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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, 1999
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 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 July 31, 1999: 23,222,511 shares of common stock were outstanding.
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<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(Unaudited)
ASSETS
July 31, January 31,
1999 1999
------------ ------------
(Unaudited)
Current assets:
Cash ..................................... $ 183,879 $ 66,394
Vending machines ......................... 195,000 195,000
Prepaid Expenses ......................... 123,313
------------ ------------
Total Current assests .................. 378,879 384,707
------------ ------------
Property and equipment, net .................... 25,617 24,777
------------ ------------
Other assets:
Loan costs, net of accumulated
amortization of $146,500 ................... 90,355 129,831
------------ ------------
$ 494,851 $ 539,315
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses ....... $ 1,866,924 $ 1,070,751
------------ ------------
Unearned revenue ............................... 220,000 261,000
------------ ------------
Stockholders' deficiency:
Common stock, $.001 par value;
authorized 50,000,000 shares; issued and
outstanding 23,222,511 shares at
July 31, 1999 and 17,995,606 at
January 31, 1999 ........................... 23,222 17,996
Additional paid-in capital ..................... 15,279,688 13,426,963
Deficit accumulated in development stage ....... (16,894,983) (14,237,395)
------------ ------------
(1,592,073) (792,436)
------------ ------------
$ 494,851 $ 539,315
============ ============
See notes to financial statements
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues ................................... $ $ $ $
------------ ------------ ------------ ------------
Costs and expenses:
Research, machine and product development 45,934 51,336 52,366 118,934
Selling, general and administrative ..... 847,679 554,011 1,249,770 1,029,525
------------ ------------ ------------ ------------
893,613 605,347 1,302,136 1,148,459
------------ ------------ ------------ ------------
Net loss before other income (expense) ..... (893,613) (605,347) (1,302,136) (1,148,459)
------------ ------------ ------------ ------------
Other income (expense):
Interest income ......................... -- 667 -- 1,354
Interest expense ........................ (8,952) (18,958) (8,952) (46,493)
Reacquired distributorships ............. (221,500) (221,500)
Litigation settlement ................... (1,125,000) (1,125,000)
------------ ------------ ------------ ------------
(1,355,452) (18,291) (1,355,452) (45,139)
------------ ------------ ------------ ------------
Net loss ................................... $ (2,249,065) $ (623,638) $ (2,657,588) $ (1,193,598)
============ ============ ============ ============
Net loss per share of common stock ......... $ (0.11) $ (0.06) $ (0.14) $ (0.11)
============ ============ ============ ============
Weighted average shares outstanding ........ 19,681,421 10,830,334 19,462,404 10,525,092
============ ============ ============ ============
</TABLE>
See notes to financial statements
2
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JULY 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
Total
Common Paid-In Deficit Stockholders'
Stock Capital Accumulation Deficit
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balance, February 1, 1999 .................. $ 17,996 $13,426,963 $(14,237,395) $ (792,436)
Issuance of 2,900,000 shares .............. 2,900 797,100 800,000
Issuance of 250,000 shares for litigation
settlement ............................. 250 124 ,750 125,000
Issuance of 1,576,905 shares for service ... 1,576 681,375 682,951
Issuance of 500,000 shares for repurchase of
distributorship ........................ 500 249,500 250,000
Net loss for six months ................... (2,657,588) (2,657,588)
----------- ----------- ------------ -----------
Balance, July 31, 1999 ..................... $ 23,222 $15,279,688 $(16,894,983) $(1,592,073)
=========== =========== ============ ===========
</TABLE>
See notes to financial statements
3
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ................................................... $(2,249,066) $ (623,638) $(2,657,588) $(1,193,598)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization ......................... 23,264 22,692 46,154 45,379
Common stock issued for services ...................... 622,951 682,951 57,000
Common stock issued for litigation settlement ......... 125,000 125,000
Common stock issued for interest on convertible notes . 26,427
Common stock issured for repurchase of distributorships 250,000 250,000
Changes in assets and liabilities:
Other assets ......................................... 58,753 (115,467) 123,313 (151,970)
Unearned revenue ..................................... (41,000) (41,000)
Accounts payable and accrued expenses ................ 996,185 101,557 796,173 205,807
----------- ----------- ----------- -----------
Net cash used by operating activities ......................... (213,913) (614,856) (674,997) (1,010,955)
----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of furniture and equipment ...................... -0- -0- (7,519) -0-
----------- ----------- ----------- -----------
Cash flows from financing activities:
Sale of common stock ....................................... 200,000 650,000 800,000 650,000
Loan receivable, officers ................................. 9,197 30,377
----------- ----------- ----------- -----------
Net cash provided by financing activities ..................... 200,000 659,197 800,000 680,377
----------- ----------- ----------- -----------
Net increase (decrease) in cash ............................... (13,913) 44,341 117,484 (330,578)
Cash, beginning balance ....................................... 197,791 5,217 66,394 380,136
----------- ----------- ----------- -----------
Cash, ending balance .......................................... $ 183,878 $ 49,558 $ 183,878 $ 49,558
=========== =========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest ..................................... $ -0- $ -0- $ -0- $ -0-
=========== =========== =========== ===========
Supplemental disclosure of non-cash financing activities:
Issuance of common stock for services ...................... $ 622,951 $ -0- $ 682,951 $ 57,000
=========== =========== =========== ===========
Issuance of common stock for litigation settlement ......... $ 125,000 $ 125,000
=========== ===========
Issuance of common stock for repurchase of distributorships $ 250,000 $ 250,000
=========== ===========
</TABLE>
See notes to financial statements
4
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 1998
(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, 1999 are not necessarily
indicative of the results that may be expected for the year ended January 31,
2000. 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, 1999.
2. Description of Business and Significant Accounting Policies:
The Company is a development stage company, having not yet completed the process
of 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 July 31, 1999 totaling $2,187,143. 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 completing its first 25 machines, which are included in inventory at
$125,000.00. The difference between the anticipated selling price and the cost
to build the first 25 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:
The Company issued an aggregate of 5,226,905 shares during the six months ended
July 31, 1999. 2,900,000 shares were sold in private placements by the company,
1,576,905 shares were issued in payment of services, 250,000 shares were issued
for litigation settlement and 500,000 shares were issued for repurchase of
distributorships.
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: 1,300,000 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 distsributorship.
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 July 31, 1999, $1,000,000 of the $1,500,000 in
proceeds has been received by the Company and 2,000,000 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, 1999.
5
<PAGE>
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, 1999, the Company entered into the
production stage of its lifecycle, having spent the latter half of fiscal 1998
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, 1999 the Company had approximately $183,879 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 alleging that Tasty Fries and its Chief Executive
Officer, Edward C. Kelly had not complied with the parties prior settlement
agreement by failing to sell distributorships, misrepresenting the Company's
financial condition at the time of the settlement and completing a reverse split
of the Company's stock after the settlement reducing the number of CFV's options
to purchase the company's stock and increasing the cost of the options. Tasty
Fries countersued California Food & Vending charging that it had breached its
fiduciary responsibility as Tasty Fries' distributor by failing to market and
promote the TFRY French fry vending machine and by unsuccessfully attempting to
introduce its own machine.
On July 12, 1999, the Company and CFV settled the case. Tasty Fries regained its
State of California distributorship which was owned by California Food &
Vending. CFV gave up its rights to share equally in the first $4,000,000 of
international and domestic distributorship fees to be paid to Tasty Fries when
it commences the commercial delivery of its machines and twenty five percent of
all such fees paid to Tasty Fries after the first $4,000,000. Tasty Fries
received a 10% reduction from $500 per machine to $450 per machine with respect
to the royalty to be paid to CFV on the cost of the machines. CFV received
250,000 shares of the Company's common stock and $1,000,000.
The litigation has been dismissed.
On August 28, 1996. the Company, Edward C. Kelly and Premier Design, Ltd., were
added as defendants to a civil lawsuit in the Riverside County Branch of the
Superior Court of the State of California brought by Prize Fries, Inc., William
Bartfield and Larry Wirth. The suit also named as defendants approximately 25
other parties, all allegedly involved, in some manner, in the pursuit of the
French fry vending machine concept and/or business. The case was removed to
Federal Court. The Company successfully moved for dismissal of the claim on
behalf of itself and Mr. Kelly; the case was dismissed on June 2, 1997. The
case, which was removed to federal court, has now been remanded by the federal
court to the state court for disposition where it will be vigorously contested.
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
<PAGE>
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.
-----------------------------------------
Edward C. Kelly,
Date: September 13, 1999 President and Principal Financial Officer
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JUL-31-1999
<CASH> 183,879
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 195,000
<CURRENT-ASSETS> 387,879
<PP&E> 77,696
<DEPRECIATION> 52,079
<TOTAL-ASSETS> 494,851
<CURRENT-LIABILITIES> 1,866,924
<BONDS> 0
0
0
<COMMON> 23,222
<OTHER-SE> (1,615,295)
<TOTAL-LIABILITY-AND-EQUITY> 494,851
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (2,648,636)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8,952)
<INCOME-PRETAX> (2,657,588)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,657,588)
<EPS-BASIC> (0.14)
<EPS-DILUTED> 0
</TABLE>
