<PAGE>
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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, 1998
Commission File No. 33-4460-NY
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TASTY FRIES, INC.
(Exact name of registrant as specified in its charter)
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Nevada 65-0259052
State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization
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, 1998: 17,099,299 shares of common stock were outstanding.
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
October 31, January 31,
1998 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash .............................................................. $ 40,870 $ 380,136
Vending machines .................................................. 195,000 70,000
Loan receivable, officers ................................... 30,377
------------ ------------
Total current assets ........................................ 235,870 480,513
Property and equipment, net ................................................ 27,729 36,581
Other assets:
Loan costs, net of accumulated amortization of $87,288 ................ 149,569 208,782
------------ ------------
$ 413,168 $ 725,876
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses ................................... $ 900,505 $ 633,042
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Total current liabilities .......................................... 900,505 633,042
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Convertible notes payable .................................................. 2,202,321
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Unearned revenue ........................................................... 261,000 376,000
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Stockholders' deficiency:
Common stock, $.001 par value; authorized 25,000,000 shares; issued and
outstanding 17,099,299 shares at October 31, 1998
and 8,638,630 at January 31, 1998 ...................................... 17,098 8,638
Additional paid-in capital ................................................. 13,099,860 9,570,693
Deficit accumulated in development stage ................................... (13,865,295) 12,064,818)
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(748,337) (2,485,487)
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$ 413,168 $ 725,876
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------------ ------------
</TABLE>
See notes to financial statements
1
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues ................................... $ $ $ $
------------ ------------ ------------ ------------
Costs and expenses:
Research, machine and product development 112,814 25,556 231,748 88,420
Selling, general and administrative ..... 487,448 225,049 1,516,973 1,175,343
Non-recurring compensation charge ....... 1,031,250 1,031,250
------------ ------------ ------------ ------------
600,262 1,281,855 1,748,721 2,295,013
------------ ------------ ------------ ------------
Net loss before other income (expense) ..... (600,262) (1,281,855) (1,748,721) (2,295,013)
------------ ------------ ------------ ------------
Other income (expense):
Interest income ......................... 1,897 1,354 9,677
Interest expense ........................ (6,617) (326,937) (53,110) (339,603)
Litigation settlement ................... (205,960) (318,382)
------------ ------------ ------------ ------------
(6,617) (531,000) (51,756) (648,308)
------------ ------------ ------------ ------------
Net loss ................................... $ (606,879) $ (1,812,855) $ (1,800,477) $ (2,943,321)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per share of common stock ......... $ (0.05) $ (0.32) $ (0.15) $ (0.55)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average shares outstanding ........ 12,292,464 5,754,397 11,717,036 5,335,883
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
2
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED OCTOBER 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, February 1, 1998 ......................... $ 8,638 $ 9,570,693 $(12,064,818) $ (2,485,487)
Issuance of 1,825,000 shares ..................... 1,825 878,175 880,000
Issuance of 5,586,150 shares for convertible notes 5,586 2,196,735 2,202,321
Issuance of 42,704 shares for interest on
convertible notes ............................. 43 26,385 26,428
Issuance of 756,815 shares for services .......... 756 303,122 303,878
Issuance of 250,000 shares for repurchase of
distributorship ............................... 250 124,750 125,000
Net loss for nine months .......................... (1,800,477) (1,800,477)
------------ ------------ ------------ ------------
Balance, October 31, 1998 ......................... $ 17,098 $ 13,099,860 $(13,865,295) $ (748,337)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See notes to financial statements
3
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................... $ (606,879) $(1,812,855) $(1,800,477) $(2,943,321)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization ......................... 22,687 2,950 68,066 6,569
Common stock issued for services ...................... 246,878 1,006,250 303,878 1,175,250
Common stock issued for litigation settlement ......... 125,960 183,383
Accrued interest on notes & convertible notes payable . 306,791 306,791
Common stock issued for interest on convertible notes . 26,427
Changes in assets and liabilities:
Other assets ......................................... 26,970 6,391 (125,000) 3,027
Unearned revenue .................................... 10,000 10,000
Accounts payable and accrued expenses ................ 61,656 109,684 267,463 (52,222)
----------- ----------- ----------- -----------
Net cash used by operating activities ......................... (238,688) (254,829) (1,249,643) (1,320,523)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of furniture and equipment ...................... -0- -0- -0- (12,000)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Sale of common stock ....................................... 230,000 100,000 880,000 100,000
Loan receivable, officers .................................. 20,180 30,377 42,369
Proceeds from convertible notes payable ................... 1,000,000
Proceeds (repayment) of note payable ....................... 162,000
Notes payable shareholder/officer........................... 30,000
----------- ----------- ----------- -----------
Net cash provided by financing activities ..................... 230,000 120,180 910,377 1,334,369
----------- ----------- ----------- -----------
Net increase (decrease) in cash ............................... (8,688) (134,649) (339,266) 1,846
Cash, beginning balance ....................................... 49,558 138,014 380,136 1,519
----------- ----------- ----------- -----------
Cash, ending balance .......................................... $ 40,870 $ 3,365 $ 40,870 $ 3,365
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for interest ..................................... $ -0- $ -0- $ -0- $ 10,500
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental disclosure of non-cash financing activities:
Issuance of common stock for services ...................... $ -0- $ 1,006,250 $ 303,878 $ 1,175,250
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Issuance of common stock for litigation settlement ......... $ 125,960 $ 183,383
----------- -----------
----------- -----------
Accrued interest on notes payable .......................... $ 306,791 $ 306,791
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements
4
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED OCTOBER 31, 1998 AND 1997
(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, 1998 are not necessarily
indicative of the results that may be expected for the year ended January 31,
1999. 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, 1998.
2. Description of Business and Significant Accounting Policies:
The Company is a development stage company, having not yet completed the process
of designing, manufacturing and marketing 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, 1998 totaling $2,106,263. The
Company produced 10 preproduction machines for demonstration and sales purposes.
These machines have a book value of $7,000 each. The Company is currently in the
process of producing its first 25 machines, which are in process and included in
inventory at $125,000.00. The difference between the anticipated selling price
and the cost to obtain the machines has been charged to research, machine and
product development costs. 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
manufacturing and marketing the vending machine.
3. Issuance of Common Stock:
After the return to treasury of a total of 287,500 shares, an aggregate of
8,460,669 shares were issued during the nine months ended October 31, 1998. The
following shares were issued during the nine months: 1,825,00 shares were sold
in private placements by the Company; 5,628,854 shares were issued pursuant to
the terms of the Company's convertible note financing (this figure includes
shares issued for interest on the notes); 756,815 shares were issued in payment
of services; 250,000 shares were issued as consideration for the re-acquisition
of an existing distributorship;
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.
4. April 1998 Financing:
In April 1998, the Company entered into an agreement to receive $1,500,000 in
proceeds from the sale of restricted stock to a U.S. corporation. The Company
issued 3,000,000 shares of common stock as consideration for the investment. The
Company also issued warrants to purchase 1,500,000 post-split shares of common
stock at an exercise price of $1.90; the warrants expire April 12, 2001. The
Company also issued 150,000 post-split shares of restricted stock as a
commission on the transaction. The Company and the investor have entered into an
escrow agreement for this transaction and all of the shares were issued into
escrow, pending funding. As of October 31, 1998, $750,000 of the $1,500,000 in
proceeds has been received by the Company and 1,500,000 of the 3,000,000 shares
of restricted common stock held in escrow have been released to the investor.
The balance of funds due are anticipated to be received by December 31, 1998.
5
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ITEM 2. PLAN OF OPERATION
General
The Company is a development-stage company having not yet completed the exercise
of manufacturing, marketing and selling its sole product, a vending machine
which will cook and dispense French fries (the "Machine"). The Company has
tested the Machine both internally and on various beta locations since December
of 1995. During the period ending October 31, 1998, the Company entered into the
production stage of its lifecycle, having spent the latter half of fiscal 1997
preparing for commercial manufacturing through the process of pre-production
tooling and completion of final production design work.
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 sale of securities to raise working capital to fund operations. At
October 31, 1998 the Company had approximately $40,870 in cash.
While management currently anticipates that the April 1998 financing will allow
it to complete the company's initial production run of machines, no assurances
can be given that the Company will be able to do so. Further, the Company will
need to secure additional funds to allow it to enter into its second production
run of machines, in line with management's current 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 or to expand its marketing efforts over the next 12 months. Based
upon its past history, management believes that it may be able to obtain funding
in such manner but is unable to predict with any certainty the amount and terms
thereof. If the Company is unable to obtain needed funds, it could be forced to
curtail or cease its activities.
The Company has, in the past, issued shares of common stock and warrants to
purchase common stock to various parties as payment for services rendered. The
Company intends to continue this practice.
ITEM 3. FORWARD-LOOKING STATEMENTS
When used in this report and in future filings by the Company 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 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 the occurrence of anticipated or
unanticipated events
6
<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 17, 1998, California Food and Vending, Inc. ("CFV") filed a
multi-count law suit in the United States District Court for the Central
District of California against the Company. CFV asserted, in essence, that Tasty
Fries and its Chief Executive Officer, Edward C. Kelly breached the terms of the
settlement reached with it in the prior litigation by failing to sell
distributorships, failing to accede to CFV's to maintain its option at the
pre-reverse split level notwithstanding the fact that the Company's stock went
through a reverse split after the settlement and misrepresenting the Company's
condition at the time of the settlement. CFV's First Amended Complaint was
dismissed with leave to amend only some of the counts. It is the opinion of the
Company's counsel that CFV's law suit lacks merit and that the Company will
prevail.
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
None
7
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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.
/s/ Edward C. Kelly
---------------
Edward C. Kelly,
Date: December 11, 1998 President and Principal Financial Officer
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> AUG-1-1998
<PERIOD-END> OCT-31-1998
<CASH> 40,870
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 195,000
<CURRENT-ASSETS> 235,870
<PP&E> 70,177
<DEPRECIATION> 42,448
<TOTAL-ASSETS> 413,168
<CURRENT-LIABILITIES> 1,161,505
<BONDS> 0
0
0
<COMMON> 17,098
<OTHER-SE> (765,435)
<TOTAL-LIABILITY-AND-EQUITY> 413,168
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (1,747,367)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,110
<INCOME-PRETAX> (1,800,447)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,800,477)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> 0
</TABLE>
