8-K/A 1 adpads8k.txt ADPADS INC. FORM 8-K/A #1 TO 12-6-01 8-K U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 8-K/A AMENDMENT NO. 1 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 December 6, 2001 ------------------------------------------------ Date of Report (date of earliest event reported) Adpads Incorporated ---------------------------------------------------- Exact Name of Registrant as Specified in its Charter Colorado 0-28373 84-1306598 --------------------------- --------------- ---------------------- State or Other Jurisdiction Commission File IRS Employer Identifi- of Incorporation Number cation Number 108 Fortunato Place, Neptune, New Jersey 07753 ---------------------------------------------------------- Address of Principal Executive Officer, Including Zip Code (732) 918-8004 -------------------------------------------------- Registrant's Telephone Number, Including Area Code 1000 Highway 34, Matawan, New Jersey 07747 ----------------------------------------------------------- Former Name or Former Address, if Changed Since Last Report This Form 8-K/A of Adpads Incorporated ("Adpads" or the "Company") constitutes Amendment No. 1 to Adpad's Current Report on Form 8-K (the "Original Form 8-K") which was filed with the Securities and Exchange Commission (the "SEC") on December 21, 2001. This amendment sets forth the information required by Items 7(a) and 7(b) omitted from the original Form 8-K. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. With respect to the acquisition of Blue Flying Fish, Inc. and Subsidiaries ("BFFI"), by Adpads Incorporated ("Adpads" or the "Company"), the following financial statements are presented below: Page ---- CONSOLIDATED FINANCIAL STATEMENTS FOR BUHL INDUSTRIES, INC. AND SUBSIDIARY FOR THE YEAR ENDED MAY 31, 2001 AND 2000: Independent Accountant's Report ................................... F-1 Consolidated Balance Sheets at May 31, 2001 and 2000 .............. F-2 Consolidated Statements of Operations for the Years Ended May 31, 2001, 2000 and 1999 ............................................... F-3 Consolidated Statements of Stockholders' Deficiency for the Years Ended May 31, 2001, 2000 and 1999 ........................... F-4 Consolidated Statements of Cash Flows for the Years Ended May 31, 2001, 2000 and 1999 ....................................... F-5 Notes to Consolidated Financial Statements ........................ F-6 (b) PRO FORMA FINANCIAL INFORMATION. The following are the pro forma financial statements of Adpads Incorporated and Blue Flying Fish and Subsidiaries included therewith: Page ---- YEAR END PRO FORMA FINANCIAL INFORMATION: Introduction to Unaudited Pro Forma Combined and Condensed Financial Data .................................................... F-13 Adpads and BFFI Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 2000 ................... F-14 2 Page ---- INTERIM PRO FORMA FINANCIAL INFORMATION: Adpads and BFFI Unaudited Pro Forma Combined Balance Sheet as of September 30, 2001........................................... F-15 Adpads and BFFI Unaudited Pro Forma Combined Statement of Operations for the Nine Months Ended September 30, 2001 ........... F-17 Notes to the Unaudited Pro Forma Combined Statements of Operations ........................................................ F-18 (c) EXHIBITS. Exhibit 10 Share Exchange Agreement between Adpads Incorporated and Blue Flying Fish, Inc. (previously filed) 3 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Stockholders of Buhl Industries, Inc. and Subsidiary We have audited the accompanying consolidated balance sheets of Buhl Industries, Inc. and Subsidiary as of May 31, 2001 and 2000, and the related consolidated statements of operations, stockholders' deficiency and cash flows for each of the three years in the period ended May 31, 2001. 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Buhl Industries, Inc. and Subsidiary as of May 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended May 31, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ AMPER, POLITZINER & MATTIA P.A. March 28, 2002 Edison, New Jersey F-1 BUHL INDUSTRIES, INC. AND SUBSIDIARY Consolidated Balance Sheets May 31, Assets 2001 2000 ---------- ---------- Current assets Cash and cash equivalents $ 31,156 $ 8,864 Accounts receivable, trade-net of allowance for doubtful accounts of $4,000 and $5,000 440,692 605,072 Accounts receivable - related party 3,116 15,945 Inventory 688,722 850,054 Other current assets 49,361 83,105 ---------- ---------- 1,213,047 1,563,040 Property and equipment, less accumulated depreciation 369,637 477,570 Other assets Patent, less accumulated amortization of $24,000 and $16,000 112,544 120,584 Other assets 73,874 103,761 ---------- ---------- $1,769,102 $2,264,955 ========== ========== Liabilities and Stockholders' Deficiency Current liabilities Line of credit $ 717,448 $ 789,755 Notes payable, current maturities 428,865 271,507 Accounts payable and accrued expenses 881,082 785,495 Accounts payable-related party 337,629 30,707 ---------- ---------- 2,365,024 1,877,464 Long term debt, net of current maturities 864 305,812 Stockholders' loans payable 272,483 237,915 Stockholders' deficiency Preferred stock, $1.00 par value, 9% non- cumulative, 1,000 shares authorized, 190 shares issued 190,000 190,000 Common stock, no par value, 1,000 shares authorized, 380 shares issued and outstanding 380,000 380,000 Additional paid-in capital 2,425,000 2,255,000 Accumulated deficit (3,408,800) (2,600,767) Less treasury stock, at cost 190 and 115 shares of preferred stock) (455,469) (380,469) ---------- ---------- (869,269) (156,236) ---------- ---------- $1,769,102 $2,264,955 ========== ========== See accompanying notes to consolidated financial statements. F-2 BUHL INDUSTRIES, INC. AND SUBSIDIARY Consolidated Statements of Operations For the Years Ended May 31, 2001 2000 1999 ---------- ----------- ----------- Net sales (including $213,000, $120,000 and $-0- from related party) $4,889,732 $ 5,306,422 $ 6,042,115 Cost of goods sold (including $807,000, $122,000 and $-0- from related party) 4,343,358 4,738,872 5,426,120 ---------- ----------- ----------- Gross profit 546,374 567,550 615,995 ---------- ----------- ----------- Other expenses Selling 444,609 559,123 464,244 General and administrative 561,659 696,162 542,855 Research and development 104,908 104,981 610,033 ---------- ----------- ----------- 1,111,176 1,360,266 1,617,132 ---------- ----------- ----------- Loss from operations (564,802) (792,716) (1,001,137) Interest expense and bank charges (239,181) (282,653) (299,248) ---------- ----------- ----------- Loss before income taxes (803,983) (1,075,369) (1,300,385) Income tax benefit - - 416,655 ---------- ----------- ----------- Net loss $ (803,983) $(1,075,369) $ (883,730) ========== =========== =========== See accompanying notes to consolidated financial statements. F-3 BUHL INDUSTRIES, INC. AND SUBSIDIARY Consolidated Statements of Stockholders Deficiency For the Years Ended May 31, 2001, 2000 and 1999

See accompanying notes to consolidated financial statements. F-4 BUHL INDUSTRIES, INC. AND SUBSIDIARY Consolidated Statements of Cash Flows For the Years Ended May 31,

See accompanying notes to consolidated financial statements. F-5 BUHL INDUSTRIES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OPERATIONS Buhl Industries, Inc. and Subsidiary (the "Company") are manufacturers and distributors of two lines of business. One is overhead projectors and advanced optical products used in lighting studios, and the other is tungsten and metal halide lampholders. Their facility is located in Fairlawn, New Jersey. The overhead projector and lampholder businesses are about equal in size based on gross revenue. The optical products business is referred to as Buhlite and is a division of Buhl Industries, Inc. Credit is granted to substantially all customers, the majority of whom are Board of Educations located in the United States. The Company has entered into an agreement with its European distributor to manufacture certain overhead projectors. The European distributor has entered into an agreement with Istra Vega of Slovania to manufacture the units (see Note 8). ORGANIZATION The consolidated financial statements include the accounts of Buhl Industries, Inc. and its wholly owned Subsidiary, Buhl Electric, Inc. after elimination of all significant intercompany balances and transactions. REVENUE RECOGNITION The Company recognizes revenue when goods are shipped and title passes to the customer. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates the recoverability of its long-lived assets in accordance with Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No., 121"). SFAS No. 121 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the future undiscounted cash flows attributable to such assets. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out basis) or market. F-6 BUHL INDUSTRIES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OPERATIONS (Continued) PROPERTY AND EQUIPMENT Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed on the straight-line method over estimated useful lives as follows: Machinery and equipment 5 - 20 years Office equipment 5 - 7 years Furniture and fixtures 7 - 10 years Leasehold improvements 10 - 40 years or life of lease, whichever is shorter INCOME TAXES The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. PATENT The cost of patent acquired is amortized on the straight-line basis over the remaining life of 17 years. Amortization expense charged to operations during the years ended May 31, 2001, 2000, and 1999 was $8,000 in each year. The Company evaluated the recoverability of its patent. Management believes that there is no impairment at this time. LOAN ACQUISITION COSTS Professional fees and other expenses associated with debt acquisition are amortized on the straight-line method over the three-year term of the note and are included in other assets. Amortization expense charged to operations during the year ended May 31, 2001, 2000, and 1999 was $30,000, $5,000, and $0, respectively. At May 31, 2001 and 2000, net loan acquisition costs of $60,000 and $90,000 are included in other assets. RESEARCH AND DEVELOPMENT COSTS The Company strongly believes that its future success depends on its ability to refine, adapt and enhance the technology developed for its low-energy lamp product line as well as develop new applications and products in its lamp socket business. Accordingly, the Company intends to continue to make investments in the development of new technologies, the commercialization of product enhancements that builds on the Company's existing technological base, and the refinement and development of additional applications for its products. F-7 BUHL INDUSTRIES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OPERATIONS (Continued) RESEARCH AND DEVELOPMENT COSTS (Continued) The Company's research and development efforts are directed primarily in its low-energy lamp technology product line. The patented "Buhlite" is a low power, high efficiency system of light collection optics powered by ceramic metal Halide lamp technology. Significant efforts are being directed toward architectural improvements as well as enhancements in digital multiplexing (DMX). Over the course of the past five years the Company has invested more than $1,035,000 in its research, development and product enhancement efforts. Research and development activities, especially with respect to new products and technologies, are subject to significant risks, and there can be no assurance that any of the Company's efforts in these areas will be completed successfully. Research and development costs are expensed as incurred. NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities. As amended by SFAS No. 138, SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. This statement did not have a material impact on the Company's financial position and results of operations. In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and No. 142, "Goodwill and Other Intangible Assets." Under the new rules, goodwill and indefinite lived intangible assets are no longer amortized, but are reviewed annually for impairment. Separable intangible assets that are not deemed to have an indefinite life will continue to be amortized over their useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and intangible assets acquired after June 30, 2001. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived assets and for Long-Lived assets to be Disposed of" and also supercedes the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," for segments of a business to be disposed of. Among its many provisions, SFAS No. 144 retains the fundamental requirements of both previous standards, however, it resolves significant implementation issues related to FASB Statement No. 121 and broadens the separate presentation of discontinued operations in the income statement required by APB Opinion No. 30 to include a component of an entity (rather than a segment of a business). The provisions of SFAS No. 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001 with early application encouraged. The Company does not believe, based on current circumstances, the effect of adoption of SFAS No. 144 will be material. F-8 BUHL INDUSTRIES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 2 - INVENTORY May 31, 2001 2000 ---------- ---------- Raw materials $ 469,000 $ 716,000 Finished goods 220,000 134,000 ---------- ---------- $ 689,000 $ 850,000 ========== ========== NOTE 3 - PROPERTY AND EQUIPMENT May 31, 2001 2000 ---------- ---------- Machinery and equipment $1,639,000 $1,699,000 Office equipment 94,000 94,000 Furniture and fixtures 41,000 41,000 Leasehold improvements 57,000 57,000 ---------- ---------- 1,831,000 1,891,000 Less accumulated depreciation 1,461,000 1,413,000 ---------- ---------- Property and equipment, net $ 370,000 $ 478,000 ========== ========== Depreciation expense for the years ended May 31, 2001, 2000, and 1999 was $105,000, $155,000, and $190,000, respectively. NOTE 4 - LINE OF CREDIT The Company entered into a three-year revolving line-of-credit agreement with a financing company in March 2000, which is collateralized by substantially all corporate assets and is personally guaranteed by several stockholders. The revolving credit facility has an overall limitation of $2,775,000, not to exceed a defined combination of 75% of eligible accounts receivable plus 75% of the appraised orderly liquidation value of finished goods inventory and 75% of the appraised orderly liquidation value of machinery and equipment. Interest is charged at the prime rate plus 2.25% and is payable monthly. Additionally, the Company is required to pay an administration fee of $750 per month, and facility fees of 3/4 of 1% of the line of credit payable at the closing date; and 1/2 of 1% of the unused line of credit payable on each anniversary of the closing date thereafter. The lender recategorized a portion of the line of credit as an equipment term loan. Details are included in the long-term debt footnote. The bank's prime rate at May 31, 2001 was 7.0%. The note agreements contain requirements for maintaining defined levels of net worth (as defined) and working capital. At May 31, 2001, the Company was not in compliance with these covenants. Under the terms of the agreement, the bank can require the Company to repay the debt on demand and the line of credit has been classified as a current liability. F-9 BUHL INDUSTRIES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 5 - LONG-TERM DEBT May 31, 2001 2000 ---------- ---------- Note payable to a bank through December 2001, payable at $4,348 per month including interest at 11% with the balance payable at maturity. The note is collateralized by substantially all the assets of the Company. $ 177,000 $ 196,000 Note payable to a financing company through May 2005, payable at $6,250 per month plus interest at prime plus 2.25%. The note is collateralized by substantially all the assets of the Company and personally guaranteed by several stockholders. (1) 250,000 376,000 Capital lease payable to a financing company through September 2002, payable at $216 per month including interest at 13.5%, collater- alized by specific equipment. 3,000 5,000 ---------- ---------- 430,000 577,000 Less current maturities 429,000 271,000 ---------- ---------- Long-term debt, net of current maturities $ 1,000 $ 306,000 ========== ========== ______________ (1) At May 31, 2001, the Company was not in compliance with debt covenants (see Note 4), and accordingly has classified approximately $250,000 of equipment loans as a current liability. ______________ The approximate aggregate amount of all long-term debt maturities for the years ending May 31, is as follows: 2002 $254,000 2003 75,000 2004 75,000 2005 25,000 F-10 BUHL INDUSTRIES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 6 - OPERATING LEASES The Company has a five year lease for office and warehouse space expiring February, 2006. Monthly payments are $7,300. The Company is required to pay utilities and insurance relating to the leased facility. The Company leases certain equipment and vehicles under various operating leases expiring through September 2002. The future minimum rental payments in excess of one year follow: 2002 $ 95,000 2003 89,000 2004 88,000 2005 88,000 2006 65,000 -------- $425,000 ======== Rent expense for all operating leases for 2001, 2000, and 1999 was $185,000, $187,000, and $230,000, respectively. NOTE 7 - INCOME TAXES Deferred tax attributes resulting from differences between financial accounting amounts and tax bases of assets and liabilities at May 31, 2001 and 2000 are as follows: Allowance for doubtful accounts $ 2,000 $ 2,200 Valuation allowance (2,000) (2,200) ----------- ----------- Net current deferred tax asset $ - $ - =========== =========== Noncurrent assets (liabilities) Property and equipment $ (135,000) $ (135,000) Net operating loss carryforward 1,552,000 1,232,000 Deferred state tax liability (92,000) (92,000) ----------- ----------- 1,325,000 1,005,000 Valuation allowance (1,325,000) (1,005,000) ----------- ----------- Net noncurrent deferred tax asset $ - $ - =========== =========== As of May 31, 2001, the Company has available federal net operating loss carryforwards of approximately $2,750,000, which begin to expire in 2017. Available state net operating loss carryforwards of approximately $3,300,000 begin to expire in 2005. Due to recent operating losses, management believes the deferred tax assets are not likely to be utilized and therefore have been offset entirely through a valuation allowance. The valuation allowance increased $320,000 and $583,000 as of May 31, 2001 and 2000 to $1,327,000 and $1,007,000, respectively. F-11 BUHL INDUSTRIES, INC. AND SUBSIDIARY Notes to Consolidated Financial Statements NOTE 8 - RELATED PARTY TRANSACTIONS A stockholder owns 10% of an entity engaged in the lampholder business in Europe. NOTE 9 - PREFERRED STOCK Preferred stock is non-voting. The Company purchased the remaining shares of preferred stock at par as of May 31, 2001. A corporate note was issued to all remaining preferred stockholders. NOTE 10 - STOCKHOLDERS' LOAN PAYABLE Notes payable to stockholders bear interest at 6.5% per annum, mature April 2005, and are subordinated to the financing company debt (see Note 5). Interest expense on the stockholders' loans payable was $14,000, $118,000, and $54,000, for 2001, 2000 and 1999. NOTE 11 - NON CASH FINANCING ACTIVITIES During the year ended May 31, 2001, the Company borrowed $79,050 from stockholders to purchase 75 shares of preferred stock for $75,000 and pay dividends. During the year ended May 31, 2000, the Company reclassed $1,081,000 of loans to stockholders to additional paid in capital as capital contributions. NOTE 12 - SUBSEQUENT EVENT On October 25, 2001, the shareholders of the Company tendered all of its outstanding shares of the Company common stock in exchange for 3,000,000 restricted shares of the .001 par value common stock of Blue Flying Fish, Inc. ("BFFI"). On December 6, 2001, the shareholders of BFFI tendered all of the outstanding common stock of BFFI to Adpads Incorporated ("APAD") in exchange for 4,783,333 authorized but unissued restricted shares of the Series A Convertible Preferred Stock of APAD and 18,800,000 authorized unissued restricted shares of common stock of APAD. F-12 INTRODUCTION TO UNAUDITED PRO FORMA COMBINED AND CONDENSED FINANCIAL DATA The Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 2000 and the nine months ended September 30, 2001 (the "Pro Forma Statements of Operations") and the Unaudited Pro Forma Combined Balance Sheet as of September 30, 2001 (the "Pro Forma Balance Sheet" and, together with the Pro Forma Statement of Operations, the "Pro Forma Financial Statements"), have been prepared to reflect the purchase of BFFI by the Company as of the beginning of the periods presented in the Pro Forma Statements of Operations and as of September 30, 2001 in the Pro Forma Balance Sheet. The Pro Forma Statement of Operations for the year ended December 31, 2000 combines the Company's twelve months Statement of Operations ended December 31, 2000 and BFFI's only operating subsidiary during 2000, Buhl Industries Inc. and Subsidiary's Statement of Operations for the twelve months ended December 31, 2000. The Pro Forma Financial Statements do not reflect any anticipated costs savings or any synergies that are anticipated to result from the BFFI acquisition. There can be no assurance that any such cost savings or synergies will occur. The pro forma financial statements do not purport to be indicative of the results of operations or financial position of the Company that would have actually been obtained had such transactions been completed as of the assumed dates 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 financial statements should be read in conjunction with the separate historical consolidated financial statements of Adpads and the notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Adpad's Form 10-KSB for the year ended December 31, 2000 and Form 10-QSB for the nine months ended September 30, 2001 previously filed with the Securities and Exchange Commission and the May 31, 2001 historical financial statements of BFFI's operating subsidiary, Buhl Industries Inc and Subsidiary, and the notes thereto included elsewhere herein. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities in the accompanying Pro Forma Financial Statements based on currently 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 Financial Statements are subject to change, and the final amounts may differ substantially. F-13 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

See notes to unaudited pro forma combined statement of operations. F-14 UNAUDITED PRO FORMA COMBINED BALANCE SHEET ASSETS

See notes to unaudited pro forma combined statement of operations. F-15 UNAUDITED PRO FORMA COMBINED BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY

See notes to unaudited pro forma combined statement of operations. F-16 UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

F-17 NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (a) For purposes of the Pro Forma Statement of Operations for the year ended December 31, 2000, the BFFI Statement of Operations for the year ended December 31, 2000 were combined with Adpad's historical Statement of Operations for the year ended December 31, 2000. For purposes of the Pro Forma Statement of Operations for the nine-month period ended September 30, 2001, BFFI's historical statement of operations was combined with Adpad's historical Statement of Operations for the nine-month period ended September 30, 2001. The acquisition was accounted for using the purchase method of account- ing. Under purchase accounting, the total purchase price will be allocated to all of the tangible and intangible assets and related liabilities, if any, of BFFI based upon their respective fair values as of the closing date. The allocations will be based on valuations and other studies, which are not yet finalized. The actual allocation of purchase price and the resulting effect on net loss may differ significantly from the pro forma amounts included herein. On June 29, 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Intangible Assets. Major provisions of these Statements are as follows: all business combinations initiated after June 30, 2001 must use the purchase method of accounting; the pooling of interest method of accounting is prohibited; goodwill and intangible assets with indefinite lives are not amortized but are tested for impairment annually, except in certain circumstances, and whenever there is an impairment indicator; all acquired goodwill must be assigned to reporting units for purposes of impairment testing; effective January 1, 2002, goodwill will no longer be subject to amortization. The Proforma Statement of Operations reflect no amortization of acquired goodwill. F-18 NOTES TO THE UNAUDITED PROFORMA BALANCE SHEET AT SEPTEMBER 30, 2001 a. The estimated purchase price and preliminary adjustments to historical book value of BFFI are as follows: Purchase price: Common stock issued $376,000 Net liabilities assumed 189,893 -------- Purchase price in excess of net assets acquired $565,893 ======== Estimated goodwill $565,893 ======== The purchase price arises from the issuance of 18,800,000 shares of Adpad common stock in exchange for all of the outstanding common shares of BFFI. No effect was given for the issuance of 4,783,333 of preferred shares issued to the shareholders of BFFI. b. In compliance with the conditions to closing the transaction with BFFI, the Company converted $220,000 of its outstanding debt into 4,400,000 restricted shares of the Company's common stock at a price of $.05 per share. F-19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized. ADPADS INCORPORATED Dated: April 10, 2002 By:/s/ Mark Spargo Mark Spargo, CEO

ADPADS INC 8-K/A