UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-QSB
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarter ended February 29, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
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
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 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 [ ]
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date: with no par value Common Stock
65,171,693 shares outstanding on February 29, 2000.
Transitional small business disclosure format: Yes [ ] No [ X ]
1
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ADAIR INTERNATIONAL OIL AND GAS, INC.
REPORT ON FORM 10-QSB
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2000
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 . .4
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999 . .5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 12
ITEM 2. CHANGE IN SECURITIES . . . . . . . . . . . . . . . . . . 12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK . . . . . . . . . . . . . . . . . . . .12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .12
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2
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PART I.
ITEM 1. FINANCIAL STATEMENTS
ADAIR INTERNATIONAL OIL AND GAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
2000 1999
----------- -----------
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS . . . . . . . . . . . $ 84,647 $ --
ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . -- 3,864
NOTE RECEIVABLE, NET . . . . . . . . . . . . . . . -- 188,500
----------- -----------
TOTAL CURRENT ASSETS . . . . . . . . . . . 84,647 192,364
----------- -----------
PROPERTY AND EQUIPMENT
OIL AND GAS PROPERTIES AND EQUIPMENT . . . . . 3,000,000 7,287,043
UNPROVED OIL AND GAS PROPERTIES . . . . . . . . -- 55,202
GEOPHYSICAL SOFTWARE AND EQUIPMENT . . . . . . . 257,986 7,399
----------- -----------
3,257,986 7,349,644
LESS ACCUMULATED DEPRECIATION AND DEPLETION . . (88,522) (4,253,307)
----------- -----------
TOTAL PROPERTY AND EQUIPMENT . . . . . . 3,169,464 3,096,337
----------- -----------
OTHER ASSETS:
GEOPHYSICAL DATA AND INTELLECTUAL PROPERTY . . . 5,226,509 --
DEPOSITS . . . . . . . . . . . . . . . . . . . . . . 6,726 375
----------- -----------
TOTAL OTHER ASSETS . . . . . . . . . . . . 5,233,235 375
----------- -----------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $ 8,487,346 $ 3,289,076
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
BANK OVERDRAFTS . . . . . . . . . . . . . . . . . $ -- $ 37,969
ADVANCES BY OFFICER . . . . . . . . . . . . . . . 82,007 --
ACCOUNTS PAYABLE . . . . . . . . . . . . . . . . . 16,656 124,575
ACCRUED LIABILITIES. . . . . . . . . . . . . . . . 351,348 127,043
TAXES PAYABLE . . . . . . . . . . . . . . . . . . 36,987 --
----------- -----------
TOTAL CURRENT LIABILITIES . . . . . . . . 486,998 319,587
----------- -----------
STOCKHOLDERS' EQUITY:
COMMON STOCK, WITH NO PAR VALUE PER SHARE. . 18,428,441 11,810,898
RETAINED DEFICIT. . . . . . . . . . . . . . . . . (10,428,093) (8,841.409)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . 8,000,348 2,969,489
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . $ 8,487,346 $ 3,289,076
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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ADAIR INTERNATIONAL OIL AND GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDING ENDING ENDING ENDING
FEBRUARY 29, FEBRUARY 28, FEBRUARY 29, FEBRUARY 28,
2000 1999 2000 1999
----------- ----------- ----------- ------------
REVENUES:
OIL AND GAS SALES. . .$ -- $ 8,788 $ -- $ 33,009
COSTS AND EXPENSES
LEASE OPERATING EXPENSE $ -- $ 2,722 -- 13,966
DEPRECIATION, DEPLETION,
AND AMORTIZATION . . . 8,856 19,078 10,978 57,234
INTEREST EXPENSE . . . 2,950 -- 4,337 --
GENERAL AND
ADMINISTRATIVE EXPENSES 457,847 163,414 1,127,981 1,027,878
----------- ----------- ----------- -----------
TOTAL COSTS AND
EXPENSES . . . 469,653 185,214 (1,143,296) 1,099,078
----------- ----------- ----------- -----------
OPERATING LOSS BEFORE
INCOME TAXES . . . . . . (469,653) (176,426) (1,143,296) (1,066,069)
FEDERAL INCOME TAX EXPENSE -- -- -- --
----------- ----------- ----------- -----------
NET LOSS . . . . . . . . $ (469,653) $ (176,426) $(1,143,296) $(1,066,069)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE:
BASIC AND DILUTED . . . $ (.01) $ (.00) $ (.02) $ (.03)
----------- ----------- ----------- -----------
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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ADAIR INTERNATIONAL OIL AND GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
(UNAUDITED)
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS . . . . . . . . . . . . . . . . . . . . . $(1,143,296) $(1,066,069)
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION . . . . . . . . . . 19,078 57,231
CHANGE IN OPERATING ASSETS AND LIABILITIES . . (63,605) 79,889
ISSUANCE OF STOCK FOR EXPENSES AND OBLIGATIONS 674,336 490,166
----------- -----------
NET USED BY OPERATING ACTIVITIES . . . . . (513,487) (438,783)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES . . . . . . -- --
----------- -----------
NET CASH FLOWS FROM INVESTING ACTIVITIES -- --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
INCREASE IN NOTE PAYABLE . . . . . . . . . . . . 51,627
PROCEEDS FROM THE SALE OF COMMON STOCK. . . . 544,768 365,184
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 596,395 365,184
----------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . 82,908 (73,599)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,739 35,630
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD. . . . $ 84,647 $ (37,969)
=========== ===========
CASH PAID DURING THE PERIOD FOR:
INTEREST. . . . . . . . . . . . . . . . . . . . . . $ 4,337 $ --
INCOME TAXES . . . . . . . . . . . . . . . . . . . $ -- $ --
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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ADAIR INTERNATIONAL OIL AND GAS, INC.
February 29, 2000
Note 1. Summary of Significant Accounting Policies
- -----------------------------------------------------------
Basis of Interim Presentation -- The consolidated financial statements include
the accounts of Adair International Oil and Gas, Inc. and its wholly owned
subsidiaries, Adair Exploration, Inc. and Adair Colombia Oil and Gas, S.A. All
material intercompany balances and transactions have been eliminated in
consolidation.
Organization -- Adair International Oil and Gas, Inc., (formerly Roberts Oil and
Gas, Inc.)("the Company") was incorporated under the laws of the state of
Texas on November 7, 1980. On June 16, 1997, a 51% interest in the Company's
outstanding common stock was acquired by Adair Oil and Gas International
of Canada, a Bahamian Corporation, and the Company name was changed to Adair
International Oil and Gas, Inc. The 51% common stock of Adair Oil and Gas
International of Canada was subsequently reissued to the individual
shareholders. Since inception the Company's primary purpose has been the
exploration, development and production of oil and gas properties in the
United States. During the year ended May 31, 1997, as described in Note 2, the
Company acquired properties located in Colombia. With that acquisition, the
primary focus of the Company has shifted to the development of natural gas fired
power generation projects. Effective February 1, 2000, the Company acquired all
of the outstanding stock of Partners In Exploration, Inc. (PIE). The
acquisition provides "state of the art" 3-D seismic works stations and technical
support not previously available in house.
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.
Accounts receivable -- Accounts receivable resulted from revenues attributable
to non-operating interests in domestic oil and gas properties which were sold
in the year ending May 31, 1999.
Note receivable -- The note receivable is the result of the sale of stock
for a note and is due from a financial advisory company. The note is in
default and has been placed with a collection agency. Management elected to
write off the note in the previous fiscal year.
Oil and Gas Properties -- The Company follows the full cost method of
accounting for its oil and gas properties. Accordingly, all costs associated
with acquisition, exploration and development of oil and gas reserves,
including directly related overhead costs, are capitalized. All capitalized
costs of oil and gas properties, including the estimated future costs to develop
proved reserves, are amortized on the unit-of-production method using estimates
of proved reserves. Investments in unproved properties and major
development projects are not amortized until impairment occurs. If the
results of an assessment indicate that the properties are impaired, the
amount of the impairment is added to the capitalized costs to be amortized.
6
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ADAIR INTERNATIONAL OIL AND GAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 2000
In addition, the capitalized costs are subject to a "ceiling test," which
basically limits such costs to the aggregate of the "estimated present value,"
discounted at a 10-percent interest rate of future net revenues from proved
reserves, based on current economic and operating conditions, plus the lower of
cost or fair market value of unproved properties. Depletion of oil and
gas properties is computed using all capitalized costs and estimated future
development and abandonment costs, exclusive of oil and gas properties not
yet evaluated, on a unit of production method based on estimated proved
reserves.
Property and equipment -- The cost of other categories of property and
equipment are capitalized at cost and depreciated using the "straight-line"
method over their estimated useful lives for financial statement purposes
as follows:
Furniture and office equipment 7 years
Computer software and equipment 5 years
Depreciation and amortization expense for the nine months ending February 29,
2000 and 1999 were $19,078 and $57,234, respectively.
Geophysical data and intellectual property - The carrying value of the
geophysical data and intellectual property acquired incident to the acquisition
of Partners In Exploration, Inc. was determined as described in Form 8-K dated
February 1, 2000, and as amended. It is the policy of the Company to carry
these as other assets until such time as the Company is engaged in an
exploration activity or under contract for geophysical analysis which utilizes
specific proprietary data. At such time the asset would be classified as either
costs as those incurred under the full cost method of accounting for oil and gas
properties or costs incident to geophysical analysis contracts. As described
below, the Company signed a production sharing agreement subsequent to the
balance sheet date to which a significant portion of the acquired geophysical
data and intellectual property will be utilized.
Income Taxes -- The Company accounts for income taxes pursuant to the asset and
liability method of computing deferred income taxes. Deferred tax assets
and liabilities are established for the temporary differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities at enacted tax rates expected to be in effect when such amounts are
realized or settled. When necessary, valuation allowances are established to
reduce deferred tax assets to the amount expected to be realized. No
provision is made for current or deferred income taxes because the Company has
an excess net operating loss carryforward.
7
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ADAIR INTERNATIONAL OIL AND GAS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 29, 2000
Note 2. Commitments and Contingencies
- --------------------------------------------
Environmental Contingencies -- The oil and gas industry is subject to
substantial regulation with respect to the discharge of materials into the
environment or otherwise relating to the protection of the oil and gas are
regulated by various governmental agencies with respect to the storage and
transportation of the hydrocarbons, the use of facilities for processing,
recovering and treating the hydrocarbons and the clean up of the sites of
the wells. Many of these activities require governmental approvals before
they can be undertaken. The costs associated with compliance with the
applicable laws and regulations have increased the cost associated with the
planning, designing, drilling, installing, operating and plugging or
abandoning of wells. To the extent that the company owns an interest in
a well it may be responsible for costs of environmental regulation compliance
even well after the plugging or abandonment of that well. Management
believes that the effect of any environmental contingency will not have a
material impact on the Company's financial position.
Note 3. Nonmonetary Transactions
- --------------------------------------
During the three months ended February 29, 2000, the Company issued 9,436,325
shares of common stock valued at $5,813,932. Included in these shares were
3,518,101 shares valued at $312,500 which were issued to three officers and
directors of the Company in payment of compensation accrued during the past two
fiscal years. Included in the shares were 4,200,000 shares valued at $5,081,538
for the acquisition of PIE as described in Note 1 - Organization.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
condensed consolidated financial statements and related notes mentioned
elsewhere in this report.
Information Regarding Factors Affecting Forward-looking Statements
- -----------------------------------------------------------------------
The Company is including the following cautionary statement in this Form 10-QSB
to make applicable and take advantage of the safe harbor provision of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
concerning plans, objectives, goals, strategies, future events or performance
and underlying assumptions and other statements which are other than statements
of historical facts. Certain statements in this Form 10-QSB are forward-looking
statements. Words such as "expects," "anticipates," "estimates" and similar
expressions are intended to indentify forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks and uncertainties
are set forth below. The Company's expectations, beliefs and projections are
expressed in good faith and are believed by the Company to have a reasonable
basis, including without limitation, management's examination of historical
operating trends, data contained in the Company's records and other data
available from third parties, but there can be no assurance that management's
expectation, believes or
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
projections will result, be achieved, or be accomplished. In addition to other
factors and matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause material adverse affects
on the Company's financial condition and results of operations: the ability of
the Company to maintain its rights in its oil and gas interests and properties;
the ability of the Company to obtain acceptable forms and amounts of financing
to fund planned prospect acquisition, exploration, development, production,
marketing and other expansion efforts; the market for electrical power under
de-regulation; the global market for oil and gas; the political climate in
nations where the Company may have interests and properties; the ability to
engage the services of suitable energy industry service providers; competitive
factors; and the effect of business interruption due to political unrest. The
Company has no obligation to update or revise these forward-looking statements
to reflect the occurrence of future events or circumstances.
Liquidity and Capital Resources
- ----------------------------------
Cash used by operations during the nine months ended February 29, 2000 was
$513,487. To meet working capital requirements the Company sold additional
common shares of stock and received cash advances totaling $82,007 from a
Company officer. As indicated below, the plan of the Company is to conclude the
projects that are currently in progress. Management believes these efforts will
generate working capital sufficient to continue operations and develop other
ongoing projects. There is no assurance that the Company will be successful in
these efforts.
The Company incurred net operating losses for the years ending May 31, 1999
and 1998 and currently has negative working capital. Operating expenses and
other financial obligations have been met, primarily, by the issuance of Company
stock and cash advances by a Company officer. There is no assurance that the
Company will be able to continue to sell stock to fund operations. Management
has a plan to reverse these conditions. The ability of the Company to continue
as a going concern is dependent upon their ability to carry out the plan
described below.
The Company has adopted a new business strategy to diversify its markets to
reverse losses such as those incurred in the past few periods. With the decline
in the oil and gas market prior to the current increase in oil and gas prices
and the deregulation of the natural gas industry, management has proceeded with
the development of natural gas fired power generation projects. The Company
looks for the availability of land, power grid, accessibility of water and
natural gas when analyzing potential sites. The Company has identified four
sites located on Native American Reservations in the Western United States. If
successful in developing sites, the Company expects to receive developer fees,
carried royalty interests, and the right to invest as an equity partner.
On July 8, 1999 the Company and a major power developer signed an agreement with
the Torres Martinez tribe for one of the sites mentioned above for an exclusive
option to develop a 540 megawatt facility. The agreement calls for the option
to lease property and to conduct a due diligence and feasibility study on the
project. The Company is in the final phases of negotiating the terms and
conditions regarding this facility.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
The Company has positioned itself to participate in the resurgence of oil and
gas exploration, consistent with a diversified energy company. On April 2,
2000, the Company, through its wholly owned subsidiary Adair-Yemen Exploration
LTD. together with partners Occidental Yemen Sabatain Inc. and Saba Yemen Oil
Company Limited, signed a production sharing agreement with the Ministry of Oil
and Mineral Resources to explore for oil on Block 20 in the Republic of Yemen.
Working interest held in the project are 30% by the Company, 50% by Occidental,
and 20% by Saba. The working interests of the group are subject to a 5% carried
interest held by the Yemen Company for Investments in Oil and Minerals in the
concession area. Block 20 is adjacent to the areas operated by Yemen Hunt Oil
Company which is currently producing 160,000 barrels of oil per day. Pipelines
and export facilities are already in place to afford the opportunity to bring
any newly discovered oil in Block 20 to market within short time frames and at
minimal cost. The Company has been named the operator during the exploration
phase because of its comprehensive knowledge and experience in the block. Mr.
Richard G. Boyce, president of Adair Exploration, Inc. (formerly Partners In
Exploration, Inc.), has extensive experience in Yemen and was formerly
exploration manager of Yemen Hunt Oil Company. The Company intends to implement
an aggressive commitment by the group to utilize "state of the art" oil and gas
exploration technology. The plan includes acquisition of 3D seismic focused on
six prospects currently mapped with existing 2D seismic data, followed by the
drilling of two (2) exploratory wells in the first exploration period and an
additional four (4) exploration wells in the optional second exploration period.
This represents a minimum financial commitment of $16.3 million dollars during
the six (6) year exploration period, if the group elects to complete the second
exploration period.
The Company has been developing a unique site located in the Aden Free Zone Port
to meet the needs of Yemen's number one imported commodity: sugar. This
development is in conjunction with the Company's joint venture partner, Arkel
Sugar, Inc (Arkel). Arkel, headquartered in Baton Rouge, Louisiana, designs,
builds and operates sugar refineries worldwide. The project includes
co-generation power production consistent with Company strategy in the power
generation market. On December 14, 1999, approval for a $567,000 grant by the
Trade Development Authority of the U. S. Government was obtained. The grant is
to conduct the feasibility study for a sugar refinery and co-generation facility
in the Aden Free Trade Zone, Republic of Yemen. Arkel Sugar International will
complete the final feasibility study on behalf of the Company and its Yemen
joint venture partner, Dhankwan Petroleum and Mineral Services Company LTD.
(DPMC).
In its continuing efforts to acquire equity partners, to make private
placements, and to seek both private and government funding for its projects,
the Company has concluded two agreements. In August, 1999, the Company obtained
a listing for its stock on the Frankfurt Stock Exchange. In March, 2000, a
listing was acquired on the Hamburg Exchange, the most traditional and modern
exchange in Germany. Management believes that these markets are more
conservative than some others and it is anticipated that these markets will
decrease the number of day traders and short term speculative investors and,
thereby, bring increased stability to the Company's stock.
Management believes that these activities are positioning the Company for rapid
growth through oil and gas exploration and power generation projects in this
millennium. Such growth is intended to provide financial stability for the
Company and its stockholders.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
Results of Operations
- -----------------------
The following summary of the Company's financial position and results of
operations should be read in conjunction with the Condensed Consolidated
Financial Statements, the Notes to Condensed Consolidated Financial Statements,
and the Company's audited financial statements for the year ended May 31, 1999,
included in the 10-KSB.
The following summarizes oil and gas revenues and operating expense for the nine
and three month periods ended February 29, 2000 and February 28, 1999:
NINE MONTH PERIOD THREE MONTH PERIOD
2000 1999 2000 1999
----------- ----------- ----------- -----------
OIL AND GAS SALES . . . $ -- $ 33,009 $ -- $ 8,788
LEASE OPERATING EXPENSE -- 13,966 -- 2,722
----------- ----------- ----------- -----------
OPERATING INCOME$ . . . . -- $ 19,043 $ -- $ 6,066
=========== =========== =========== ===========
THE FOLLOWING REFLECTS THE COMPANY'S CUMULATIVE COSTS IN OIL AND GAS PROPERTIES
AT FEBRUARY 29, 2000 AND FEBRUARY 28, 1999:
2000 1999
----------- -----------
OIL AND GAS PROPERTIES AT FULL COST:
OIL AND GAS PROPERTIES AND EQUIPMENT (COLUMBIA) $ 3,000,000 $ 3,000,000
OIL AND GAS PROPERTIES AND EQUIPMENT (U.S.) -- 4,287,043
IMPROVED OIL AND GAS PROPERTIES (U.S.) -- 55,202
LESS ACCUMULATED DEPRECIATION AND DEPLETION (U.S.) -- (4,253,307)
----------- -----------
$ 3,000,000 $ 3,088,938
=========== ===========
The decrease revenues and related direct operating expenses is a combination of
the Company's sale of its domestic production in March, 1999 and some residual
revenues of the subsidiary acquired in the current period. The decrease in
depreciation, depletion, and amortization from $57,234 to $19,078 is a result of
the same circumstance described in the preceeding sentence: depreciable oil and
gas properties were sold in the prior fiscal year an other depreciable property
was acquired in the current period. Interest expense was incurred in the past
nine months is attributable to interest-bearing obligations, including a note
payable which was pain in the current period. General and Administrative
expenses declined from $1,127,981 to $457,847 or a net of $670,134 compared to
the same period for the previous year. The decrease occurred, primarily, due to
decreases in consulting and professional fees and travel expense. The net loss
for the quarter ended February 29, 2000 was ($469,653) or ($0.01) per share on
revenues of $8,788 compared to a loss of ($1,143,296) or ($0.00) per share on
revenues of $33,009 for the same period in the previous year.
11
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PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.
Reference is made to Part II, Item 7, Note 9, Commitments and Contingencies,
Legal Proceedings, on page F15 of the Company's Annual Report on Form 10-KSB for
the year ended May 31, 1999.
ITEM 2. Change in Securities.
None.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.
Reference is made to Part I, Item 1, Risk Factors, on pages 3-5 of the Company's
Annual Report on Form 10-KSB for the year ended May 31, 1999.
ITEM 4. Submission of Matters to a Vote of Security Holders.
None.
ITEM 5. Other Information.
None.
ITEM 6. Exhibits and Reports on Form 8-K.
Reference is made to the Company's Report on Form 8-K filed August 24, 1999 and
related Amendment No. 1 dated July 2, 1999 and filed August 31, 1999.
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
------------------------------------
John W. Adair, Chairman and Director
Pursuant to the requirements of the Exchange Act, this report has been signed
below by the following persons in the capacities and on the dates indicated:
Signature Title Date
- -------------------------- -------------------------- -----------------
/s/ John W. Adair Chairman of the Board April 14, 2000
- --------------------------
John W. Adair Chief Executive Officer,
and Director
/s/ Earl K. Roberts President and Director April 14, 2000
- --------------------------
Earl K. Roberts
/s/ Jalal Alghani Chief Financial Officer April 14, 2000
- --------------------------
Jalal Alghani
12
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