-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LS48JKEXIGrieg3Mh3MP/0TskLV/5Ua55wWLBtLA+p15K/4d0VoHY7qFyeno5pBf 1Bq0egaS6vXCOCsoVkUczw== 0000950110-02-000605.txt : 20020916 0000950110-02-000605.hdr.sgml : 20020916 20020916114832 ACCESSION NUMBER: 0000950110-02-000605 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020731 FILED AS OF DATE: 20020916 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TASTY FRIES INC CENTRAL INDEX KEY: 0000791885 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 650159052 STATE OF INCORPORATION: NV FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-04460-NY FILM NUMBER: 02764534 BUSINESS ADDRESS: STREET 1: 650 SENTRY PKWY STE ONE CITY: BLUE BELL STATE: PA ZIP: 19422 BUSINESS PHONE: 6109412109 MAIL ADDRESS: STREET 1: 650 SENTRY PARKWAY STREET 2: SUITE ONE CITY: BLUE BELL STATE: PA ZIP: 19422 FORMER COMPANY: FORMER CONFORMED NAME: YO SYSTEMS LTD DATE OF NAME CHANGE: 19870417 FORMER COMPANY: FORMER CONFORMED NAME: METRO SYSTEMS INC DATE OF NAME CHANGE: 19910805 FORMER COMPANY: FORMER CONFORMED NAME: ADELAIDE HOLDINGS INC DATE OF NAME CHANGE: 19930929 10QSB 1 e89799_10qsb.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, 2002 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, 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, 2002: 67,351,761 shares of common stock were outstanding. TASTY FRIES, INC. (A Development Stage Company) BALANCE SHEETS ================================================================================
31-Jul January 31, ASSETS 2002 2002 ------------ ------------ (Unaudited) ------------ CURRENT ASSETS Cash ............................................. $ 184,296 $ 120,566 Prepaid expenses ................................. 17,139 24,598 ------------ ------------ TOTAL CURRENT ASSETS ............................. 201,435 145,164 Furniture and office equipment, net of accumulated depreciation of $75,558, July 31, 2002 and $74,062, January 31, 2002 .................... 2,137 3,633 OTHER ASSETS Royalty rights ................................... 1,500,000 1,500,000 ------------ ------------ Total Assets ........................................ $ 1,703,572 $ 1,648,797 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Accounts payable and accrued expenses ............ $ 624,010 $ 739,783 Current maturities of long-term debt ............. 800,000 600,000 Stockholder loans payable ........................ 277,566 312,566 ------------ ------------ TOTAL CURRENT LIABILITIES ........................ 1,701,576 1,652,349 ------------ ------------ LONG TERM LIABILITIES Long-term debt, net of current maturities ........ 250,000 750,000 Unearned revenue ................................. 320,000 320,000 ------------ ------------ TOTAL LONG TERM LIABILITIES ...................... 570,000 1,070,000 ------------ ------------ TOTAL LIABILITIES ................................... 2,271,576 2,722,349 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' DEFICIENCY Common stock, $.001 par value Authorized 100,000,000 shares; issued 68,601,761 and outstanding 67,351,761 shares, July 31, 2002; issued and outstanding 59,171,758 shares, January 31, 2002 ........... 68,601 59,171 Additional paid-in capital ....................... 30,700,645 28,261,075 Deficit accumulated in the development stage ..... (30,812,750) (29,331,798) Treasury stock, 1,250,000 shares at cost ......... (512,500) -- ------------ ------------ (556,004) (1,011,552) Less: Subscription receivable .................... (12,000) (62,000) ------------ ------------ TOTAL STOCKHOLDERS' DEFICIENCY ................... (568,004) (1,073,552) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY ...... $ 1,703,572 $ 1,648,797 ============ ============
See notes to financial statements 3
TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED JULY 31, 2002 AND 2001 AND OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2002 =========================================================================================================================== Six Months Ended July 31 Three Months Ended July 31 Cumulative ---------------------------- ---------------------------- Since Inception 2002 2001 2002 2001 ------------ ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------ ------------ ------------ REVENUES ................................... $ -- $ -- $ -- $ -- $ -- ------------ ------------ ------------ ------------ ------------ COSTS AND EXPENSES Research, machine and product development 5,750,913 222,612 588,708 117,582 160,648 Selling, general and administrative ..... 20,198,676 626,525 656,697 275,104 200,247 ------------ ------------ ------------ ------------ ------------ Total costs and expenses ................ 25,949,589 849,137 1,245,405 392,686 360,895 ------------ ------------ ------------ ------------ ------------ LOSS BEFORE OTHER INCOME (EXPENSE) ......... (25,949,589) (849,137) (1,245,405) (392,686) (360,895) ------------ ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE) Interest income ......................... 21,274 -- -- -- -- Forfeited distributor deposits .......... 15,000 -- -- -- -- Stock purchase discount ................. (2,802,552) (525,000) (29,000) (40,500) -- Interest expense ........................ (2,096,883) (106,815) (38,588) (76,445) (26,516) ------------ ------------ ------------ ------------ ------------ TOTAL OTHER INCOME (EXPENSE) ............ (4,863,161) (631,815) (67,588) (116,945) (26,516) ------------ ------------ ------------ ------------ ------------ NET LOSS ................................... $(30,812,750) $ (1,480,952) $ (1,312,993) $ (509,631) $ (387,411) ============ ============ ============ ============ ============ NET LOSS PER SHARE OF COMMON STOCK ......... $ (0.02) $ (0.03) $ (0.01) $ (0.01) ============ ============ ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING ........ 61,758,401 42,938,613 62,174,017 43,047,854 ============ ============ ============ ============
See notes to financial statements 4
TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2002 ==================================================================================================================== Deficit Accumulated in the Total Common Additional Development Treasury Stockholders' Stock Paid-in Capital Stage Stock (Deficiency) ----------- --------------- ----------- ----------- ----------- 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) Issued 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 (carried forward) .............. 322,270 2,075,490 (3,779,482) -- (1,381,722) (continued)
See notes to financial statements 5
TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2002 ==================================================================================================================== (continued) Deficit Accumulated in the Total Common Additional Development Treasury Stockholders' Stock Paid-in Capital Stage Stock (Deficiency) ----------- --------------- ----------- ----------- ----------- Balance, January 31, 1995 (brought forward) ............ 322,270 2,075,490 (3,779,482) -- (1,381,722) Issued 21,815,000 shares ........... 218,150 1,054,350 -- -- 1,272,500 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 ................ (620,885) 620,885 -- -- -- Net loss for the year ended January 31, 1996 ............. -- -- (1,384,488) -- (1,384,488) ----------- ----------- ----------- ---------- ----------- Balance, January 31, 1996 .......... 3,120 4,266,355 (5,163,970) -- (894,495) 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 (carried forward) ............ 4,700 6,097,275 (7,336,230) -- (1,234,255) (continued)
See notes to financial statements 6
TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2002 - ------------------------------------------------------------------------------------------------------------------ (continued) Deficit Accumulated in the Total Common Additional Development Treasury Stockholders' Stock Paid-in Capital Stage Stock (Deficiency) ----------- --------------- ----------- ----------- ----------- Balance, January 31, 1997 (brought forward) ............ 4,700 6,097,275 (7,336,230) -- (1,234,255) Issued 1,500,000 shares for non-recurring compensation ... 1,500 1,029,750 -- -- 1,031,250 Issued 167,083 shares .............. 167 80,650 -- -- 80,817 Issued 955,000 shares for services . 955 1,317,545 -- -- 1,318,500 Issued 43,750 shares for litigation settlement ........ 44 54,644 -- -- 54,688 Issued 700,000 shares for convertible notes ............ 700 566,979 -- -- 567,679 Issued 452,772 shares for repayment of notes payable ... 452 523,587 -- -- 524,039 Issued 120,000 shares for repayment of notes payable, officer/director ............. 120 175,830 -- -- 175,950 Net loss for the year ended January 31, 1998 ............. -- -- (5,074,155) (5,074,155) ----------- ----------- ----------- ----------- ----------- Balance, January 31, 1998 .......... 8,638 9,846,260 (12,410,385) -- (2,555,487) Issued 2,251,307 shares ............ 2,252 1,299,526 -- -- 1,301,778 Issued 5,586,150 shares for convertible notes ............ 5,586 3,129,504 -- -- 3,135,090 Issued 42,704 shares for interest on convertible notes 43 26,385 -- -- 26,428 Issued 1,226,815 shares for services 1,227 490,652 -- -- 491,879 Issued 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 (carried forward) ............ 17,996 14,917,077 (15,922,509) -- (987,436) (continued)
See notes to financial statements 7
TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2002 ================================================================================================================= (continued) Deficit Accumulated in the Total Common Additional Development Treasury Stockholders' Stock Paid-in Capital Stage Stock (Deficiency) ----------- --------------- ----------- ----------- ----------- Balance, January 31, 1999 (as restated) (brought forward) 17,996 14,917,077 (15,922,509) -- (987,436) Issued 3,789,000 shares ............. 3,789 1,624,291 -- -- 1,628,080 Issued 250,000 shares for litigation settlement ......... 250 124,750 -- -- 125,000 Issued 6,184,405 shares for services 6,184 2,799,214 -- -- 2,805,398 Issued 500,000 shares for repurchase of distributorship . 500 249,500 -- -- 250,000 Net loss for the year ended January 31, 2000 .............. -- -- (5,783,657) -- (5,783,657) ----------- ----------- ----------- ----------- ----------- Balance, January 31, 2000 ........... 28,719 19,714,832 (21,706,166) -- (1,962,615) Issued 3,660,000 shares ............. 3,660 1,228,140 -- -- 1,231,800 Issued 3,155,000 shares for services 3,155 1,312,312 -- -- 1,315,467 Issued 4,000,000 shares for repayment of note payable ..... 4,000 1,596,000 -- -- 1,600,000 Issued 1,200,000 shares for payment of accrued expenses ... 1,200 548,800 -- -- 550,000 Net loss for the year ended January 31, 2001 .............. -- -- (3,792,684) -- (3,792,684) ----------- ----------- ----------- ----------- ----------- Balance, January 31, 2001 ........... 40,734 24,400,084 (25,498,850) -- (1,058,032) Issued 6,200,000 shares ............. 6,200 835,800 -- -- 842,000 Issued 747,500 shares for litigation settlement .................... 747 113,928 -- -- 114,675 Issued 10,010,247 shares for services 10,010 2,542,743 -- -- 2,552,753 Issued 1,480,000 shares for repayment of note payable ..... 1,480 368,520 -- -- 370,000 Net loss for the year ended January 31, 2002 .............. -- -- (3,832,948) -- (3,832,948) ----------- ----------- ----------- ----------- ----------- Balance, January 31, 2002 (carried forward) ............. 59,171 28,261,075 (29,331,798) -- (1,011,552) (continued)
See notes to financial statements 8
TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2002 ================================================================================================================== (continued) Deficit Accumulated in the Total Common Additional Development Treasury Stockholders' Stock Paid-in Capital Stage Stock (Deficiency) ----------- --------------- ----------- ----------- ----------- Balance, January 31, 2002 (brought forward) ........... 59,171 28,261,075 (29,331,798) -- (1,011,552) Issued 5,450,000 shares (unaudited) 5,450 1,257,050 -- -- 1,262,500 Issued 330,000 shares for services (unaudited) ........ 330 590,670 -- -- 591,000 Acquisition of 1,250,000 shares (unaudited) ................. -- -- -- (512,500) (512,500) Net loss for the three months (unaudited) ................. -- -- (971,321) -- (971,321) ------------ ------------ ------------ ------------ ------------ Balance, April 30, 2002 (unaudited) 64,951 30,108,795 (30,303,119) (512,500) (641,873) Issued 3,650,003 shares (unaudited) 3,650 591,850 595,500 Net loss for the three months (unaudited) ................. (509,631) (509,631) ------------ ------------ ------------ ------------ ------------ Balance, July 31, 2002 (unaudited) $ 68,601 $ 30,700,645 $(30,812,750) $ (512,500) $ (556,004) ============ ============ ============ ============ ============
See notes to financial statements 9
TASTY FRIES, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS FOR THE SIX AND THREE MONTHS ENDED JULY 31, 2002 AND 2001 AND OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2002 ================================================================================================================================== Six Months Ended July 31 Three Months Ended July 31 Cumulative --------------------------- --------------------------- Since Inception 2002 2001 2002 2001 ------------ ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES .................. $(30,812,750) $ (1,480,952) $ (1,312,993) $ (509,631) $ (387,411) Net loss Adjustments to reconcile net loss to net cash used in operating activities Depreciation and amortization ................. 312,414 1,496 3,209 748 1,606 Common stock issued for services .............. 10,310,335 106,500 873,276 -- 125,000 Common stock issued for litigation settlement . 764,364 -- 14,400 -- 14,400 Stock purchase discount ....................... 2,802,552 525,000 29,000 40,500 -- Common stock issued for interest on convertible notes ....................................... 1,129,196 -- -- -- -- Common stock issued for repurchase of distributorships ............................ 250,000 -- -- -- -- Accrued interest on notes and convertible notes payable ..................................... 438,594 -- -- -- -- (Increase) decrease in assets Prepaid expenses ............................ (17,139) 7,459 (18,623) 3,730 (18,623) Other assets ................................ -- -- -- -- -- Increase (decrease) in liabilities Accounts payable and accrued expenses ....... 1,133,992 (115,773) 43,753 64,995 181,378 Unearned revenue ............................ 320,000 -- -- -- -- ------------ ------------ ------------ ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES ............... (13,368,442) (956,270) (367,978) (399,658) (83,650) ------------ ------------ ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of furniture and office equipment .......... (77,695) -- -- -- -- Loan costs .......................................... (236,856) -- -- -- -- ------------ ------------ ------------ ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES ............... (314,551) -- -- -- -- ------------ ------------ ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from convertible notes payable ............. 2,600,000 -- -- -- -- Issuance of common stock ............................ 10,315,173 1,355,000 70,000 555,000 -- Costs of raising capital ............................ (318,700) -- -- -- -- Note payable, net ................................... 1,190,816 (335,000) 211,000 (170,000) 56,000 Officer/director note ............................... 80,000 -- -- ------------ ------------ ------------ ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES ........... 13,867,289 1,020,000 281,000 385,000 56,000 ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN CASH (CARRIED FORWARD) ......... 184,296 63,730 (86,978) (14,658) (27,650) (continued) 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, 2002 AND 2001 AND OCTOBER 18, 1985 (INCEPTION) TO JULY 31, 2002 ================================================================================================================================== (continued) Six Months Ended July 31 Three Months Ended July 31 Cumulative --------------------------- --------------------------- Since Inception 2002 2001 2002 2001 ------------ ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------ ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN CASH (BROUGHT FORWARD) .......... 184,296 63,730 (86,978) (14,658) (27,650) CASH, BEGINNING OF PERIOD .............................. -- 120,566 86,978 198,954 27,650 ------------ ------------ ------------ ------------ ------------ CASH, END OF PERIOD .................................... $ 184,296 $ 184,296 $ -- $ 184,296 $ -- ============ ============ ============ ============ ============ SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest ......... $ 109,117 $ 54,314 $ -- $ 23,945 $ -- ============ ============ ============ ============ ============ SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES Issuance of common stock for services .............. $ 10,310,335 $ 106,500 $ 873,276 $ -- $ 125,000 Issuance of common stock for conversion of note payable .......................................... 2,675,000 -- -- -- -- Issuance of common stock for repurchase of distributorship .................................. 475,000 -- -- -- -- Issuance of common stock for litigation settlement . 764,364 -- 14,400 -- 14,400 Accrued interest on notes payable .................. 438,594 -- -- -- -- Issuance of common stock to pay accrued expenses ... 550,000 -- -- -- -- Issuance of common stock to pay note payable ....... 1,270,000 -- 370,000 -- 370,000 Acquisition of royalty rights ...................... (1,500,000) -- -- -- -- Note payable, royalty rights ....................... 1,500,000 -- -- -- -- Issuance of common stock for subscription receivable 12,000 (50,000) -- -- -- See notes to financial statements 11
TASTY FRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JULY 31, 2002 (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-QSB 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, 2002 are not necessarily indicative of the results that may be expected for the year ending January 31, 2003. 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-KSB/A for the year ended January 31, 2002. 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, 2002 totaling $5,750,913. The Company has contracted with ACE Metal Products, Inc. in Turlock California for the first run production. No significant revenue has been received from these 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. 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 ended July 31, 2002, the Company entered into the production stage of its lifecycle. The Company entered into a manufacturing contract with ACE Metal Products, Inc., located in Turlock, California, to commence the production run of the Machines. 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, 2002 the Company had approximately $185,000 in cash. The Company will need to secure 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 may 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 On February 1, 2002 the Company entered into an exclusive Master Sales and Marketing Agreement with SilverLeaf LLC. According to the terms of the Agreement SilverLeaf was to purchase 10,000 of the Company's French fry vending machines by 2004. Delivery of production machines was to commence in July 2002. After a request by the Company, SilverLeaf failed to demonstrate its financial capability to support the purchase of 10,000 machines and ancillary products. On May 10, 2002 the Company issued a notice of termination to SilverLeaf canceling the Master Sales and Marketing Agreement. Thereafter, SilverLeaf filed a lawsuit in the State of New Jersey requesting the Court to issue an injunction preventing the termination of the agreement. The lawsuit, which was originally filed in New Jersey Superior Court, Union County, was removed to the United States District Court for the District of New Jersey by the Company. In the lawsuit, SilverLeaf contended that it had no obligation to provide the Company with adequate assurances of its financial ability to purchase the machines under the agreement and that by terminating the agreement SilverLeaf would suffer irreparable injury. A hearing was held on May 31, 2002 wherein the District Court found in favor of the Company, dissolved an "Order to Show Cause with Temporary Restraints" ("OSC"), which SilverLeaf obtained on May 10, 2002 from a New Jersey State Court, and upheld the Company's termination of the February 1, 2002 Master Sales and Marketing Agreement. SilverLeaf has appealed the District Courts decision. 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 President and Principal Financial Officer Date: September 13, 2002 -----END PRIVACY-ENHANCED MESSAGE-----