<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT OR [ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended October 31, 1997 Commission File No. 33-4460-NY
TASTY FRIES, INC.
------------------------------
(Exact name of registrant as specified in its charter)
Nevada 65-0259052
----------------------------- -------------------
State or other jurisdiction (I.R.S. Employer
incorporation or organization Identification No.)
650 Sentry Parkway, Suite One
Blue Bell, PA 19422
------------------------------------------------------------
(Address Of Principal Executive Offices)(Zip Code)
(610) 941-2109
------------------------
(Registrant's telephone number,
including area code)
ADELAIDE HOLDINGS, INC.
11098 Biscayne Boulevard, Suite 403
Miami, Florida
(305) 899-0200
---------------------------------------------
(Former name and address)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 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
--- ---
As of October 31, 1997: 7,804,880 shares of common stock were outstanding.
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(Unaudited)
2
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
October 31, January 31,
1997 1997
----------- ----------
(Unaudited)
Current Assets:
Cash $ 3,365 $ 1,519
Vending machines 70,000 70,000
Loan receivable, officer 57,631 100,000
Interest receivable 9,027
---------- ----------
Total current assets 130,996 180,546
---------- ----------
Property and equipment, net 39,534 23,276
---------- ----------
Other assets:
Deposits 6,000
---------- ----------
$ 176,530 $ 203,822
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current Liabilities:
Note payable $ 60,000
Note payable, officer/director 50,000
Accounts payable and accrued expenses $ 829,855 882,077
---------- ----------
Total current liabilities 829,855 992,077
---------- ----------
Long-term liabilities:
Convertible notes payable 602,321
---------- ----------
Unearned revenue 376,000 376,000
---------- ----------
Stockholders' Deficiency:
Common stock, $.001 par value; authorized
25,000,000 shares; issued and outstanding
7,804,880 shares at October 31, 1997 and
4,700,025 at January 31, 1997 7,805 4,700
Additional paid-in capital 8,570,100 6,097,275
Deficit accumulated in development stage (10,209,551) (7,266,230)
---------- ----------
(1,631,646) (1,164,255)
---------- ----------
$ 176,530 $ 203,822
---------- ----------
---------- ----------
See notes to financial statements
3
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended Nine Months Ended
October 31, October 31,
1996 1997 1996 1997
---- ---- ---- ----
Revenues $ -0- $ -0- $ -0- $ -0-
---------- --------- --------- ---------
Costs and expenses:
Research, machine
and product development 7,384 25,556 586,528 88,420
Selling, general and administrative 364,068 225,049 1,020,925 1,175,343
Non-recurring compensation charge 1,031,250 1,031,250
---------- --------- --------- ---------
371,452 1,281,855 1,607,453 2,295,013
Net loss before interest (371,452) (1,281,855) (1,607,453) (2,295,013)
---------- --------- --------- ---------
Other income (expense):
Interest income 1,897 9,677
Interest expense 1,910 (326,937) 6,404 (339,603)
Litigation settlements (205,960) (318,382)
---------- --------- --------- ---------
(1,910) (531,000) (6,404) (648,308)
---------- --------- --------- ---------
Net loss $(373,362) $(1,812,855) $(1,613,857) $(2,943,321)
---------- --------- --------- ---------
---------- --------- --------- ---------
Net loss per share of common stock $(.08) $(.32) $(.39) $(.55)
---------- --------- --------- ---------
---------- --------- --------- ---------
Weighted average shares outstanding 4,698,180 5,754,397 4,153,424 5,335,883
---------- --------- --------- ---------
---------- --------- --------- ---------
See notes to financial statements
4
</TABLE>
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL
STOCKHOLDERS'
COMMON PAID-IN RETAINED EQUITY
STOCK CAPITAL EARNINGS (DEFICIENCY)
--------- ----------- ----------- ------------
Balance, February 1, 1997 $ 4,700 $6,097,275 $(7,266,230) $(1,164,255)
Issuance of 1,500,000 shares
for non-recurring compensation 1,500 1,029,750 1,031,250
Issuance of 158,333 shares
for restricted stock 158 99,842 100,000
Issuance of 100,000 shares
for services 100 143,900 144,000
Issuance of 137,000 shares
for litigation settlement 137 183,246 183,383
Issuance of 700,000 shares
for convertible notes 700 396,979 397,679
Issuance of 389,388 shares
for repayment of notes payable 390 473,694 474,084
Issuance of 120,000 shares for
repayment of notes payable
officer/director 120 145,414 145,534
Net loss for nine months (2,943,321) (2,943,321)
--------- ----------- ----------- ------------
Balance, October 31, 1997 $ 7,805 $8,570,100 $(10,209,551) $(1,631,646)
--------- ----------- ----------- ------------
--------- ----------- ----------- ------------
</TABLE>
See notes to financial statements
5
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended Nine Months Ended
October 31, October 31,
1996 1997 1996 1997
----------- ------------ ------------- ------------
Cash flows from operating activities:
Net loss $ (373,362) $(1,812,855) $ (1,613,857) $ (2,943,321)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,809 2,950 5,427 6,569
Issuance of common stock for services 1,006,250 75,000 1,175,250
Issuance of common stock for
litigation settlements 125,960 183,383
Accrued interest
on notes & convertible notes payable 306,791 306,791
Changes in assets and liabilities:
Other assets 6,391 3,027
Unearned revenue 20,000
Accounts payable and accrued expenses 99,902 109,684 120,404 (52,222)
----------- ----------- ------------- ------------
Net cash used by operating activities (271,651) (254,829) (1,393,026) (1,320,523)
----------- ----------- ------------- ------------
Net cash flows used by investing activities:
Purchase of property and equipment -0- -0- -0- (12,000)
----------- ----------- ------------- ------------
Cash flows from financing activities:
Issuance of common stock 100,000 1,415,500 100,000
Loan receivable, officer 20,180 42,369
Proceeds from convertible notes payable 1,000,000
Proceeds (repayment) of note payable 162,000
Note payable shareholder/officer 30,000
----------- ----------- ------------- ------------
Net cash provided by financing activities 120,180 1,415,500 1,334,369
----------- ----------- ------------- ------------
Net increase (decrease) in cash (271,651) (134,649) 22,474 1,846
Cash, beginning balance 299,398 138,014 5,273 1,519
----------- ----------- ------------- ------------
Cash, ending balance $ 27,747 $ 3,365 $ 27,747 $ 3,365
----------- ----------- ------------- ------------
----------- ----------- ------------- ------------
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 20 $ -0- $ 1,363 $ 10,500
----------- ----------- ------------- ------------
----------- ----------- ------------- ------------
Supplemental disclosures of non-cash
financing activities:
Issuance of stock for services $ -0- $ 1,006,250 $ 75,000 $ 1,175,250
----------- ----------- ------------- ------------
----------- ----------- ------------- ------------
Issuance of stock for litigation settlement $ -0- $ 125,960 $ -0- $ 183,383
----------- ----------- ------------- ------------
----------- ----------- ------------- ------------
Accrued interest on notes $ 306,791 $ 306,791
----------- ----------- ------------- ------------
----------- ----------- ------------- ------------
</TABLE>
See notes to financial statements
6
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(Unaudited)
1. Basis of presentation:
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine months ended October 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended January
31, 1998. The unaudited financial statements should be read in conjunction
with the financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended January 31, 1997.
2. Description of Business and Significant Accounting Policies:
The Company is a development stage company since it has not completed
designing, testing, and manufacturing its sole product, a vending machine
which will cook and dispense french fries. The Company has incurred
research and development costs from inception to October 31, 1997 totaling
$1,427,315. The Company has entered into a manufacturing agreement with an
unaffiliated company which manufactures and assembles a variety of high
technology equipment. The Company has received ten pre-production
prototype machines and it is anticipated that each machine can be sold for
approximately $9,000. The difference between the anticipated selling price
and the cost to obtain the machines has been charged to research, machine
and product development costs. From the corporation's date of inception,
October 18, 1985, to date it has engaged in various business activities
that were unprofitable. The Company had no significant revenues from
operations from the sale of its french fry vending machine since inception
and its ability to continue as a going concern is dependent on the
continuation of financing to fund the expenses relating to successfully
manufacturing and marketing the vending machine. Management is currently
in negotiations with several funding sources to provide the working capital
necessary to: (i) begin commercial production of the machines, and (ii)
bring them to market, at which time the Company believes that sufficient
cash will be generated to support its operations. Although management
cannot assure the ultimate success of the above plan, it is reasonably
confident that it will enable the Company to continue its business and grow
modestly.
7
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(Unaudited)
3. Issuance of Common Stock:
An aggregate of 3,104,855 shares were issued during the nine months ended
October 31, 1997, including: 1,500,000 shares issued to Edward Kelly as a
one-time, non-recurring compensation event; 1,142,857 shares issued into
escrow, pursuant to the June 1997 convertible note financing; 509,388
shares issued for repayment of notes payable (including notes payable to
officers/directors); 158,333 shares issued in private placements of
restricted common stock; 100,000 shares were issued as payment for
commissions; 137,000 shares issued for settlement of litigation. 442,857
of the aggregate 1,142,857 shares issued into escrow pursuant to the June
1997 financing remain in escrow and are not deemed to be outstanding (see
Note 5).
The total shares issued during the nine months ended October 31, 1996 were
898,155 shares; 823,155 shares were sold in private placements by the
Company and 75,000 shares were issued in payment for legal services.
Subsequent to October 31, 1997, the Company has issued additional shares
and common stock purchase warrants to purchase common stock to various
parties as payment for services rendered. The Company intends to continue
this practice in future periods.
4. Litigation:
In February 1995, the Company reached a settlement agreement with
California Food & Vending, Inc. (CFV) which supersedes an arbitration award
from October 1994 granted in CFV's favor that resulted from an agreement
between the two parties. In addition to a one-time cash payment, the
settlement agreement provides for: (i) payment to CFV of a royalty per
machine sold consisting of $350 per machine for the first 500 machines sold
and 35% of the gross profit for machines sold thereafter, up to a limit of
$500 per machine; (ii) payment to CFV of a royalty consisting of $.25 for
each pound of potato product sold; (iii) issuance of an option to CFV for
the purchase of 100,000 shares of the Company's common stock at an exercise
price of $2.00 per share through February 1, 1999; and (iv) CFV shall
receive an aggregate of $2,000,000 payable from 50% of all domestic and
international gross distribution fees until paid in full and thereafter 25%
of all international distribution fees. The royalties, fees and profits
payable in the future to CFV could become material, but there is no way to
assign a dollar figure to this payable since it will be based on future
Company sales. These royalties will be expensed by the Company when
incurred.
8
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE NINE MONTHS ENDED OCTOBER 31, 1997 AND 1996
(Unaudited)
4. Litigation (continued):
On May 23, 1995, a former agent of the Company instituted a lawsuit against
the Company and its former president, Gary Arzt, for breach of contract,
quantum meruit, breach of verbal contract and requested damages in excess
of $15,000 for unpaid commissions. In October 1997, the lawsuit was
settled. The Company made a cash payment of $5,000 and issued 30,000
shares of restricted common stock as the settlement.
5. Convertible Notes Payable:
In June 1997, the Company received $1,000,000 in exchange for notes
convertible into the Company's common stock. Pursuant to the terms of the
financing, the Company issued 1,142,857 shares of common stock to be held
in escrow, pending the potential conversion of notes. In September 1997,
the note holders converted an aggregate of $397,679 of principal into
700,000 shares of common stock. As of October 31, 1997, the aggregate
outstanding principal balance of the convertible notes is $602,321. The
remaining 442,857 shares of common stock in escrow are not deemed to be
outstanding as of October 31, 1997.
9
<PAGE>
ITEM 2. PLAN OF OPERATION
GENERAL
The Company is a development-stage company. The Company has not yet begun the
process of manufacturing its sole product, a vending machine which will cook and
dispense french fries (the "Machine"). The Company has completed the design of
the Machine and has tested the Machine both internally and on various beta
locations since December of 1995; however, it has yet to enter into commercial
production of the Machine.
In June, September and November of 1997, the Company completed private
placements of its securities which provided the Company with funds to continue
its limited operations. To date, the Company's operations have been limited to:
(i) designing and testing the machine; (ii) initial marketing efforts for the
Company's machines; and (iii) initiating the pre-production tooling and
fabrication of the component parts required to manufacture the machines.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has had virtually no revenues from operations
and has relied almost exclusively on shareholder loans, limited distribution
deposits and private securities transactions to raise working capital to fund
operations. At October 31, 1997 the Company had approximately $3,365 in cash.
In September 1997, the Company received $100,000 in connection with a private
sale of its restricted common stock.
The Company is currently attempting to secure additional funds to allow it to
complete its plan of operation. No assurances can be given that the Company
will be able to secure adequate financing from any source to pursue its current
plan of operation, to meet its obligations, to commence commercial production
or expand marketing over the next 12 months. If the Company is unable to obtain
the requisite funds, it could be forced to curtail or cease its activities.
ITEM 3. FORWARD-LOOKING STATEMENTS
When used in this report and in future filings by the Company with the
Commission, in the Company's press releases or other public or stockholder
communications, and in oral statements made with the approval of an authorized
executive officer, the words or phrases "will likely result", "are expected to",
"will continue", "is anticipated", "estimate", "project" or similar expressions
are intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties, including the Company's liquidity constraints,
potential increases in manufacturing costs and delays, pending litigation,
availability of raw materials, competition, demand for the Machine and other
proprietary products, and delays in the distribution process that could cause
actual results to differ materially from those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that actual results for future periods to
differ materially from any opinions or statements expressed with respect to
future periods in any current statements.
The Company does not undertake--and specifically declines any obligation--to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
PRIZE FRIES LITIGATION - SETTLED
On August 28, 1996, the Company and Edward C. Kelly, its President, C.E.O. and
Chairman, were added as defendants to an amended complaint between Prize Frize,
Inc., William Bartfield and Larry Wirth, Plaintiffs, and Tasty Fries, Inc;
Premier Design, Ltd.; H&R Industries; and Edward C. Kelly as defendants. The
Company successfully moved for dismissal of the claim on behalf of itself and
Mr. Kelly and the matter is concluded.
GARY ARZT LITIGATION- SETTLED
On September 30, 1996, a lawsuit was instituted by Mr. Arzt against the Company
in Dade County, Florida for breach of a promissory note and reimbursement of
certain alleged expenses incurred by Mr. Arzt as former Chairman of the Board of
the Company. Mr. Arzt was paid the balance of the funds due in connection with
the note in June 1997. A Satisfaction of Judgement was filed on June 17, 1997
on this matter. This action was settled in November 1997.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
See Part II, Item 1. Above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8-K dated November 5, 1997 is hereby incorporated by reference.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the exchange act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
TASTY FRIES, INC.
Date: December 15, 1997 /s/ Edward C. Kelly
---------------------------
Edward C. Kelly, President
and Principal Financial
Officer
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 3,365
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 130,996
<PP&E> 39,534
<DEPRECIATION> (30,642)
<TOTAL-ASSETS> 176,530
<CURRENT-LIABILITIES> 829,855
<BONDS> 602,321
0
0
<COMMON> 7,805
<OTHER-SE> (1,631,646)
<TOTAL-LIABILITY-AND-EQUITY> 176,530
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 225,049
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 326,937
<INCOME-PRETAX> (1,812,855)
<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,812,855)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> (.29)
</TABLE>
