Historical Continental Pro Forma for Southern The the Resources, The Offering Pro Forma for Restructuring Restructuring Inc. Adjustments the Offering Adjustments and Offering ------------ ------------ ------------- ------------- ------------- Revenues $ 27,305 $ $ 27,305 $ (27,305)(I) $ - Expenses: Operating Expenses 920,494 920,494 (920,494)(I), (N) - Depletion and Amortization 1,496,725 1,496,725 (1,496,725)(I) - Impairment of oil and gas properties 21,502,321 21,502,321 (10,117,867)(I) 11,384,454 Bad Debt Expense - Related Party 1,800,000 1,800,000 1,800,000 General and Administrative 2,261,451 2,261,451 (297,249)(I), (N) 1,964,202 ------------ ------------ ------------ ------------- ------------ Total Expenses 27,980,991 27,980,991 (12,832,335) 15,148,656 ------------ ------------ ------------ ------------- ------------ Loss from Operations (27,953,686) (27,953,686) 12,805,030 (15,148,656) Other (Income) Expense: Equity interest in oil and gas partnerships 1,217,317 1,217,317 1,217,317 Interest Income (239,950) (239,950) 1,408 (I), (N) (238,542) Interest Expense 3,569,992 3,569,992 (3,554,547)(E), (I) 15,445 (J), (N) Gain on Sale of Oil and Gas Interest (1,235,248) (1,235,248) (1,235,248) Loss on Sale of Marketable Securities 1,659,220 1,659,220 1,659,220 ------------ ------------ ------------ ------------- ------------ Total Other (Income) Expense 4,971,331 4,971,331 (3,553,139) 1,418,192 ------------ ------------ ------------ ------------- ------------ Loss Before Minority Interest (32,925,017) (32,925,017) 16,358,169 (16,566,848) Minority Interest 82,260 82,260 (77,459)(I), (N) 4,801 ------------ ------------ ------------ ------------- ------------ Net Loss (32,842,757) (32,842,757) 16,280,710 (16,562,047) Preferred Stock Dividends (4,405,708) (4,405,708) 4,245,836 (I), (K) (159,872) ------------ ------------ ------------ ------------- ------------ Net Loss to Common Stockholders $(37,248,465) $(37,248,465) $ 20,526,546 $(16,721,919) ============ ============ ============ ============= ============ Net Loss Per Share - Basic and Diluted $ (1.06) $ (0.62) $ (0.33) ============ ============ ============ ============ Weighted Average Number of Common Share Outstanding - Basic and Diluted 35,076,435 25,000,000 (A) 60,076,435 (8,752,224)(I), (J), (K) 51,324,211 ============ ============ ============ ============= ============ Endeavour - Pro Forma for the Offering, Historical The Merger Restructuring, NSNV Adjustments and Merger ---------- ----------- -------------- Revenues $ - $ $ - Expenses: Operating Expenses - - Depletion and Amortization 5,181 32,007 (L) 37,188 Impairment of oil and gas properties - 11,384,454 Bad Debt Expense - Related Party - 1,800,000 General and Administrative 130,510 2,094,712 ------------ ----------- ------------- Total Expenses 135,691 32,007 15,316,354 ------------ ----------- ------------- Loss from Operations (135,691) (32,007) (15,316,354) Other (Income) Expense: Equity interest in oil and gas partnerships - 1,217,317 Interest Income - (238,542) Interest Expense - 15,445 Gain on Sale of Oil and Gas Interest - (1,235,248) Loss on Sale of Marketable Securities - 1,659,220 ------------ ----------- ------------- Total Other (Income) Expense - - 1,418,192 ------------ ----------- ------------- Loss Before Minority Interest (135,691) (32,007) (16,734,546) Minority Interest - 4,801 ------------ ----------- ------------- Net Loss (135,691) (32,007) (16,729,745) Preferred Stock Dividends - (159,872) ------------ ----------- ------------- Net Loss to Common Stockholders $ (135,691) $ (32,007) (16,889,617) ============ =========== ============= Net Loss Per Share - Basic and Diluted $ (1.36) $ (0.31) ============ ============= Weighted Average Number of Common Share Outstanding - Basic and Diluted 100,000 2,539,178 (L) 53,963,389 ============ =========== =============
5 ENDEAVOUR INTERNATIONAL CORPORATION (FORMERLY CONTINENTAL SOUTHERN RESOURCES, INC.) NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENTS (A) To record the Offering by the issuance of 25,000,000 shares of common stock for proceeds of $46,000,000, net of placement agent commissions of $2,500,000, financial advisory fees of $1,250,000 and accrued offering expenses of $250,000. (B) To record the repayment of $1,500,000 principal amount of our outstanding convertible notes and the conversion of all remaining convertible notes into common stock. (C) To record the sale of BWP Gas LLC and various other non-core assets to the holders of the Series A Preferred Stock and certain holders of the Series B Preferred Stock as follows: - Cash of $5,589; - Notes receivable of $817,500; - Interest receivables of $223,778; - Accounts receivable of $10,276; - Marketable securities of $719,480; - Oil and gas properties not being amortized of $679,649; - Developed oil and gas interests of $71,037; - Accounts payable of $844,950; - Deferred revenue of $20,143; and - Subscription receivables of $425,000. (D) To record the sale of all the limited partnership units in Knox Miss. Partners, L.P. for $5.0 million. The $5.0 million was payable $500,000 in cash and by the issuance of a $4.5 million short-term note that is secured by a pledge of the limited partnership interest. The assets and liabilities sold included the following: - Cash of $6,470; - Notes receivable of $30,428; - Interest receivable of $1,408; - Oil and gas properties not being amortized of $5,748,578; - Payables for oil and gas interest of $2,018,913; and - Note payable of $3,500. (E) To record the purchase and retirement of 14.1 million shares of common stock and 103,500.07 shares of Series B Preferred Stock from RAM Trading, Ltd. for $5,330,948 in cash, and issuance of 300,000 shares of our common stock issued as compensation for related legal and consulting services. (F) To record the issuance 2,808,824 shares of our common stock upon conversion of all of the outstanding Series C Preferred Stock, and accrued dividends of $165,625, at a conversion price of $1.70 per share, net of deferred expenses of $712,910. 6 ENDEAVOUR INTERNATIONAL CORPORATION (FORMERLY CONTINENTAL SOUTHERN RESOURCES, INC.) NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING STATEMENTS (G) To record the Company's exercise of its call option to buy back the Knox Miss limited partnership interest from RAM Trading Ltd. and issuance of 835,000 shares of common stock in full payment of the option. (H) To record the preliminary allocation of the purchase price of the Merger, including estimated merger costs to property and goodwill. The following is a calculation and allocation of the purchase price to the acquired assets and liabilities based on their relative fair values. Calculation of Purchase Price: Shares of common stock to be issued............. 12,500,000 Common stock price of the Offering.............. $ 2.00 ---------------- Fair value of stock issued...................... 25,000,000 Add: Estimated merger cost...................... 525,000 ---------------- Purchase price $ 25,525,000 ================ Allocation of Purchase Price: Equity.......................................... $ 24,100,000 Working Capital................................. (1,570,745) Intangible assets............................... 8,925,000 Goodwill........................................ 16,745,745
The purchase price allocation is subject to change in the fair value of the acquired's working capital on the effective date and the actual merger costs incurred. These items will not be known until the effective date of the merger. Management does not believe the final purchase price allocation will differ materially from the preliminary purchase price allocation. (I) To reverse the revenues and expenses of BWP Gas LLC and the other non-core assets sold. (J) To reverse the historical interest expense of the convertible notes that were retired or converted. (K) To reverse the historical preferred stock dividends of the Series A, Series B and Series C preferred stock that were converted to common or surrendered as payment for BWP Gas LLC and other non-core assets. (L) To adjust the historical amortization of the intangible asset of NSNV to the amortization of the fair value of the intangible asset recorded in the purchase price allocation over its useful life of 10 years. (M) To reverse the prepaid legal fees related to the Merger incurred in 2003 by CSOR. (N) To reverse the expenses of Knox Miss-Partners, L.P. -----END PRIVACY-ENHANCED MESSAGE-----