Tasty Fries Inc · 10QSB · For 10/31/96

Filed On 12/19/96   ·   SEC File 33-04460-NY   ·   Accession Number 950170-96-1125

Quarterly Report -- Small Business   ·   Form 10-QSB
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                    22    111K 
 2: EX-3.0      Articles of Incorporation/Organization or By-Laws      4     13K 
 3: EX-27       Financial Data Schedule                                1      6K 

10QSB   ·   Quarterly Report -- Small Business
Document Table of Contents

10QSB
1st Page of 22
TOC
Top
Previous
Next
Bottom
Just 1st
 
Sponsored Ads...


 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 October 31, 1996           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, 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 December 6, 1996: 94,000,495 shares of common stock were outstanding      
                    (without giving effect to the 1 for 20 reverse stock
                    split to be effective on or about December 23, 1996)

 1

10QSB
2nd Page of 22
TOC
1st
Previous
Next
Bottom
Just 2nd

PART I AND PART II HEREOF DO NOT GIVE EFFECT TO THE 1 FOR 20 REVERSE STOCK SPLIT
TO BE EFFECTIVE ON OR ABOUT DECEMBER 23, 1996.                                  

PART I - FINANCIAL INFORMATION

ITEM 1.           FINANCIAL STATEMENTS:                                         

         Unaudited financial statements for the quarterly period covered by this
Report are attached hereto.                                                     

ITEM 2.           PLAN OF OPERATION:                                            

 Since 1993 the Registrant has encountered significant delays in
connection with the production of its Machine which was initially caused by the 
necessity to design, develop and test a totally new Machine commencing in late  
1993. As a result, the Registrant was unable to ship its Machine as originally  
anticipated by the end of 1993 or as intended in 1994. The Registrant completed 
the initial engineering development of the Machine during the last quarter of   
1994 but continued to experience delays in the final stages of development and  
testing throughout 1995 and 1996, much of which resulted from a material lack of
working capital and the necessity to allocate a material amount of the limited  
capital received from the private sales of equity and debt securities for       
litigation and related expenses, including payments mandated to be paid to      
California Food & Vending, Inc. ("CFV") by federal court order granting CFV's   
motion to assign benefits granted on March 16, 1996 (the "Court Order"). See    
"Part II, Item 1. Legal Proceedings" herein. The Registrant anticipated that it 
would complete the testing of the Machine by September 1, 1995 based upon the   
expected delivery of the ten pre-production Machines in late July 1995, but     
actual testing did not commence until early December 1995 due to the delayed    
delivery of such pre-production Machines by Premier Design, Ltd. ("Premier"). As
a result of such testing, certain modifications to and enhancements of the      
machine were made. Further, testing occurred on a more limited basis than       
initially expected due to the lack of working capital discussed herein.         
Accordingly, no Machines were shipped to distributors in the fiscal year ended  
January 31, 1996 although a demonstration machine was shipped to CFV in February
1996 pursuant to the Registrant's Settlement agreement with CFV. See "Part II,  
Item 1. Legal Proceedings" herein. The Registrant expected to commence          
commercial production of the Machine in September or October 1996, although no  
assurances were given that this date would be met. Due to the Registrant's lack 
of working capital to complete the tooling of certain component parts of the    
Machine for commercial production, this schedule has been delayed until the     
second quarter of 1997. No assurances can be given that the Registrant will     
secure the additional $350,000 necessary to complete the tooling process to meet
such timetable.                                                                 

        In connection with the development of the Machine, the Registrant paid
$75,000 toward the first $150,000 of development costs as provided in the       
Manufacturing                                                                   

 2

10QSB
3rd Page of 22
TOC
1st
Previous
Next
Bottom
Just 3rd

Requirements Agreement between Premier and the Registrant (the "Premier         
Agreement"). In April 1994, the Registrant advanced Premier $125,000 to be      
applied to the aggregate cost of manufacturing ten pre-production Machines to be
placed in strategic locations for beta testing to gather data relating to, among
other things, the Machine's performance, marketing trends and customer          
satisfaction. From May through July 1995, the Registrant paid Premier an        
aggregate of an additional $250,000 ($35,000 for each of ten pre-production     
Machines less the $125,000 paid in April 1994). The cost of these Machines was  
capitalized by the Registrant for $246,600; however, the only revenue to be     
realized from the sale of the ten pre-production Machines is $7,000 per         
Machine or $70,000 in the aggregate. In July 1996, the Registrant paid Premier  
$100,000 of the $650,000 to be paid Premier representing its one-half share of  
the Machine's development costs. The remaining balance of $550,000 is still due 
and owed to Premier.                                                            

        The ten pre-production Machines were placed at beta test sites located
at bowling alleys and corporate office centers in the greater Philadelphia area 
and were monitored over a 90 day period by the Registrant. Testing of these     
Machines was successful based upon customer acceptance and approval, taste,     
price, convenience, Machine operation and the minimum down time experienced. The
testing enabled management to correct and improve the Machine in certain key    
areas to enhance performance and operation. The Registrant's third party        
contractor is in the process of tooling certain component parts of the Machine  
which will then be assembled by S & H Electronics, Inc., a local Pennsylvania   
manufacturer with whom the Registrant entered into a manufacturing agreement in 
June 1996 because of Premier's inability to manufacture the Machines under the  
terms of the amended Premier Agreement (the "Amendment"). As previously         
discussed, the tooling process has been delayed due to the unavailability of    
working capital for the Registrant to pay to complete the same. Once tooling is 
completed and the Registrant is able to order Machines from the manufacturer for
delivery to purchasers, the Registrant will require payment from such purchasers
on terms which management believes will cover its cash payment requirements to  
the manufacturer so that the registrant will not have to advance cash for       
Machines or build an inventory, although no assurances are given that this will 
occur. If management is incorrect, the Registrant will be required to advance   
cash to the manufacturer. This will require the Registrant to raise additional  
funds. There can be no assurances given that any funding, including that which  
may be required to be advanced, will be available or if available, on terms     
satisfactory to the Registrant.                                                 

        In September 1996, the Registrant entered into a vendor agreement (the
"Vendor Agreement") with Forrest Financial Corp. (the "Leasing Company") to     
provide lease financing to distributors and others who may wish to lease        
Machines rather than purchase. Pursuant to the terms of the Vendor Agreement,   
approximately $15,000,000 will be made available by the Leasing Company to      
qualified lessees for such purpose. Management believes that the availability of
financing to lease the Machines to qualified lessees may attract more vending   
machine companies and operators. To the extent that Machines are leased and     
funded in this manner, the Registrant may no longer be required to provide      
initial cash funding for production but will receive funding directly from the  

 3

10QSB
4th Page of 22
TOC
1st
Previous
Next
Bottom
Just 4th

Leasing Company. This should, although no assurances are given, enable the      
Registrant to attain greater profit margins without incurring the attendant cost
of capital.                                                                     

     The Registrant presently estimates, based upon current distribution
agreements, that it will provide at a minimum up to approximately 2,600 Machines
to its existing and possible new distributors during the 12 months following    
delivery of the first commercial production Machines. This number of Machines is
subject to the Registrant receiving adequate funding from purchasers of the     
Machines, as to which no assurances are given. Further, although management     
previously anticipated that commercial production would commence in September or
October 1996, it now anticipates that this will occur in the second quarter of  
1997. No assurance can be given that this revised timetable will be met, when   
such Machines will be shipped or the number that will ultimately be shipped in  
the following 12 months. If a lesser number of Machines is purchased or leased, 
the Registrant's financial condition and operations will be materially and      
adversely effected. In addition, the Registrant has developed its Potato Product
for use in the Machine. Management estimates that the cost to establish a       
manufacturing line to produce the Potato Product is approximately $500,000. Due 
to the cost involved and the current availability of certain other potato       
products comparable with the Registrant's Potato Product for use in the Machine,
the Registrant does not currently intend to establish a manufacturing line at   
this time, Rather, the Registrant has been seeking other available potato       
products and believes it has located and secured the same from unaffiliated     
sources.                                                                        

       The Registrant has expanded its distributor base during the past year
which currently includes several foreign countries (see below), has reacquired  
one distributorship for Common Stock and an option and is negotiating the       
reacquisition of another. Management continues discussions with third parties,  
who have seen the Machine in operation, for distributorships in South and       
Central America, the Far East and the Middle East. To date, distribution        
agreements for Brazil, Israel, Egypt and Jordan have been executed and there are
negotiations for other territories. The Registrant is presently negotiating with
individuals in Saudi Arabia for access to other Middle East territories. The    
Registrant has, however, changed its marketing focus and anticipates, in most   
instances, operating in other territories directly rather than through          
distributorships with third parties. No assurances are given, however, that the 
Registrant will continue in this direction or that other distribution agreements
or joint venture agreements will not be entered into for other territories.     

       It is management's intention to work closely with its distributors as
they take delivery and install and maintain the Machines. This working          
relationship has been repeatedly postponed due to the persistent delays in      
testing and developing a totally new Machine and the lack of working capital to 
fund commercial production. Further, the Registrant's financial condition may be
materially and adversely effected if any current distributors breach their      
respective distribution agreements and fail to accept delivery and pay for      
Machines as required by such agreements. As of this date, management believes   
that approximately one-half of its distributors are in breach of their          
agreements due to                                                               

 4

10QSB
5th Page of 22
TOC
1st
Previous
Next
Bottom
Just 5th

non-payment of distribution fees. Management intends to notify those defaulting 
distributors that have not previously been notified that they have forfeited    
their distribution rights for such non-payment. Notwithstanding the foregoing,  
management believes that there may be other channels to distribute the Machine  
and the Products of the Registrant, including joint venture agreements, which   
could be as effective and profitable as the existing distribution network is    
expected to be. Although management is in preliminary discussions for several   
joint ventures, there are no definitive agreements entered into as of this time.
No assurances can be given that management will successfully negotiate any joint
venture agreements or be successful in marketing and developing this area.      
Management will continue to seek the most efficient and profitable ways to      
market and distribute the Machines and the Products.                            

        As of December 1, 1996 the Registrant had a total of six (6) full-time
employees, including Leonard Klarich, who has served as Executive Vice President
and Secretary since June 1996, is a Registrant director and has previously      
provided consulting services to the Registrant during the current fiscal year.  
Mr. Klarich, experienced in operating larger companies than the Registrant, is  
responsible for marketing, distribution and administrative matters which has    
enabled Mr. Kelly to focus on tooling, production and assembly of the Machine   
and to seek regulatory approvals and design enhancements. Although preliminary  
matters have already been addressed for the necessary approvals, only commercial
production Machines can obtain final approval. Additional employees are expected
to be hired during the next 12 months if the Registrant's proposed plan of      
operation is successful and there is sufficient cash flow from operations, if   
any, which remains constant to support such additional expense. There can be no 
assurances that additional employees will be hired or that there will be        
sufficient income generated from operations to fund such additional expenses. If
hired, such additional employees may include a food technician, a chief         
operating officer with significant experience in the vending machine business, a
chief financial officer, and sales and marketing personnel. At the present time,
management is unable to estimate how many employees will be needed during the   
next 12 months, if any.                                                         

      Due to the continued and significant lack of working capital and the
restrictions on cash expenditures resulting from the CFV Court Order in the     
first quarter of the current fiscal year, the Registrant had been unable to     
finalize new and expansive marketing literature to assist it and its            
distributors in marketing its Machines. Management believes that it has made    
significant inroads in stabilizing its working capital deficiencies and severe  
financial problems it has experienced in the past and that the Registrant will  
be able to move forward with its marketing efforts. In this regard, the         
Registrant has completed all marketing and warranty materials and the necessary 
technical manuals relative to the operation of the Machine. Further, it has     
finalized its training program and completed an instructional video for         
distributors and the technicians who will service the Machine. Several          
technicians representing distributors have already attended the Registrant's    
training program.                                                               

       In the past, the Registrant had retained and may in the future retain
consultants with significant experience in marketing and                        

 5

10QSB
6th Page of 22
TOC
1st
Previous
Next
Bottom
Just 6th

advertising and in the food vending business to assist the Registrant with its  
marketing efforts as well as other related matters. On May 23, 1996 the         
Registrant entered into a consulting agreement with LBI Group, Inc. ("LBI") to  
provide certain business consulting services, including marketing, for a 12     
month period, subject to prior termination by either party upon at least 30 days
prior notice. In consideration thereof, the Registrant granted an option to     
employees of LBI involved in providing such consulting services to the          
Registrant to purchase on a pro-rata basis an aggregate of 4,000,000 (pre-split)
shares of free-trading Common Stock at an exercise price of $.05 per share. Such
free-trading shares were issued by the Registrant upon exercise of the option by
these LBI employees for $200,000 in July 1996. In August 1996 the Registrant, by
letter, terminated the agreement with LBI for alleged non-performance. Prior    
thereto, the employees of LBI returned an aggregate of 1,000,000 shares to the  
registrant which were canceled and returned to treasury. The Registrant has been
negotiating with LBI for the return of additional shares. No assurances are     
given that any additional shares will be returned or what action, if any, the   
Registrant may take in connection therewith.                                    

        Since its inception, the Registrant has had virtually no revenues from
operations and has relied almost exclusively on shareholder loans, limited      
distribution deposits and private securities transactions to raise working      
capital to fund operations. At October 31, 1996 the Registrant had approximately
$27,750 in cash. Until the most recent investment of $1,250,000, in April and   
May 1996 as described below, funding had been substantially inadequate to allow 
the Registrant to continue its plan of operation. Accordingly, the Registrant   
secured additional funds through the sale of restricted Common Stock to the     
extent and on the best terms possible in light of its adverse financial position
(see below). Despite the $1,250,000 investment, a significant amount of which   
was used to pay CFV and related expenses, it is now necessary for the Registrant
to seek additional funding primarily for tooling expenses and marketing. No     
assurances can be given that the Registrant will be able to secure adequate     
financing from any source to pursue its current plan of operation, to meet its  
obligations or to commence commercial production or expand marketing over the   
next 12 months. If the Registrant is unable to obtain needed funds, it could be 
forced to curtail or cease its activities.                                      

         In September 1995, the Registrant entered into an agreement with Acumen
Services, Ltd. an off-shore Abaco, Bahamas company ("Acumen"), to purchase an   
aggregate of 21,500,000 shares of Common Stock of the Registrant for a purchase 
price of no less than $.10 per share payable pursuant to the terms of a         
Promissory Note from Acumen providing for payment of the purchase price on the  
earlier to occur of (i) the date that commercial production of the Machine      
commences or (ii) January 2, 1996. In late November 1995, when it was apparent  
that the delayed beta testing was about to commence, management and Acumen      
agreed to provide for payment of the purchase price to occur solely upon        
commercial production of the Machine. The 21,500,000 shares were held in escrow 
until October 1995 when the Registrant agreed to the transfer of 3,900,000      
shares from Acumen to its Trustee (an off-shore, non-U.S. Person pursuant to    
Regulation S) and subject to payment in full for all shares so transferred as   
agreed. The Trustee and                                                         

 6

10QSB
7th Page of 22
TOC
1st
Previous
Next
Bottom
Just 7th

Acumen executed Regulation S representation letters and the trustee also        
executed a guaranty and indemnity in favor of the registrant agreeing to return 
the shares or pay for them upon the written request of the registrant. In       
January 1996 the registrant agreed to the transfer of an additional 3,000,000   
shares by Acumen to the trustee in the same manner and new Regulation S         
representation letters were executed by both parties and a guaranty and         
indemnity relative to such shares was executed by the trustee. During the last  
quarter of the fiscal year ended January 31, 1996, Acumen transferred 2,000,000 
of such shares to two non-U.S. persons in two separate off-shore transactions in
conformity with Regulation S. Such non-U.S. persons thereafter directly paid the
registrant for these shares, in the aggregate amount of $100,000 (usd),         
representing a decrease in the price to be paid by Acumen to $.05 Per share,    
based upon the then current market price of the Registrant's Common Stock. The  
Registrant believes that approximately 1,000,000 shares of the 3,000,000 shares 
transferred from Acumen to the trustee were thereafter transferred to U.S.      
citizens in violation of Regulation S. The balance of the shares issued to      
Acumen were canceled and returned to the Registrant's treasury in late May 1996.
A written request for either the return of 3,900,000 shares transferred to the  
trustee or payment therefore was sent to the trustee on May 30, 1996 but as of  
the date hereof, the shares have not been returned or paid for. On June 26 the  
registrant instituted a lawsuit against the trustee in the circuit court of the 
eleventh judicial circuit in and for Dade County, Florida alleging breach of the
guaranty and indemnity agreement based upon the failure of the trustee to return
the 3,900,000 shares plus interest and attorneys' fees. On September 4, 1996,   
the Registrant obtained a default against the trustee. Thereafter, on October   
28, 1996, the trustee filed a motion to vacate default. On October 29, 1996, the
Registrant filed a motion for final default judgment. The pending motions have  
not been set for hearing before the court.                                      

On April 30, 1996 the Registrant entered into a stock purchase
agreement with an accredited investor to purchase an aggregate of 25,000,000    
shares of restricted Common Stock at a purchase price of $.05 per share for     
aggregate gross proceeds to the Registrant of $1,250,000 payable (i) $500,000 on
April 30, 1996 for 10,000,000 shares and (ii) the balance of $750,000 payable on
or before May 30, 1996. An aggregate of $1,250,000 was paid to the Registrant on
or before May 31, 1996. The investor also received an additional 250,000        
post-split shares and will receive certain anti-dilution warrants. Although the 
Registrant entered into the stock purchase agreement with one investor, certain 
other individuals provided a portion of the $1,250,000 used to fund such        
investor's purchase of the Registrant's Common Stock. In addition, a portion of 
the 25,000,000 shares issued to the investor were later transferred to the      
individuals who provided such funds. As a result of requests by certain of these
individuals who acquired shares from the investor, the registrant returned an   
aggregate of $225,000 to these individuals in exchange for the shares of the    
Registrant's Common Stock held by them. These funds were replaced by the        
purchase of an equivalent number of shares of Common Stock by other investors   
for the same amount. These shares of Common Stock, including those underlying   
the warrants to be issued, are being registered in a Registration Statement     
to be filed with the Securities and Exchange Commission ("SEC").                

 7

10QSB
8th Page of 22
TOC
1st
Previous
Next
Bottom
Just 8th

         The Stock Purchase Agreement, among other things, also provides for (i)
the investor to receive 250,000 (post-split) shares of restricted Common Stock  
in consideration for the investment after the reverse split is effective, (ii)  
the appointment of a nominee to the Board of Directors (who was appointed on    
October 4, 1996), and (iii) the purchase of up to an additional $1,000,000 in   
value of restricted Common Stock promptly after a reverse stock split is        
approved by a majority of the Registrant's issued and outstanding shares of     
voting stock. The number of post-split shares to be purchased by the investor   
for the $1,000,000 shall be determined by dividing $1,000,000 by the average of 
the bid and asked price of the Common Stock on December 18, 1996, the effective 
date of the reverse split. Further, the Stock Purchase Agreement provides that  
Edward C. Kelly, President of the Registrant, shall be issued 1,500,000         
post-split shares of Common Stock for past, present and future services to the  
Registrant, exclusive of any salary, bonus or other compensation in any form    
received or to be received by Mr. Kelly, based upon a reverse split resulting in
no greater than 6,000,000 shares of the Registrant's Common Stock to be         
outstanding. All shares received by the investor and Mr. Kelly will be          
restricted but will be subsequently registered in a registration statement      
together with the shares underlying the Warrants described below, to be filed   
with the SEC within 60 days from the date of payment for all 25,000,000 shares. 
Both the investor (and its transferees) and Mr. Kelly have agreed not to sell   
such shares for 60 days from the effective date of such registration statement. 
The investor and Mr. Kelly shall also receive anti-dilution warrants (the       
"Warrants") to purchase the lesser of (i) 5,000,000 shares of restricted Common 
Stock or (ii) such amount of shares to ensure that each of them shall maintain  
ownership of no less than 25% of the issued and outstanding Common Stock of the 
Registrant at any time for a period of three years from May 29, 1996 at an      
exercise price equal to the average of the bid and asked price per share on     
December 23, 1996, the effective date of the reverse split. It was agreed that  
the Warrant Shares would also be registered.                                    

       On December 16, 1996, a majority of the issued and outstanding voting
securities of the Registrant, by written consent, approved a 1 for 20 reverse   
stock split of the Registrant's Common Stock and authorized an amendment to the 
Registrant's Articles of Incorporation to change its authorized common shares to
25,000,000 shares of Common Stock, and its par value to $.001 per share. The    
Amendment was filed with the Nevada Secretary of State on December 18, 1996.    

ITEM 3.           FORWARD-LOOKING STATEMENTS:                                   

       When used in this report and in future filings by the Registrant 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                                     

 8

10QSB
9th Page of 22
TOC
1st
Previous
Next
Bottom
Just 9th

uncertainties, including the Registrant'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         
Registrant wishes to caution readers not to place undue reliance on any such    
forward-looking statements, which speak only as of the date made. The Registrant
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 Registrant 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 events or circumstances after the date
of such statements or to reflect the occurrence of anticipated or unanticipated 
events.                                                                         

 PART II - OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS                                             

In March 1993, CFV filed a suit against the Registrant, its   
then-serving management (not including Edward C. Kelly and Leonard J. Klarich or
any other current members of the Board of Directors) and others, in federal     
court in California alleging: a) breach of contract, b) fraud, c) securities    
fraud, d) constructive trust, and seeking an accounting and declaratory relief. 
CFV sought to prove its damages at trial, obtain an accounting and a declaration
that it was entitled to all inventions, processes and improvements relating to  
any french fry machine developed by the Registrant. The lawsuit was stayed on   
July 6, 1993 pending the outcome of arbitration regarding the matter because the
original agreement among the parties provided that the exclusive resolution of  
disputes among the parties was to be determined by binding arbitration.         
Arbitration of this matter took place in September 1994. On October 25, 1994 an 
award (the "Award") was rendered against the Registrant in the aggregate amount 
of $279,500 for domestic and international distribution fees owed to CFV        
pursuant to a March 17, 1992 Memorandum of Understanding (the "Memorandum") and 
a May 14, 1991 international joint venture agreement between the Registrant and 
cfv (the "Joint Venture Agreement"), and an additional $249,500 in compensatory 
damages, jointly and severally, as among the Registrant and Edward Abramson and 
Martin Balan, two former officers and directors of the Registrant. The award and
compensatory damages totaling $529,000 were recorded in the Registrant's        
financial statements as of October 31, 1994.                                    

The Award also ordered (a) the enforcement of the terms of the
Memorandum and the Joint Venture Agreement which, generally, provided for the   
payment by the Registrant of certain royalties, fees and profits to CFV in      
connection with future sales by the Registrant of the Registrant's vending      
machines and related products, and (b) the                                      

 9

10QSB
10th Page of 22
TOC
1st
Previous
Next
Bottom
Just 10th

issuance by the Registrant to CFV of an option to purchase 2,000,000 shares of  
the Registrant's restricted Common Stock at an exercise price of $2.00 Per share
through March 17, 1997.                                                         

         In connection with the foregoing, an award was also entered in favor of
the cross-claimant, Samuel Balan who is the brother of Martin Balan, one of the 
former officers and directors of the Registrant. It requires, among other       
things, that the Registrant issue Samuel Balan 1,000,000 shares of unrestricted 
Common Stock. The financial statements do not reflect the issuance of these     
shares for the fiscal year ended January 31, 1996. Such shares, with            
restriction, were issued to him in June 1996 and their issuance is reflected in 
the financial statements for the quarter ended October 31, 1996.                

         On December 23, 1994, a Supplemental Award of arbitrator ("Supplemental
Award") was issued in connection with certain motions, oppositions, requests and
replies. In connection therewith, CFV was awarded (i) attorneys' fees of        
$94,962.50 Against the registrant and (ii) costs of $29,896.43 Against the      
Registrant and Edward Abramson and Martin Balan, its two former officers and    
directors, jointly and severally. In addition, the cross-claimant, Samuel Balan,
was awarded $4,099.34 For certain specific costs against the registrant. The    
Registrant's request for Clarification Re Fraud Damages was reviewed by the     
Arbitrator and denied.                                                          

     In February 1995, the Registrant, through the efforts of Mr. Kelly,
then President of the Registrant and now President, Chief Executive Officer and 
Chairman of the Board, and CFV entered into a Settlement Agreement which        
supersedes the Award and Supplemental Award. The Settlement Agreement, which was
subsequently amended on February 22, 1995 and February 23, 1995 (collectively   
the "Settlement Agreement"), provides, in pertinent part, among other things    
that (i) the Registrant shall pay to CFV the sum of $25,000 on or before        
February 28, 1995 and an additional $175,000 to be applied against the          
Supplemental Award as partial payment for past due royalties (which was paid),  
the balance payable over three (3) years commencing six (6) months after        
February 1, 1995 and shall bear interest at 10% per annum. The payment of the   
$175,000 originally due by March 10, 1995 was extended by agreement between the 
Registrant and CFV to March 15, 1995 and was paid by the Registrant, (ii) a     
royalty to CFV of $350 per Machine for the first 500 Machines and thereafter a  
royalty equal to 35% of the difference between the price paid to the            
manufacturer and/or the wholesale price to the purchaser, domestic or           
international, of a minimum of $350 up to a maximum of $500 per Machine (the    
Award provides for $500 for every Machine and a 50% joint venture interest);    
(iii) $.25 per pound of all Potato Product sold, commercially used or           
distributed (the Award provides for 25% profit of all domestically related sales
and 50% of all internationally related sales of all Products). CFV expressly    
waives any and all rights to profit participation in any other ancillary        
products of the Registrant upon timely payment of the royalty by the Registrant;
(iv) CFV shall receive $2,000,000 payable from domestic and international gross 
distribution fees and utilization fees received by the Registrant as            
consideration for the reduction by CFV of its international distribution fee    
rights from                                                                     

10

10QSB
11th Page of 22
TOC
1st
Previous
Next
Bottom
Just 11th

50% to 25% which shall be payable to CFV by receipt by CFV of 50% of all such   
fees until paid in full; and (v) an option to purchase 2,000,000 shares of the  
Registrant's restricted Common Stock at $.10 per share exercisable for four (4) 
years from February 1, 1995.                                                    

      The aggregate amount of $200,000 to be paid by the Registrant to CFV
was paid in February and March 1995 as agreed. An additional payment of $80,000 
was made in August 1995. The Registrant thereafter defaulted in the payment of  
$84,745.75 due February 1, 1996. As a result, CFV filed a Motion for a Temporary
Protective Order ("TPO") in February 1996 in the Federal District Court for the 
Central District of California seeking an injunction freezing certain assets of 
the Registrant until such time as CFV's Motion for Assignment of Benefits could 
be heard by the court on March 18, 1996. The TPO was issued by the court on     
February 21, 1996 and the Motion for Assignment of Benefits was granted by the  
Court ex parte on March 15, 1996 (the "Court Order"). The Court Order provided, 
among other things, that the Registrant assign any monies it had in its         
possession at such time or received from third parties for investment,          
royalties, distribution fees or other sources be kept in a segregated account   
for the benefit of CFV and paid to CFV until the entire sum due, including      
accrued interest from August 1995 and attorney's fees incurred in connection    
with enforcement of the judgment, were paid in full. During April and May 1996, 
the Registrant paid CFV an aggregate of approximately $452,000 representing     
payment in full of all such amounts due and in satisfaction of the Court Order. 
CFV has agreed to file a Partial Satisfaction of Judgment with the appropriate  
tribunals but has not done so as of the date hereof.                            

   In connection with the award to Samuel Balan, on June 24, 1994, a
lawsuit was instituted against the Registrant and a shareholder of the          
Registrant in Circuit Court for the 11th Judicial Circuit in and for Dade       
County, Florida by Samuel Balan, brother of Martin Balan, the former Chairman of
the Board of the Registrant, alleging breach of contract, quantum meruit and    
seeking a declaratory judgment for entitlement to 1,100,000 shares of the       
Registrant's Common Stock and in excess of $300,000 for past due wages and      
expenses. This action was heard by the arbitrator as part of the arbitration    
between the registrant and CFV. An award was entered in Mr. Balan's             
(cross-claimant's) favor. The Registrant paid the award in May 1996 and issued  
to him 1,000,000 restricted shares of Common Stock in June 1996. Counsel to Mr. 
Balan filed a motion with the Federal District Court for the Southern District  
of Florida on July 1, 1996 requesting that the Court convert the award of stock 
into a cash award. The motion was heard on August 13, 1996 and, on August 19,   
1996, the magistrate issued his report recommending dismissal of the Motion     
(without prejudice) for lack of jurisdiction. Mr. Balan filed a Motion to Show  
Cause in the Federal District Court for the Central District of California and  
the Court has stated that it will issue an Order To Show Cause Why The          
Registrant Should Not Be Held In Contempt for its alleged failure to abide by   
the judgment. Mr. Balan alleges that the Registrant's alleged failure to issue  
unrestricted Common Stock has caused him to suffer financial harm. The matter   
has not yet been set for hearing by the Court.                                  

11

10QSB
12th Page of 22
TOC
1st
Previous
Next
Bottom
Just 12th

      On May 23, 1995, a lawsuit was instituted against the Registrant and
Mr. Gary Arzt, former President, Secretary and Chairman of the Board of the     
Registrant, individually, by an alleged former agent of the Registrant in the   
Circuit Court in the Ninth Judicial Circuit in and for Orange County, Florida   
alleging (i) breach of contract, (ii) quantum meruit, (iii) breach of verbal    
contract, and (iv) requesting an accounting and seeking damages in excess of    
$15,000 for alleged commissions due on the sale of certain distributorships that
he allegedly sold. The Registrant's and Mr. Arzt's answer denying the           
allegations and affirmative defenses to the complaint were filed on September   
29, 1995. To date, preliminary discovery has been exchanged but the matter has  
not been set for trial. Management intends to vigorously defend this matter and 
believes, based upon the allegations in the complaint, that it will ultimately  
prevail; however, no assurances can be given at this time that this will be the 
result.                                                                         

       See Part I, Item 2. Herein for a discussion of the lawsuit brought by
the Registrant against the Trustee for Acumen.                                  

         On January 15, 1996, a lawsuit was instituted in New Jersey against the
Registrant, Edward C. Kelly and Michelle Kramish Kain, individually, who is a   
shareholder of the law firm of Kipnis Tescher Lippman Valinsky & Kain, counsel  
to the Registrant, by a former consultant and current shareholder and his       
related companies alleging among other things: 1) breach of contract, 2)        
fraudulent inducement and misrepresentation and 3) violation of a New Jersey law
relating to consumer contracts. The action related to an agreement entered into 
by the Registrant and to the individual plaintiff to file a registration        
statement with the Commission in October 1995 to register certain securities of 
the plaintiff. The Registrant and Kelly, through their independent counsel,     
answered the complaint and filed separate defenses. Thereafter, they filed a    
Motion for Partial Summary Judgment to dismiss the consumer fraud claims as a   
matter of law and sought leave to amend the answer to assert counterclaims, both
of which were granted on May 20, 1996. Defendant Kain, through her counsel,     
answered the complaint by general denial and filed a Motion to vacate the       
service of summons and complaint and dismiss the complaint for lack of in       
personam jurisdiction. A hearing on the Motion was heard on may 10, 1996 and the
Court entered an order on May 20, 1996 dismissing the action against Ms. Kain   
for lack of personal jurisdiction. This suit was settled in July 1996 and       
releases were executed.                                                         

        On August 28, 1996, the Registrant and Edward C. Kelly, its President,
Chief Executive Officer and Chairman of the Board, were added as defendants to a
Second Amended Complaint in litigation pending in the Riverside County Branch of
the Superior Court of the State of California, between Prize Frize, Inc.,       
William Bartfield and Larry Wirth, Plaintiffs, and Matrix (U.S.), Inc; Matrix,  
Inc.; Peter Fisher; International Tasty                                         

12

10QSB
13th Page of 22
TOC
1st
Previous
Next
Bottom
Just 13th

Fries, Inc.; Fry Factor, Inc.; Edward Trent; Xavier Castro; Marcellino Menendez;
Mxi, Inc.; Inter Trade Exchange Co.; Baltkor International; Sanad Registrant;   
Michael Krakow; Andrei Lutikov; Griffin Financial Management Corporation, Inc.; 
Ez Fries, Inc.; Samuel Hepburn; Dudley Muth; Richard O. Wahlgren; Gene Fruhling;
Eurofrize, Inc.; Laszlo Kovacs; Seek, Inc.; Fresh Fries Uk Ltd; Tega, S.A.;     
Tasty Fries, Inc; Premier Design, Ltd.; H&R Industries; and Edward C. Kelly as  
defendants. The causes of action alleged against the Registrant and Mr. Kelly   
include misappropriation of trade secrets, unfair competition, conversion and   
conspiracy. The Second Amended Complaint seeks damages against the Registrant   
and Mr. Kelly in an unspecified amount for compensatory and punitive damages,   
according to proof at trial. The Registrant has filed a Motion to Quash for lack
of personal jurisdiction over Edward Kelly which is to be heard by the Court on 
January 8, 1997. Counsel for the Registrant expects a Third Amended Complaint to
be filed in response to a Motion to Dismiss filed by other defendants.          

         On September 25, 1996, a lawsuit was instituted by Mr. Arzt against the
Registrant in the Circuit Court of the 11th Judicial Circuit in and for Dade    
County, Florida for breach of a promissory note and reimbursement of certain    
alleged expenses incurred by Mr. Arzt as former Chairman of the Board of the    
Registrant. Mr. Arzt is seeking approximately $64,000. The Registrant has filed 
a Motion to Dismiss the complaint which is currently pending.                   

ITEM 2.           CHANGES IN SECURITIES                                         

        On December 16, 1996, upon written consent, the stockholders holding a
majority of the issued and outstanding shares of Common Stock of the Registrant,
approved a reverse split of the issued and outstanding Common Stock of the      
Registrant on a 1 for 20 basis resulting in 4,700,025 shares of Common Stock in 
the aggregate being outstanding on the effective date of the reverse split. All 
outstanding options, warrants and other rights to acquire shares of Common      
Stock, unless specifically not subject to the reverse stock split, were reverse 
split on a 1 for 20 basis. The Registrant thereafter filed on December 18, 1996 
an amendment to its Articles of Incorporation to change the authorized common   
shares to 25,000,000 shares of Common Stock and the par value to $.001 per      
share, which such amendments were also approved by the stockholders on December 
16, 1996.                                                                       

ITEM 3.           DEFAULTS UPON SENIOR SECURITIES                               

None.                                                         

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS           

See Item 2. above.                                            

13

10QSB
14th Page of 22
TOC
1st
Previous
Next
Bottom
Just 14th


ITEM 5.           OTHER INFORMATION                                             

See Part II, Item 1. Above.                                   

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K                                 

EXHIBITS                                          

       3.0   Amendment to Articles of Incorporation as filed with the Nevada
Secretary of State on December 18, 1996.          

27    Financial Data Schedule                                 

REPORTS ON FORM 8-K                               

None.                                             

14

10QSB
15th Page of 22
TOC
1st
Previous
Next
Bottom
Just 15th

TASTY FRIES, INC. AND SUBSIDIARY

 (A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS

 FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995

15

10QSB
16th Page of 22
TOC
1st
Previous
Next
Bottom
Just 16th

TASTY FRIES, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE COMPANY)
 CONSOLIDATED BALANCE SHEETS

ASSETS    

                                            OCTOBER 31,        JANUARY 31,
                                             1996               1996
                                            -----------        -----------
                         (Unaudited)

Current Assets:                                                                 
  Cash                                           $   27,747         $    5,273
  Machine                                            70,000             70,000
  Subscription receivables                                           2,092,000
  Loans receivable - officer                         50,000             50,000
                                                 -----------------------------
       Total current assets                         147,747          2,217,273

Property and equipment, net                           25,088             30,515 
                                                 -----------------------------
                                                 $  172,835         $2,247,788
                                                 ==========         ==========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:                                                            
  Note payable                                     $  25,000        $   25,000
  Note payable, shareholder/officer                   50,000            50,000
  Accounts payable and accrued expenses              669,686           549,283
  Unearned revenue                                   376,000           356,000
                                                   ---------        ----------
       Total current liabilities                   1,120,686           980,283
                                                   ---------------------------

Stockholders' Deficiency:                                                       
Common stock, $.01 par value; authorized                                  
100,000,000 shares; issued and outstanding                              
93,963,594 shares at October 31, 1996 and                               
   77,000,495 at January 31, 1996                    939,636           770,005
  Additional paid-in capital                       4,348,140         5,119,270
   Deficit accumulated in development stage        (6,235,627)       (4,621,770)
                                                   ---------------------------
                                                    (947,851)        1,267,505
                                                   ---------------------------

                                                  $  172,835        $2,247,788
                                                   ===========================

See notes to consolidated financial statements

16

10QSB
17th Page of 22
TOC
1st
Previous
Next
Bottom
Just 17th
                                                        · Enlarge/Download Table

                        TASTY FRIES, INC. AND SUBSIDIARY                                                                  
                          (A DEVELOPMENT STAGE COMPANY)                                                                   
                      CONSOLIDATED STATEMENTS OF OPERATIONS                                                               
          FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995                                                   
                                   (Unaudited)                                                                            

                                                      THREE MONTHS ENDED                     NINE MONTHS ENDED            
                                                       1995               1996              1995                1996      
                                                       ----               ----              ----                ----      

                                                                                                                          
Revenues                                            $         0         $         0      $         0        $         478 
                                                    ------------        ------------     ------------       ------------- 
Costs and expenses:                                                                                                       

Machine and product development                          17,385               7,384           22,113              587,006 
Selling, general and administrative                     314,025             364,068          771,579            1,020,925 
                                                      ------------------------------------------------------------------- 
                                                        331,410             371,452          793,692            1,607,931 
                                                      ------------------------------------------------------------------- 

Net loss before interest                               (331,410)           (371,452)        (793,692)          (1,607,453)

Interest expense                                          1,621               1,910           25,197                6,404 
                                                     -------------------------------------------------------------------- 

Net loss                                              $(333,031)          $(373,362)       $(818,889)         $(1,613,857)
                                                     ==============================       ==========         ============ 

Net loss per share of common stock                        $(.01)              $(.01)           $(.01)              $( .02)
                                                          =====               =====            =====               ====== 

Weighted average shares outstanding                  55,625,617          93,963,594       41,151,847           83,068,472 
                                                    ===========         ===========      ===========          =========== 

See notes to consolidated financial statements

17

10QSB
18th Page of 22
TOC
1st
Previous
Next
Bottom
Just 18th
                                                        · Enlarge/Download Table


                        TASTY FRIES, INC. AND SUBSIDIARY                                                                     
                          (A DEVELOPMENT STAGE COMPANY)                                                                      
                      CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                  
          FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995                                                      
                                   (Unaudited)                                                                               

                                                              THREE MONTHS ENDED                       NINE MONTHS ENDED     
                                                            1995              1996                  1995              1996   
                                                          ------------------------------------------------------------------ 
                                                                                                                             
Cash flows from operating activities:                                                                                        

Net loss                                                   $  (333,031)        $(373,362)      $  (818,889)      $(1,613,857)

Adjustments to reconcile net loss to net                                                                                     
  cash provided by operating activities:                                                                                     
   Depreciation                                                  1,580             1,809             4,740             5,427 
   Other assets                                                                                   (225,000)                  
   Subscriptions receivable                                 (2,150,000)        2,070,000        (2,150,000)        2,092,000 
   Unearned revenue                                           (100,000)                            (80,000)           20,000 
   Accounts payable and accrued expenses                      (222,448)           74,902          (446,692)          120,404 
                                                           ----------------------------------------------------------------- 
Net cash used by operating activities                       (2,803,899)        1,773,349        (3,715,841)          623,974 
                                                           ----------------------------------------------------------------- 

Net cash flows used by investing activities:                                                                                 

   Purchase of property and equipment                          -0-                -0-               (5,604)            -0-   
                                                          ------------------------------------------------------------------ 

Cash flows from financing activities:                                                                                        
   Issuance (cancellation) of common stock                   2,565,000        (2,045,000)        3,514,500          (676,500)
   Issuance of common stock for services                       246,960                             421,714            75,000 
   Loan receivable, officer                                                                        (50,000)                  
   Loan conversion to stock                                                                        (50,000)                  
   Repayment of note payable                                                                       (25,000)                  
   Note payable shareholder/officer                                                                (79,947)                  
                                                          ------------------------------------------------------------------ 
Net cash provided by financing activities                    2,811,960        (2,045,000)        3,731,267          (601,500)
                                                          ------------------------------------------------------------------ 

Net increase (decrease) in cash                                  8,061          (271,651)            9,822            22,474 
Cash, beginning balance                                          2,066           299,398               305             5,273 
                                                          ------------------------------------------------------------------ 

Cash, ending balance                                      $     10,127       $    27,747       $    10,127       $    27,747 
                                                          ================================================================== 

Supplemental disclosure of cash flow information:                                                                            

   Cash paid for interest                                 $        360       $        20       $    22,636       $     1,363 
                                                          ================================================================== 

See notes to consolidated financial statements

18

10QSB
19th Page of 22
TOC
1st
Previous
Next
Bottom
Just 19th

TASTY FRIES, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
 (Unaudited)

1.       Basis of presentation:                                                 

        The accompanying unaudited consolidated 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 nine months ended October 31, 1996
        are not necessarily indicative of the results that may be expected for
       the year ended January 31, 1997. The unaudited consolidated financial
statements should be read in conjunction with the consolidated
      financial statements and footnotes thereto included in the Company's
 annual report on Form 10-K for the year ended January 31, 1996.

2.       Description of Business and Significant Accounting Policies:           

       The Company is a development stage company since it has not completed
   designing, testing, and manufacturing its sole product, a vending
    machine which will cook and dispense french fries. The Company had
  entered into a manufacturing requirements agreement with Premier
       Design, Inc., a company which manufactures and assembles a variety of
         high technology equipment. The Company has determined that Premier will
       be unable to meet production requirements. The Company has determined
     with Premier to pay them $650,000 in research and development costs
     ($100,000 paid July, 1996; $550,000 due as of October 31, 1996). In
  exchange for 25% of research and development costs paid with the
         remaining balance paid over twelve months, Premier will assign one-half
        interest in the patent associated with the machine. This new agreement
       was executed by the Company to avoid significant costs from potential
         litigation proceedings and further delays in production of the machine.
         The additional research and development costs are reflected in the nine
     months loss figure. The President of the manufacturing company is a
        former Director of Tasty Fries, Inc. and the President of Tasty Fries,
        Inc. owns 50% of the manufacturing company. In June, 1996, the Company
       entered into a new manufacturing agreement with S&H Electronics, Inc.
         (a Pennsylvania corporation) to assemble the machines after the tooling
       phase is completed. From the corporation's date of inception, October
      18, 1985, to date it has engaged in various business activities that
     were unprofitable. The Company has no revenues from operations, but
         does have immaterial revenues from operation of beta test machines. Its
         ability to continue as a going concern is dependent on the continuation
   of equity financing to fund the expenses relating to successfully
       marketing the vending machine and resolving existing litigation (Note
5).                                                           

  All intercompany accounts and transactions have been eliminated.

19

10QSB
20th Page of 22
TOC
1st
Previous
Next
Bottom
Just 20th

TASTY FRIES, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
 (Unaudited)

3.       Unearned Revenue:                                                      

    In May 1996 the Company received payments totaling $20,000 for the
rights to distribute its machines in Israel, Egypt and Jordan.

4.       Issuance of Common Stock:                                              

         There were no additional shares issued during the quarter ended October
31, 1996.                                                     

5.       Litigation:                                                            

     On October 25, 1994 the Company received a copy of the award of the
         arbitrator in the American Arbitration Association matter of California
      Food & Vending, Inc. (CFV) vs. Tasty Fries, Inc. et.al. An award was
      rendered against the Company in the aggregate amount of $279,500 for
        domestic and international distribution fees owed to the plaintiff and
      $249,500 in compensatory damages. The award and compensatory damages
        totaling $529,000 have been recorded in the financial statements as of
    October 31, 1994. Payment pursuant to a settlement agreement which
       supersedes the award began in February 1995 and was satisfied in full
in May, 1996.                                                 

        The arbitration award also ordered (a) the enforcement of the terms of
        the Memorandum of Understanding dated March 17, 1992 and Joint Venture
        Agreement dated May 14, 1991 which, generally, provide for the payment
 by the Company of certain royalties, fees and profits to CFV in
      connection with future sales of Company vending machines and related
       products, and (b) the issuance of the Company to CFV of an option for
      the purchase of 2,000,000 shares of the Company's common stock at an
exercise price of $2.00 per share through March 17, 1997.     

    In connection with the foregoing, an award was entered in favor of
      cross-claimant, which requires, among other things, that the Company
 issue 1,000,000 shares of unrestricted common stock to him. The
    financial statements reflect the issuance of these shares in June,
1996.                                                         

      On January 5, 1995 the arbitrator in the case of California Food and
      Vending, Inc. (CFV) vs. the Company awarded CFV and a cross-claimant
        legal fees amounting to $94,963 and $4,099, respectively. The total of
         $99,062 is recorded in the financial statements as of January 31, 1995.
       Payment pursuant to a settlement agreement which supersedes the award
 began in February, 1995 and was satisfied in full in May, 1996.

20

10QSB
21st Page of 22
TOC
1st
Previous
Next
Bottom
Just 21st

TASTY FRIES, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE THREE AND NINE MONTHS ENDED OCTOBER 31, 1996 AND 1995
 (Unaudited)

5.       Litigation (continued):                                                

        On March 15, 1996, the Federal District Court for the Central District
     of California issued a temporary Protective Order (TPO) against the
         Company since the Company defaulted on their February, 1996 installment
  payment to CFV. The TPO provided that any monies received by the
        Company currently were to be paid to CFV until all monies due CFV were
         paid in full. The Company satisfied, in full, the CFV judgment in April
and May, 1996 and rendered the TPO void.                      

      In September 1995, the Company entered into an agreement with Acumen
        Services, Ltd. to purchase an aggregate of 21,500,000 shares of common
    stock. These shares were issued by the Company, but held in escrow
  until payment for the shares was received. 3,900,000 shares were
        transferred to Acumen in January, 1996, but no money has been received
      for these shares to date. On June 26, 1996, the Company instituted a
 lawsuit against Acumen for breach of the Guaranty and Indemnity
  Agreement and has demanded the return of the 3,900,000 shares or
      payment therefore of $390,000 plus interest and attorneys' fees. The
    cancellation of these shares has been recorded in the books of the
Company as of October 31, 1996.                               

    The Company is a defendant in several lawsuits arising from normal
      business activities. Management has reviewed pending litigation with
         legal counsel and believes that those actions are without merit or that
         the ultimate liability, if any, resulting from them will not materially
affect the Company's financial position.                      

21

10QSB
Last Page of 22
TOC
1st
Previous
Next
Bottom
Just 22nd

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.

Date:  December 16, 1996                        /S/ EDWARD C. KELLY             
                                 ---------------------
                                      Edward C. Kelly, President
                                           and Principal Financial Officer

22

Dates Referenced Herein   and   Documents Incorporated By Reference

				Referenced-On Page
This 10QSB Filing		Date		First		Last			Other Filings
		3/17/92		9		20
		7/6/93		9
		6/24/94		11
		10/25/94		9		20
		10/31/94		9		20
		12/23/94		10
		1/5/95		20
		1/31/95		20
		2/1/95		10		11
		2/22/95		10
		2/23/95		10
		2/28/95		10
		3/10/95		10
		3/15/95		10
		5/23/95		12
		9/1/95		2
		9/29/95		12
		10/31/95		15		21
		1/2/96		6
		1/15/96		12
		1/31/96		2		19			10KSB
		2/1/96		11
		2/21/96		11
		3/15/96		11		21
		3/16/96		2
		3/18/96		11
		4/30/96		7					10QSB, NTN 10Q
		5/10/96		12
		5/20/96		12
		5/23/96		6
		5/29/96		8
		5/30/96		7
		5/31/96		7
		6/26/96		21
		7/1/96		11
		8/13/96		11
		8/19/96		11
		8/28/96		12
		9/4/96		7
		9/25/96		13
		10/4/96		8
		10/28/96		7
		10/29/96		7
For The Period Ended		10/31/96		1		21			NT 10-Q
		12/1/96		5
		12/6/96		1
		12/16/96		8		22			NT 10-Q
		12/18/96		8		14
Filed On / Filed As Of		12/19/96
		12/23/96		1		8
		1/8/97		13
		1/31/97		19					10KSB, NT 10-K
		3/17/97		10		20
Top									List All Filings