FORM 10-KSB

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

         [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended January 31, 1997.

         [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         For the transition period from ___________ to _______________

Commission File No. 33-4460-NY
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              TASTY FRIES, INC. (FORMERLY ADELAIDE HOLDINGS, 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)

Registrant's telephone number, including area code: (610) 941-2109
                                                    --------------

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None

         Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 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  [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB [X]

State issuer's revenues for its most recent fiscal year: None

         The aggregate market value of the common voting stock held by
non-affiliates as of May 1, 1997: Not Determinable.

         Shares outstanding of the registrant's common stock as of May 1, 1997:
4,763,909 shares.

         Transitional Small Business Disclosure Format:

                            Yes [ ]  No  [X]

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                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

         (A) GENERAL BUSINESS DEVELOPMENT

         Tasty Fries, Inc. (the "Registrant"), was incorporated under the laws
of the State of Nevada on October 18, 1985, under the name Y.O., Systems, Ltd.
The Registrant was organized to raise capital and then seek out, investigate and
acquire any suitable asset, property or other business potential. No specific
business or industry was originally contemplated. The Registrant was formed as a
"blank check" company for the purpose of seeking a business acquisition without
regard to any specific industry or business.

         In connection with its formation, the Registrant issued 150,000,000
shares of its restricted common stock to its founders in October, 1986. In
November 1987, the Registrant consummated a public securities offering
registered under Form S-18 wherein it sold 10,000,000 units at $.01 per unit.
Each unit consisted of one share of common stock and one redeemable common stock
purchase warrant to purchase one share of common stock for $.04 per share.

         On November 12, 1987, the Board of Directors of the Registrant declared
a five for one (5 for 1) forward split of the Registrant's common stock and
warrants to holders of record on November 27, 1987. The stock split resulted in
an increase in the number of issued and outstanding shares to 160,000,000 and
decreased the par value of each share to $.0002.

         During 1987 through 1989 a total of 7,268,600 common stock purchase
warrants were exercised at $.04 per share, resulting in the issuance of
7,268,600 shares of common stock for aggregate proceeds to the Registrant of
$290,744.

         The Registrant was unsuccessful in certain business proposals and began
actively looking for a business acquisition during 1990.

         Effective July 29, 1991, the Registrant issued 13,500,000 shares of
restricted common stock (after giving effect to a 1 for 50 reverse stock split)
to the stockholders of Adelaide Holdings, Inc., a private Delaware corporation
incorporated in April, 1990 (hereafter referred to as "AHI"). The 13,500,000
shares represented approximately 80% of the 16,845,370 shares of common stock of
the Registrant outstanding after the acquisition.

         As a part of the acquisition of AHI, the Registrant amended its
Articles of Incorporation to provide for a name change to Adelaide Holdings,
Inc. and a change in par value per share of common stock to $.01. The Registrant
effectuated a 1 for 50 reverse stock split which reduced its prior outstanding
shares of common stock to 3,345,372 effective as of July 31, 1991. The
Registrant also reduced its authorized shares of common stock to 100,000,000
shares and authorized 5,000,000 shares of $.001 par value preferred stock to be
issued at the discretion of the Board of Directors.

         The Registrant also amended its Articles of Incorporation to include a
provision that officers and directors of the Registrant are not liable for
damages as a result of a breach of

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fiduciary duty except in certain specified instances under Nevada law. In
September 1993, the Registrant amended its Articles of Incorporation changing
its name to Tasty Fries, Inc.

         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 and
the reverse stock split was effective on December 23, 1996.

         (B) BUSINESS OF THE REGISTRANT.

             GENERAL

         The Registrant has developed its own patented french fries vending
machine (the "Machine") and the related proprietary potato powder mix for the
production of french fries in the Machine (the "Potato Product") for marketing
on a worldwide basis. The Registrant had previously received a federally
registered trademark for its former name and logo,"Adelaide". The Registrant has
subsequently federally registered its name and logo, "Tasty Fries", as a federal
trademark on the Supplemental Register and has been marketing the Machine and
its Products under that name. The Registrant's early plans were to principally
market its Products through an exclusive distributorship network which then
current management believed would offer uniform and consistent Products to
consumers worldwide. In furtherance of this plan, the Registrant sold
distributorships for different markets throughout the United States and foreign
countries. In 1995, under current management, the Registrant redirected its
marketing focus by commencing to reacquire and negotiate the reacquisition of
certain distributorships and sell Machines and Products on a non-exclusive basis
to established well-financed vending companies. The Machines are expected to be
located in high traffic locations such as airports, bus and train stations,
universities, schools, military bases, theaters, work areas and recreational
venues.

         The Registrant completed the final stages of beta testing of its
Machines in the last quarter of the fiscal year ended January 31, 1996 and
completed certain modifications to and enhancements of the Machine based upon
such tests. Further, although the development of the Potato Product has been
completed, due to the cost of establishing a manufacturing line to produce it,
the Registrant anticipates entering into an exclusive license agreement for a
comparable potato product for use in the Machine. Management originally
anticipated that the beta site testing and development would be completed and
Machines would be delivered by the end of the 1994 calendar year and then
possibly by the end of the 1995 calendar year. This did not occur because (i)
the Registrant abandoned all engineering and design work on the original french
fry vending machine and commenced work on a completely new Machine, continuous
lack of working capital available to fund the testing of the Machine and its
commercial production, and (iii) the substantial time and funds necessary to
satisfy the arbitration award in favor of California Food & Vending, Inc.
("CFV"). See "LITIGATION" herein. Further, beta site testing did not commence
until early December 1995 which was longer than originally anticipated and
therefore delayed even further the commercial production of Machines.

HISTORY

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         In 1992, persons then associated with the Registrant filed a U.S.
patent application with respect to a device for the vending of fresh french
fried potatoes which was assigned to the Registrant on October 9, 1992.
Substantial testing and test-marketing of the device resulted in the device
failing to perform as anticipated and significant and numerous mechanical and
design imperfections were encountered. Then current management of the Registrant
decided to abandon the original device and retained the services of an expert
engineer through Premier Design Ltd. ("Premier"), Edward C. Kelly, to design and
develop a completely new machine with totally different technology. Premier is a
private Warminster, Pennsylvania company owned by Harry Schmidt, and Mr. Kelly.
At the time, neither Mr. Schmidt nor Mr. Kelly had any affiliation with the
Registrant. Production of such a device did not proceed as originally scheduled
due to the significant amount of time needed to design, engineer and test the
new Machine and the continual lack of working capital to adequately fund the
process.

DESIGN AND MANUFACTURING

         In January 1993, the Registrant entered into an agreement with Premier
(the "Premier Agreement") for the purpose of designing and manufacturing a
completely new french fries vending machine in a joint venture with the
Registrant. The President of Premier is Harry Schmidt who subsequently was
appointed to the Registrant's Board of Directors in May 1993 but did not stand
for re-election to the Board in September 1995. Edward C. Kelly, an owner of
Premier but not an officer or director of the Registrant at that time, was
subsequently appointed by the Registrant's Board of Directors as Executive Vice
President from January 1994 to June 1994, President and Treasurer in June 1994,
and has been a member of its Board of Directors since February 1994 and its
Chairman since June 1996.

         The Premier Agreement provided that the manufacturer, Premier, would
refine and manufacture the Machine which dispenses hot french fried potatoes;
however, due to the substantial design and engineering flaws in the original
licensed device, Premier, through Edward C. Kelly, in February 1993, recommended
that the Registrant abandon said device and undertake the design and engineering
of a totally new Machine. The Registrant and Premier then agreed to equally
share the first $150,000 of development costs, which such costs included design,
engineering and initial manufacturing costs projected over the initial 500
production machines or a lesser number as would be jointly determined by Premier
and the Registrant. Development costs, if any, in excess of $150,000 would be
advanced by Premier and reimbursed on the basis of $500 per Machine up to the
first 200 Machines produced or $100,000, whichever was less. The first 500
Machines were to be priced at a cost to the Registrant not to exceed $7,000 plus
$500 reimbursement for excess development costs, if any, with a goal of reducing
the cost of the Machine in the future as feasible. After the first 500 Machines,
the Premier Agreement required that the Registrant purchase the Machines from
Premier based on manufacturing cost plus 20%. The Premier Agreement could not be
terminated by either party so long as Premier provided the Machines as required
by the Registrant. Pursuant to the terms of the Premier Agreement, the first
initial production of Machines was to be delivered by June 15, 1993. This
schedule was based on delivery of the original Machine which was subsequently
abandoned.

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         On December 30, 1994, the Registrant and Premier amended the Premier
Agreement (the "Premier Amendment") to provide that Premier supply the
Registrant with ten pre-production Machines to be used at beta test sites for
testing by Premier at a total cost of $35,000 per Machine for an aggregate
purchase price of $350,000 to be paid by the Registrant. This amount was to be
offset by the $125,000 advanced by the Registrant in April 1994 which amount was
originally intended to be for development costs. In addition, Premier agreed to
field test the Machines and, upon the Registrant receiving satisfactory results,
agreed to manufacture the Machines exclusively for the Registrant. The Premier
Amendment further provides, among other things, that (i) the first 500 Machines
manufactured for distributors after the pre-production Machines, will be sold to
the Registrant for $7,000 each, after which the price per Machine will be
manufacturer's cost plus 20%, (ii) delivery of the Machines will take place
within 180 days after receipt of a purchase order from the Registrant, (iii) any
foreign or U.S. patents issued on the Machine or any aspects thereof shall be
jointly owned by the Registrant and Premier upon delivery to the Registrant of
an audited accounting of development costs from Premier and tender by the
Registrant to Premier of 25% of such costs, with an additional 25% payable to
Premier within 12 months thereof, (iv) Premier and the Registrant will seek
independent bids on the manufacturing costs of the Machine from independent
manufacturers, and if the parties agree to the terms (a lower manufacturing
cost), Premier will purchase Machines from such manufacturer at the lower cost
and be permitted to add its 20% mark-up to such price, and (v) the Registrant
cannot license any party to manufacture the Machine without written consent from
Premier.

         The Registrant, through Mr. Kelly as inventor, in good faith assigned
the patent rights for the Machine to Premier solely in consideration for and
reliance upon Premier's specific representations in the Premier Amendment, with
the express understanding that Premier would immediately assign to the
Registrant its one-half interest in the patent upon delivery to the Registrant
of the audited accounting of development costs to be provided by Premier and
payment by the Registrant thereof in accordance with the terms of the Premier
Amendment. Premier did not provide the Registrant with an audited accounting as
required by the Premier Amendment but with a spread sheet of costs. Further,
Premier did not conduct the beta testing of the pre-production Machines as
required by the Premier Amendment and the Registrant incurred the additional
costs of such testing. Because no audited accounting of development costs was
provided by Premier to the Registrant as required, the Registrant retained its
independent auditors to audit the spreadsheet of development costs received from
Premier. Based upon such audit, the Registrant estimated that its share of the
development costs was approximately $417,500 after adjustment for certain
charges which were applied to the development costs by Premier but were
unrelated to the development of the Machine and other duplicative billing, but
not including the beta testing costs. After payment of $350,000 between May and
July 1995 for the ten pre-production beta test Machines and other payments made,
the Registrant's independent auditors estimated that the Registrant paid
virtually all of its share of the development costs. Subsequently, after several
months of discussion with Premier, the Registrant and Premier verbally agreed
that the Registrant will pay an aggregate of $650,000 to Premier as its one-half
share of all development costs of which $100,000 was paid in July 1996. Premier
will also receive $250 per Machine manufactured by a third party. Management and
the Board of Directors agreed to these terms based upon the potentially
prohibitive costs to the Registrant resulting from protracted litigation
(monetary and otherwise), additional delays in the commercial production of the
Machine and the agreement of Premier to waive any rights

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it may have to manufacture the Machine. Upon payment of an additional $225,000
to Premier (representing payment of an aggregate of 50% of the Registrant's
total share of development costs as required by the Premier Amendment), Premier
will assign a one-half interest in the patent for the Machine to the Registrant
in accordance with the terms of the Premier Amendment.

         As commencement of commercial production is a Registrant priority and
Premier cannot manufacture the Machine pursuant to the terms of the Premier
Amendment, on June 17, 1996, the Registrant announced its intention to award the
manufacturing contract for the Machine to S&H Electronics of Robesonia,
Pennsylvania ("S&H"), an unaffiliated third party, and subsequently entered into
manufacturing agreement with S&H for such purpose. S&H is a contract
manufacturer which specializes in the assembly and testing of electro-mechanical
assemblies and equipment. The Registrant's central procurement station is
expected to be located within the manufacturing site with initial manufacturing
procedures to be supervised by Registrant personnel to insure strict compliance
with NAMA (as defined herein) and U.S. Food & Drug Administration (FDA)
regulations. The Registrant is currently in negotiations with a subsidiary of
Koors Industries, a multi-billion dollar Israeli conglomerate, to manufacture
Machines for the European, Middle Eastern and Asian markets. No final agreement
has been reached.

         Although the Premier Amendment provides for delivery of the
pre-production Machines within 180 days of a purchase order from the Registrant,
Premier agreed to use its best efforts to complete these pre-production Machines
on or before July 14, 1995 although no assurances were given. In connection
therewith, the Registrant and Premier entered into an Escrow Agreement through
which Premier was paid the balance of $175,000 for the ten pre-production
Machines (after deduction of the $50,000 down payment made on May 5, 1995), in
weekly increments of $17,500 over a ten week period commencing in May 1995 and
ending in July 1995, provided that Premier meet certain pre-production schedule
benchmarks during such time period. The pre-production Machines were not
completed by Premier within the intended time period and were not delivered to
the Registrant until mid-November 1995. As a result, beta testing did not begin
until early December 1995 which further delayed the opportunity for the
commercial production of the Machine.

THE MACHINE

         The Machine is designed to produce quality freshly made french fried
potatoes utilizing a unique method that automatically converts a specifically
formulated dehydrated Potato Product, with approximately an 18 to 24 month shelf
life, into rehydrated potato mix, delivers this mix into a proprietary forming
and cooking cycle, and finally into complete high-quality freshly made french
fried potatoes. The Potato Product can be stored at room temperature, requires
no refrigeration or freezing, and occupies less storage space than frozen fries,
thereby offering greater storage capacity. The french fried potatoes are
delivered to the consumer in a 10 ounce cup of 32 french fries. This is
accomplished from the dehydrated mix to a completed order of quality fresh
french fried potatoes in approximately 90 seconds. The utilization of a
state-of-the-art combination of computer driven mechanics makes this possible.
Also attached to the bottom of the vended cup are individually prepackaged
portions of ketchup and salt. The attachment device currently has a patent
pending before the U.S. Patent and Trademark office.

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         The design of the Machine permits the use of a vegetable oil so that it
delivers a cholesterol-free product. Each vend contains french fries which are
crisp and golden. The quality of the product is consistently uniform in each
vend. The Machine has the capacity to produce 500 vends before any refill is
required. The Machine is computer controlled and communicates with the consumer
from the time the money is deposited into it until the time the vended cup of
fresh french fried potatoes is delivered. The Machine can accept dollar bills,
coins or any combination thereof, depending on the vend charge, which can be
changed at anytime by simply reprogramming the dollar bill/coin component.

         The Machine requires a 220 volt electrical connection and is equipped
with up-to-date computer technology using microprocessors and sensors, thus
making it possible to continuously monitor all vending parts and report any
potential problems. The Machine can report to a central data base, if required,
to make this information available to the service company/refill operator. The
Machine monitors the amount of vends, and simultaneously provides cash reports.
Based upon the results of the beta testing and the operation of beta test
machines in the field, the Registrant has no maintenance and repair track
records to date, as the Machines have required no replacement parts. The
Machines have been designed to be repaired on-site without the necessity of
being returned to the manufacturer. It is anticipated that ongoing maintenance
will be limited, and labor will involve the resupply of the Machines once Potato
Product is required to be replenished. At such time oil will be replaced and
additional cups and condiments will be restocked. Water will also be changed at
such time unless the Machine is attached to a plumbing supply which is not
necessary for the Machine's operation. The frequency with which the Machine must
be restocked depends completely upon the number of vends dispensed daily and how
often the Machine's coin box is emptied. Normally, operators empty coin boxes
frequently to reduce the potential for theft. Management anticipates that coin
boxes will be emptied on average every three days for a moderately busy
location.

         Management currently expects that the commercial sales price for the
Machine will be approximately $9,000 per unit. Currently, the anticipated price
per vend is $1.25, although the actual price may vary greatly from location to
location based upon several factors, including supply and demand and local costs
for electricity, labor, transportation, etc.

MARKETING THROUGH DISTRIBUTORSHIPS

         The Registrant had, until late 1995, exclusively marketed the Machines
and the Products through exclusive territorial distributorships. Although it has
continued to market on a very limited basis through distributorships, current
management has shifted its marketing focus to ultimately place Machines in
locations not covered by exclusive distributorship agreements and reacquire
certain existing distributorships, although no assurances are given that this
marketing plan will be followed or not be revised in some manner. This shift
occurred when management realized that exclusive distributorships for
territories would not be ultimately practical or profitable. Management learned
that major vending companies do not want to be sub- distributors but want to
deal directly with the factory that manufactures the equipment. Additionally,
these same companies have the established infrastructure which enable them to
service the equipment that they purchase or lease. Such companies enter into
their own agreements to place vending units at different locations and require
the ability to use their discretion as to where to place machines. Furthermore,
the Registrant's own internal research

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indicated that the largest profit margins and the greatest long-term area of
profitability would be from the sale of Products. Accordingly, limiting to whom
Machines could be sold and ultimately limiting their number through the sale of
exclusive distributorships, could be financially detrimental to the Registrant's
long-term operations, revenues and potential cash flow.

         In contemplation of selling Machines on a non-exclusive basis, the
Registrant entered into a vendor agreement (the "Vendor Agreement") with Forrest
Financial Corp. (the "Leasing Company") to provide lease financing to operators
of the Machines who may wish to lease Machines rather than purchase. The Vendor
Agreement provides that up to approximately $15,000,000 will be available to
qualified lessees for this purpose. Management anticipates, but cannot assure,
that operators will ultimately be established, experienced vending companies
with significant financial resources and infrastructures that will enable them
to place and service their Machines in their sole discretion.

         The existing distributorship agreements vary from territory to
territory, but essentially require a non-refundable down payment and minimum
annual payments usually over a five to ten year period. Most distributors must
also pay $200 to $500 per Machine purchased as a credit toward the minimum
annual payments. Most distributorship agreements require a minimum number of
Machines to be purchased per year. The total price of the distributorship will
vary substantially based on the estimated market potential of the particular
territory which is usually based upon population and other relevant criteria.

         The Registrant has, to date, sold or granted an aggregate of 15
territorial distributorships, one of which has been reacquired by the Registrant
and some of which were terminated by the Registrant for breach of the terms of
the respective distributorship agreement. There are currently 10
distributorships which have not been terminated or reacquired. The distributor's
obligations to make further payments, after tendering the initial deposit
required upon execution of the distributorship agreement, are conditioned on the
Registrant's ability to ship its Machines and related Products.

         The currently existing territories are listed as follows:

                                              MINIMUM
                                              DEPOSIT              YEARLY
          TERRITORY            TOTAL PRICE    RECEIVED           PURCHASE(e)
          ---------            -----------    --------           -----------

1.(a)    DE, D.C.,             $  750,000     $ 50,000           100 machines
         MD & VA

2.       Texas                 $  750,000     $ 25,000           200 machines

3.(b)    Israel                $  200,000     $ 40,000           100 machines

4.       Pennsylvania          $  750,000     $  -0-             200 machines

5.       AR, AZ, CO            $1,500,000     $ 65,000           300 machines
         KS, LA, MI,
         MN, MS, MO,
         MT, NE, NV,
         NM, ND, OK,
         OR, UT, WA,
         WI & WY

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6.       Austria,               $1,550,000    $ 60,000           500 machines
         Germany,
         Switzerland,
         Luxembourg,
         Belgium,
         Holland &
         Lichenstein

7.(c)    Bulgaria,              $4,000,000    $175,000           400 machines
         Czechoslovakia,                                         (year one)
         (former),Denmark,
         Finland, France,                                        800 machines
         Greece, Italy,                                          (years 2-9)
         Norway, Poland,
         Portugal, Romania,                                      850 machines
         Spain, Sweden,                                          (year 10)
         Turkey

8.(c)    AL, AK, GA, IL, IN     $1,000,000    $175,000           100 Machines
         KY, MS, NC, OH, SC,                                     (year one)
         TN, WV

9.       Dade, Broward,         $  250,000    $1,000 down        150 machines
         Monroe & Palm                        & $4,000 upon
         Beach County,                        delivery of
         Florida                              first machine

10.      Brazil                 $  250,000    $100,000           250 machines

11.(d)   California                    -            -                  -

---------
(a)      Assigned to a group which includes Harry Schmidt, a former director of
         the Registrant and President of Premier.

(b)      Deposit forfeited in August 1994 for non-performance and a new
         distributor paid an aggregate deposit of $40,000 for this territory.

(c)      Granted to International Tasty Fries, Inc., a publicly traded Nevada
         corporation.

(d)      Granted to CFV by agreement and confirmed by the award of the
         arbitrator and subsequent Court Order. See "LITIGATION" herein

(e)      No Machines have been purchased as of the date hereof.

         The exclusive territorial distributorship agreements generally have a
term of five to ten years, require the distributor to purchase all supplies for
the Machines directly from the Registrant, and set forth uniform standards of
operation. The agreements are transferable under certain conditions as uniformly
established in the respective agreements and require the prior approval of the
Registrant for sub-licensing and for sub-distributors. The majority of the
agreements can be terminated by 30 day written notice from the Registrant in the
event of default. In September 1993, December 1993, August 1994 and April 1995
the Registrant terminated distribution rights for Georgia, New Jersey, Israel
and the United Kingdom, respectively, due to a failure to fulfill certain
contractual obligations pursuant to the terms of the distributorship agreements
and the respective deposits were forfeited. In September 1995 the Registrant
repurchased the Canadian distributorship from Adelaide Vending (Canada) Ltd.

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for the original purchase price plus costs aggregating $100,000 (USD) for
1,000,000 pre-split shares of common stock at its then current market value of
$.10 per share and an option to acquire 50,000 post-split shares of common stock
for two years at $5.00 (USD) per share, all pursuant to Regulation S.

         Pursuant to the award of the arbitrator on October 25, 1994 and
subsequent Court Order, CFV was granted distribution rights to California. There
is no formal written distribution agreement between the Registrant and CFV. All
terms and conditions related thereto would require negotiation between the
parties which has not occurred to date. CFV has previously expressed an interest
in returning the distributorship to the Registrant for a to-be-agreed upon price
but no further discussions have taken place. No assurances are given that the
Registrant will determine to reacquire this territory from CFV in the future.

COMPETITION

         The Registrant faces competition from other suppliers of french fries,
including fast food outlets. The Registrant is aware of other companies which
have test marketed french fry vending machines or are in the process of
developing such machines. Certain of the companies which are viewed as
competitors or which may become competitors in the future, have more capital and
greater resources than the Registrant. Currently, the Registrant is aware of
only one viable competitor which is Ore-Ida, a major manufacturer and
distributor of frozen potato products. The Ore-Ida vending machine is not
comparable to the Registrant's Machine for many reasons, including that it only
hot air cooks frozen french fries which must be kept frozen in the unit thereby
requiring refrigeration. This contrasts with the Registrant's Machine which
cooks only freshly made french fries and requires no refrigeration, thereby
eliminating spoilage and potential loss from a power shortage.

AVAILABILITY OF RAW MATERIALS AND PRINCIPAL SUPPLIERS

         The Machine was initially intended to be manufactured by Premier
pursuant to the Premier Agreement and the Amendment; however, Premier is not
able to manufacture the Machine at a competitive price or even the first 500
Machines at $7,000 as required by the Amendment. See "DESIGN AND MANUFACTURING"
herein. Certain individual components of the Machine are in the process of being
tooled from custom made molds owned by the Registrant and produced by
independent manufacturers or suppliers together with other parts including those
which are custom designed. The tooling process has been delayed due to the lack
of capital available to complete the process. Management believes there are
several alternative sources of supplies and manufacturers for such items and
that the loss of any one supplier would have no material adverse effect upon the
Registrant, although no assurance can be given. If substantial demand for the
Machines develops then management believes, although no assurance is given, that
it has or can readily locate and secure sources for subcontract manufacturing.

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         Management believes that the Registrant's consumable Products used in
the dispensing of french fries are widely available from numerous suppliers. The
Registrant has located and secured one alternative source for the potatoes which
are compatible for use in the Machine from a major supplier and is aware of at
least one other supplier of potatoes that can be used in the Machine. Until the
Registrant determines to establish a manufacturing line to produce its Potato
Product, as to which no assurance is given, it expects to enter into an
exclusive license agreement to purchase potatoes from one of these suppliers on
terms which are expected to be favorable to the Registrant.

PATENTS AND PROPRIETARY RIGHTS

         The Machines inventor, Edward C. Kelly, President and Chief Executive
Officer of the Registrant, was issued a patent by the U.S. Patent and Trademark
office in July 1996. That patent is assigned to Premier as required by the
Amendment in consideration for and with the express requirement, agreement and
understanding that upon payment by the Registrant of its proportionate share of
the Machine's audited development costs as required by the Amendment, the patent
will be jointly owned by the Registrant and Premier. See "DESIGN AND
MANUFACTURING" herein. The Registrant currently has applied for a patent for the
attachment to the bottom of the vend cup with the United States Patent and
Trademark Office. In addition, the Registrant is seeking but has not yet
received patent protection in Japan, Israel and in those countries which are
parties to the Patent Cooperation Treaty (PCT), specifically as follows:

Albania          Georgia               Republic of Moldavia   Slovakia
Armenia          Germany               Macedonia              Spain
Austria          Hungary               Madagascar             Sudan
Australia        Iceland               Mongolia               Sweden
Barbados         Kenya                 Malawi                 Tajikistan
Bulgaria         Democratic Peoples'   Mexico                 Turkmenistan
Brazil           Republic of Korea     Norway                 Trinidad & Tobago
Belarus          Kjagyzstan            New Zealand            Uganda
Canada           Kazakhstan            Poland                 Ukraine
China            Latvia                Portugal               United Kingdom
Czech Republic   Liberia               Romania                Uzbekistan
Denmark          Lichtenstein          Russian Federation     Vietnam
Estonia          Lithuania             Singapore
Finland          Luxembourg            Slovenia

The Registrant also has obtained a federally registered trademark on the
Supplemental Register for its name and logo, "Tasty Fries."

         Management intends to seek patent, trademark and related legal
protection in the future where it deems the same to be beneficial. No assurances
can be given that the Registrant will ultimately receive a patent on the vend
cup attachment in the United States or elsewhere. In

                                       11

<PAGE>

addition, such legal protections and precautions do not prevent third party
development of competitive products or technologies. There can be no assurance;
however, that the legal precautions and other measures taken by the Registrant
will be adequate to prevent misappropriation of the Registrant's proprietary
technology. Notwithstanding the foregoing, the Registrant does not intend to be
solely dependent upon patent protection for any competitive advantage. The
Registrant expects to rely on its technological expertise and early entry into
the marketplace with respect to its Products.

GOVERNMENTAL APPROVALS AND REGULATIONS

         The Machine was designed and developed in consideration of applicable
governmental and industry rules and regulations. Management believes that the
Machine complies with National Food Sanitation guidelines as well as
Underwriter's Laboratory ("U.L.") procedures. The Machine must receive U.L. and
National Food Standards (N.F.S.) approvals prior to sale and installation. The
Registrant has requested that the Machine be inspected and expects to have the
Machine inspected by various regulatory agencies during the production process
but prior to sale and installation. In this regard, management has forwarded to
U.L. a listing of all individually numbered parts used in the Machine. The
Registrant is also seeking certification from the National Automatic
Merchandising Association (NAMA). NAMA has previously informally inspected the
Machine, the result of which was the subsequent installation of a sanitation
cycle. Management has been advised that all certifications and approvals should
be applied for upon commercial production and would not issue until such time.
Management believes, although no assurance is given, that the required approvals
from U.L., NAMA and the various regulatory agencies are obtainable and is not
currently aware of anything that will delay the necessary approvals.

         Management is not aware of and does not believe that there are any
specifically applicable compliance requirements under state or federal
environmental or related laws relating to the manufacture and operation of the
Machine.

ITEM 2. PROPERTIES.

         The Registrant owns no significant properties. Since June 1994 it has
leased executive office space at the premises located at 650 Sentry Parkway,
Suite One, Blue Bell, Pennsylvania 19422. The lease, renewed for an additional
24 months commencing in June 1995, is for 1,020 square feet at a monthly rental
of $1,650 plus additional base rent of $175. The Registrant will exercise its
option to extend the lease for an additional two year term at approximately
$1,730 per month. At the present time, management believes that this office
space is sufficient but may require additional space if additional
administrative personnel are hired during the next 12 months.

         In April 1996, the Registrant leased approximately 468 square feet of
working space and 400 square feet of storage space located at 320 Elm Avenue,
North Wales, Pennsylvania at $600

                                       12

<PAGE>

per month on a month to month basis for technical support purposes and storage
of Machines. The lease may be terminated any time after January 1, 1997 on 60
days prior notice by the lessor and 30 days prior notice by the Registrant.

ITEM 3. 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 issuance by the Registrant to CFV of
an option to purchase 2,000,000 pre-split 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 on October
25, 1994 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
pre-split 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 previously
issued 1,000,000 pre-split shares are included for registration in the
Registrant's registration statement 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

                                       13

<PAGE>

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 which was paid in May 1996.
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,
President of the Registrant at the time, 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 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
pre-split 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 filed a Partial Satisfaction of Judgment in June 1996 with

                                       14

<PAGE>

the appropriate tribunals. The Registrant expensed $7,000 and $1,098,062 in
fiscal year 1995 and 1996, respectively, in connection with this litigation.

         In February 1997, CFV sought and obtained a Temporary Protective Order
in connection with the failure of the Registrant to pay CFV $20,000 of a
distributorship fee which was extinguished when the $20,000 was paid in February
1997. Also in February 1997, CFV filed certain motions with the Court seeking a
Temporary and Permanent Receiver to ensure that monies owed to CFV in the future
would be paid to CFV due to the failure of the Registrant to pay to CFV the
$20,000 share of the distribution downpayment. In addition, CFV filed motions
seeking sanctions against the Registrant for failure to provide complete
discovery responses to interrogatories, motions to compel further production of
documents and for sanctions in connection therewith, and a Motion to Show Cause
why the Registrant should not be held in contempt for failure to comply with the
judgement of the Court due to the Registrant's failure to pay CFV the $20,000 of
the distributorship downpayment received. The Court denied CFV's Motion to
Appoint a Temporary Receiver and scheduled a hearing on the other Motions for
March 24, 1997 and March 31, 1997. These hearings were continued until April 21,
1997 during which time the Registrant filed affidavits of Edward Kelly,
President of the Registrant, and William Bartfield, President of Prize Frize,
Inc., in support of the Registrant's opposition to CFV's Motions. CFV filed
affidavits of its counsel, Ronald Palmieri, Esq. and Gary Arzt, former President
and Chairman of the Board of the Registrant. Based upon the statements made in
these affidavits, the Court continued the hearing on the Motion to Show Cause
and the Motion for Sanctions until June 9, 1997. The Court has taken CFV's
Motion to Appoint a Permanent Receiver under submission and will determine which
documents it will compel the Registrant to produce by Order, in response to
CFV's Motion to Compel Further Production of Documents.

         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 pre-split 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 on October 25, 1994. The Registrant paid the award in
May 1996 and issued to him 1,000,000 pre-split restricted shares of common stock
in June 1996. Such shares are being registered in the Registrant's registration
statement filed with the Commission. 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 issued an
Order to Show Cause Why the Registrant Should Not Be Held in Contempt for its
alleged failure to abide by the judgment. This matter was settled by the parties
on March 4, 1997. Pursuant thereto, the Registrant has (i) issued 43,750
post-split shares of common stock being registered on the Registrant's
registration statement filed with the Commission, certain of which shares are
subject to a lock-up agreement, and (ii) paid $60,000 of $70,000, the balance of
which is due in May 1997.

                                       15

<PAGE>

         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.

         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. Pursuant to the settlement agreement, the Registrant is
registering the plaintiff's shares of common stock in the Registrant's
registration statement filed with the Commission.

         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 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. A Fourth Amended Complaint was
filed by the plaintiffs against each of the named defendants alleging the same
causes of action against the Registrant and Mr. Kelly. The plaintiffs have
granted the Registrant and Mr. Kelly an extension of time to respond to the
Fourth Amended Complaint. The lawsuit was removed to the United States District
Court for the Central District of California in March 1997 due to the

                                       16

<PAGE>

patent infringement claims. On April 24, 1997 the Court entered an order
granting a Motion to Dismiss the action as to all 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. A judgment was entered by the Court in favor of Mr. Arzt in the
amount of $59,000 in April 1997 and the parties are negotiating the payment of
this judgement.

         See "MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION - PLAN OF OPERATION" for information
regarding the Registrant's lawsuit against the Trustee of Acumen, which
information regarding this lawsuit is hereby incorporated by reference.

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

         No matter was submitted to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this Report.

                                       17

<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
        STOCKHOLDERS MATTERS.

         The common stock of the Registrant is quoted on the OTC Bulletin Board,
under the symbol "FRYA". The following table sets forth the highest and lowest
bid prices for the common stock for each calendar quarter during the last two
years and subsequent interim periods as reported by the National Quotation
Bureau.

         The prices set forth below represent interdealer quotations, without
retail markup, markdown or commission and may not be reflective of actual
transactions.

         FISCAL 1995                             HIGH BID          LOW BID
         -----------                             --------          -------

         First Quarter                            $.44              $.14
         Second Quarter                            .21               .10
         Third Quarter                             .21               .10
         Fourth Quarter                            .17               .05

         FISCAL 1996
         -----------

         First Quarter                             .52               .04
         Second Quarter                            .41               .10
         Third Quarter                             .27               .17
         November 1 - December 22                  .19               .11
         December 23 - January 31(1)              2.88              1.75

         FISCAL 1997
         -----------

         February 1 through April 30(1)           2.44              1.13
         May 1 through May 12(1)                  1.44              1.19

----------

(1) High and low bid prices from December 23, 1996 through May 12, 1997
give effect to the 1 for 20 reverse stock split effective on December 23, 1996.

         (B) HOLDERS.

         The approximate number of record holders of the Registrant's common
stock as of May 1, 1997 is 1,081.

                                       18

<PAGE>

         (C) DIVIDENDS.

         The Registrant has not paid any cash dividends to date and does not
anticipate or contemplate paying dividends in the foreseeable future. It is the
present intention of management to utilize all available funds for the
development of the Registrant's business.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATION.

         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. Engineering and design of the totally new Machine took approximately 24
months. 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 CFV
by federal court order granting CFV's motion to assign benefits granted on March
16, 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. 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. 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 a lack of working capital to complete the tooling of
certain component parts of the Machine for commercial production, this schedule
has been delayed until mid to late 1997. Although the Registrant is currently in
negotiations with three funding sources, each of which individually is capable
of providing the necessary funding to complete tooling and commence the
commercial production process, no assurances can be given that the Registrant
will finalize satisfactory agreements with one or more of such funding sources
and secure the additional $350,000 necessary to complete the tooling process to
meet such timetable.

         Since its inception, the Registrant has had no revenues from operations
and has relied almost exclusively on stockholder loans, limited distribution
deposits and private securities

                                       19

<PAGE>

transactions to raise working capital to fund operations. At January 31, 1997
the Registrant had approximately $1,519 in cash. Until the 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, the Registrant continues to seek additional funding, primarily for
tooling expenses of approximately $700,000 and commercial production, and is in
discussion with three unrelated funding sources as discussed herein . 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 connection with the development of the Machine, the Registrant paid
$75,000 toward the first $150,000 of development costs as provided in 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
toward the $650,000 owing to Premier for its one-half share of the Machine's
development costs. The remaining balance of $550,000 is still due and owed to
Premier. Management anticipates utilizing proceeds from the consummation of a
transaction with one or more of the three potential funding sources to pay
Premier the $225,000 representing the amount currently necessary for one-half of
the U.S. Patent on the Machine to be assigned to the Registrant pursuant to the
terms of the Premier Amendment.

         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 commenced the tooling of certain component parts of the Machine in
mid-summer 1996 to 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 Premier Amendment. As previously discussed, the
tooling process has been delayed due to the unavailability of working capital to
complete same in the amount of approximately $700,000. If the necessary funding
is received, as to which no assurances are given, then once tooling is completed
and the Registrant is able

                                       20

<PAGE>

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 be required 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.

         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, assuming that such
distributors will be able to comply with the terms of their distribution
agreements. This number of Machines is subject to the Registrant receiving the
required upfront fees pursuant to their respective distribution agreements, as
to which no assurances are given. (See the discussion of leasing below.)
Further, although management previously anticipated that commercial production
would commence in September or October 1996, it now anticipates that this will
occur in mid to late 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 unless it is able to sell to other
operators who are not current distributors and/or through the Leasing Company.

         In connection with the Registrant's decision to refocus its marketing
efforts and to secure a financing source that had the financial ability to
purchase and lease Machines, in September 1996, the Registrant entered into a
vendor agreement (the "Vendor Agreement") with the Leasing Company whereby the
Leasing Company will 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
Registrant to qualified lessees for such purpose. The Leasing Company has since
qualified approximately 1,400 vending companies which it believes have the
financial capability and internal structure and experience to lease Machines
from the Leasing Company and place them in geographically desirable locations.
Once commercial production commences, the Leasing Company intends to contact
each of these companies with the goal of entering into lease agreements for
Machines. The Leasing Company will then purchase Machines directly from the
Registrant at the anticipated sales price of approximately $9,000 and lease them
for a period of three years. During this lease period, lessees will purchase
Potato Product and related Products directly from the Registrant. After the
three year lease term, the Leasing Company expects to take possession of the
leased Machine and return it to the Registrant's manufacturer for refurbishment
and modifications, if necessary, and the Registrant will be paid therefore.
Thereafter, the Machine will be leased once again by the Leasing Company with
the lease payment to be divided equally between the Registrant and the Leasing
Company for the full term of the lease for each Machine so refurbished and
leased. Management believes that the availability of financing to qualified

                                       21

<PAGE>

lessees to lease the Machine may attract more vending machine companies and
operators. To the extent that Machines are leased and funded in this manner, the
Registrant expects that it will no longer be required to provide initial cash
funding for production but rather will receive funding directly from the Leasing
Company, as well revenue after year three from the refurbishment of the
Machines, in addition to a continuing revenue stream for each Machine leased
thereafter. This should, although no assurances are given, enable the Registrant
to attain greater profit margins, and a potential cash flow source without
incurring the attendant cost of capital.

         In addition, the Potato Product for use in the Machine was developed in
1995. Management estimates that the cost to establish a manufacturing line to
produce the Potato Product is approximately $500,000. Due to the significant
cost involved and the current availability of certain other potato products
which are comparable with the Registrant's Potato Product and can be used in the
Machine, the Registrant does not currently intend to establish a manufacturing
line at this time, Rather, management anticipates that it will enter into an
exclusive license agreement for an alternative potato product in the near future
on terms expected to be favorable to the Registrant.

         In accordance with the terms of the Registrant's current distribution
agreements, deposits and other down payments are non-refundable, and the
Registrant has retained such fees upon termination of distribution rights in the
past. Management believes that once commercial production of Machines is
commenced and distributors notified and required to place orders for Machines,
most of such distributors will be financially unable to do so. Notwithstanding
the foregoing, as previously discussed, management shifted its marketing focus
and has discontinued its practice of selling exclusive distributorships for
territories based upon the belief that sales to experienced, well-financed
vending companies on a non-exclusive basis would be more effective and
ultimately more profitable than the existing distribution network was expected
to be. No assurances can be given that management will successfully negotiate,
market and develop this new market but management will continue to seek the most
efficient and profitable ways to market and distribute the Machines and the
Products.

         As previously discussed, the Registrant has suffered from a continuous
lack of working capital to fund the necessary tooling and related pre-production
needs to commence commercial production of Machines. Management is currently in
negotiations with three separate funding sources to provide the capital it
requires to fully fund tooling and bring the Machine to market. Once funding is
in place, management anticipates placing purchase orders with approved suppliers
for 1,000 Machines. The Registrant expects to then release an order for 50
Machines and have these Machines placed at locations in the Greater Philadelphia
metropolitan area.

         Management believes that this plan can be successfully implemented and
should enable the Registrant to generate sufficient cash to support its
operations from the date that the first 50 Machines are placed for operation.
The balance of 950 Machines will thereafter be assembled as soon as the initial
50 Machines are fully field tested and all modifications to the
electro/mechanical assemblies are documented and approved. Upon final submission
of all

                                       22

<PAGE>

tooling and drawings, the Registrant will have approximately eight to ten weeks
in which to secure purchased items, set manufacturing and commence sub-assembly
production. Management bases its belief that the plan can be successfully
implemented upon the expected revenue to be received from the operation of these
first 50 Machines. Specifically, management currently estimates that each of
such 50 Machines strategically placed in high traffic areas such as railroad
stations, schools and universities, and airports, will average approximately 40
vends per day six days per week which represents approximately a $2,600 net
profit to the Registrant per Machine annually. Based upon the number of pounds
of Potato Product and related Products which will be used for this number of
vends, their respective cost to the Registrant and price to be paid by
distributors, (if any), and Machine operators, the Registrant should receive
sufficient cash flow to support the modest expansion of operations over the next
12 months. Although management cannot assure the ultimate success of its plan,
it is reasonably confident that it will enable the Registrant to continue its
business and grow modestly.

         If the Registrant is unable to obtain the desired funding from any of
the three sources previously discussed, it is highly unlikely that it will be
able to generate a sufficient amount of cash to support its operations during
the 12 months following the date hereof, unless it is able to obtain the
necessary funds from the sale of debt and/or equity during such period. Based
upon its past history, management believes that it may be able to obtain funding
in such manner but is unable to predict with any certainty the amount and terms
thereof.

         Pursuant to the Registrant's settlement agreement with CFV, CFV is to
receive certain royalty and other payments from the Registrant in the future
only upon the occurrence of certain events. Specifically, CFV will receive (i)
$350 for each Machine sold for the first 500 Machines and thereafter an amount
equal to 35% of the difference between the price paid to the manufacturer and/or
the wholesale price to the domestic or international purchaser, of a minimum of
$350 up to a maximum of $500 per Machine, (ii) $.25 per pound of all Potato
Product sold, commercially used or distributed, and (iii) an aggregate of
$2,000,000 payable from domestic and international gross distribution fees and
utilization fees received by the Registrant payable to CFV by receipt by CFV of
50% of all such fees received by the Registrant until paid in full. Thereafter,
CFV will receive 25% of all distributorship fees received by the Registrant
after the $2,000,000 is paid to CFV as previously described. The Registrant has
taken into account all royalty payments to be made to CFV and others and has
priced the Machine and Potato Product accordingly. Management therefore believes
that the royalty payments to CFV, when due, will not have any material effect on
its business.

         The drain on the limited capital available to the Registrant has
adversely effected the Registrant. Since February 1995, the Registrant has been
required to pay CFV in excess of $700,000 pursuant to the Court Order. In
addition, there have also been increases in certain line item expenses as the
Registrant has prepared for beta testing and commercial production. From fiscal
1996 to 1997, travel and entertainment expense decreased approximately 45% from
approximately $101,360 in 1996 to approximately $55,000 in 1997 primarily due to
a significant reduction in business related travel. Consulting expenses
decreased approximately 74% from approximately $252,000 in fiscal 1996 to
approximately $66,000 in fiscal 1997. The decrease

                                       23

<PAGE>

in consulting fees was primarily due to the Registrant's decreased dependence on
consultants to provide marketing and business expertise. Payroll and payroll tax
increased approximately 24% from approximately $260,000 in fiscal 1996 to
approximately $342,000 in fiscal 1997. The increased payroll and payroll tax
expenses resulted primarily from the hiring of Leonard Klarich as Vice President
in June 1996. Management believes, although it cannot be assured, that it has
made significant inroads in stabilizing its operating and overhead costs and
should be able to move forward with its business plan as discussed herein. 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, operators and the technicians who will ultimately service the
Machine. Several technicians representing distributors have already attended the
Registrant's training program.

         As of May 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 fiscal year ended
January 31, 1997. 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.

         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 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 pre-split shares to the Registrant
which were canceled and returned to treasury. The

                                       24

<PAGE>

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.

         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 pre-split 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 pre-split shares were held
in escrow until October 1995 when the Registrant agreed to the transfer of
3,900,000 pre-split 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 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 pre-split 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 pre-split 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 pre-split shares of the 3,000,000 pre-split 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 pre-split 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 pre-split shares plus interest and attorneys' fees. On September 4,
1996, the Registrant obtained a Default against the Trustee. 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. Pursuant to an Agreed
Order dated March 5, 1997, the Registrant filed an Amended Complaint on March
28, 1997. Defendant filed a Motion to Dismiss the Amended Complaint on April 25,
1997.

         On April 30, 1996 the Registrant entered into the Stock Purchase
Agreement with an accredited investor to purchase an aggregate of 25,000,000
pre-split shares of restricted common

                                       25

<PAGE>

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
pre-split 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 250,000 post-split shares and will receive
Warrants to purchase 119,143 post-split shares. 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
pre-split shares issued to the investor were later transferred by such investor
to the individuals who provided such funds on a pro-rata basis. 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. The purchaser and transferees of
these shares of common stock, who have also received warrants to purchase an
aggregate of 425,010 post-split shares of common stock on a pro-rata basis until
May 31, 1999 at $1.90 per share, are listed as selling securityholders and the
shares and shares underlying the warrants, among others, are being registered
for sale in the Registrant's registration statement filed with the Commission.

         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 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 23, 1996, the effective date of the reverse split. To date, these
shares have not been purchased. 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 post-split shares of the Registrant's common stock to
be outstanding. All shares received will be restricted and will be registered in
the Registration Statement of which this Prospectus is a part, together with the
shares underlying the warrants described below, to be filed with the Commission
within 60 days from the date of payment for all 25,000,000 pre-split 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 the Registration Statement.
The investor and Mr. Kelly shall also receive warrants to purchase the lesser of
(i) 5,000,000 pre-split shares of restricted common stock or (ii) such amount of
post-split 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 which is $1.90 per share. It was further agreed that the
shares underlying the warrants would also be registered. These warrants are

                                       26

<PAGE>

being issued to the investors on a pro-rata basis based upon the aggregate
amount of their respective purchase.

ITEM 7. FINANCIAL STATEMENTS.

         Audited consolidated balance sheets as of January 31, 1997 and 1996,
and related statement of operations, stockholders' equity (deficiency) and cash
flows for the years then ended and for the period from October 18, 1985
(inception) to January 31, 1997 are included after Item 12. herein.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE.

         Management is not aware, and has not been advised by any former
accountants, of any disagreement on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
Management has not consulted the accountants regarding either the application of
accounting principles to any specified transaction or any disagreement with any
former accountants.

                                       27
<PAGE>


                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
         PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

         (A) IDENTIFICATION OF DIRECTORS.

         The current directors of the Registrant will serve until the next
annual (or special in lieu of annual) meeting of shareholders at which directors
are elected and qualified. Names, age, period served and positions held with the
Registrant are as follows:

                                                      POSITIONS
               NAME                  AGE            WITH REGISTRANT
         ---------------             ---            ---------------

         Edward C. Kelly             61             President, Chief
                                                    Executive  Officer,
                                                    Treasurer and
                                                    Chairman of the
                                                    Board*

         Leonard J. Klarich          61             Executive Vice
                                                    President,
                                                    Secretary and
                                                    Director**

         Jurgen A. Wolf              62             Director**

         Ian D. Lambert              51             Director

         Kurt R. Ziemer              41             Director
----------
*        Mr. Gary J. Arzt was removed as Chairman of the Board of Directors on
         June 1, 1996 by consent of two- thirds of the shares entitled to vote
         in accordance with Nevada law and was removed as Secretary by the Board
         of Directors on June 3, 1996. Mr. Kelly was appointed Chairman of the
         Board by the Board of Directors on June 3, 1996. Mr. Kelly also serves
         on the Executive Committee of the Board of Directors.

**       Member of the Executive Committee of the Board of Directors. Mr.
         Klarich was also appointed Secretary by the Board of Directors on June
         3, 1996.

                                       28


<PAGE>


         EDWARD C. KELLY, Blue Bell, Pennsylvania. Mr. Kelly has been President
of the Registrant since June 10, 1994, and a director since April 1994. He was
appointed a member of the Executive Committee on September 18, 1995, and
Chairman of the Board of Directors after the removal of Mr. Arzt in June 1996.
From January 1994 until June 10, 1994 he was Executive Vice President of the
Registrant. Mr. Kelly was President and a Director of Mega Manufacturing Co.,
Inc., a private manufacturing company from 1980 to 1994. Mega Manufacturing
filed for bankruptcy under Chapter 7 of the U.S. Bankruptcy Code on November 19,
1993. Mr. Kelly has been involved in the engineering and design of the Machine
and is part owner of Premier Design, Ltd. Mr. Kelly received a degree in
Mechanical Engineering from Penn State University and is a member of the
American Association of Professional Engineers and the American Federation of
Engineers.

         LEONARD J. KLARICH, Knoxville, Tennessee. Since September 1995, Mr.
Klarich has been a director of the Registrant and also was a consultant to
management from March through May 1996. Mr. Klarich was retained as Executive
Vice President of the Registrant in June 1996 to assist in the day to day
operations of the Registrant, with specific emphasis on distribution networks,
distributors and marketing. He was also appointed Secretary in June 1996. Mr.
Klarich was Chairman of the Board of K & D, a high-tech graphic design company
located in Woodland Hills, California until early 1996. From 1976 to 1989 he
owned and operated Avecor, Inc., a color for plastics manufacturing company with
yearly sales in 1976 of $3,000,000. He sold Avecor in 1989 when its sales
exceeded $40,000,000. Prior thereto, he spent a number of years as a chief
operating officer of companies in need of turnaround due to financial concerns.
He received a Bachelor of Arts from Hofstra University in 1967 and a Masters
Degree in Marketing Research from the City College of New York.

         JURGEN A. WOLF, Vancouver, British Columbia, Canada. Mr. Wolf has been
a director of the Registrant and a member of the Executive Committee of the
Board of Directors since September 18, 1995. Since 1983, he has been President
of J.A. Wolf Projects Ltd., a private Vancouver company engaged in commercial
and industrial contracting. He was a director of Yukon Spirit Mines and is a
director and the controlling stockholder of Adelaide Vending (Canada) Ltd., both
of which are and were distributors, respectively, of the Registrant's Machine.
He also was a co-distributor of the Machine in the United Kingdom but those
rights were terminated in April 1995 for non-payment of part of the distribution
deposit by his co- distributor. Mr. Wolf also serves on the Board of Directors
as a director of five (5) Canadian public companies, which include OJ Oil and
Gas Corporation, Gulfside Industries, Ltd., Shoreham Resources, Ltd., Zeus Oil
and Gas Corporation and Key Capital Group, Inc.

         IAN D. LAMBERT, North Vancouver, British Columbia, Canada. Mr. Lambert
was appointed as a director of the Registrant in July 1995 and was re-elected to
the Board in September 1995. He is the President of International Tasty Fries,
Inc., a major stockholder in the Registrant whose shares are being registered
hereby, and, until November 1996, was President of Yukon Spirit Mines Ltd., both
of which are affiliates of the other and each of which have distributorship
agreements with the Registrant for territories in North America and Europe. Mr.
Lambert has been involved with the financing and management of numerous resource
and

                                       29


<PAGE>


industrial based public companies, both in Canada and the U.S., since the early
1980's, and currently is on the Board of Directors of six (6) publicly-traded
companies of which only the Registrant is a reporting company. Prior to that
time, he was an Information Systems executive with MacMillan Bloedel Ltd. and
also the Manager, Systems Consulting for the Vancouver office of Deloitte
Haskins & Sells. Mr. Lambert received a Bachelor of Commerce and Quantitative
Analysis from the University of Saskatchewan in Canada in 1970.

         KURT R. ZIEMER, New Holland, Pennsylvania. Mr. Ziemer was appointed to
the Board of Directors on October 4, 1996 as the board designee of Whetstone
Ventures Corporation, Inc. pursuant to the April 30, 1996 Stock Purchase
Agreement with the Registrant. Since 1989 he has owned and operated Ziemer
Buick-Pontiac-GMC Truck, Inc. located in New Holland, Pennsylvania. From 1977
until 1989, he served in several capacities for the auto dealership. Mr. Ziemer
graduated from Penn State University in 1977 with a business degree in marketing
and management.

         (B) DIRECTORSHIPS.

         The current directors hold no other directorships in any Registrant
with a class of securities registered pursuant to Section 12 of the Exchange Act
or subject to the requirements of Section 15(d) of such Act or any Registrant
registered as an investment Registrant under the Investment Registrant Act of
1940, except as disclosed herein.

         (C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES.

             None

         (D) FAMILY RELATIONSHIPS.

             None.

                                       30


<PAGE>
<TABLE>
<CAPTION>

                             EXECUTIVE COMPENSATION

                           SUMMARY COMPENSATION TABLE

                              ANNUAL COMPENSATION                        LONG TERM COMPENSATION
                 -------------------------------------------    -----------------------------------------------
                                                                    AWARDS                    PAYOUTS
NAME             FISCAL                              OTHER                                 
AND              YEAR                                ANNUAL     RESTD.                                ALL
PRINCIPAL        ENDED                               COMPEN-    STOCK                   LTIP         OTHER
POSITION        JANUARY 31    SALARY      BONUS      SATION     AWARDS     OPTIONS     PAYOUTS    COMPENSATION
--------        ----------    ------      -----      ------     ------     -------     -------    ------------

<S>             <C>           <C>         <C>        <C>         <C>       <C>         <C>        <C>
Edward C.          1997         (1)        0.00          0        None        (1)        None         (1)
Kelly(3)           1996         (1)        0.00          0        None        (1)        None         (1)
President          1995         (1)        0.00          0        None        (1)        None         (1)
and Chief
Executive
Officer
<FN>
----------
(1)      Mr. Kelly has served as President and Treasurer of the Company since
         June 10, 1994, a director since April 1994, Chairman of the Board since
         June 3, 1996, and was Executive Vice President from January 1994 to
         June 10, 1994. For the fiscal year ended January 31, 1995, Mr. Kelly
         received an aggregate of $49,000 in cash payments and Mr. Kelly or his
         assigns received an aggregate of 75,000 pre-split shares of restricted
         Common Stock in accordance with the terms of his employment agreement.
         For the fiscal year ended January 31, 1996, Mr. Kelly received an
         aggregate salary of $180,000, consisting of $160,000 in cash and
         184,127 pre-split shares of restricted common stock pursuant to the
         terms of his employment agreement which was amended effective as of May
         1, 1995 and provides (i) for salary of $20,000 per month of which
         $10,000 accrues until the Company is financially able to pay the
         accrued amount or Mr. Kelly elects to convert all or part of such
         accrued amount into restricted Common Stock at a conversion price of
         $.20 per share, (ii) an annual bonus or bonuses, if any, in an amount
         to be determined by the Board of Directors in its sole discretion,
         (iii) 2,000,000 pre-split shares of Common Stock as additional
         compensation for all services provided to the Company from June 4, 1994
         through April 30, 1995 to be registered on Form S-8. He received the
         2,000,000 pre-split shares of Common Stock issued pursuant to a
         registration statement on Form S-8 filed with the Commission on
         September 28, 1995 for services rendered to the Company from June 4,
         1994 through April 30, 1995. For the fiscal year ended January 31,
         1997, Mr. Kelly received salary of $240,000.
</FN>
</TABLE>

         This table does not include (i) $10,000 paid each month by H&R
         Industries, Inc., an affiliate of Premier pursuant to the Premier
         Agreement, from January 1994 through September 1995, which amount is
         included in the total development costs of the Machine, (ii) accrued
         director compensation of approximately $833.33 per month since
         September 1995, (iii) 1,500,000 post-split shares to be issued to Mr.
         Kelly pursuant to the Stock Purchase Agreement with Whetstone Ventures
         Corporation, Inc., and (iv) options granted to each of Messrs. Kelly,
         Klarich, Wolf and Lambert on October 1 1996 by the Board of Directors
         for 50,000 post-split shares of restricted Common Stock exercisable for
         three years at $4.00 per share.

                                       31


<PAGE>


OPTION GRANTS IN THE FISCAL YEAR ENDED JANUARY 31, 1997

         On October 1, 1996, the Board of Directors granted options to Messrs.
Kelly, Klarich, Wolf and Lambert, all members of the Board of Directors at such
time. Messrs. Kelly and Klarich are also executive officers of the Company. Such
options are for each of them to purchase 50,000 post-split shares of common
stock for a period of three years commencing October 1, 1996 at $4.00 per share.
Pursuant to the 1995 Stock Option Plan adopted by the Board of Directors on July
1, 1995 and approved by the stockholders on September 18, 1995, non-employee
directors receive options under a formula set forth in such Stock Option Plan
determined by dividing the annual director's fee paid or accrued (accrued
$10,000 per director for the fiscal year ended January 31, 1997) by the fair
market value per share of common stock on the date of the grant ($.1225 at
December 15, 1996). Each of Messrs. Klarich, Wolf, and Lambert received an
option to purchase 4,082 post-split shares of common stock under the 1995 Stock
Option Plan at an exercise price of $2.45 per share (representing fair market
value per share as of December 15, 1996 giving effect to the reverse stock
split), which options expire December 15, 2006. Mr. Ziemer received an option to
purchase 680 post-split shares of common stock under the 1995 Stock Option Plan
at an exercise price of $2.45 per share as of December 15, 1996, which expires
December 15, 2006. This grant was prorated to reflect his appointment to the
Board on October 4, 1996.

         On June 27, 1996, Mr. Klarich was granted an option to purchase
1,000,000 pre-split shares of common stock at $.05 per share in consideration
for consulting services he provided to the Registrant from March 1 through May
31, 1996, which was prior to his appointment as vice president in June 1996. The
option was exercised by Mr. Klarich in July 1996.
         

         (D) AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR END OPTION/SAR
             VALUE TABLE

             None

         (E) LONG TERM INCENTIVE PLAN ("LTIP") AWARDS TABLE

             None

         (F) COMPENSATION OF DIRECTORS.

         The Directors were not entitled to compensation prior to September 18,
1995. At the Board of Directors meeting held on September 18, 1995, the Board
voted to approve payment of annual directors' fees of $10,000 per director plus
reasonable expenses commencing as of such date. Payments for the fiscal years
ending January 31, 1997 and 1996 have been accrued on a pro rata basis each year
and will be paid when the Registrant is financially able to do so. All such
accrued compensation has been included in the audited financial statements for
Gary J. Arzt (up to June 3, 1996), Edward C. Kelly, Jurgen Wolf, Ian Lambert,
Leonard Klarich and Kurt Ziemer (commencing October 4, 1996).

                                       32


<PAGE>


         (G)  EMPLOYMENT CONTRACTS AND TERMINATION OF
              EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS

         On October 1, 1994 the Registrant entered into an employment agreement
with Edward C. Kelly, its then President and Treasurer. The employment agreement
was for a three year term commencing retroactively to October 1, 1993 (the date
on which Mr. Kelly began providing design, engineering and consulting services
to the Registrant) and was automatically renewable for additional one year terms
after expiration on September 30, 1996. The employment agreement was
subsequently amended but effective as of May 1, 1995 to provide the following
changes: (i) salary of $20,000 (replacing $10,000 per month no longer being paid
by H&R Industries, Inc.) per month payable $10,000 in cash with $10,000 accruing
until the Registrant is financially able to pay such amount or Mr. Kelly elects
to convert all or any part of such amount into restricted common stock based on
a conversion ratio of $.20 per pre-split share; (ii) an employment term until
April 30, 2001; (iii) an annual bonus or bonuses, if any, in an amount to be
determined by the Board of Directors in its sole discretion; (iv) 2,000,000
pre-split shares of common stock registered on a Form S-8 registration statement
as additional compensation for all services provided by Mr. Kelly to the
Registrant from June 4, 1994 to April 30, 1995. All other terms and conditions
of the October 1, 1994 employment agreement remain in full force and effect. The
employment agreement, as amended, is automatically renewable for additional one
(1) year terms without any further action by the Registrant or Mr. Kelly. The
employment agreement, as amended, may be terminated by the Registrant for
certain enumerated causes or upon written notice of the Registrant to Mr. Kelly
60 days prior to the end of any term or renewal thereof.

         (H) REPORT ON REPRICING OF OPTIONS/SARS

             None

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         (A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS.

         The following table sets forth, as of May 1, 1997, the ownership of
common stock by persons known to the Registrant who own beneficially more than
5% of the outstanding shares of common stock, as adjusted to give effect to the
1 for 20 reverse stock split effective on December 23, 1996:

                                       33


<PAGE>


NAME AND ADDRESS OF                AMOUNT AND NATURE OF           PERCENT
BENEFICIAL OWNER                   BENEFICIAL OWNERSHIP           OF CLASS
----------------                   --------------------           --------

International Tasty                      515,000 (1)                7.7%
Fries, Inc.
Suite 602
595 Howe Street
Vancouver, B.C. V6C 2T5(1)

Usis International Capital               350,501                     5.2%
  Corp.(1)
2806 N. Clark Street
Chicago, IL 60657

Whetstone Ventures                        720,343                   10.7%
  Corporation, Inc.
11 Waterfront Estates
Estates Drive
Lancaster, PA 17602(2)

--------------------------------------

(1)      All of these shares are shown of record as of April 1, 1997, pursuant
         to the Registrant's stock transfer records, all of which are being
         registered hereby.

(2)      Includes (i) all 351,000 post-split of the original 1,250,000
         post-split shares sold to Whetstone Ventures Corporation, Inc., the
         balance of which were transferred to others, (ii) 250,000 additional
         post-split shares, and (iii) 119,143 shares underlying a warrant to be
         issued to Whetstone Ventures Corporation, Inc. Does not include 250,000
         post-split shares of common stock to be issued to Whetstone Ventures
         Corporation, Inc. for consulting services pursuant to its April 30,
         1996 Consulting Agreement with the Registrant, and an additional 37,500
         post-split shares to be issued each year for five years commencing upon
         the effective date of the Registrant's registration statement filed
         with the Commission.

                                       34


<PAGE>


         (B) SECURITY OWNERSHIP OF MANAGEMENT

         The following table sets forth, as of May 1, 1997, the beneficial
common stock ownership of all directors, executive officers, and of all
directors and officers as group, as adjusted to give effect to the 1 for 20
reverse stock split effected on December 23, 1996:

NAME AND ADDRESS OF             AMOUNT AND NATURE OF           PERCENT
BENEFICIAL OWNER                BENEFICIAL OWNERSHIP           OF CLASS
----------------                --------------------           --------

Edward C. Kelly                      1,807,950                  27.0%
650 Sentry Parkway
Suite One
Blue Bell, PA 19472(1)

Jurgen A. Wolf                        155,124                    2.6%
1285 West Pender Street
Vancouver, B.C. Canada(2)

Leonard J. Klarich                     92,624                    1.4%
839 Claybrook Court
Knoxville, TN 37923(3)

Ian D. Lambert                         55,124                     *
1220 Eastview Road

North Vancouver, B.C.(4)

Kurt R. Ziemer                         67,680                    1.0%
599 Valley View Drive
New Holland, PA  17557(5)

All Officers and Directors           2,178,502                  32.0%
as a group (5 persons)

----------------------------------
*  less than 1%

                                       35


<PAGE>

(1)      Includes (i) an option for 50,000 post-split shares of restricted
         common stock presently exercisable at $2.00 per share until March 15,
         1998, (ii) 57,450 post-split shares of common stock held by Irene
         Kelly, his wife, as to which Mr. Kelly claims beneficial ownership,
         (iii) an option for 50,000 post-split shares of common stock granted by
         the Board of Directors on October 1, 1996 exercisable until October 1,
         1999 at $4.00 per share; and (iv) 1,500,000 post-split shares to be
         issued pursuant to the terms of the April 30, 1996 Stock Purchase
         Agreement, all as calculated in accordance with Rule 13d-3.

(2)      Includes (i) an option to purchase 1,042 post-split shares of common
         stock exercisable at $2.40 per share until December 15, 2005,
         automatically granted to each non-employee director under the 1995
         Stock Option Plan on December 15, 1995, (ii) an option to purchase
         4,082 post-split shares of common stock exercisable at $2.45 per share
         until December 15, 2006, automatically granted to each non-employee
         director under the 1995 Stock Option Plan; (iii) an option to purchase
         50,000 post-split shares of common stock granted by the Board of
         Directors on October 1, 1996 exercisable at $4.00 per share until
         October 1, 1999; and (iv) 50,000 post-split shares of common stock
         issued to Adelaide Vending (Canada) Ltd. for the reacquisition by the
         Registrant of the Canadian distributorship and an option granted to
         Adelaide Vending for 50,000 post-split shares of common stock
         exercisable at $5.00 per share until September 1, 1997, all as
         calculated in accordance with Rule 13d-3. Mr. Wolf is a director and
         the controlling stockholder of Adelaide Vending (Canada), Ltd..

(3)      Includes (i) an option to purchase 1,042 post-split shares of common
         stock exercisable at $2.40 per share until December 15, 2005,
         automatically granted to each non-employee director under the 1995
         Stock Option Plan on December 15, 1995, (ii) an option to purchase
         4,082 post-split shares of common stock exercisable at $2.45 per share
         until December 15, 2006, automatically granted to each non-employee
         director under the 1995 Stock Option Plan; and (iii) an option for
         50,000 post-split shares of common stock granted by the Board of
         Directors on October 1, 1996 exercisable for $4.00 per share until
         October 1, 1999, all as calculated in accordance with Rule 13d-3.

(4)      Includes (i) 515,000 post-split shares issued to International Tasty
         Fries, Inc. in 1995 for an aggregate of $800,000 including a $175,000
         loan converted into equity, (ii) an option to purchase 1,042 post-split
         shares of common stock exercisable at $2.40 per share until December
         15, 2005, automatically granted to each non- employee director under
         the 1995 Stock Option Plan on December 15, 1995, (iii) an option to
         purchase 4,082 post-split shares of common stock exercisable at $2.45
         per share until December 15, 2006, automatically granted to each
         non-employee director under the 1995 Stock Option Plan; and (iv) an
         option for 50,000 post- split shares of common stock granted by the
         Board of Directors on October 1, 1996 exercisable at $4.00 per share
         until October 1, 1999, all as calculated in accordance with Rule 13d-3.

(5)      Includes 680 post-split shares underlying an option exercisable at
         $2.45 per share until December 15, 2006, automatically granted to each
         non-employee director under the 1995 Stock Option Plan. Mr. Ziemer's
         option has been prorated to reflect the date he was appointed to the
         Board of Directors on October 4, 1996.

                                       36


<PAGE>


         (C) CHANGES IN CONTROL.

         Except as described in this Report, there are no arrangements, known to
         the Registrant, including any pledge by any person of securities of the
         Registrant or of any of its parents, the operation of which may at a
         subsequent date result in a change in control of the Registrant.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         In April 1993, the Registrant issued a promissory note to Mr. Gary
Arzt, then President, Secretary and Chairman of the Board of the Registrant, for
up to $300,000 in funds which may be advanced to the Registrant. Such note was
superseded on October 31, 1993 by a new promissory note in the amount of
$129,946.55 (the "Note"). The Note, which bears interest at 8% per annum payable
in quarterly installments, was due on or before November 1, 1994. In April 1995,
the Note was partially repaid in the amount of $79,947. Mr. Arzt filed a lawsuit
against the Registrant for payment of the Note and other alleged expenses and a
judgment was entered in his favor by the court in April 1997 for $59,000.

         In September 1995 the Registrant reacquired the Canadian distribution
rights from Adelaide Vending (Canada) Ltd. for 1,000,000 pre-split shares
(50,000 post-split shares) of common stock and an option to purchase 1,000,000
pre-split shares (50,000 post-split shares) of common stock at $.25 (US)($5.00
(US) post-split exercise price) for two years until September 1997. Mr. Wolf, a
member of the Registrant's Board of Directors since September 18, 1995, is a
major stockholder of Adelaide Vending (Canada) Ltd. Adelaide Vending (Canada)
Ltd. had made a downpayment of $75,000 (US) for the Canadian distribution rights
plus had incurred certain other organizational expenses in connection therewith
which, totalled $100,000 (US) in the aggregate. As part of the Registrant's
desire to operate the Machines directly and limit its dependence on third party
operators, the Board of Directors determined to offer Adelaide Vending the
opportunity to return the distributorship for 1,000,000 pre-split shares of
common stock, the fair market value of which at the time was $100,000 (US) or
$.10 per share and the option.

         In May 1995, the Registrant loaned Mr. Kelly $50,000 at 10% interest
per annum. This loan is being repaid in accordance with a payment plan over the
current fiscal year.

         In April 1996, the Registrant, Edward Kelly and Whetstone Ventures
Corporation, Inc. entered into the Stock Purchase Agreement. Pursuant to the
terms thereof, Mr. Kelly will receive 1,500,000 post-split shares and warrants
to purchase shares of common stock at $1.90 per share, such warrants to be in an
amount necessary to ensure his ownership of no less than 25% of the outstanding
common stock of the Registrant until May 1999.

         In August 1996, the Registrant loaned Mr. Klarich $50,000 at 10%
interest per annum. This loan is currently being repaid by Mr. Klarich in
accordence with a payment plan over the current fiscal year.

                                       37


<PAGE>


                                TASTY FRIES, INC.

                          (A DEVELOPMENT STAGE COMPANY)

                              FINANCIAL STATEMENTS

                  FOR THE YEARS ENDED JANUARY 31, 1997 AND 1996

       AND FOR THE PERIOD OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 1997

                                       38


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Stockholders
of Tasty Fries, Inc.

We have audited the accompanying balance sheets of Tasty Fries, Inc. (a
development stage company) (formerly Adelaide Holdings, Inc.) as of January 31,
1997 and 1996, and the related statements of operations, stockholder's equity
(deficiency), and cash flows for the years then ended and for the period from
October 18, 1985 (inception) to January 31, 1997. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tasty Fries, Inc. as of January
31, 1997 and 1996, and the results of its operations and its cash flows for the
years then ended and from October 18, 1985 (inception) to January 31, 1997, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception and has experienced
liquidity problems. Unless the Company can continue to obtain financing from the
issuance of common stock and/or through loans, substantial doubt arises about
the Company's ability to continue as a going concern (Note 1). The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

Schiffman Hughes Brown
Blue Bell, Pennsylvania
February 18, 1997

                                       39


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                 BALANCE SHEETS AS OF JANUARY 31, 1997 AND 1996

                                     ASSETS

                                                       1997          1996
                                                   -----------    -----------

Current assets:
   Cash                                            $     1,519    $     5,273
   Vending machines (Note 3)                            70,000         70,000
   Loan receivable, officers (Note 4)                  100,000         50,000
   Interest receivable                                   9,027
                                                   -----------    -----------
        Total current assets                           180,546        125,273
                                                   -----------    -----------
Property and equipment, net of
 accumulated depreciation of
 $24,073 in 1997 and $16,834 in 1996                    23,276         30,515
                                                   -----------    -----------

                                                   $   203,822    $   155,788
                                                   ===========    ===========

                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
   Note payable (Note 5)                           $    60,000    $    25,000
   Note payable, officer/director (Note 6)              50,000         50,000
   Accounts payable and accrued expenses               882,077        106,269
   Litigation settlements payable (Note 11)            443,014
                                                   -----------    -----------
        Total current liabilities                      992,077        624,283
                                                   -----------    -----------
Unearned revenue (Note 7)                              376,000        356,000
                                                   -----------    -----------
Commitments and contingencies (Note 9)

Stockholders' equity (deficiency):
   Common stock, $.001 par value;
    authorized 25,000,000 shares;
    issued and outstanding 4,700,025
    shares at January 31, 1997 and
    3,850,025 at January 31, 1996                        4,700          3,850
   Additional paid-in capital                        6,097,275      6,357,625
   Deficit accumulated in development stage         (7,266,230)    (5,093,970)
                                                   -----------    -----------
                                                    (1,164,255)     1,267,505
Subscriptions receivable (Note 12)                                 (2,092,000)
                                                   -----------    -----------
                                                    (1,164,255)      (824,495)
                                                   -----------    -----------

                                                   $   203,822    $   155,788
                                                   ===========    ===========

       See independent auditor's report and notes to financial statements

                                       40


<PAGE>
<TABLE>
<CAPTION>

                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF OPERATIONS
                  FOR THE YEARS ENDED JANUARY 31, 1997 AND 1996
       AND FOR THE PERIOD OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 1997

                                              Cumulative
                                                SINCE
                                              INCEPTION           1997           1996
                                              -----------     -----------    -----------
<S>                                           <C>             <C>            <C>
Revenues                                       $   -0-         $   -0-        $   -0-
                                              -----------     -----------    -----------
Costs and expenses:
   Research, machine
    and product development                     1,341,057         589,571         264,997
   Selling, general and administrative          4,780,598       1,583,875       1,086,033
                                              -----------     -----------     -----------
                                                6,121,655       2,173,446       1,351,030
                                              -----------     -----------     -----------
Net loss before other income (expense)         (6,121,655)     (2,173,446)     (1,351,030)

Other income (expense):
   Interest income                                  9,028           9,028
   Forfeited distributor deposits (Note 7)         15,000
   Interest expense                               (63,541)         (7,842)        (26,458)
   Litigation settlement (Note 11)             (1,105,062)                         (7,000)
                                              -----------     -----------     -----------
                                               (1,144,575)          1,186         (33,458)
                                              -----------     -----------     -----------
Net loss                                      $(7,266,230)    $(2,172,260)    $(1,384,488)
                                              ===========     ===========     ===========
Net loss per share of common stock            $     (1.55)    $      (.52)    $      (.60)
                                              ===========     ===========     ===========

Weighted average shares outstanding                           $4,200,642       $2,324,928
                                                              ===========     ===========
</TABLE>

       See independent auditor's report and notes to financial statements

                                       41


<PAGE>
<TABLE>
<CAPTION>

                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
           STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
               FOR THE PERIOD JANUARY 31, 1994 TO JANUARY 31, 1997

                                                           PAID                            TOTAL
                                           COMMON           IN           RETAINED       STOCKHOLDER
                                            STOCK         CAPITAL        EARNINGS         EQUITY
                                        -----------     -----------     -----------     ------------
<S>                                     <C>             <C>             <C>             <C> 
Balance, January 31, 1994               $   259,454     $   946,246     $(1,630,549)    $  (424,849)

Issued 3,129,999 shares                      31,300         547,950                         579,250

Issued 2,151,622 shares for services         21,516         121,294                         142,810

Issued 1,000,000 shares for
 litigation settlement                       10,000         460,000                         470,000

Net loss for the year ended
 January 31, 1995                                                        (2,078,933)     (2,078,933)
                                         -----------     -----------     -----------
Balance, January 31, 1995                   322,270       2,075,490      (3,709,482)     (1,311,722)

Issued 36,415,000 shares                    364,150       3,000,350                       3,364,500

Issued 6,733,502 shares for services         67,335         381,880                         449,215

Issued 625,000 shares for
 loan conversion                              6,250          43,750                          50,000

Issued 1,000,000 shares for
 repurchase of distributorship               10,000          90,000                         100,000

Reverse stock split                        (766,155)        766,155                              

Net loss for the year ended
 January 31, 1996                                                        (1,384,488)     (1,384,488)
                                        -----------     -----------     -----------     -----------
Balance, January 31, 1996                     3,850       6,357,625      (5,093,970)      1,267,505

Redemption of 730,000 shares
issued to Acumen Services, Ltd. 
 in September 1995                             (730)     (2,091,270)                     (2,092,000)

Issued 1,455,000 shares                       1,455       1,506,045                       1,507,500

Issued 125,000 shares for services              125         324,875                         325,000

Net loss for the year ended
 January 31, 1997                                                        (2,172,260)     (2,172,260)
                                        -----------     -----------     -----------     -----------
Balance, January 31, 1997               $     4,700     $ 6,097,275     $(7,266,230)    $(1,164,255)
                                        ===========     ===========     ===========     ===========
</TABLE>

       See independent auditor's report and notes to financial statements

                                       42


<PAGE>
<TABLE>
<CAPTION>
                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS
                  FOR THE YEARS ENDED JANUARY 31, 1997 AND 1996
       AND FOR THE PERIOD OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 1997

                                                               CUMULATIVE
                                                                 SINCE
                                                               INCEPTION         1997           1996
                                                              ------------    -----------    ----------- 
<S>                                                           <C>             <C>            <C>
Cash flows from operating activities:
    Net loss                                                  $(7,266,230)    $(2,172,260)    $(1,384,488)
    Adjustments to reconcile net loss to net
     cash used by operating activities:
       Depreciation                                                24,073           7,239           6,554
       Common stock issued for services                           956,725         325,000         449,215
       Common stock issued for litigation settlement
    470,000 Changes in assets and liabilities:
       Other assets                                               (79,027)         (9,027)             
       Accounts payable and accrued expenses                      882,078         332,794        (245,562)
       Unearned revenue                                           376,000          20,000         (80,000)
                                                              -----------     -----------     -----------
Net cash used by operating activities                          (4,636,381)     (1,496,254)     (1,254,281)
                                                              -----------     -----------     -----------
Net cash flows used in investing activities:
    Purchase of property and equipment                            (47,350)                         (8,304)
                                                              -----------                     -----------
Cash flows from financing activities:
    Issuance of common stock                                    4,675,250       1,507,500       1,422,500
    Loan receivable, officers                                    (100,000)        (50,000)        (50,000)
    Note payable, current                                          60,000          35,000         (25,000)
    Officer/director note                                          50,000                         (79,947)
                                                              -----------     -----------     -----------
Net cash provided by financing activities                       4,685,250       1,492,500       1,267,553
                                                              -----------     -----------     -----------
Net increase (decrease) in cash                                     1,519          (3,754)          4,968
Cash, beginning balance                                                             5,273             305
                                                              -----------     -----------     -----------
Cash, ending balance                                          $     1,519     $     1,519     $     5,273
                                                              ===========     ===========     ===========
Supplemental disclosure of cash flow information:
    Cash paid for interest                                    $    35,351     $     1,363     $    22,636
                                                              ===========     ===========     ===========
Supplemental disclosures of non-cash financing activities:
    Issuance of common stock for services                     $   831,725     $   325,000     $   449,215
                                                              ===========     ===========     ===========
    Issuance of common stock for
     conversion of note payable                               $    75,000                     $    50,000
                                                              ===========                     ===========
    Issuance of common stock for
     repurchase of distributorship                            $   100,000                     $   100,000
                                                              ===========                     ===========
    Issuance of common stock for
     litigation settlement                                    $   470,000    
                                                              ===========   
</TABLE>

       See independent auditor's report and notes to financial statements

                                       43


<PAGE>

                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
                            JANUARY 31, 1997 AND 1996

1.       Description of Business:

         On July 31, 1991 Metro Systems Inc., a Nevada Corporation, acquired
         100% of the outstanding stock of Adelaide Holdings, Inc., a Delaware
         Corporation, for 13,500,000 shares of its common stock. The acquisition
         has been accounted for as a reverse acquisition. Metro Systems Inc. was
         a shell company having no assets or liabilities at the time of the
         reverse acquisition and changed the name of Metro Systems Inc. to
         Adelaide Holdings, Inc. Effective October 1, 1993 its name was changed
         to Tasty Fries, Inc.

         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 agreement with an unaffiliated company
         which manufactures and assembles a variety of high technology
         equipment. The Company has received ten machines and it is anticipated
         that each machine can be sold for approximately $9,000. The difference
         between the anticipated selling price and the cost to obtain the
         machines has been charged to research, machine and product development
         costs. 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 related to
         successfully marketing the vending machine and resolving existing
         litigation (Note 11). Management is currently in negotiations with
         three separate funding sources to provide the working capital necessary
         to pay Premier and fund the tooling of the Machine for commercial
         production. These funding sources will also assist the Company in
         manufacturing the first 50 machines and bring them to market, at which
         time the Company believes that sufficient cash will be generated to
         support its operations. Although management cannot assure the ultimate
         success of the above plan, it is reasonably confident that it will
         enable the Company to continue its business and grow modestly.

                                       44


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                            JANUARY 31, 1997 AND 1996

2.      Significant accounting policies:

        Property and equipment:

        Property and equipment are carried at cost. Depreciation is calculated
        using the straight-line method over their estimated useful lives ranging
        from 3 to 7 years. Depreciation expense for January 31, 1997 and 1996
        was $7,239 and $6,554, respectively.

        Research, machine and product development:

        Research and development costs consist of expenditures incurred by the
        Company during the course of planned search and investigation aimed at
        the discovery of new knowledge which will be used to develop and test a
        vending machine and potato product for the formation of french fries.
        Research and development costs also include costs for significant
        enhancements or improvements to the machine and/or potato product. The
        Company expenses all such research and development costs as they are
        incurred.

        Unearned revenue:

        Represents monies received for distribution rights of the vending
        machines which the Company is still in the process of developing and
        testing. The Company records these monies as unearned revenue upon
        receipt. These deferrals will be recognized as income over the life of
        the machine upon commercial production of machines or upon forfeiture by
        distributors as a result of breach of contract. Since commercial
        production of the machine has not commenced, the unearned revenue is
        classified as a non-current liability.

3.      Vending machines:

        Vending machines are carried at the lower of cost or market. During the
        year ended January 31, 1995, the Company paid to Premier, $246,600, for
        the production of ten reproduction machines. In the year ended January
        31, 1995, the Company charged $176,600 to research and development
        expense.

4.      Loan receivable, officers:

        Represent monies borrowed from the Company by an officer in May, 1995.
        The loan is being repaid, along with interest at 10% per annum, in
        accordance with a payment plan over the current fiscal year.

        In August, 1996, another officer borrowed $50,000 from the Company. This
        loan is being repaid, along with interest at 10% per annum, in
        accordance with a payment plan over the current fiscal year.

                                       45


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                            JANUARY 31, 1996 AND 1995

5.      Notes Payable:

        An unsecured note from a third party shareholder which bears interest at
        the rate of 8% per annum. The note was due June 4, 1993 but has been
        extended indefinitely. The Company issued to the noteholder, options for
        400,000 shares of its common stock on December 22, 1994, with an
        exercise price of 35 cents per share. The Company issued 180,000 and
        90,000 shares of its common stock on December 22, 1994 and May 4, 1995,
        respectively, to the noteholder in addition to paying $30,600 on May 5,
        1995. This payment of $30,600 on May 5, 1995 includes a principal
        payment of $25,000 and interest covering the period June, 1992 to March,
        1995 in the amount of $5,600. The 180,000 and 90,000 shares issued to
        the noteholder at $.01 were consideration for indefinitely extending the
        repayment and recorded as a financing expense which is included in
        selling, general and administrative expense. The balance at January 31,
        1997 and 1996 was $25,000.

        In November, 1996, the Company was advanced, by an unrelated third
        party, $35,000. This advance has no interest rate and repayment is due
        on demand. The Company, subsequent to the balance sheet, repaid $20,000
        in March, 1997.

6.      Note Payable, Officer/Director:

        Represents the unsecured note from a then existing officer/director of
        the Company which bears interest at the rate of 8% per annum and is due
        and payable on demand. The Company reduced this note to $50,000 with a
        principal payment of $79,947 on May 1, 1995. In addition to the
        principal payment on May 1, 1995 of $79,947, the Company also paid
        interest in the amount of $9,576.14. Pursuant to an order of the Circuit
        Court for Dade County, Florida in April, 1997 in reference to a lawsuit
        instituted against the Company by such former officer/director, the
        Company must pay $59,000 in satisfaction of this note.

7.      Unearned Revenue:

        During the year ended January 31, 1995, a distributor who had paid
        $10,000 to the Company for the rights to a distributorship, forfeited
        its rights in the distributorship. The remaining $5,000 in forfeited
        distributor deposits since inception of the Company occurred during the
        year ended January 31, 1994 when a distributor forfeited its rights to a
        distributorship. On September 5, 1995, the Company issued 1,000,000
        shares of its common stock to repurchase the Canadian distributorship
        rights which the Company has shown as unearned revenue in the amount of
        $100,000. In May, 1996, the Company received payments totaling $20,000
        for the rights to distribute its machines in Israel, Egypt and Jordan.

                                       46


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                            JANUARY 31, 1997 AND 1996

8.      Related Party Transactions:

        The Company paid salary to Mr. Edward Kelly, the president and director,
        during the fiscal year ended January 31, 1997 and 1996 totaling $240,000
        and $160,000, respectively. The Company also issued an aggregate of
        184,127 shares of common stock (in lieu of cash compensation of $20,000)
        to Mr. Edward Kelly in the fiscal year ended January 31, 1996 and
        2,000,000 shares of common stock during September, 1995. During the year
        ended January 31, 1997, the Company paid salary to Mr. Leonard Klarich,
        vice president/director, of $40,000.

9.      Commitments and Contingencies:

        During the years ended January 31, 1997 and 1996, the Company paid
        $28,997 and $17,400, respectively, for the rental of office space. The
        Company represented that they will continue leasing this office space at
        a monthly rental of $2,250 until May 31, 1997.

10.     Issuance of Common Stock:

        After the cancellation of 730,000 post-split shares of common stock
        issued to Acumen Services, Ltd., an aggregate of 1,580,000 post-split
        shares of common stock were issued during the year ended January 31,
        1997. 1,455,000 post-split shares were sold in private placements by the
        Company, 125,000 post-split shares were issued for payment of
        advertising, marketing, consulting and legal services totaling $125,000.

        44,773,502 total pre-split shares of common stock were issued during the
        year ended January 31, 1996. 36,415,000 pre-split shares were sold in
        private placements by the Company, 6,733,502 pre-split shares were
        issued for payment of advertising, marketing, consulting and legal
        services totaling $449,215, 625,000 pre-split shares were issued for a
        $50,000 loan conversion to common stock and 1,000,000 pre-split shares
        were issued for the repurchase of the Canadian distributorship rights
        (see Note 7).

        On December 23, 1996, the Board of Directors authorized a reverse stock
        split of 1 for 20 thereby reducing the number of shares of common stock
        issued and outstanding from 94,000,495 to 4,700,025. The Board also
        authorized changing the authorized shares from 100,000,000 to 25,000,000
        and par value from $.01 to $.001.

11.     Litigation:

        Former officers of the Company caused the Company to guarantee a lease
        for another corporation owned by them. The other corporation breached
        its lease obligation causing the landlord to assert a claim against the
        Company as guarantor for an amount due approximating $110,000. In
        October, 1994 the Company, without admitting any liability, settled the
        litigation assessment by paying the landlord $76,000. Upon payment of
        the $76,000, the Company was released as guarantor of the lease.

                                       47


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                            JANUARY 31, 1997 AND 1996

11.     Litigation (continued):

        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.

        In addition, the settlement agreement provides for (a) payment to CFV
        royalties of $350 per machine for the first 500 machines sold and 35% of
        the gross profit for machines sold thereafter; (b) payment to CFV of
        $.25 for each pound of potato product sold; (c) issuance of an option to
        CFV for the purchase of 100,000 shares of the Company's common stock at
        a exercise price of $2.00 per share through February 1, 1999; and (d)
        CFV shall receive an aggregate of $2,000,000 payable from 50% of
        domestic and international gross distribution fees until paid in full
        and thereafter 25% of all international distribution fees. The
        royalties, fees and profits payable in the future to CFV could become
        material, but there is no way to assign a dollar figure to this payable
        since it will be based on future Company sales. These royalties will be
        expensed by the Company when incurred.

        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 the
        cross-claimant. These 1,000,000 shares of common stock were accounted
        for in the financial statements at market value at the time of the award
        (October 25, 1994). The shares were not issued by the Company until
        June, 1996. On March 4, 1997, the Company agreed to pay the
        cross-claimant $70,000 and issue 43,750 shares of common stock at fair
        value in settlement of pending litigation.

        On January 5, 1995, the arbitrator in the case of California Food and
        Vending, Inc. (CFV) vs. the Company awarded CFV and cross-claimant legal
        fees amounting to $94,963 and $4,099, respectively. In addition, CFV was
        awarded one proto-type vending machine, which had a value of $7,000. The
        legal fees and the proto-type machine, totaling $106,062 were recorded
        in the financial statements. Payment pursuant to a settlement agreement
        which supersedes the award began in February, 1995 and was satisfied in
        full in May, 1996.

                                       48


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                            JANUARY 31, 1997 AND 1996

11.     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 its February, 1996 installment
        payment to CFV. The TPO provided that any monies received by the Company
        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.

        On May 23, 1995, an alleged former agent of the Company instituted a
        lawsuit against the Company and its former president Gary Arzt for
        breach of contract, quantum meruit, breach of verbal contract and
        requested damages in excess of $15,000 for unpaid commissions. The
        Company and Mr. Arzt responded to the lawsuit on September 29, 1995
        denying the allegations. No date for trial has been set and the Company
        believes that the lawsuit is without merit and intends to vigorously
        defend this matter. Management believes that there will be no liability
        arising from this lawsuit.

        On January 15, 1996, a lawsuit was instituted alleging breach of
        contract, fraudulent inducement and misrepresentation, and violation of
        New Jersey law relating to consumer contracts. A settlement of this
        lawsuit occurred in July, 1996 and the Company agreed to register shares
        of the Company's common stock in its current registration statement
        filed with the Commission. These shares are recorded in the financial
        statements at fair market value at time of issuance.

12.     Subscriptions receivable:

        In September, 1995, the Company entered into an agreement with Acumen
        Services, Ltd., an off-shore Abaco, Bahamas company, to purchase an
        aggregate of 21,500,000 pre-split shares of common stock at $.10 per
        share payable pursuant to a promissory note providing for payment upon
        the commencement of commercial production of the machine. The Company
        received $80,000 in December, 1995 from an unrelated third party who was
        issued shares of common stock. The balance of the remaining shares were
        canceled and returned to the Company's treasury in May, 1996 as a result
        of a dispute between the Company and Acumen.

        In January, 1996, the Company issued 1,000,000 pre-split shares to a
        third party individual investor for $50,000 with $28,000 cash received
        in late January, 1996 and the remaining $22,000 cash received in
        February, 1996.

                                       49


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                    NOTES TO FINANCIAL STATEMENTS (CONTINUED)
                            JANUARY 31, 1997 AND 1996

13.     Common Stock Option Plan:

        The Company adopted incentive and nonqualified stock option plans for
        employees effective as of September 18, 1995. The plan also provides for
        stock options to be issued to non-employee directors based upon a
        formula set forth in the document. The incentive stock option plan is
        intended to qualify under Section 422 of the Internal Revenue Code.
        Under the terms of the plan, options to purchase common stock are
        granted at not less than the estimated fair market value at the date of
        the grant and are exercisable during specified future periods. There
        were no options granted as of January 31, 1997 or 1996 to any executive
        officers, but non-employee directors received options to purchase an
        aggregate of 12,926 and 4,167 shares of common stock, respectively, at
        an exercise price of $2.45 and $2.40 per share, respectively.

        Adoption of SFAS 123 by the Company would require an expense of $30,000
        and $9,999 in 1997 and 1996, respectively as directors fees to be
        accrued for the 12,926 and 4,167 options at the fair market value of
        $2.45 and $2.40 on grant date, respectively.

14.     Preferred stock:

        On July 29, 1991, the Board of Directors authorized 5,000,000 shares of
        preferred stock at a par value of $.001 per share. No shares of
        preferred stock were issued as of January 31, 1997.

15.     Warrants:

        At January 31, 1997, the Company has warrants outstanding for the
        purchase of 425,010 shares of common stock until May 29, 1999 at an
        exercise price of $1.90 per share. No warrants have been exercised as of
        January 31, 1997.

                                       50


<PAGE>


ITEM 13.    EXHIBITS.

    (A)     THE FOLLOWING EXHIBITS ARE FILED AS A PART OF THIS REPORT:

    3.0     Articles of Incorporation, as amended*

    3.1     Articles of Amendment to Articles of Incorporation of the Registrant
            dated December 16, 1996 changing authorized common shares and par 
            value**

    3.2     By-Laws**

    4.0     Form of Warrant Agreement**

    10.0    Employment Agreement of Edward Kelly dated October 1, 1994***

    10.1    Amendment to Employment Agreement******

    10.2    Amendment to Manufacturing Requirements Agreement***

    10.3    Forrest Financial Corporation Vendor Agreement, as amended, dated
            November 20, 1996**

    10.4    Promissory Note from the Registrant dated February 7, 1995***

    10.5    Lease Agreement between the Registrant and Blue Bell Executive 
            Suites dated May 23, 1995*****

    10.6    1995 Stock Option Plan******

    10.7    Stock Purchase Agreement between the Registrant and Whetstone 
            Ventures Corporation, Inc. dated April 30, 1996*******

    10.8    Manufacturing Agreement between the Registrant and S&H Electronics,
            Inc. dated August 22, 1996**

    10.9    Agreement between the Registrant and Whetstone Ventures Corporation,
            Inc. dated April 30, 1996**

                                       51


<PAGE>


    10.10    Distribution Agreements**

    27.0     Financial Data Schedule

-------------------

    *        Filed as an exhibit to the Registrant's registration statement
on Form SB-2, File No. 333-19239, filed with the Commission on January 3, 1997
and incorporated herein by such reference.

    **      Filed as an exhibit to Amendment No. 2 to the Registrant's
registration statement on Form SB-2, File No. 333-19239, filed with the
Commission on May 2, 1997 and incorporated herein by such reference.

    ***     Filed as an exhibit to the Registrant's Form 10-QSB for the
fiscal quarter ended October 31, 1994 and incorporated herein by such reference.

    ****    Filed as an exhibit to the Registrant's Form 10-KSB for the
fiscal year ended January 31, 1994 and incorporated herein by such reference.

    *****    Filed as an exhibit to the Registrant's Form 10-KSB for the
fiscal year ended January 31, 1995 and incorporated herein by such reference.

    ******   Filed as an exhibit to the Registrant's Form 10-QSB for the
fiscal quarter ended October 31, 1995 and incorporated herein by such reference.

   *******   Filed as an exhibit to the Registrant's Form 10-KSB for the
fiscal year ended January 31, 1996 and incorporated herein by such reference

      (B)    REPORTS ON FORM 8-K.

             None.

                                       52


<PAGE>


                                   SIGNATURES

         In accordance with Section 13 or 15(d) 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:  May 12, 1997             By: /s/ EDWARD C. KELLY
                                   ----------------------
                                   Edward C. Kelly
                                   President and Principal
                                   Financial Officer

         In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

/S/ EDWARD C. KELLY                             May 12, 1997
------------------------                                    
Edward C. Kelly,
President, Treasurer &
Director


/s/ JURGEN A. WOLF                              May 12, 1997
------------------------
Jurgen A. Wolf, Director

/s/ LEONARD KLARICH                             May 12, 1997
------------------------
Leonard Klarich, Vice President,
Secretary & Director


/s/ IAN D. LAMBERT                              May 12, 1997
-------------------------
Ian D. Lambert, Director

/s/ KURT N. ZIEMER                              May 12, 1997
------------------------
Kurt N. Ziemer, Director

                                       53

<PAGE>


                              EXHIBIT INDEX
                             -------------
EXHIBIT                                                          PAGE
-------                                                          ----

27                Financial Data Schedule (for SEC use only)


                                       54