The Company is a development-stage company. The Company has not yet
begun the process of manufacturing its sole product, a vending machine which
will cook and dispense french fries (the "Machine"). The Company has completed
the design of the Machine and has tested the Machine both internally and on
various beta locations since December of 1995; however, it has yet to enter
into commercial production of the Machine.
In April and May of 1996 and June of 1997, the Company completed
private placements of its securities which provided the Company with funds to
continue its limited operations. To date, the Company's operations have been
limited to: (i) designing and testing the machine; (ii) initial marketing
efforts for the Company's machines; and (iii) initiating the pre-production
tooling and fabrication of the component parts required to manufacture the
machines.
In June 1997, the Company hired Christopher Plunkett to serve as
Executive Vice President. Terms of his employment contract have not been
finalized.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has had virtually no revenues
from operations and has relied almost exclusively on shareholder loans,
limited distribution deposits and private securities transactions to raise
working capital to fund operations. At July 31, 1997 the Company had
approximately $138,014 in cash.
On June 4, 1997, the Company completed a $1,000,000 convertible
note financing. The sale was completed pursuant to Regulation S under the
Securities Act of 1933. These notes are convertible into the Company's common
stock, bear interest at the rate of 7% per annum and have a maturity date of
May 14, 2000. The financing came from three European institutional investors
and the proceeds were used as follows: (i) to fund a portion of the
pre-production tooling process; (ii) to satisfy existing obligations; and
(iii) for working capital needs. The note holders also received 250,000
warrants to purchase common stock. The warrants are exercisable from July 15,
1997 until November 27, 1997 at a price of $1.21 per share. In addition, as a
commission on the transaction, the Company paid $60,000 and issued 100,000
shares of common stock. The Company also issued 82,644 additional common
stock purchase warrants as a portion of the placement agent's fees payable in
connection with the funding; these warrants are identical to the warrants
issued to the note holders, except that they are exercisable until June 3,
2002.
On June 10, 1997, the Company paid an additional $100,000 to Premier
Design, the Firm that funded the development of the machine.
The Company is currently attempting to secure additional funds to
allow it to complete its plan of operation. No assurances can be given that
the Company will be able to secure adequate financing from any source to
pursue its current plan of operation, to meet its obligations or to commence
commercial production or expand marketing over the next 12 months. If the
Company is unable to obtain needed funds, it could be forced to curtail or
cease its activities.
ITEM 3. FORWARD-LOOKING STATEMENTS
When used in this report and in future filings by the Company with
the Commission, in the Company's press releases or other public or
stockholder communications, and in oral statements made with the approval of
an authorized executive officer, the words or phrases "will likely result",
"are expected to", "will continue", "is anticipated", "estimate", "project"
or similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such statements are subject to certain risks and uncertainties, including the
Company's liquidity constraints, potential increases in manufacturing
costs and delays, pending litigation, availability of raw materials,
competition, demand for the Machine and other proprietary products, and
delays in the distribution process that could cause actual results to differ
materially from those presently anticipated or projected. The Company
wishes to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The
Company wishes to advise readers that actual results for future periods
to differ materially from any opinions or statements expressed with respect
to future periods in any current statements.
10
The Company does not undertake--and specifically declines any
obligation--to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect 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
PRIZE FRIES LITIGATION - SETTLED
On August 28, 1996, the Company 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 Tasty Fries, Inc.,
Premier Design, Ltd.; H&R Industries; and Edward C. Kelly as defendants. The
suit also named as defendants approximately 25 other parties, all allegedly
involved, in some manner, in the pursuit of the french fry vending machine
concept and/or business. The causes of action alleged against the Company
and Mr. Kelly include misappropriation of trade secrets, unfair competition,
conversion and conspiracy. The Second Amended Complaint seeks damages against
the Company and Mr. Kelly in an unspecified amount for compensatory and
punitive damages, according to proof at trial. The Company has filed a
Motion to Quash for lack of personal jurisdiction over Edward Kelly.
This action against the Company and Kelly was dismissed on June 2, 1997;
however the plaintiffs may appeal the ruling.
GARY ARTZ LITIGATION --SETTLED IN PART
On September 25, 1996, a lawsuit was instituted by Mr. Artz against the
Company 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. Artz as former Chairman of the Board of the
the Company, Mr. Artz was paid the balance of the funds due in connection with
the note in June 1997. A Satisfaction of Judgement was filed on June 17, 1997
on this matter. The Company remains in negotiations with Mr. Artz regarding
the final resolution of the matter of alleged expenses due Mr. Artz.
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
11
See Part II, Item 1. Above
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A Form 8-K was filed on June 3, 1997, relating to the sale of
securities pursuant to Regulation S.
12
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 19, 1997 /S/EDWARD C. KELLY
------------------
Edward C. Kelly, President
and Principal Financial
Officer
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