10-Q 1 e86437_10q.txt 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, 2001 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. incorporation or organization Employer 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, 2001: 44,961,511 shares of common stock were outstanding. ITEM 2. PLAN OF OPERATION General The Company is a development-stage company having not yet completed the final 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 April 30, 2001, the Company entered into the production stage of its lifecycle, having spent the latter half of fiscal 2000 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. 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. 2 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. 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. 3 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 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, 2001 President & Principal Financial Officer 4 TASTY FRIES, INC . (A Development Stage Company) BALANCE SHEETS ---------------------------------------------------------------------------------------------------

See notes to financial statements 5 TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2001 AND 2000 AND OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2001 (UNAUDITED) ------------------------------------------------------------------------------------------------------------------------------------

See notes to financial statements 6 TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JUlY 31, 2001 (UNAUDITED) -----------------------------------------------------------------------------------------------------------------------

See notes to financial statements 7 TASTY FRIES, INC. (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JUlY 31, 2001 ----------------------------------------------------------------------------------------------------------

See notes to financial statements 8 TASTY FRIES, INC. (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JUlY 31, 2001 ----------------------------------------------------------------------------------------------------------

See notes to financial statements 9 TASTY FRIES, INC. (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JUlY 31, 2001 -----------------------------------------------------------------------------------------------------------------------

See notes to financial statements 10 TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS FOR THE SIX AND THREE MONTHS ENDED JULY 31, 2001 AND 2000 AND OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2001 (UNAUDITED) ----------------------------------------------------------------------------------------------------------------------------------

See notes to financial statements 11 TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS FOR THE SIX AND THREE MONTHS ENDED JULY 31, 2001 AND 2000 AND OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2001 (UNAUDITED) ----------------------------------------------------------------------------------------------------------------------------------- (continued)

See notes to financial statements 12 TASTY FRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JULY 31, 2001 AND 2000 (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, 2001 are not necessarily indicative of the results that may be expected for the year ended January 31, 2002. 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, 2001. NOTE 2 DESCRIPTION OF BUSINESS 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, 2001 totaling ($4,357,110.). The Company has placed five machines throughout the greater Portsmouth, NH. vicinity. No significant revenue has been received from these machines. The Company is in the process integrating field data into the completion of an additional 20 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 RECLASSIFICATION The financial statements for the six months ended July 31, 2000 include a reclassification of consulting fees ($22,000) and stock purchase discounts ($262,000). Consulting fees have been reclassified as a research, machine and product development cost and stock purchase discounts have been separately stated in the statements of operations. These reclassifications conform with the presentation for the period ended July 31, 2001. 13 NOTE 4 RESTATEMENT The financial statements for the three months ended April 30, 2001 have been restated. The prior financial statements incorrectly reported the issuance of 1,200,000 shares of stock with a stock purchase discount of $319,000. The correction restates the issuance of 200,000 shares of stock with a stock purchase discount of $29,000. TASTY FRIES, INC. (A DEVELOPMENT STAGE COMPANY) STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2001 AS ORIGINALLY REPORTED AS RESTATED ----------- ----------- Revenue $ -- $ -- Costs and expenses Research, machine and product development 428,060 428,060 Selling, general and administrative 456,450 456,450 ----------- ----------- Total cost and expenses 884,510 884,510 ----------- ----------- Loss before other income (expense) (884,510) (884,510) ----------- ----------- Other income (expense) Stock purchase discount (29,000) (319,000) Interest expense (12,072) (12,072) ----------- ----------- Total other income (expense) (41,072) (331,072) ----------- ----------- Net loss $ (925,582) $(1,215,582) ----------- ----------- 14

TASTY FRIES INC 10-Q