UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM
8-K
AMENDMENT NUMBER 1
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: February 1, 2000
Commission File Number: 000-10056
ADAIR INTERNATIONAL OIL AND GAS, INC.
(A Texas Corporation)
I.R.S. Employer Identification No. 74-2142545
3000 Richmond, Suite 100
Houston, Texas 77098
Telephone: (713) 621-8241
_____________________
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND PROFORM INFORMATION NOT PREVIOUSLY
SUBMITTED WITH FORM 8-K.
On February 1, 2000, Adair International Oil and Gas, Inc. (the Company)
acquired 100% of the outstanding common stock of Partners In Exploration, Inc.
(PIE). The terms and conditions of the stock exchange were determined by the
parties through arms length negotiations.
ITEM 7 (A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
WITH
INDEPENDENT AUDITORS' REPORT
<PAGE>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
INDEX TO COMBINED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report for December 31, 1999 and 1998 . . . . . . .F-2
Combined Balance Sheets at December 31, 1999 and 1998 . . . . . . . F-3
Combined Statements of Operations for the Years Ended
December 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . F-4
Combined Statements of Changes in Stockholders' Equity (Deficit)
for the Years Ended December 31, 1999 and 1998. . . . . . . . . F-5
Combined Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998 . . . . . . . . . . . . . . . . . . . . .F-6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Partners in Exploration, Inc. and Affiliates
We have audited the accompanying combined balance sheets of Partners in
Exploration, Inc. and Affiliates as of December 31, 1999 and 1998 and the
related combined statements of operations, changes in stockholders' equity
(deficit) and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Partners in
Exploration, Inc. and Affiliates as of December 31, 1999 and 1998 and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company's significant operating losses and its working
capital deficit and stockholders' deficit raise substantial doubt about its
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Jackson & Rhodes P.C.
Dallas, Texas
March 20, 2000 (except as to Note 3, which is as of
April 2, 2000)
F-2
<PAGE>
<TABLE>
<CAPTION>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
1999 1998
---------- ---------
<S> <C> <C>
Current assets:
Cash $ 11,954 $ 31,159
Equipment:
Office equipment 14,123 14,798
Software 56,525 94,564
Other 64,342 96,695
---------- ---------
134,990 206,057
Less accumulated depreciation (65,595) (52,461)
---------- ---------
69,395 153,596
---------- ---------
Other assets 6,509 6,509
---------- ---------
$ 87,858 $191,264
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 286,294 $ 25,058
Commitments and contingencies (Note 2) - -
Stockholders' equity (deficit):
Common stock, $.10 par value: 10,000,000 shares authorized;
4,200,000 and 612,000 shares issued and outstanding 420,000 61,200
Partners' capital - 166,206
Accumulated deficit (618,436) (61,200)
---------- ---------
Total stockholders' equity (deficit) (198,436) 166,206
---------- ---------
$ 87,858 $191,264
========== =========
See accompanying notes to financial statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------- ----------
<S> <C> <C>
Revenues $ 651,593 $1,578,371
---------- ----------
Expenses:
Operating 177,049 96,780
Salaries and wages 442,496 840,955
Depreciation 66,376 36,971
General and administrative 206,788 464,325
---------- ----------
892,709 1,439,031
---------- ----------
Net income (loss) $(241,116) $ 139,340
========== ==========
See accompanying notes to financial statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
COMBINED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1999 AND 1998
Common Stock
------------------------ Partners' Accumulated
Shares Amount Capital Deficit Total
------------ ---------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 612,000 $ 61,200 $ 42,379 $ (61,200) $ 42,379
Partner's contributions - - 112,539 - 112,539
Partners' draws - - (128,052) - (128,052)
Net income - - 139,340 - 139,340
------------ ---------- ------------- ----------- ----------
Balance, December 31, 1998 612,000 61,200 166,206 (61,200) 166,206
Partners' draws - - (123,526) - (123,526)
Issuance of common stock for net assets of
PIE, LLC and IXR, LLC (Note 1) 3,588,000 358,800 (42,680) (316,120) -
Net loss - - - (241,116) (241,116)
------------ ---------- ------------- ----------- ----------
Balance, December 31, 1999 4,200,000 $ 420,000 $ - $ (618,436) $(198,436)
============ ========== ============= =========== ==========
See accompanying notes to financial statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(241,116) $ 139,340
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 66,376 36,971
Changes in operating assets and liabilities:
Accounts receivable - 59,220
Other assets - (6,509)
Accounts payable 261,236 -
Pension liability - (68,253)
---------- ----------
Net cash provided by operating activities 86,496 160,769
---------- ----------
Cash flows from investing activities:
Purchase of equipment (11,391) (68,434)
---------- ----------
Cash flows from financing activities:
Partners' draws (94,310) (128,052)
Partners' contributions - 22,145
---------- ----------
Net cash used in financing activities (94,310) (105,907)
---------- ----------
Net increase (decrease) in cash and cash equivalents (19,205) (13,572)
Cash and cash equivalents, beginning of year 31,159 44,731
---------- ----------
Cash and cash equivalents, end of year $ 11,954 $ 31,159
========== ==========
Non-cash transactions:
During 1998, the partners contrbuted equipment at a net book value of
$91,153.
During 1999, equipment with a net book value of $29,216 was distributed to
a partner.
See accompanying notes to financial statements.
</TABLE>
F-6
<PAGE>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Partners In Exploration, Inc., (PIE, Inc. or the "Company") was
incorporated on January 28, 1997 in the State of Texas. PIE, Inc. was
capitalized using the assets of a former oil and gas consulting partnership
known as Exploration Consultants, formed by Boyce and Robinson in October
of 1996. PIE, Inc. continued the pursuit of providing advanced exploration
consulting services for the oil and gas industry which had been previously
provided by Exploration Consultants. A key business strategy followed by
PIE, Inc. included receiving direct equity participation in various oil and
gas exploration ventures by providing "state of the art" in geotechnical
consulting services. Consulting clients of PIE, Inc. included, Vintage
Petroleum Yemen, Inc., Globex Exploration, Inc., and Parker and Parsley
Petroleum Company and ROC Oil Company.
In February 1998, a sister company, Partners In Exploration, LLC (PIE, LLC)
was formed as a limited liability company in the State of Nevada to
participate in a major joint venture under development with Pioneer Natural
Resources, USA, IncThis joint venture was designed to explore, drill and
develop large natural gas prospects on the South Louisiana coastal
transition zone. The joint venture was formalized as of July of 1997, with
Pioneer allocating an initial capital investment of $35 million in
geological and geophysical data to a defined Area of Mutual Interest, while
PIE, LLC provided technical project management for an annual fee and
received a 5% carried working interest in those prospects jointly
developed. During 1998, PIE, LLC successfully completed the terms and
conditions of the joint venture agreement turning over an exploration
program to Pioneer that included twenty (20) wildcat wells, including
leasing and contingent appraisal drilling programs based on PIE, LLC's
prospects. Following a corporate restructuring at Pioneer which was
intended to reduce leverage and focus on existing core operations, Pioneer
decided not to pursue the PIE, LLC exploration program, and the joint
venture was dissolved, leaving PIE, LLC with certain capital assets in the
form of computer workstations, technical software, furniture and fixtures
and defined unleased prospects.
In March of 1998, a subsequent sister corporation, International
Exploration Resources, LLC was incorporated in Nevada to conduct certain
exploration consulting activities in the oil and gas business which were
unrelated to those activities undertaken by PIE, LLC or PIE, Inc. During
1998, a small amount of consulting work was completed on behalf of several
clients under this company name.
F-7
<PAGE>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Description of Business (Continued)
In July of 1999, PIE, LLC entered into a joint venture agreement with Adair
International Oil and Gas, Inc. ("Adair") to pursue an exploration project
in Yemen which had been developed by PIE, Inc. in October of 1999, PIE and
Adair jointly signed a Memorandum of Understanding ("MOU") with the
government of Yemen on Block 20. This MOU defined the exploration work
program commitments, the basic economic sharing terms and secured an
exclusive time period to negotiate a final Production Sharing Agreement for
this major exploration project. Subsequently, discussions were opened
between PIE and Adair to consider a possible merger of PIE with Adair.
Those specific merger negotiations were unsuccessful, but principal
partners Richard G. Boyce and Lloyd D. Robinson decided to dissolve their
associations and go separate ways in business. As a result, through a
negotiated settlement between Boyce and Robinson effective October 31,
1999, the assets of PIE - LLC, PIE - Inc. and IXR - LLC were equitably
divided and one half of the assets derived from those individual businesses
were allocated to Boyce under a Settlement Agreement.
On November 1, 1999 a joint consent resolution of all stockholders and
directors of PIE, Inc. declared that all outstanding shares previously held
were cancelled. The Corporation, was subsequently authorized to issue
4,200,000 shares of stock in consideration of the assets retained under the
Settlement Agreement.
By this resolution the above distribution constitutes all of the
outstanding common stock which is authorized by Partners In Exploration,
Inc.
Principles of Combination
The combined financial statements include the accounts of the Company and
its affiliated companies. All significant intercompany balances and
transactions are eliminated in combination.
Use of Estimates and Assumptions
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 reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
F-8
<PAGE>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation
The Company's financial statements have been presented on the basis that it
is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty. The Company is reporting a net loss for 1999
of $241,116 and has a deficit in working capital of $274,340 and a
stockholders' deficit of $198,436 as of December 31, 1999. The following is
a summary of management's plan to raise capital and generate additional
operating funds.
Subsequent to December 31, 1999, the Company has been acquired by Adair
International Oil and Gas, Inc. ("Adair") (see Note 3). See Note 3
regarding the Company's partnership with Occidental Yemen Sabatain, Inc.
and Saba Yemen Oil and Gas, Limited in the Republic of Yemen.
Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of
three months or less when purchased, to be cash equivalents.
Furniture and Equipment
Furniture and equipment is recorded at cost. Depreciation is computed
principally by the straight-line method based on the estimated useful life
of three years. Expenditures for normal maintenance and repairs are charged
to expense
Income Taxes
The financial statements include only those assets, liabilities and results
of operations which relate to the business of the Company. The statements
do not include any assets, liabilities, revenues or expenses attributable
to the partners' individual activities.
No Federal or state income taxes are payable by the Company, and none have
been provided in the accompanying financial statements. The partners are to
include their respective share of Company profits or losses in their
individual tax returns.
Net income or loss as determined for income tax purposes is allocated among
the partners based upon the provisions in the Company agreement.
F-9
<PAGE>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
2. COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases its office space under terms of an operating lease.
Minimum lease payments required under the operating lease are as follows:
2000 $53,900
2001 53,900
2002 53,900
2003 13,475
Rent expense amounted to $49,882 and $36,701 for 1999 and 1998,
respectively.
Revenue Concentration
Following is a summary of major customers by year, as a percentage of total
revenues:
1999 1998
---- ----
Company A 54% *
Company B 15% *
Company C 12% 16%
Company D 11% 19%
Company E * 60%
* less than 10%
Concentration of Credit Risk
The Company invests its cash primarily in deposits with major banks.
Certain deposits have been in excess of federally insured limits. The
Company has not incurred losses related to its cash.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
Disclosures about Fair Value of Financial Instruments. The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. The fair value of
financial instruments classified as current assets or liabilities including
cash and cash equivalents and accounts payable approximate carrying value
due to their short-term maturity.
F-10
<PAGE>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
2. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Uncertainty Due to the Year 2000 Issue
The Company did not and does not expect to encounter any significant matter
which will effect its operations arising from the so called Y2K or Year
2000 problem.
3. SUBSEQUENT EVENTS
In December of 1999, Adair International Oil and Gas, Inc. ("Adair") made
an offer to the shareholders of PIE, Inc. for a stock-per-stock
reorganization whereby Adair will transfer 4,200,000 shares of Adair common
stock for all the shares of PIE, Inc. presently outstanding, which is
4,200,000 shares. On February 1, 2000 the directors and shareholders of PIE
accepted this offer and PIE, Inc. became a wholly owned subsidiary of
Adair.
In February, subsequent to this reorganization, PIE, Inc. filed for a name
change with the State of Texas and has received notification that the
corporation is now authorized to conduct business under the name of Adair
Exploration, Inc., a wholly owned subsidiary of Adair International Oil and
Gas, Inc.
On March 7, 2000, Adair agreed to issue 100,000 shares of Adair common
stock, valued at $140,000, to a third party, as payment for certain data
and expenses related to the Yemen project. This fee was contingent upon the
Company's ability to secure a partner for the project.
On April 2, 2000, Adair Yemen Exploration Limited (a wholly owned affiliate
of Adair International Oil and Gas, Inc.) and partners Occidental Yemen
Sabatain, Inc. and Saba Yemen Oil and Gas, Limited signed a Production
Sharing Agreement with the Republic of Yemen.
4. ACCOUNTING PRONOUNCEMENTS
SFAS 130
Statement of Financial Accounting Standards (SFAS) 130, "Reporting
Comprehensive Income," establishes standards for reporting and display of
comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS 130 requires that all items that are required
to be recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. The pronouncement
has had no effect on the Company's financial statements.
F-11
<PAGE>
PARTNERS IN EXPLORATION, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
4. ACCOUNTING PRONOUNCEMENTS (CONTINUED)
SFAS 131
SFAS 131, "Disclosure About Segments of a Business Enterprise," establishes
standards for the way that public enterprises report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial
statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS 131 defines operating segments as components of an
enterprise about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance. This accounting
pronouncement has had no effect on the Company's financial statements for
the periods presented.
SFAS 132
Statement of Financial Accounting Standards (SFAS) 132, "Employers'
Disclosure about Pensions and Other Postretirement Benefits," revises
standards for disclosures regarding pensions and other postretirement
benefits. It also requires additional information on changes in the benefit
obligations and fair values of plan assets that will facilitate financial
analysis. This statement does not change the measurement or recognition of
the pension and other postretirement plans. The financial statements are
unaffected by implementation of this new standard.
SFAS 133
Statement of Financial Accounting Standards (SFAS) 133, "Accounting for
Derivative Instruments and Hedging Activities,: establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively referred
to as derivatives) 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. If
certain conditions are met, a derivative may be specifically designated as
(a) a hedge of the exposure to changes in the fair value of a recognized
asset or liability or an unrecognized firm commitment, (b) a hedge of the
exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available-for-sale security,
or a foreign-currency-denominated forecasted transaction. Because the
Company has no derivatives, this accounting pronouncement has no effect on
the Company's financial statements.
F-12
<PAGE>
ITEM 7 (B) PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated statement of operations for the previous
fiscal years of Adair International Oil and Gas, Inc. (the Company) and Partners
In Exploration, Inc. (PIE) which ended on May 31, 1999 and December 31, 1999,
respectively. In accordance with Regulation S-X 210.11-02 (b)(8.7)(c)(3), it
was deemed not practicable to bring the acquired entity's statement to within 93
days of the Company's year end. It was determined that the prior fiscal year
pro forma information would not be materially different had information been
extracted from the records of PIE and its affiliates on the same chronological
basis. The interim pro forma financial information was deemed not practicable
to present on the same chronological basis as a portion of such information was
presented in the previous fiscal year information. As indicated in Note 1 to the
combined financial statements of Partners In Exploration, Inc. and Affiliates
(Item 7(A), the business that was acquired evolved through several entities and
a division of assets and liabilities in one case. It was these circumstances
that constitute the primary determination that chronological restatement of the
acquired business coincident with that of the Company would not be practicable.
The pro forma statements of operations have been prepared to illustrate the
estimated effect of the acquisition by the Company of 100% of the outstanding
stock of PIE. The two companies entered into an agreement on December 31, 1999,
with an effective date of February 1, 2000, whereby the Company would acquire
all of the outstanding common shares of PIE which totaled 4,200,000 shares for
4,200,000 shares of restricted common stock of the Company. The pro forma
statements do not reflect any anticipated costs savings from the acquisition, or
any synergies that are anticipated to result from the acquisition. The pro
forma statement of operations give pro forma effect to the acquisition as if it
had occurred at the beginning of the last fiscal year of the Company. The pro
forma statements of operations do not purport to be indicative of the results of
operations of the Company that would have actually been obtained had such
transaction been completed as of the assumed date and for the period presented,
or which may be obtained in the future. The pro forma adjustments are described
in the accompanying notes and are based upon available information and certain
assumptions that the Company believes are reasonable. The pro forma statements
of operations should be read in conjunction with the separate historical
consolidated financial statements of each company and the notes thereto.
A preliminary allocation of the purchase price has been made to major categories
of assets and liabilities in the accompanying pro forma statement of operations
based on available information. The actual allocation of purchase price and the
resulting effect on income from operations may differ significantly from the pro
forma amounts included herein. These pro forma adjustments represent the
Company's preliminary determination of purchase accounting adjustments and are
based upon available information and certain assumptions that the company
believes to be reasonable. Consequently, the amounts reflected in the pro forma
statements of operations are subject to change, and the final amounts may differ
substantially.
<PAGE>
<TABLE>
<CAPTION>
ADAIR INTERNATIONAL OIL & GAS, INC AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ending on the Dates Indicated
(unaudited)
Adair Int'l Partners In
Oil & Gas Exploration Pro Forma
May 31, December 31, Adjustment Pro Forma
1999 1999 (1) Below Consolidated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 33,008 $ 651,593 $ -- $ 684,601
Operating expenses
Operating expenses $ 13,966 $ 177,049 $ -- 191,015
Depreciation, depletion,
and amortization 60,435 66,376 17,141 143,952
Interest expense 2,268 -- -- 2,268
General and
Administrative expenses 1,396,887 649,284 -- 2,046,171
------------ ------------ ------------ ------------
Total operating expenses . 1,473,556 892,709 17,141 2.383.406
------------ ------------ ------------ ------------
Operating loss (1,440,548) (241,116) (17,141) (1,698,805)
Loss on sale of assets (68,910) -- (68,910)
------------ ------------ ------------ ------------
Net loss before taxes (1,509,458) (241,116) (17,141) (1,767,715)
Federal income tax expense -- -- -- --
------------ ------------ ------------ ------------
Net loss $(1,509,458) $ (241,116) (17,141) $ (1,767,715)
============ ============ ============ ============
Net loss per common share:
Basic and diluted $ (.03) $ (.01) $ -- $ (.03)
------------ ------------ ------------ ------------
<FN>
(1) To record additional depreciation for the period prior to date of
acquisition.
</TABLE>
<PAGE>
ADAIR INTERNATIONAL OIL & GAS, INC AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL DATA
Note 1. Accounting Method for the Acquisition
The acquisition of Partners in Exploration, Inc. (PIE) was accounted for under
the purchase method of accounting. Adair International Oil & Gas, Inc. (the
Company) is considered the acquiring company for accounting purposes under this
method and its operations are considered the historical operations of the
reporting entity. Under purchase accounting, the total purchase price was
allocated to the tangible and intangible assets and liabilities of PIE upon
their respective fair values as of the closing date based upon evaluations and
other analyses. The estimated purchase price and preliminary adjustments to the
historical book value of PIE are as follows:
Purchase price based on value of common stock issued $ 5,081,538
Add: Book value of net liabilities acquired 230,735
-----------
Purchase price allocable to assets acquired $ 5,312,273
===========
Allocation of purchase price:
Geophysical data and intellectual property $ 5,220,000
Software, equipment, and office furniture and fixtures 92,273
-----------
$ 5,312,273
============
Note 2. Depreciation Adjustments
Depreciation was increased by $ 17,141 and $ 1,825 for the previous fiscal year
and the nine months ending February 29, 2000, respectively, as a result of the
purchase adjustments.
Note 3. Issuance of Shares Pursuant to Acquisition
The 4,200,000 shares issued in the acquisition have been assumed to have been
issued at the beginning of each period presented.
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 thereunto duly authorized.
ADAIR INTERNATIONAL OIL AND GAS, INC.
By /s/ John W. Adair Date: April 14, 2000
------------------------------------
John W. Adair, Chairman and Director
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FDS for Partners in Exploration, Inc. - 8K filing by Adair International Oil and
Gas, Inc.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 11954
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11954
<PP&E> 134990
<DEPRECIATION> (65595)
<TOTAL-ASSETS> 87858
<CURRENT-LIABILITIES> 286294
<BONDS> 0
0
0
<COMMON> 420000
<OTHER-SE> (618436)
<TOTAL-LIABILITY-AND-EQUITY> 87858
<SALES> 651593
<TOTAL-REVENUES> 651593
<CGS> 0
<TOTAL-COSTS> 892709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (241116)
<INCOME-TAX> 0
<INCOME-CONTINUING> (241116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (241116)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
