<PAGE> 1
_____ Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period from _____ to _____
Commission file number: 000-28373
AdPads Incorporated
--------------------------------------------------------------------------------
(Exact name of Small Business Issuer as Specified in Its Charter)
Colorado 84-1306598
----------- ---------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
FORM 10-QSB
AdPads Incorporated
1000 Highway 34, Matawan, New Jersey 07747
-------------------------------------------------------------
(Address of Principal Executive Offices)
(732) 290-8940
---------------------
(Issuer's Telephone Number, Including Area Code)
----------------------------------------------------
(Former Name, Former Address and former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
12 or 15(d) of the Exchange Act during the past 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
APPLICABLE ONLY TO CORPORATE ISSURES
As of August 14, 2000 the Issuer had 24,275,015 shares of Common Stock, no par
value outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE> 2
ADPADS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
PART I - FINANCIAL INFORMATION
<S> <C> <C>
I Item 1. Consolidated Balance Sheets as of June 30, 2000 (Unaudited) and
December 31, 1999 2
Consolidated Statements of Operations for the Six Months Ended
June 30, 2000 and 1999 , the Three Months Ended June 30, 2000 and
1999 and the Cumulative Period from Inception to June 30, 2000
(Unaudited) 3
Consolidated Statements of Cash Flows for the Six Months Ended
June 30, 2000 and 1999 and the Cumulative Period from Inception to
June 30, 2000 (Unaudited) 4
Notes to Consolidated Financial Statements 5-6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7-8
PART II - OTHER INFORMATION
9
Item 1. Legal Proceedings
9
Item 2. Changes in Securities
9
Item 3. Defaults Upon Senior Securities
9
Item 4. Submission of Matters to a Vote of Security Holders
9
Item 5. Other Information
9
Item 6. Exhibits and Reports on Form 8-K
10
Signatures
11
Exhibits
</TABLE>
1
<PAGE> 3
ADPADS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
---- ----
(Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ -- $ --
Accounts receivable, less allowance for doubtful
accounts of $1,000 11,542 48,768
Inventories 8,367 8,826
Prepaid expenses and other current assets 4,457 3,056
--------- ---------
Total Current Assets 24,825 60,191
--------- ---------
PROPERTY AND EQUIPMENT, NET 141,663 83,732
--------- ---------
GOODWILL, NET 166,250 --
---------
Total Assets $ 332,738 $ 143,923
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Cash overdraft $ 5,187 $ 3,436
Current maturities of long-term debt 14,676 8,227
Accounts payable and accrued expense 70,312 23,449
Deferred revenue 42,454 51,643
Billings in excess of costs on uncompleted contracts 11,700 11,700
Due to shareholders 18,500 31,500
--------- ---------
Total Current Liabilities 162,829 129,955
--------- ---------
LONG-TERM DEBT, LESS CURRENT MATURITIES 61,311 36,036
COMMITMENT --------- ---------
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common stock, no par value, authorized 50,000,000
shares; issued and to be issued 24,275,015 in
June and 15,542,000 in December 471,546 75,504
Deficit accumulated during the development stage (362,948) (97,572)
--------- ---------
Total Liabilities and Shareholders' Equity (Deficiency) 108,598 (22,068)
--------- ---------
$ 332,738 $ 143,923
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 4
ADPADS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
August 12,
1998,
Date of
Inception,
Six Months Three Months to
Ended June 30, Ended June 30, June 30,
----------------------------------------------------------------------
2000 1999 2000 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
REVENUES $ 52,677 $ 88,152 $ 20,107 $ 35,650 $ 193,479
------------ ------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of revenues 11,633 15,716 3,364 7,922 53,992
Selling, general and administrative expenses 302,870 61,392 218,895 24,452 497,686
------------ ------------ ------------ ------------ ------------
314,533 77,108 222,259 32,374 551,678
------------ ------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (261,856) 11,044 (202,152) 3,276 (358,199)
INTEREST EXPENSE 3,520 478 2,162 239 4,749
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (265,376) $ 10,566 $ (204,314) $ 3,037 $ (362,948)
============ ============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted 21,342,793 15,542,000 24,199,459 15,542,000
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE:
Basic and diluted $ (.01) $ - $ (.01) $ -
=========== ============ ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 5
ADPADS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
August 12, 1998,
Date of
Six Months Inception, to
Ended June 30, June 30,
2000 1999 2000
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(265,373) $ 10,566 $(362,948)
Adjustments to reconcile net income (loss) to net cash flows
from operating activities:
Depreciation and amortization 32,238 2,344 54,501
Provision for losses on accounts receivable 12,000 -- 13,000
Changes in operating assets and liabilities:
Accounts receivable 25,226 (5,231) (24,542)
Inventories (459) (2,232) (8,826)
Prepaid expenses and other current assets (1,401) (670) (4,457)
Accounts payable and accrued expenses (46,863) 17,754 70,312
Deferred revenue (9,189) -- 42,454
Billings in excess of costs -- -- 11,700
---------- --------- ---------
Net cash flows from operating activities (160,098) 22,531 (208,806)
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (81,419) (17,419) (159,285)
Cost of Acquired Business (150,000) (150,000)
---------- ---------
(231,419) (17,419) (309,285)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from cash overdraft (1,751) -- 5,187
Contributions from shareholders 8,594 1,587 102,068
Distributions to shareholders (17,552) (8,495) (35,522)
Proceeds from sale of stock and exercise of warrants 380,000 -- 380,000
Due to shareholder (13,000) -- 18,500
Payments on long-term debt (5,012) (516) (6,786)
Proceeds of long-term debt 36,736 3,998 54,644
---------- --------- ---------
Net cash flows from financing activities 391,517 (3,426) 518,091
---------- --------- ---------
NET CHANGE IN CASH -- 1,686 --
CASH, BEGINNING OF PERIOD -- 211 --
---------- --------- ---------
CASH, END OF PERIOD $ $ 1,897 $ --
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 3,520 $ 478 $ 4,749
========= ========= =========
Noncash financing and investing activities:
Equipment additions by capital leases $ -- $ -- $ 28,129
========= ========= =========
Issuance of Common Stock for Acquisition $ 25,000 $ -- $ 25,000
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 6
ADPADS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
The consolidated balance sheet as of December 31, 1999 has been derived from the
audited balance sheet that is included in the Company's Form 8K/A which was
filed on May 30, 2000 and is presented for comparative purposes. All other
financial statements are unaudited. All material intercompany accounts and
transactions have been eliminated. In the opinion of management, all
adjustments, which include only normal recurring adjustments necessary to
present fairly the financial position, results of operations and cash flows for
all periods presented, have been made. The results of operations for interim
periods are not necessarily indicative of the operating results for the full
year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's 8K/A.
NOTE 2 - ORGANIZATION AND NATURE OF BUSINESS:
On March 15, 2000, AdPads LLC executed an Asset Purchase Agreement ("Agreement")
with Regents Road, Ltd., ("Regents") an unrelated Colorado corporation. Regents
is a publicly traded entity with nominal assets. Pursuant to the Agreement,
Regents issued 16,000,000 shares (approximately 89%) of its post-Agreement
outstanding no par value common stock in exchange for the Assets of AdPads, LLC.
The members of AdPads, LLC became the controlling stockholders of the Registrant
in a transaction viewed as a reverse acquisition. The Agreement was treated as a
recapitalization of AdPads, LLC for accounting purposes. The historical
financial statements of Regents prior to the merger will no longer be reported,
as AdPads, LLC's financial statements are now considered the financial
statements of the ongoing entity.
Regents changed its name to AdPads Incorporated on March 20, 2000.
On March 20, 2000, a change in control of the Company ("AdPads, Inc." or
"AdPads" formerly known as Regents Road, Ltd.) occurred in conjunction with a
closing under an Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the Company and Visual-Presentation Systems, Inc., an
unrelated Delaware Corporation ("Visual").
Under the terms of the Reorganization Agreement AdPads, Inc. acquired all of the
issued and outstanding common stock of Visual in exchange for $150,000 in cash
and the issuance of 250,000 shares of its common stock. As a result of this
transaction, Visual became a wholly-owned subsidiary of AdPads. AdPads, Inc. was
a non-reporting publicly traded company until the acquisition of Visual became
effective.
The Reorganization was approved by the unanimous consent of the Board of
Directors of AdPads on March 18, 2000.
Upon effectiveness of the Reorganization Agreement, AdPads became the successor
issuer to Visual for reporting purposes under the Securities Exchange Act of
1934 and elects to report under the Act effective March 21, 2000.
5
<PAGE> 7
ADPADS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 2000, the shareholders approved an amendment to the Certificate of
Incorporation of the Company to change the Company's name from Visual
Presentation Systems, Inc. to AdPads, Inc. The shareholders also approved the
reincorporation of the Company as a Delaware corporation and a related Agreement
and Plan of Merger pursuant to which the Company will be merged into a
wholly-owned Delaware subsidiary. The Board of Directors of the Company have
authorized a Parent/Subsidiary merger of the two companies.
The Company provides print and internet marketing services to the retail,
wholesale, manufacturing and service industries. The Company has been in the
development stage since formation and has engaged in organizational activities
and development and marketing of its print and internet services. AdPads has had
limited revenues and has operated at a loss since inception.
NOTE 3 - GOING CONCERN AND LIQUIDITY:
The Company has incurred significant operating losses raising substantial doubt
about its ability to continue as a going concern. The continued existence of the
Company is dependent upon its ability to raise additional financing and
eventually upon obtaining profitable operations. There can be no assurance that
such financing will be available to the Company upon acceptable terms.
In an effort to obtain profitable operations, the Company will attempt to
increase sales by recruiting sales representatives and developing a franchising
model. Should the Company be unsuccessful in its attempts to raise capital
and/or increase sales, the Company may not be able to continue operations.
NOTE 4 - GOODWILL:
The excess of the purchase price ($150,000 in cash and 250,000 shares of common
stock valued at $25,000) of Visual over the fair value of the net assets
acquired of $175,000 was allocated to goodwill. The goodwill is being amortized
on the straight-line method over an estimated useful life of five years.
NOTE 5 - STOCKHOLDER'S EQUITY:
During January and February 2000, the Company sold 458,000 shares for proceeds
of $65,000.
During March 2000, the Company sold 1,725,000 shares of common stock for net
proceeds of $150,000 and issued 4,200,015 shares of common stock to former
Regents shareholders in exchange for the net assets of Regents.
In March 2000, the Company issued warrants to purchase a total of 4,000,000
shares of common stock for investment banking services, 1,000,000 each at
exercise prices of $.05, $.10, $.15 and $.25. In March 2000, the Company
received $150,000 from the exercise of 2,000,000 common stock purchase warrants,
1,000,000 at $.05 per share and 1,000,000 at $.10 per share. In June 2000, the
received $15,000 from the exercise of 100,000 common stock purchase warrants at
$.15 per share.
6
<PAGE> 8
ADPADS INCORPORATED
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the company's financial position and operating
results during the periods included in the accompanying condensed financial
statements.
The discussion and analysis which follows in this Quarterly Report and in other
reports and documents of the Company and oral statements made on behalf of the
Company by its management and others may contain trend analysis and other
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 which reflect the Company's current views with respect to
future events and financial results. These include statements regarding the
Company's earnings, projected growth and forecasts, and similar matters which
are not historical facts. The Company reminds stockholders that forward-looking
statements are merely predictions and therefore are inherently subject to
uncertainties and other factors which could cause the actual future events or
statements. These uncertainties and other factors include, among other things,
business conditions and growth in the food industry and general economies, both
domestic and international; lower than expected customer orders; competitive
factors; changes in product mix or distribution channels; and resource
constraints encountered in developing new products. In addition, difficulties in
completing remediation of the year 2000 issues by the Company's customers or
suppliers may have a material adverse affect on the Company and its operations.
The forward-looking statements contained in this Quarterly Report and made
elsewhere by or on behalf of the Company should be considered in light of these
factors.
Results of Operations
SIX MONTH PERIOD ENDED JUNE 30, 2000 COMPARED WITH SIX MONTH PERIOD ENDED JUNE
30, 1999:
The Company's fiscal year ends on December 31.
The Company anticipates that sales during the remainder of the current fiscal
year will improve over prior comparable periods due to its implementation of
AdPads Franchise Development. Such increases are dependent upon market
acceptance, for which no assurance can be given.
Net revenue for the period ended June 30, 2000 was $52,677, a decrease of
$35,475 or 40% from the sales level realized for the period ended June 30, 1999.
As a result of the decrease in revenue, the Company's gross profit for the
current period decreased by $31,392 and its gross profit percentage decreased by
approximately 4% when compared to the same period last year.
Selling, general and administrative expense increased to $302,870 for the
current period compared with $61,392 for the comparable period in 1999 due
primarily to an increase in trade show costs, professional fees associated with
being public, additional personnel and the development and implementation of the
Company's franchising strategy.
THREE MONTH PERIOD ENDED JUNE 30, 2000 COMPARED WITH THE THREE MONTH PERIOD
ENDED JUNE 30, 1999:
7
<PAGE> 9
Net revenue for the three month period ended June 30, 2000 was $20,017, a
decrease of $15,543, or 44% from the three month period ended June 30, 1999. As
a result of the decrease in revenue, gross profit in the current period
decreased by $10,985. Gross profit percentage increased by 7% in the three month
period.
Selling, general and administrative expense increased to $218,895 for the
current period compared with $24,452 for the comparable period in 1999 due
primarily to an increase in trade show costs, professional fees associated with
being public, additional personnel, amortization of goodwill and the development
and implementation of the Company's franchising strategy.
Liquidity and Capital Resources
The Company's working capital deficit increased to $138,004 at June 30, 2000
from a deficit of $69,764 at December 31,1999 due to the loss from operations,
purchase of software and computer equipment and the purchase of Visual offset by
sale of common stock and exercise of warrants. Accounts receivable decreased to
$11,542 at June 30, 2000, a decrease of $37,226 from December 31, 2000,
reflecting the Company's lower sales.
Accounts payable and accrued expenses increased by $46,863 to $70,312 at June
30, 2000 as a result of the Company's increased selling, general and
administrative costs and shortage of cash.
The Company raised $380,000 by issuance of stock and warrants during the six
months ended June 30,2000. The Company expended $150,000 for the acquisition of
Visual, $81,419 for the purchase of equipment and approximately $160,000 to
cover loss from operations.
The Company is attempting to increase sales by recruiting sales representatives
and implementing its franchising strategy. It is also attempting to raise
additional equity capital. Should the Company be unsuccessful in its attempts to
raise capital and/or increase sales, the Company may be unable to continue
operations.
The Year 2000 Issue
The Company has completed a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 ("Y2K") issue.
Substantially all of the Company's manufacturing is performed by third-party
co-packers, and the Company's financial systems are PC-based purchased software.
Consequently, management presently believes that due to the lack of date
sensitive computer systems and applications currently in use, the Y2K issue will
not pose significant operational problems for the Company's computer systems.
In addition, the Company has contacted its major suppliers and vendors seeking
information about their internal compliance efforts. Upon review, the Company
believes that most of its major suppliers and co-packers will be Y2K compliant
and any non-compliance by its suppliers and co-packers will not have a
significant adverse effect upon the Company's operations.
Therefore, the Company to date has not nor does it expect to develop any
contingency plans relating to the Y2K issue. Costs of addressing the Y2K issue
have not been material to date and, based on information gathered to date from
the Company and its vendors, are not currently expected to have a material
adverse impact on the Company's financial position, results of operations or
cash flows. However, the Company could be subject to risks should the Company or
third party vendor or service provider be unable to resolve issues related to
the Y2K.
8
<PAGE> 10
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
There have been no material modifications to or changes in any class of the
Company's securities required to be disclosed pursuant to this item.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the six months
ended June 30, 2000.
Item 5. Other Information
The Company has incurred significant operating losses raising substantial doubt
about its ability to continue as a going concern. The continued existence of the
Company is dependent upon its ability to raise additional financing and
eventually upon obtaining profitable operations. There can be no assurance that
such financing will be available to the Company upon acceptable terms.
In an effort to obtain profitable operations, the Company will attempt to
increase sales by recruiting sales representatives and developing a franchising
model. Should the Company be unsuccessful in its attempts to raise capital
and/or increase sales, the Company may not be able to continue operations.
Item 6. Exhibits and Reports on Form 8-K
Reports of Form 8-K filed during the last quarter of the period covered by this
report. Form 8KA pursuant to Securities Exchange Act 1934 date of event March
21, 2000 filed May 30, 2000
9
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
(Registrant)
/s/ David I. Brownstein
----------------------------
David I. Brownstein
President
/s/ David I. Brownstein
----------------------------
David I. Brownstein
Chief Financial Officer
10
