10QSB 1 doc1.txt 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 MARCH 31, 2001. OR [ ] 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. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) TEXAS 74-2142545 (STATE OR OTHER JURISDICTION (IRS EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 3000 RICHMOND, SUITE 100, HOUSTON, TX 77098 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE) (713) 621-8241 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: NONE SECURITIES REGISTERED PURSUANT TO 12(G) OF THE EXCHANGE ACT: COMMON STOCK, NO PAR VALUE THE AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NON-AFFILIATES OF THE REGISTRANT AT MAY 4, 2001, BASED UPON THE LAST CLOSING PRICE ON THE OTCBB, WAS $24,426,622. AS OF MAY 4, 2001 THERE WERE 74,020,066 SHARES OF COMMON STOCK OUTSTANDING. TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT [ ] YES [X] TABLE OF CONTENTS PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. CONSOLIDATED BALANCE SHEETS MARCH 31, 2001 AND DECEMBER 31, 2000 3 CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2001 AND FEBRUARY 28, 2000 4 CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2001 AND FEBRUARY 28, 2000 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 8 ITEM 2. CHANGES IN SECURITIES 8 ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8 ITEM 5. OTHER INFORMATION 8 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8 SIGNATURES
ADAIR INTERNATIONAL OIL AND GAS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS MARCH 31, 2001 AND DECEMBER 31, 2000 ASSETS MARCH 31 DECEMBER 31 ------------- 2001 2000 ------------- ------------- CURRENT ASSETS: CASH AND CASH EQUIVALENTS $ - $ 30,195 ACCOUNTS RECEIVABLE 12,000 36,100 PREPAID EXPENSES 47,588 13,689 TOTAL CURRENT ASSETS 59,588 79,984 ------------- ------------- PROPERTY AND EQUIPMENT: OIL AND GAS PROPERTIES AND EQUIPMENT UNDER THE FULL COST METHOD OF ACCOUNTING 10,735,726 7,262,348 FURNITURE AND EQUIPMENT 827,073 289,244 ------------- ------------- 11,562,799 7,551,592 LESS ACCUMULATED DEPRECIATION (148,618) (123,041) ------------- ------------- NET PROPERTY AND EQUIPMENT 11,414,181 7,428,551 ------------- ------------- OTHER ASSETS: GEOPHYSICAL DATA AND INTELLECTUAL PROPERTY (1,864,226) 1,583,362 DEPOSITS AND OTHER ASSETS 13,033 7,456 ------------- ------------- TOTAL OTHER ASSETS (1,851,193) 1,590,818 ------------- ------------- $ 9,622,576 $ 9,099,353 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: ACCOUNTS PAYABLE $ 440,428 $ 107,042 CAPITALIZED LEASES PAYABLE - CURRENT PORTION $ 374,438 $ 4,868 TAXES PAYABLE - 8,494 ------------- ------------- TOTAL CURRENT LIABILITIES 814,866 120,404 ------------- ------------- LONG-TERM DEBT: CAPITALIZED LEASES PAYABLE-LONG-TERM PORTION 11,332 COMMITMENTS AND CONTINGENCIES - - SHAREHOLDERS' EQUITY: COMMON STOCK, WITHOUT PAR VALUE 20,317,883 20,142,182 ACCUMULATED DEFICIT (11,510,173) (11,174,565) ------------- ------------- TOTAL SHAREHOLDEREQUITY 8,807,710 8,967,617 ------------- ------------- $ 9,622,576 $ 9,099,353 ============= =============
See accompanying notes to consolidated financial statements.
ADAIR INTERNATIONAL OIL AND GAS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND FEBRUARY 2000 2001 2000 ---------- ---------- REVENUES: PROSPECT BONUS TECHNICAL SERVICES 174,125 CONSULTING FEES 60,000 ADMINISTRATIVE FEES AND OTHER INCOME 2,194 ---------- 236,319 - ---------- ---------- COSTS AND EXPENSES: DEPRECIATION AND DEPLETION 25,577 8,856 INTEREST EXPENSE 6,326 2,950 GENERAL AND ADMINISTRATIVE 540,024 457,847 ---------- ---------- TOTAL COSTS AND EXPENSES 571,927 469,653 --------------------------------------- ---------- ---------- NET INCOME (LOSS) FROM OPERATIONS (335,608) (469,653) ---------- OTHER INCOME (INTEREST) - - ---------- ---------- NET LOSS BEFORE INCOME TAXES (335,608) (469,653) ---------- INCOME TAXES - - ---------- ---------- NET INCOME (LOSS) $(335,608) $(469,653) ---------- ========== NET LOSS PER COMMON SHARE: BASIC AND DILUTED $ (0.00) $ (0.01) ---------- ----------
See accompanying notes to consolidated financial statements. ADAIR INTERNATIONAL OIL AND GAS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2001 AND FEBRUARY 28, 2000 Note 1. Organization and Business ------------------------------------- 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. During the year ended May 31, 1999, the Company has changed its focus 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 provided "state of the art" 3-D seismic works stations and technical support not previously available in house. With this acquisition the Company broadened its basic objectives to include exploration, evaluation of producing properties for potential acquisition, and the technical evaluation of oil and gas properties. Note 2. Basis of Presentation --------------------------------- Basis of Presentation - The accompanying unaudited consolidated financial statements of the Company and its wholly-owned subsidiaries have been prepared in accordance with the instructions and requirements of Form 10-QSB and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of management, such financial statements reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations and financial position for the interim periods presented. Operating results and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the full year. These consolidated financial statements should be read in conjunction with the Company's annual report on Form 10-KSB. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report, including Management's Discussion and Analysis of Financial Condition and Results of Operations, includes certain forward-looking statements. The forward-looking statements reflect the Company's expectations, objectives and goals with respect to future events and financial performance, and are based on assumptions and estimates which the Company believes are reasonable. However, actual results could differ materially from anticipated results. Important factors which may affect the actual results include, but are not limited to, commodity prices, political developments, market and economic conditions, industry competition, the weather, changes in financial markets and changing legislation and regulations. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. The Notes to Consolidated Financial Statements contain information that is pertinent to the following analysis. Power projects and major exploration programs are, by nature, long term, and require time and capital to develop. In the same manner that projects and major industry partners were brought to the Company in 2000, management has been vigorously positioning itself to acquire the financing to execute the total business plan. We are confident that the year 2001 will see the acquisition of all elements to attain the company's goals, including the acquisition of domestic cash producing oil and gas properties with upside infield drilling potential. 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 December 31, 2000, included in the 10-KSB. Comparison of the three months ending March 31, 2001 and February 28, 2000 Revenues. In the current quarter, total revenues of $236,319 were largely the technical services fees of $174,125. This is in contrast to no revenues during the comparable period in the prior year. Depreciation. Depreciation expense increased from $8,856 in the prior year three month period to $25,577 in the same period of 2001. The increase was attributable to the acquisition of additional assets of two subsidiaries and their related asset carrying values. Interest Expense. The Company incurred $6,326 interest expense in the current period compared with $2,950 in the comparable period of the prior year. General and administrative Expenses. The Company experienced an increase in general and administrative expenses during the three month periods of from $457,847 to $540,023, an increase of $82,176. This increase was attributable to the general and administrative expenses of Superior Geophysical, Inc. which was formed during the quarter. The general increases were proportionate to the inclusion of the subsidiary and no major variances in general and administrative expenses were incurred. The net loss of ($335,608) or ($0.00) per share on revenues of $236,319 for the three months ended March 31, 2001 was in contrast to the net loss of ($469,653) or ($0.00) per shares on no revenues in the comparable period in 2000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) LIQUIDITY AND CAPITAL RESOURCES The Company expects that its existing cash reserves, cash flows from operations, partial project farmins, and financing, if available, will be sufficient to cover the Company's cash requirements for the next year. However, there can be no assurance that these sources of cash will cover those requirements. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to Part I, Item 3, Legal Proceedings on page 15 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000. ITEM 2. CHANGES IN SECURITIES During the quarter 581,280 shares were issued in lieu of cash for salaries and other expenses totaling $175,701. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Reference is made to Part I, Item 4, Submission of Matters to a Vote of Security Holders on page 16 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None. (B) REPORTS ON FORM 8-K None. SIGNATURES In accordance with the requirements of Section 13 of 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 21, 2001. ADAIR INTERNATIONAL OIL AND GAS, INC. /s/ Jalal Alghani ------------------------------ Jalal Alghani Chief Financial Officer