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.