Tasty Fries Inc – ‘10QSB’ for 7/31/96

As of:  Monday, 9/16/96   ·   For:  7/31/96   ·   Accession #:  950116-96-980   ·   File #:  33-04460-NY

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

Document/Exhibit                   Description                      Pages   Size 

 1: 10QSB       Quarterly Report -- Small Business                    17     86K 
 2: EX-27       Financial Data Schedule                                1      8K 

10QSB   —   Quarterly Report — Small Business
Document Table of Contents

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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 FORM 10-QSB

[X]  Quarterly Report under Section 13 or 15(d) of the Securities and Exchange  
Act of 1934                                                           

For the quarterly period ended July 31, 1996                                    

[ ] Transition Report under Section 13 or 15(d) of the Exchange Act             

For the transition period from _______ to _______                               

Commission File No. 33-4460-NY                                                  

 TASTY FRIES, INC.
 -----------------------------------------------------

 (Exact name of small business issuer as specified in its charter)

Nevada                                  65-0259052  
  (State or other jurisdiction         (I.R.S. Employer Identification Number)
of incorporation or organization)                                               

 650 Sentry Parkway, Suite One
 Blue Bell, PA 19422
 -------------------------------------------------

(Address of principal executive offices)

(610) 941-2109
 -------------------------------------------------

(Issuer's telephone number, including area code)

 Adelaide Holdings, Inc.
 11098 Biscayne Boulevard, Suite 403
Miami, Florida
(305) 899-0200
 -------------------------------------------------

(Former name, former address and
 former fiscal year, if changed since last report)

        Check whether the issuer (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 September 11, 1996: 94,000,495 shares of common stock were
outstanding.                                                                    

Transitional Small Business Disclosure Format (check one) YES [ ] NO [X]

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Item 1.           Financial Statements.                                         

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

ASSETS

                                                      July 31,     January 31,
                                                    1996          1996
                                                   -----------    ------------
                                     (Unaudited)

Current Assets:                                                                 
  Cash                                             $  299,398     $      5,273
  Machines                                             70,000           70,000
  Subscriptions receivable                          2,070,000        2,092,000
  Loan receivable, officer                             50,000           50,000
                                                   ----------     ------------
       Total current assets                         2,489,398        2,217,273

Property and equipment, net                             26,897           30,515 
                                                   ----------      -----------

                                                   $2,516,295       $2,247,788
                                                   ==========       ==========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current Liabilities:                                                            
  Notes payable                                    $   25,000      $    25,000
  Note payable, shareholder/officer                    50,000           50,000
  Accounts payable and accrued expenses               594,784          549,283
  Unearned revenue                                    376,000          356,000
                                                   ----------      -----------
       Total current liabilities                    1,045,784          980,283
                                                   ----------      -----------

Stockholders' Deficiency:                                                       
Common stock, $.01 par value; authorized                                  
100,000,000 shares; issued and outstanding                              
93,963,594 shares at July 31, 1996 and                                  
   77,000,495 at January 31, 1996                     939,636          770,005
  Additional paid-in capital                        6,393,140        5,119,270
   Deficit accumulated in development stage         (5,862,265)      (4,621,770)
                                                  -----------      -----------
                                                    1,470,511        1,267,505
                                                  -----------      -----------

                                                   $2,516,295       $2,247,788
                                                  ===========       ==========

See notes to consolidated financial statements

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

                                                        [Enlarge/Download Table]

                                           Three Months Ended                Six Months Ended         
                                         1995               1996         1995                1996     
                                       --------           --------     --------             ------    
                                                                                                      
Revenues                             $         0        $         0   $         0         $       478 
                                     -----------        -----------   -----------         ----------- 

Costs and expenses:                                                                                   

Machine and product development           (1,572)           579,622         4,728             579,622 
Selling, general and administrative      311,332            363,160       457,554             656,857 
                                     -----------        -----------   -----------         ----------- 
                                         309,760            942,782       462,282           1,236,479 
                                     -----------        -----------   -----------         ----------- 

Net loss before interest and taxes      (309,760)          (942,782)     (462,282)         (1,236,001)

Interest expense                          12,700              3,234        23,576               4,494 
                                     -----------        -----------   -----------         ----------- 

Net loss                               $(322,460)         $(946,016)    $(485,858)        $(1,240,495)
                                     ===========        ===========   ===========         =========== 

Net loss per share of common stock        $(0.01)            $(0.01)       $(0.01)             $(0.02)
                                     ===========        ===========   ===========         =========== 

Weighted average shares outstanding   43,288,812         85,815,330    36,259,020          80,733,775 
                                     ===========        ===========   ===========         =========== 

See notes to consolidated financial statements

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

                                                        [Enlarge/Download Table]

                                                        Three Months Ended             Six Months Ended          
                                                       1995            1996          1995             1996       
                                                     --------        --------      --------          ------      
                                                                                                                 
Cash flows from operating activities:                                                                            

Net loss                                           $(322,460)        $ (946,016)   $(485,858)        $(1,240,495)
Adjustments to reconcile net loss to net                                                                         
 cash provided by operating activities:                                                                          
   Depreciation                                        1,580              1,809        3,160               3,618 
   Other assets                                     (221,000)                       (225,000)             22,000 
   Unearned revenue                                                      20,000       20,000              20,000 
   Accounts payable and accrued expenses              13,524           (233,639)    (224,244)             45,502 
                                                   ---------         ----------   ----------         ----------- 
Net cash used by operating activities               (528,356)        (1,157,846)    (911,942)         (1,149,375)
                                                   ---------         ----------   ----------         ----------- 

Net cash flows used by investing activities:                                                                     
   Purchase of property and equipment                                                 (5,604)                    
                                                   ---------         ----------   ----------         ----------- 

Cash flows from financing activities:                                                                            
   Sale of common stock                               50,000          1,368,500      949,500           1,368,500 
   Issuance of common stock for services              94,544                         174,754              75,000 
   Loan receivable, officer                          (50,000)                        (50,000)                    
   Loan conversion to stock                          (50,000)                        (50,000)                    
   Repayment of note payable                         (25,000)          (100,000)     (25,000)                    
   Note payable shareholder/officer                                                  (79,947)                    
                                                   ---------         ----------   ----------         ----------- 
Net cash provided by financing activities             19,544          1,268,500      919,307           1,443,500 
                                                   ---------         ----------   ----------         ----------- 

Net increase (decrease) in cash                     (508,812)           110,654        1,761             294,125 

Cash, beginning balance                              510,878            188,744          305               5,273 
                                                   ---------         ----------   ----------         ----------- 

Cash, ending balance                               $   2,066         $  299,398   $    2,066         $   299,398 
                                                   =========         ==========   ==========         =========== 

Supplemental disclosure of cash flow information:                                                                
   Cash paid for interest                          $  12,700         $    1,343   $   22,276         $     1,343 
                                                   =========         ==========   ==========         =========== 

See notes to consolidated financial statements

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TASTY FRIES, INC. AND SUBSIDIARY
 (A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE THREE AND SIX MONTHS ENDED JULY 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 six months ended July 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 has entered into a 
manufacturing requirements agreement with a company which manufactures and
assembles a variety of high technology equipment. The President of the    
   manufacturing company is a Director of Tasty Fries, Inc. and the President of
Tasty Fries, Inc. owns 50% of the manufacturing company. From the         
  corporation's date of inception, October 18, 1985, to date it has engaged in
various business activities that were unprofitable. 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 marketing the vending machine and   
resolving existing litigation (Note 5).                                   

All intercompany accounts and transactions have been eliminated.          

3. Unearned Revenue:                                                            

 In March 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:                                                    

   The total shares issued during the quarter ended July 31, 1996 was 16,463,099
   shares; all 16,463,099 shares were sold in private placements by the Company.

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

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 do not reflect the issuance of these shares.                   

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.                                   

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.                                                                 

 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.                                                       

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Item 2.           Plan of Operation.                                            

General                                                   

 Since 1993 the Registrant encountered significant delays in
connection with the production of its french fries vending machine (the         
"Machine") which resulted from 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, much of  
which resulted in a material lack of working capital and the necessity to       
allocate a material amount of its limited capital received from equity and debt 
investments for litigation and related expenses, including payments mandated to 
be paid to California Food & Vending, Inc. ("CFV") by the court order granting  
CFV's motion to assign benefits granted on March 15, 1996 (the "Court Order").  
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"), the manufacturer of the pre-production        
Machines. As a result of such testing, certain modifications to 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 during the fiscal year ended January 31, 1996      
although a demonstration Machine was shipped to CFV during the first quarter    
ended April 30, 1996 pursuant to the Registrant's February 1995 Settlement      
Agreement with CFV. Another demonstration Machine has been purchased by the     
Registrant's Israeli distributor and was shipped to Israel in August 1995. At   
the present time, the Registrant expects to commence commercial production of   
the Machine in September or October 1996, although no assurances are given that 
these dates will be met.                                                        

        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 Requirements Agreement (the "Manufacturing Agreement") with       
Premier. 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 to 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 will be $7,000 per Machine or $70,000 in the 
aggregate. See "Unaudited Financial Statements and Notes" thereto.              

        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 modify and improve the Machine in certain key     
areas to enhance performance and operation. The Registrant is in the process of 
tooling certain production parts of the Machine which will then be assembled by 
a manufacturer being chosen by management for such purpose as Premier cannot    
manufacture the Machine under the terms of the amendment to the Manufacturing   
Agreement dated December 30, 1994. Once the Registrant is able to order Machines
from a manufacturer for delivery to purchasers, the Registrant will             

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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 an agreement with
Forrest Financial Corp. (the "Leasing Company") to provide lease financing to   
distributors and others who wish to lease the Machine. Pursuant to the terms of 
the agreement approximately $15,000,000 will be made available by the Leasing   
Company to qualified lessees.                                                   

     The Registrant presently estimates, based upon current distribution
agreements, that it will provide a minimum of 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. The Registrant is continuing its 
discussions with a manufacturing company related to the production of the       
Machine. Although management currently anticipates that commercial production   
will commence in September or October of 1996, no assurance can be given that   
this timetable will be met, when such Machines will be shipped or the number    
that will ultimately be shipped in the next 12 months. If a lesser number of    
Machines is purchased, the Registrant's financial condition and operations will 
be materially and adversely effected. In addition, the Registrant has developed 
a proprietary potato product. Management estimates that the cost to establish a 
manufacturing line to produce this product is approximately $500,000. The       
Registrant is also looking at alternative solutions to acquire the potato       
product.                                                                        

  The Registrant has expanded its distributor base during the past
several months which currently includes several foreign countries (see below),  
has reacquired certain distributorships for stock and options and is negotiating
the reacquisition of others. Over the last several months, management has been  
in discussions with parties, who have seen the Machine in its final development 
stages, for distributorships in South 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 the Middle 
East territories. The Registrant has, however, changed its marketing focus and  
anticipates 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 postponed due to the persistent delays in testing and     
developing a totally new Machine. 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, however, management is
not aware that any existing agreements are currently in breach; however, this   
may not remain the case if information currently being received and collected   
from distributors indicates otherwise. Notwithstanding the foregoing, management
believes that there may be other channels to distribute the Machine and related 
products of the Registrant, including joint venture agreements, which could be  
as effective and profitable as                                                  

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the existing distribution network is expected to be. No assurances can be given 
that management will 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 July 31, 1996, the Registrant had a total of six (6) full-time
employees, including Leonard Klarich, currently a director of the Registrant who
has provided consulting services to the Registrant over the past year. Mr.      
Klarich, experienced in operating larger companies than the Registrant, serves  
as Executive Vice President responsible for marketing, distribution and         
administrative matters which will enable Mr. Kelly to concentrate on tooling,   
production and assembly of the Machine and to secure regulatory approvals and   
design enhancements. 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. 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 resolved
the severe financial problems it has experienced in the past and that the       
Registrant will now 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 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 has agreed to grant an option to LBI to   
purchase 4,000,000 (pre-split) shares of free-trading common stock at an        
exercise price of $.05 per share.                                               

         Since its inception, the Registrant has had no revenues from operations
and has relied almost exclusively on shareholder loans, distribution deposits   
and private securities transactions to raise working capital to fund operations.
Until the most recent investment aggregating $1,250,000, as described below,    
funding had been substantially inadequate to allow the Registrant to complete   
its plan of operation. Accordingly, the Registrant has raised additional funds  
through the sale of restricted common stock as described below. The Registrant  
expects that it will be required to seek additional funding for marketing and   
related purposes but anticipates, although no assurances can be given, that     
working capital, from revenues produced by the anticipated sale and distribution
of Machines sold in the current fiscal year, will help to fund this need. 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 expand marketing over the next 12 months.                     

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         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) subject to payment in full for all shares so transferred as       
agreed. The Trustee and Acumen executed Regulation S representation letters and 
the Trustee also executed a Guaranty and Indemnity Agreement 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 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. The Registrant believes  
that approximately 1,000,000 shares of the 3,000,000 shares transferred to      
Acumen were thereafter transferred to U.S. citizens in violation of Regulation  
S.                                                                              

        On June 26, 1996, the Registrant filed suit against E. Patrick Toothe,
the former attorney and agent of Acumen, in the Circuit Court in the Eleventh   
Judicial Circuit in and for Dade County, Florida, alleging breach of the        
Guaranty and Indemnity Agreement based on Mr. Toothe's failure to return the    
3,900,000 shares to the Registrant upon the Registrant's request and seeking    
damages of $390,000 plus interest and attorneys' fees. Mr. Toothe received      
notice of the suit and failed to respond thereto. As a result, a default        
judgment was entered against him in September 1996. The Registrant is currently 
in the process of attempting to enforce this judgment.                          

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. 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 investors' 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 $150,000 to these individuals 
in exchange for the shares of the Registrant's common stock held by them.       
Several others who acquired shares from the investor have also requested and the
Registrant has agreed to return approximately $75,000 in exchange for the       
Registrant's shares held by such individuals.                                   

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         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, and (iii) the purchase  
of up to an additional $1,000,000 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. As of the date hereof, neither the date of  
the vote on the reverse stock split nor the reverse stock split ratio have been 
set. Assuming the approval of the reverse stock split by the shareholders, 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 the effective date of the reverse split. Further,  
the Stock Purchase Agreement provides that Edward 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 and will be registered in a registration       
statement, together with the shares underlying the warrants described below, to 
be filed with the Securities and Exchange Commission (the "Commission") within  
60 days from the date of payment for all 25,000,000 shares purchased by the     
investor. Both the investor and Mr. Kelly have agreed not to sell such shares   
purchased by the investor for 60 days from the effective date of such           
registration statement. The investor and Mr. Kelly shall also receive           
anti-dilution 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 the effective date of the reverse split.                           

Forward-Looking Statements                                                      

       When used in this Form 10-QSB and in future filings by the Registrant
with the Commission, in the Registrant's press releases or other public or      
shareholder 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       
Registrant's liquidity constraints, potential increases in manufacturing costs  
and delays, pending litigation, availability of raw materials, competition,     
demand for the product 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 the factors listed above could     
affect the Registrant's financial performance and could cause the Registrant's  
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.                                                                         

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PART II.          Other Information                                             

Item 1.                    Legal Proceedings.                                   

In March 1993, CFV filed a suit against the Registrant, its   
then-serving management and others, in federal court in California alleging: (a)
breach of contract, (b) fraud, (c) securities fraud, (d) constructive trust,    
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 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 issuance by the Registrant to CFV of 
an option for the purchase of 2,000,000 shares of the Registrant's restricted   
common stock at an exercise price of $2.00 per share which option is exercisable
through March 17, 1997.                                                         

         In connection with the foregoing, an award was also entered in favor of
the cross-claimant, the brother of one of the former officers and directors of  
the Registrant, which requires, among other things, that the Registrant issue   
him 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. These     
shares are to be included for registration in a selling shareholder registration
statement to be filed with the Commission.                                      

         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 its two former officers and directors, jointly and severally. In 
addition, the cross-claimant 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 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 

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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 only 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 50% to 25% which shall be payable to CFV upon 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       
("Motion") 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 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.                        

         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. 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 which will be registered in a selling shareholder registration     
statement to be filed with the Commission. Mr. Balan's counsel filed a motion   
with the Court 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 can seek to enforce the 
final judgment in California or Pennsylvania although as of the date hereof the 
Registrant has not been notified of any action being filed with respect to this 
matter.                                                                         

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      On May 23, 1995, a lawsuit was instituted against the Registrant and
Mr. Arzt, former 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. The          
Registrant answered the Complaint and commenced discovery. The Registrant is    
currently in the process of responding to interrogatories served by the         
plaintiff. To date, no trial date has been sent. 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 occur.                                              

         On January 15, 1996, a lawsuit was instituted in New Jersey against the
Registrant, Edward C. Kelly, its President and a director, and Michelle Kramish 
Kain, individually, who is a shareholder of the law firm of Kipnis Tescher      
Lippman Valinsky & Kain, which acts as 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 relates 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 by the plaintiffs. As  
part of the settlement agreement, the Registrant agreed to register the         
plaintiff's shares of the Registrant's common stock with the Commission. The    
Company's failure to register such shares resulted in a default judgment against
the Registrant pursuant to the terms of the settlement agreement.               

       On August 28, 1996, the Registrant and Edward C. Kelly, its president
and a director, 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, on the one hand, and Matrix (U.S.), Inc.; Matrix, Inc.; Peter Fisher;    
International Fries, Inc.; Fry Factor, Inc.; Edward Trent; Xavier Castro;       
Marcellino Menendez; MXI, Inc.; Inter Trade Exchange Co.; Baltkor International;
Sanad Company; 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, on the other hand. 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 attorneys   
representing the Registrant and Mr. Kelly are in the process of preparing a     
response to the Second Amended Complaint.                                       

See "Item 1 - Plan of Operation" for information regarding the
Registrant's suit against the former attorney and agent of Acumen, which        
information regarding this suit is hereby incorporated by reference.            

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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.                                            

None.                                       

Item 6.           Exhibits and Reports on Form 8-K                              

(a)      Exhibits.                          

Financial Data Schedule   

(b)      Reports on Form 8-K                

                          No Current Reports on Form 8-K were filed during the
  quarter ended July 31, 1996.

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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:    September 13, 1996           /s/ Edward Kelly                          
-----    ------------------           ------------------------------------------
                                 Edward Kelly, President and Principal
             Financial Officer
                                     (Duly Authorized Representative and Chief
                             Financial and Accounting Officer)

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 TASTY FRIES, INC.

 Form 10-QSB

 Index to Exhibits

S-B                                                                 
Exhibit Number                Description                       Page No.        
--------------                -----------                       --------        

27                     Financial Data Schedule            18      

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Dates Referenced Herein   and   Documents Incorporated by Reference

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