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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, 2000
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, PENNSYLVANIA 19422
--------------------------------------------------
(Address Of Principal Executive Offices)(Zip Code)
(610) 941-2109
--------------------------------------------------
(Registrant's telephone number, include 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, 2000: 31,529,011 shares of common stock were outstanding.
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(Unaudited)
ASSETS
July 31, January 31,
2000 2000
------------ ------------
(Unaudited)
Current assets:
Cash ........................................ $ 120,657 $ 10,703
Prepaid expenses ............................ 5,000
------------ ------------
Total current assets .................. 125,657 10,703
------------ ------------
Property and equipment, net .................... 14,816 20,258
------------ ------------
$ 140,473 $ 30,961
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable and accrued expenses ....... $ 737,758 $ 773,576
Shareholder loan payable .................... 924,000 900,000
------------ ------------
1,661,758 1,673,576
------------ ------------
Unearned revenue ............................... 440,000 320,000
------------ ------------
Stockholders' deficiency:
Common stock, $.001 par value;
authorized 50,000,000 shares;
issued and outstanding 31,529,011
shares at July 31, 2000 and
27,719,011 at January 31, 2000 ............. 31,529 27,719
Additional paid-in capital .................. 21,030,821 19,231,332
Deficit accumulated in development stage .... (23,023,635) (21,221,666)
------------ ------------
(1,961,285) (1,962,615)
------------ ------------
$ 140,473 $ 30,961
============ ============
See notes to financial statements 1
<PAGE>
<TABLE>
<CAPTION>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2000 AND 1999
(Unaudited)
Cumulative
Since Three Months Ended Six Months Ended
Inception 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------
Revenues $ $ $ $
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Costs and expenses:
Research, machine and
product development ......... $ 2,920,865 76,579 45,935 246,530 52,366
Selling, general and
administrative .............. 18,393,549 704,082 2,432,179 1,497,420 3,010,770
------------ ------------ ------------ ------------ ------------
21,314,414 780,661 2,478,114 1,743,950 3,063,136
------------ ------------ ------------ ------------ ------------
Net loss before other
income (expense) ............... (21,314,414) (780,961) (2,478,114) (1,743,950) (3,063,136)
------------ ------------ ------------ ------------ ------------
Other income (expense):
Interest income .............. 21,274
Forfeited distributor deposits 15,000
Interest expense ............. (1,745,495) (41,400) (8,952) (58,019) (8,952)
------------ ------------ ------------ ------------ ------------
(1,709,221) (41,400) (8,952) (58,019) (8,952)
------------ ------------ ------------ ------------ ------------
Net loss ........................ $(23,023,635) $ (822,061) $ (2,487,066) $ (1,801,969) $ (3,072,088)
============ ============ ============ ============ ============
Net loss per share of
common stock ................... $ (0.03) $ (0.13) $ (.06) $ (0.16)
============ ============ ============ ============
Weighted average shares
outstanding .................... 29,496,261 19,681,421 29,219,709 19,462,404
============ ============ ============ ============
See notes to financial statements 2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE SIX MONTHS ENDED JULY 31, 2000
(Unaudited)
Total
Common Paid in Accumulated Stockholder
Stock Capital Deficit Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, February 1, 1991 ........................... $ 157,307 $ (156,307) $ 1,000
Issued 1,114,679 shares for note conversion ......... 11,147 113,853 125,000
Net loss for the year ended January 31, 1992 ........ $ (198,425) (198,425)
----------- ----------- ----------- -----------
Balance, January 31, 1992 ........................... 168,454 (42,454) (198,425) (72,425)
Sold 4,275,000 shares ............................... 42,750 457,250 500,000
Issued 150,000 shares for services .................. 1,500 36,000 37,500
Net loss for the year ended January 31, 1993 ........ (773,304) (773,304)
----------- ----------- ----------- -----------
Balance January 31, 1993 ............................ 212,704 450,796 (971,729) (308,229)
Issued 7,600,000 shares ............................. 76,000 464,000 540,000
Issued 220,000 shares for services .................. 2,200 2,200
Redeemed 3,145,000 shares ........................... (31,450) 31,450
Net loss for the year ended January 31, 1994 ........ (658,820) (658,820)
----------- ----------- ----------- -----------
Balance January 31, 1994 ............................ 259,454 946,246 (1,630,549) (424,849)
Issued 3,129,999 shares ............................. 31,300 547,950 579,250
Issued 2,151,622 shares for services ................ 21,516 121,294 142,810
Issued 1,000,000 shares for litigation settlement ... 10,000 460,000 470,000
Net loss for the year ended January 31, 1995 ........ (2,148,933) (2,148,933)
----------- ----------- ----------- -----------
Balance, January 31, 1995 ........................... 322,270 2,075,490 (3,779,482) (1,381,722)
See notes to financial statements 3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE SIX MONTHS ENDED JULY 31, 2000
(Unaudited)
Total
Common Paid in Accumulated Stockholder
Stock Capital Deficit Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, January 31, 1995 ...................... $ 322,270 $ 2,075,490 $(3,779,482) $(1,381,722)
Issued 36,415,000 shares ....................... 364,150 3,000,350 3,364,500
Issued 6,733,502 shares for services ........... 67,335 381,880 449,215
Issued 625,000 shares for loan conversion ...... 6,250 43,750 50,000
Issued 1,000,000 shares for repurchase of
distributorship .............................. 10,000 90,000 100,000
Reverse stock split ............................ (766,155) 766,155
Net loss for the year ended January 31, 1996 ... (1,384,488) (1,384,488)
----------- ----------- ----------- -----------
Balance, January 31, 1996 ...................... 3,850 6,357,625 (5,163,970) 1,197,505
Redemption of 730,000 shares issued to
Acumen Services, Ltd. in September 1995 ...... (730) (2,091,270) (2,092,000)
Issued 1,455,000 shares ........................ 1,455 1,506,045 1,507,500
Issued 125,000 shares for services ............. 125 324,875 325,000
Net loss for the year ended January 31, 1997 ... (2,172,260) (2,172,260)
----------- ----------- ----------- -----------
Balance, January 31, 1997 ...................... 4,700 6,097,275 (7,336,230) (1,234,255)
See notes to financial statements 4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE SIX MONTHS ENDED JULY 31, 2000
(Unaudited)
Total
Common Paid in Accumulated Stockholder
Stock Capital Deficit Equity
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, January 31, 1997 ......................... $ 4,700 $ 6,097,275 $ (7,336,230) $ (1,234,255)
Issuance of 1,500,000 shares for
non-recurring compensation ...................... 1,500 1,029,750 1,031,250
Issuance of 167,083 shares ........................ 167 80,650 80,817
Issuance of 955,000 shares for services ........... 955 1,239,045 1,240,000
Issuance of 43,750 shares for litigation settlement 44 54,644 54,688
Issuance of 700,000 shares for convertible notes .. 700 566,979 567,679
Issuance of 452,772 shares for repayment
of notes payable ................................ 452 523,587 524,039
Issuance of 120,000 shares for repayment
of notes payable officer/director ............... 120 175,830 175,950
Net loss for the year ended January 31, 1998 ...... (4,995,655) (4,995,655)
----------- ----------- ----------- -----------
Balance, January 31, 1998 ......................... 8,638 9,767,760 (12,331,885) (2,555,487)
Issuance of 2,251,307 shares ...................... 2,252 1,299,526 1,301,778
Issuance of 5,586,150 shares for convertible notes 5,586 3,129,504 3,135,090
Issuance of 42,704 shares for interest
on convertible notes ............................ 43 26,385 26,428
Issuance of 1,226,815 shares for services ......... 1,227 490,652 491,879
Issuance of 250,000 shares for repurchase
of distributorship .............................. 250 124,750 125,000
Net loss for the year ended January 31, 1999 ...... (3,512,124) (3,512,124)
----------- ----------- ----------- -----------
Balance, January 31, 1999 ......................... 17,996 14,838,577 (15,844,009) (987,436)
See notes to financial statements 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JULY 31, 2000
(Unaudited)
Total
Common Paid-In Deficit Stockholders'
Stock Capital Accumulation Deficit
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, January 31, 1999 ............. $ 17,996 $ 14,838,577 $(15,844,009) $ (987,436)
Issuance of 3,789,000 shares .......... 3,789 1,624,291 1,628,080
Issuance of 250,000 shares for
litigation settlement ................ 250 124,750 125,000
Issuance of 5,184,405 shares
for services ......................... 5,184 2,394,214 2,399,398
Issuance of 500,000 shares for
repurchase of distributorship ........ 500 249,500 250,000
Net loss for the year ended
January 31, 2000 ..................... (5,377,657) (5,377,657)
------------ ------------ ------------ ------------
Balance, January 31, 2000 ............. 27,719 19,231,332 (21,221,666) (1,962,615)
Issuance of 2,400,000 shares .......... 2,400 1,134,950 1,137,350
Issuance of 1,410,000 shares
for services ........................ 1,410 664,539 665,949
Net loss for six months ............... (1,801,969) (1,801,969)
------------ ------------ ------------ ------------
Balance, July 31, 2000 ................ $ 31,529 $ 21,030,821 $(23,023,635) $ (1,961,285)
============ ============ ============ ============
See notes to financial statements 6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2000 AND 1999
(Unaudited)
Cumulative
Since Three Months Ended Six Months Ended
Inception 2000 1999 2000 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss ....................................... $(23,023,635) $ (822,061) $ (2,487,066) $ (1,801,969) $ (3,072,088)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization ............... 299,735 2,646 23,264 5,442 46,154
Common stock issued for services ............ 6,813,362 426,249 622,951 665,949 682,951
Stock purchase discount ..................... 1,043,102 7,500 238,000 262,350 414,500
Common stock issued for litigation settlement 649,689 125,000 125,000
Common stock issued for interest
on convertible notes ....................... 1,129,196 -- -- -- --
Common stock issued for repurchase
of distributorships ........................ 250,000 250,000 250,000
Accrued interest on notes and convertible
notes payable .............................. 398,577 -- -- -- --
Changes in assets and liabilities:
Other assets ................................ (5,000) 58,753 (5,000) 123,313
Unearned revenue ............................ 565,000 (41,000) 120,000 (41,000)
Accounts payable and accrued expenses ....... 737,759 40,233 996,185 (35,818) 796,173
------------ ------------ ------------ ------------ ------------
Net cash used by operating activities ............. (11,142,215) (345,433) (213,913) (789,046) (674,997)
------------ ------------ ------------ ------------ ------------
Cash flows from investing activities:
Purchase of furniture and equipment ............ (77,695) -- -- -- (7,519)
Loan costs ..................................... (236,856) -- --
------------ ------------
Net cash used by investing activities ............ (314,551) (7,519)
------------ ------------
Cash flows from financing activities:
Sale of common stock ........................... 7,780,173 275,000 200,000 875,000 800,000
Proceed from convertible notes payable ......... 2,600,000
Note payable, current .......................... 1,117,250
Loan payable, officer .......................... 80,000 24,000
------------ ------------ ------------ ------------ ------------
Net cash provided by financing activities ......... 11,577,423 275,000 200,000 899,000 800,000
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash ................... 120,657 (70,433) (13,913) 109,954 117,484
Cash, beginning balance ........................... 191,090 197,791 10,703 66,394
------------ ------------ ------------ ------------ ------------
Cash, ending balance .............................. $ 120,657 $ 120,657 $ 183,878 $ 120,657 $ 183,878
============ ============ ============ ============ ============
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 .......... $ 6,813,362 $ 426,249 $ 622,951 $ 665,949 $ 682,951
============ ============ ============ ============ ============
Issuance of common stock for
litigation settlement ......................... $ 649,689 $ 125,000 $ 125,000
------------ ============ ============
Issuance of common stock for repurchase
of distributorships ........................... $ 475,000 $ 250,000 $ 250,000
------------ ============ ============
Issuance of common stock for conversion
of note payable ............................... $ 2,675,000
============
Accrued interest on notes payable .............. $ 398,577
============
See notes to financial statements 7
</TABLE>
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JULY 31, 2000 AND 1999
(Unaudited)
Note 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, 2000 are not necessarily indicative of the
results that may be expected for the year ended January 31, 2001. 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, 2000.
Note 2 Description of business and significant account 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, 2000 totaling $2,920,865. The Company is
currently in the process of completing its first 25 machines. The costs
associated with the production of the machines have 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.
Note 3 Issuance of common stock:
The Company issued an aggregate of 3,810,000 shares during the quarter
ended July 31, 2000. 2,400,000 shares were sold in private placements by
the Company and 1,410,000 shares were issued in payment of services.
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.
8
<PAGE>
TASTY FRIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE SIX MONTHS ENDED JULY 31, 1999 AND 1998
(Unaudited)
Note 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, 2000 $1,375,000 of the $1,500,000 in proceeds has been received by the
Company and 2,750,000 of the 3,000,000 shares of restricted common stock
held in escrow have been released to the investor. The balance of funds due
have not been received as of the date of this filing.
9
<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, 2000, the Company entered into the
production stage of its lifecycle, having spent the latter half of fiscal 1999
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, 2000 the Company had approximately $120,657 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
10
<PAGE>
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In May 1991, the Company entered into a joint venture agreement with California
Food and Vending, Inc. ("CFV"), another vending and food service company with a
high interest in the research and development of a french fry vending machine.
The companies planned to work together in the manufacturing and marketing of a
french fry machine. Disputes arose between the parties, litigation was
instituted by CFV and in July 1999 the disputes were settled and the litigation
dismissed. Pursuant to the settlement agreement, the Company regained our
distributorship rights for the State of California; agreed to pay CFV the sum of
$1,000,000, which has been paid; issue 250,000 shares of our common stock to
CFV; and CFV will receive $350 for each of the first 500 machines produced and
$450 thereafter and $.25 for each pound of potato product sold by Tasty Fries.
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 Frize, 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
dismissal was reversed on appeal by the Federal Court and the case was remanded
to State Court. The plaintiffs' claim against Tasty Fries was severed. The
claims against Edward C. Kelly and Premier Design, Ltd. were dismissed. The
claim brought by Prize Frize asserts that the Company had usurped its basic
trade secrets by developing a french fry vending machine, which utilizes the
Basic American Food potato product. The Company denies the allegations and is
vigorously defending the litigation. It is the opinion of the Company's counsel
that Prize Frizes' lawsuit lacks merit and that the Company will prevail.
ITEM 2. CHANGES IN SECURITIES
The Company issued 210,000 unregistered shares of its common stock in payment of
services rendered to the Company by third parties.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
11
<PAGE>
ITEM 5. OTHER INFORMATION
See Part II, Item 1. Above
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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: September 7, 2000 President and Principal
Financial Officer
12
