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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 July 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
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As of July 31, 1998: 14,208,712 shares of common stock were outstanding.
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues ................................... $ $ $ $
---------- --------- ---------- ---------
Costs and expenses:
Research, machine and product development 51,336 62,864 118,934 62,864
Selling, general and administrative ..... 554,011 545,380 1,029,525 950,294
---------- --------- ---------- ---------
605,347 608,244 1,148,459 1,013,158
---------- --------- ---------- ---------
Net loss before other income (expense) ..... (605,347) (608,244) (1,148,459) (1,013,158)
Other income (expense):
Interest income ......................... 667 2,860 1,354 7,780
Interest expense ........................ (18,958) (11,666) (46,493) (12,666)
Litigation settlement ................... (112,422)
---------- --------- ---------- ---------
(18,291) (8,806) (45,139) (117,308)
---------- --------- ---------- ---------
Net loss ................................... $ (623,638) $ (617,050) $ (1,193,598) $ (1,130,466)
Net loss per share of common stock ......... $ (0.06) $ (0.13) $ (0.11) $ (0.24)
Weighted average shares outstanding ........ 10,830,334 4,744,380 10,525,092 4,734,217
---------- --------- ---------- ---------
---------- --------- ---------- ---------
</TABLE>
See notes to financial statements
2
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JULY 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Total
Common Paid-In Retained Stockholders'
Stock Capital Earnings Equity
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, February 1, 1998 ............................ $ 8,638 $ 9,570,693 $(12,064,818) $(2,485,487)
Issuance of 1,300,000 shares ......................... 1,300 648,700 650,000
Issuance of 3,764,878 shares for convertible notes.... 3,764 1,443,529 1,447,293
Issuance of 42,704 shares for interest on
convertible notes ................................ 43 26,385 26,428
Issuance of 212,500 shares for services .............. 212 56,788 57,000
Issuance of 250,000 shares for repurchase of
distributorship .................................. 250 124,750 125,000
Net loss for six months .............................. (1,193,598) (1,193,598)
----------- ----------- ------------ -----------
Balance, July 31, 1998 ............................... $ 14,207 $11,870,845 $(13,258,416) $(1,373,364)
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
</TABLE>
See notes to financial statements
3
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss .................................................... $ (623,638) $ (617,050) $(1,193,598) $(1,130,466)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization .......................... 22,692 1,809 45,379 3,619
Common stock issued for services ....................... 144,000 57,000 169,000
Common stock issued for litigation settlement .......... 57,423
Common stock issued for interest on convertible notes... 26,427
Changes in assets and liabilities:
Other assets .......................................... (115,467) 1,556 (151,970) (3,364)
Unearned revenue......................................
Accounts payable and accrued expenses ................. 101,557 (358,982) 205,807 (161,906)
----------- ----------- ----------- -----------
Net cash used by operating activities .......................... (614,856) (828,667) (1,010,955) (1,065,694)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of furniture and equipment ....................... (12,000) (12,000)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Sale of common stock ........................................ 650,000 650,000
Loan receivable, officers ................................... 9,197 22,189 30,377 22,189
Proceeds from convertible notes payable .................... 1,000,000 1,000,000
Proceeds (repayment) of note payable ........................ 2,000 162,000
Notes payable shareholder/officer ........................... (50,000) 30,000
----------- ----------- ----------- -----------
Net cash provided by financing activities ...................... 659,197 974,189 680,377 1,214,189
----------- ----------- ----------- -----------
Net increase in cash ........................................... 44,341 133,522 (330,578) 136,495
Cash, beginning balance ........................................ 5,217 4,492 380,136 1,519
----------- ----------- ----------- -----------
Cash, ending balance ........................................... $ 49,558 $ 138,014 $ 49,558 $ 138,014
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental disclosure of cash flow information: Cash
paid for interest ............................................ $ 10,500 $ 10,500
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental disclosure of non-cash financing activities:
Issuance of common stock for services ....................... $ 144,000 $ 57,000 $ 169,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Issuance of common stock for litigation settlement .......... $ -0- $ 57,423
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements
4
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TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JULY 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 six months ended July 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 April 30, 1998 totaling $1,993,449. 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 manufacturing and
marketing the vending machine. The Company is currently in the process of
producing its first 25 machines.
3. Issuance of Common Stock:
After the return to treasury of a total of 287,500 shares, an aggregate of
4,270,082 shares were issued during the six months ended July 31, 1998. The
following shares were issued during the six months: 1,300,00 shares were sold in
private placements by the Company; 3,807,582 shares were issued pursuant to the
terms of the Company's convertible note financing (this figure includes shares
issued for interest on the notes); 212,500 shares were issued in payment of
services; 250,000 shares were issued as consideration for the re-acquisition of
an existing distributorship;
After the return to teasury of 294,950 shares, an aggregate of 423,750 shares
were issued during the quarter ended April 30, 1997. 260,000 shares were sold in
private placements by the Company, 120,000 shares were issued in payment for
legal services and 43,750 shares were issued for settlement of litigation.
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. As part of the transaction, the Company also
agreed to register all of the restricted shares and warrant shares associated
with the transaction as soon as practicable. 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 July 31, 1998, $650,000 of the
$1,500,000 in proceeds has been received by the Company and 1,300,000 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
September 30, 1998.
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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 July 31, 9198, 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
July 31, 1998 the Company had approximately $49,558 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
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
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
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Edward C. Kelly,
Date: September 14, 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> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 49,558
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 70,000
<CURRENT-ASSETS> 271,528
<PP&E> 70,177
<DEPRECIATION> 39,497
<TOTAL-ASSETS> 471,513
<CURRENT-LIABILITIES> 838,849
<BONDS> 251,000
0
0
<COMMON> 14,207
<OTHER-SE> (1,387,571)
<TOTAL-LIABILITY-AND-EQUITY> 471,513
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,147,105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,493
<INCOME-PRETAX> (1,193,598)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,193,598)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> 0
</TABLE>
