<PAGE> 1
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 April 30, 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 April 30, 1997: 4,763,775 shares of common stock were outstanding.
<PAGE> 2
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
April 30, January 31,
1997 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash $ 4,492 $ 1,519
Vending machines 70,000 70,000
Loan receivable, officers 100,000 100,000
Interest receivable 13,947 9,027
----------- -----------
Total current assets 188,439 180,546
Property and equipment, net 21,466 23,276
----------- -----------
$ 209,905 $ 203,822
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Notes payable $ 40,000 $ 60,000
Note payable, officer/director 50,000 50,000
Accounts payable and accrued expenses 1,079,153 882,077
----------- -----------
Total current liabilities 1,169,153 992,077
----------- -----------
Unearned revenue 376,000 376,000
----------- -----------
Stockholders' deficiency:
Common stock, $.001 par value; authorized
25,000,000 shares; issued and outstanding
4,763,775 shares at April 30, 1997 and
4,700,025 at January 31, 1997 4,764 4,700
Additional paid-in capital 6,424,634 6,097,275
Deficit accumulated in development stage (7,764,646) (7,266,230)
----------- -----------
(1,335,248) (1,164,255)
----------- -----------
$ 209,905 $ 203,822
=========== ===========
</TABLE>
See notes to financial statements
<PAGE> 3
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Revenues $ $
----------- -----------
Costs and expenses:
Research, machine and
product development
Selling, general and administrative 389,914 293,219
----------- -----------
389,914 293,219
----------- -----------
Net loss before other income (expense) (389,914) (293,219)
Other income (expense):
Interest income 4,920
Interest expense (1,000) (1,260)
Litigation settlement (112,422)
----------- -----------
(108,502) (1,260)
----------- -----------
Net loss $ (498,416) $ (294,479)
=========== ===========
Net loss per share of common stock $ (0.11) $ (0.08)
=========== ===========
Weighted average shares outstanding 4,720,343 3,890,473
=========== ==========
</TABLE>
See notes to financial statements
<PAGE> 4
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED APRIL 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, February 1, 1997 $ 4,700 $ 6,097,275 $(7,266,230) $(1,164,255)
Return of 294,950 shares -0- -0- -0-
Issuance of 260,000 shares -0- 260,000 260,000
Issuance of 20,000 shares
for services 20 9,980 10,000
Issuance of 43,750 shares
for litigation settlement 44 57,379 57,423
Net loss for three months (498,416) (498,416)
----------- ----------- ----------- -----------
$ 4,764 $ 6,424,634 $(7,764,646) $(1,335,248)
=========== =========== =========== ===========
</TABLE>
See notes to financial statements
<PAGE> 5
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(498,416) $(294,479)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation 1,810 1,809
Common stock issued for services 10,000 75,000
Common stock issued for litigation settlement 57,423
Changes in assets and liabilities:
Other assets (4,920)
Unearned revenue 20,000
Accounts payable and accrued expenses 197,076 71,141
--------- ---------
Net cash used by operating activities (237,027) (126,529)
--------- ---------
Cash flows from investing activities:
Purchase of furniture and equipment --------- ---------
Cash flows from financing activities:
Sale of common stock 260,000 210,000
Proceeds from loan 100,000
Repayment of note payable (20,000)
--------- ---------
Net cash provided by financing activities 240,000 310,000
--------- ---------
Net increase in cash 2,973 183,471
Cash, beginning balance 1,519 5,273
--------- ---------
Cash, ending balance $ 4,492 $ 188,744
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ $
========= =========
Supplemental disclosure of non-cash
financing activities:
Issuance of common stock for services $ 10,000 $ 75,000
========= =========
Issuance of common stock for
litigation settlement $ 57,423
=========
</TABLE>
See notes to financial statements
<PAGE> 6
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED APRIL 30, 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 three months ended April 30, 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 April 30, 1997 totaling
$1,341,895. 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 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 revenues from operations since inception and its ability to
continue as a going concern is dependent on the continuation of equity
financing to fund the expenses relating to successfully marketing the
vending machine and resolving existing litigation (Note 5). Management is
currently in negotiations with three separate funding sources to provide
the working capital necessary to pay Premier and fund the tooling of the
Machine. These funding sources will also assist the Company in
manufacturing the first 50 machines and 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.
<PAGE> 7
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(Unaudited)
3. Issuance of Common Stock:
After the return of 294,950 shares, an aggregate of 323,750 shares were
issued during the quarter ended April 30, 1997. 260,000 shares were sold
in private placements by the Company, 20,000 shares were issued in payment
for legal services and 43,750 shares were issued for settlement of
litigation.
The total shares issued during the quarter ended April 30, 1996 was
11,500,000 shares; 10,000,000 shares were sold in private placements by
the Company and 1,500,000 shares were issued in payment for legal
services.
4. Litigation:
On October 25, 1994, the Company received a copy of the award of the
arbitrator in the American Arbitration Association matter of California
Food & Vending, Inc. (CFV) vs. Tasty Fries, Inc. et al. An award was
rendered against the Company in the aggregate amount of $279,500 for
domestic and international distribution fees owed to the plaintiff and
$249,500 in compensatory damages. The award and compensatory damages
totaling $529,000 have been recorded in the financial statements as of
October 31, 1994. Payment (pursuant to a settlement agreement which
supersedes the award) began in February, 1995 and was satisfied in full in
May, 1996.
In addition, the settlement agreements provides for (a) payment to CFV
royalties of $350 per machine for the first 500 machines sold and 35% of
the gross profit for machines sold thereafter; (b) payment to CFV of $.25
for each pound of potato product sold; (c) issuance of an option to CFV
for the purchase of 100,000 shares of the Company's common stock at a
exercise price of $2.00 per share through February 1, 1999; and (d) CFV
shall receive an aggregate of $2,000,000 payable from 50% of 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.
<PAGE> 8
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(Unaudited)
4. Litigation (continued):
In connection with the foregoing, an award was entered in favor of
cross-claimant, which requires, among other things, that the Company issue
1,000,000 shares of unrestricted common stock to the cross-claimant. These
1,000,000 shares of common stock were accounted for in the financial
statements at market value at the time of the award (October 25, 1994).
The shares were not issued by the Company until June, 1996. On March 4,
1997, the Company agreed to pay the cross-claimant $70,000 and issue
43,750 shares of common stock at fair value in settlement of pending
litigation.
On January 5, 1995, the arbitrator in the case of California Food and
Vending, Inc. (CFV) vs. the Company awarded CFV and cross-claimant legal
fees amounting to $94,963 and $4,099, respectively. In addition, CFV was
awarded one proto-type vending machine, which had a value of $7,000. The
legal fees and the proto-type machine, totaling $106,062 were recorded in
the financial statements. Payment pursuant to a settlement agreement which
supersedes the award began in February, 1995 and was satisfied in full in
May, 1996.
On March 15, 1996, the Federal District Court for the Central District of
California issued a Temporary Protective Order (TPO) against the Company
since the Company defaulted on their February, 1996 installment payment to
CFV. The TPO provided that any monies received by the Company currently,
were to be paid to CFV until all monies due CFV were paid in full. The
Company satisfied, in full, the CFV judgment in April and May, 1996 and
rendered the TPO void.
On May 23, 1995, an alleged former agent of the Company instituted a
lawsuit against the Company and its former president for breach of
contract, quantum meruit, breach of verbal contract and requested damages
in excess of $15,000 for unpaid commissions. The Company and Mr. Arzt
responded to the lawsuit on September 29, 1995 denying the allegations. No
date for trial has been set and the Company believes that the lawsuit is
without merit and intends to vigorously defend this matter. Management
believes that there will be no liability arising from this lawsuit.
<PAGE> 9
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(Unaudited)
4. Litigation (continued):
On January 15, 1996, a lawsuit was instituted alleging breach of contract,
fraudulent inducement and misrepresentation and violation of New Jersey
law relating to consumer contracts. A settlement of this lawsuit occurred
in July, 1996 and the Company agreed to register shares of the Company's
common stock in its current registration statement filed with the
Commission. These shares are recorded in the financial statements at fair
market value at time of issuance.
5. Subsequent event:
On June 3, 1997, the Company received $1,000,000 in exchange for
convertible notes bearing interest at 7% per annum and are due May 14,
2000. The note holders have an option to convert the notes into common
stock of the Company commencing July 19, 1997.
<PAGE> 10
ITEM 2. PLAN OF OPERATION
General
The Company is a development-stage company having not yet completed the
exercise of designing, testing and 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. Management believes that
such production will commence by late-1997.
In April and May of 1996 and June 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
designing and testing the Machine and arranging sales for the Company's
machines.
Liquidity and Capital Resources
Since its inception, the Registrant 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 April 30, 1997 the Registrant had approximately
$4,492 in cash.
On June 4, 1997, the Registrant completed a $1,000,000 convertible
financing. The financing came from a major European institutional investor and
is expected to allow the Registrant to complete its production tooling process
and enter into limited commercial production.
On June 10, 1997, Registrant paid an additional $100,000 to Premier
Design, the firm that assisted in the development of the machine.
No assurances can be given that the Registrant will be able to secure
adequate financing from any source to pursue its current plan of operation, to
meet its obligations or to commence commercial production or expand marketing
over the next 12 months. If the Registrant is unable to obtain needed 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 Registrant with
the Commission, in the Registrant'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
Registrant'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
<PAGE> 11
anticipated or projected. The Registrant wishes to caution readers not to place
undue reliance on any such forward-looking statements, which speak only as of
the date made. The Registrant 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 Registrant 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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Prize Fries Litigation - Settled
On August 28, 1996, the Registrant and Edward C. Kelly, its President,
Chief Executive Officer and Chairman of the Board, were added as defendants to a
Second Amended Complaint in litigation pending in the Riverside County Branch of
the Superior Court of the State of California, between Prize Frize, Inc.,
William Bartfield and Larry Wirth, Plaintiffs, and Matrix (U.S.), Inc; Matrix,
Inc.; Peter Fisher; International Tasty Fries, Inc.; Fry Factor, Inc.; Edward
Trent; Xavier Castro; Marcellino Menendez; Maxi, Inc.; Inter Trade Exchange Co.;
Baltkor International; Sanad Registrant; Michael Krakow; Andrei Lutikov; Griffin
Financial Management Corporation, Inc.; Ez Fries, Inc.; Samuel Hepburn; Dudley
Muth; Richard O. Wahlgren; Gene Fruhling; Eurofrize, Inc.; Laszlo Kovacs; Seek,
Inc.; Fresh Fries Uk Ltd; Tega, S.A.; Tasty Fries, Inc; Premier Design, Ltd.;
H&R Industries; and Edward C. Kelly as defendants. The causes of action alleged
against the Registrant and Mr. Kelly include misappropriation of trade secrets,
unfair competition, conversion and conspiracy. The Second Amended Complaint
seeks damages against the Registrant and Mr. Kelly in an unspecified amount for
compensatory and punitive damages, according to proof at trial. The Registrant
has filed a Motion to Quash for lack of personal jurisdiction over Edward Kelly.
Counsel for the Registrant expects a Third Amended Complaint to be filed in
response to a Motion to Dismiss filed by other defendants. This action was
dismissed on June 2, 1997.
Gary Arzt Litigation - Settled
On September 25, 1996, a lawsuit was instituted by Mr. Arzt against the
Registrant in the Circuit Court of the 11th Judicial Circuit in and for 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
Registrant. Mr. Arzt was paid the balance of the funds due in June 1997. A
Satisfaction of Judgement was filed on June 17, 1997.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
<PAGE> 12
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
None.
<PAGE> 13
SIGNATURES
In accordance with the requirements of the exchange act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
TASTY FRIES, INC.
Date: June 19, 1997 /S/ EDWARD C. KELLY
--------------------------
Edward C. Kelly, President
and Principal Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<CASH> 4,492
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 183,947
<PP&E> 47,349
<DEPRECIATION> (25,883)
<TOTAL-ASSETS> 209,905
<CURRENT-LIABILITIES> 1,169,153
<BONDS> 0
0
0
<COMMON> 4,763
<OTHER-SE> (1,340,012)
<TOTAL-LIABILITY-AND-EQUITY> 209,905
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 497,416
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,000
<INCOME-PRETAX> (498,416)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (498,416)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
