FORM 10-KSB/A

                       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, 2002

          [ ] 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

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

              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 January 2002: Not Determinable.
                 -----------------

Shares outstanding of the registrant's common stock as of January 31, 2002:
59,171,758 shares.


<PAGE>


PART I

ITEM 1. DESCRIPTION OF BUSINESS.

(A) GENERAL BUSINESS DEVELOPMENT

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

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

    Effective July 29, 1991, the Company 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 Company outstanding after the acquisition.

    The Company also amended its Articles of Incorporation to include a
provision that officers and directors of the Company are not liable for damages
as a result of a breach of fiduciary duty except in certain specified instances
under Nevada law. In September 1993, the Company amended its Articles of
Incorporation changing its name to Tasty Fries, Inc.

(B) BUSINESS OF THE COMPANY

    GENERAL

    The Company has developed a patented French fry vending machine (the
"Machine"). The Company intends to manufacture and market the machine in both
domestic and international markets through a combination of exclusive,
territorial distributorships and traditional sales to established companies in
the vending industry. The Company may also own and operate machines itself. The
Machines are expected to be located in high-traffic locations that have
historically been successful for vending operators, such as universities,
airports, bus and train stations, high schools, military bases, industrial
locations and recreational venues.

    The Company has also developed a related proprietary potato product for the
production of French fries in the Machine (the "Potato Product"). Although the
Company has developed its own potato product, the Company presently intends to
purchase a comparable potato product, for use in the machine, from a third
party. This strategic determination is driven by the high costs associated with
establishing a production line to produce its own, proprietary Potato Product.
At such time as the economics of the business and the success of the machine
warrant the capital investment of a production line, the Company may manufacture
its own, proprietary Potato Product or license the product to a contract
manufacturer.

    The Company's basic business strategy is to market the machines and the
ancillary products that are required to prepare each serving of French fries.
These ancillary products include the potato product, vegetable cooking oil,
serving cups and condiments. The Company's long-term profitability and success
will be driven primarily by the revenue and accompanying profit to the Company
associated with each and every vended portion sold from its installed base of
Machines.

    The Company had previously received a federally registered trademark for its
former name and logo, "Adelaide." The Company 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.


                                       1

<PAGE>


DESIGN AND MANUFACTURING HISTORY

    In 1992, persons then associated with the Company filed a U.S. patent
application with respect to a device for the vending of fresh French fried
potatoes (the original machine), which was assigned to the Company on October 9,
1992. In January 1993, the Company entered into a manufacturing agreement with
Premier Design, Ltd. ("Premier") for the production of its vending machine (the
"Premier Agreement"). The Premier Agreement provided that Premier would refine
and manufacture the original machine. The Agreement called for the Company and
Premier to share the development costs of the project; such costs were to
include design, engineering and initial manufacturing costs projected over the
initial quantity of production machines. The Agreement also provided for Premier
to manufacture any additional or similar machines for the Company. The Premier
Agreement could not be terminated by either party so long as Premier provided
the Machines as required by the Company. Pursuant to the terms of the Premier
Agreement, the first initial production of machines was to be delivered by June
15, 1993.

    As one element of the process undertaken by Premier, an engineering review
of the machine was to be performed. Mr. Harry Schmidt, president of Premier,
retained the services of Mr. Edward C. Kelly to perform said evaluation. In
February 1993, Mr. Kelly submitted the findings of his evaluation. Mr. Kelly's
study found the device failing to perform as anticipated and his review
identified significant and numerous mechanical and design problems. Mr. Kelly
and Premier's recommendation to prior management was that the existing machine
should be abandoned completely. Prior management, none of whom are presently
connected with the Company, believed they had developed a viable production
model French fry vending machine. They decided to abandon the original device.
The Company retained Premier Design to design and develop a machine based on new
and different technology. Kelly and Premier began the process of designing a new
machine in March 1993.

    Premier is a private company owned by Mr. Schmidt. Mr. Schmidt was
subsequently appointed to the Company's Board of Directors in May 1993, but did
not stand for reelection to the Board in September 1995. At the time of the
original Premier Agreement, neither Mr. Schmidt nor Mr. Kelly had any
affiliation with the Company. Edward C. Kelly joined the Company as Executive
Vice President in January 1994 and was subsequently appointed to the Company's
Board of Directors in February 1994. In June of 1994, he was named President of
the Company.

    In December 1994, having completed much of the design and development of the
new Machine, the parties amended the original manufacturing contract (the
"Premier Amendment"). The Premier Amendment described the terms under which
Premier would manufacture the 10 prototype models of the new machine and begin
manufacture of the production units.

    In July 1996, a U.S. patent was issued in Mr. Kelly's name for the Machine.
Mr. Kelly assigned the patent rights for the Machine to Premier based upon the
terms of the Premier Amendment and the express understanding between Premier,
the Company and Mr. Kelly (individually) that: (i) upon issuance, the patent
would be assigned 100% to Premier as consideration for the significant funds
expended by Premier in the development of the machine; (ii) Premier would
immediately assign the Company a 50% interest in the patent upon payment to
Premier by the Company of one-half of the total development costs.

    The Company's 50% share of the development costs were later determined to be
$650,000. The Company has paid $350,000 to Premiere towards its 50% share of the
development costs. Premiere will also receive $250 per machine manufactured by
the third party.

    In the spring of 1996, the Company and Premier agreed that Premier would be
unable to manufacture the Machines under the terms of the Premier Amendment. On
June 17, 1996, the Company 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 a non-exclusive
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. Subsequently the contract was
cancelled. In January 2000, the Company opened an assembly facility in
Portsmouth, New Hampshire and hired sub-contractors to produce the first
twenty-five units. In November 2001 the Company contracted with ACE Metal
Products, Inc. an unaffiliated third party to produce the first run production
models of its machines. ACE Metal Products, Inc. is a UL certified manufacturing
company located in Turlock, California.


                                       2


<PAGE>


PRE-PRODUCTION TOOLING

    The pre-production tooling stage for the machine is a critical element of
the process of getting the machine into commercial production. The Tasty Fries
device is comprised of approximately 3,100 individual parts. A portion of these
parts are basic, "off-the-shelf" manufacturing components such as hardware,
lighting and electrical components. However, approximately 75% of the components
are customized parts that require a subcontract supplier to manufacture
specifically for Tasty Fries. Because of the costs associated with manufacturing
these custom-designed parts, the most critical components have been designed to
be tooled, molded or cast by the various suppliers. While very costly and
time-consuming in the front-end of a project, the tooling of various component
parts will: (a) ensure the consistency and quality of the machine's critical
parts and (b) greatly reduce the unit costs of both the individual parts and the
overall machine, as production volume increases. As with the overall business
plan, the tooling process itself has been delayed over the past 18-24 months due
to the lack of capital available to complete the process.

    The pre-production tooling stage is complete. The Company will produce a
tabletop model of the machine. Modifying the existing machine for tabletop use
and ordering tooling will cost approximately $200,000 to $300,000. Customized
parts will be marketed to operators of the machine, be they owners or leasees.
No third parties will have any interest in the sale of the parts. The Company is
unable to estimate when sale of the parts might commence but when they do,
revenues are not expected to be significant.

THE MACHINE

    The Machine is designed to produce quality, freshly-made French fries
utilizing a unique method that automatically converts a dehydrated potato
product into rehydrated potato mix, delivers this mix into a proprietary forming
and cooking cycle, and finally into complete, high-quality, freshly-made French
fries. The potato product can be stored at room temperature, has a shelf-life of
between 12 and 24 months (depending on storage conditions), requires no
refrigeration or freezing, and occupies less storage space than frozen fries,
thereby offering greater storage capacity than competing technologies which use
frozen French fries. The French fries are delivered to the consumer in a 4-ounce
serving of 32 French fries. From the time currency is deposited, the total vend
time for an order of fries from the final production model Machine is estimated
to be approximately one and one-half minutes. The utilization of a
state-of-the-art combination of computer driven mechanics makes this possible.

    The design of the Machine involves the use of a vegetable oil enabling the
process to deliver a cholesterol-free product. Each vend contains French fries
which are crisp and golden brown. The quality of the product is consistently
uniform in each vend. The Machine has the capacity to produce 500 vends before
any refill of potato product or other ingredient 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 fries 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 currency mechanism.

    The Machine requires a 220-volt electrical connection (although the Company
plans for the production models of the machine to require a 110-volt connection)
and is equipped with modern computer technology using microprocessors and
sensors. If the machine operator desires, the Machine can communicate with a
central database, via modem, to make available immediate information on product
levels, service issues or currency levels. The machine's cash management program
enables it to monitor the cash position at any time and the amount of vends,
which allows for spontaneous and immediate cash reporting to the vending
operator.

    The Machine has 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 the majority of an operator's labor
expenditures will involve the replenishment of products into the Machines. At
such time, oil and water will be replaced, additional cups and condiments will
be restocked. Water will also be changed at such time unless the Machine is
directly 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.

    The Machine has received Underwriter's Laboratory ("UL") approval for the
United States and Canada. The Company is committed to placing in the market, a
reliable vending machine which will dispense our French fry


                                       3

<PAGE>


product. We plan for improvements to the machine at costs which are not
material. These improvements to the machine will require re-certification by UL,
which may cause delay in installation of the improved machine. The machine also
received certification from the National Automatic Merchandising Association
("NAMA") and from the Federal Communications Commission ("FCC").

THE POTATO PRODUCT

    The Company's proprietary Potato Product for use in the Machine was
developed jointly by Tasty Fries, Inc. and Nestle Netherlands BV. Management
estimates that the cost to establish its own manufacturing line to produce the
Potato Product is significant. Due to the considerable costs involved and the
current availability of another potato product, the Company does not currently
intend to establish a manufacturing line for the production of its own product.
SEE "AVAILABILITY OF RAW MATERIALS."

MARKETING

    The Company has historically marketed the Machines and the products
exclusively through territorial distributorships. The Company currently intends
to market its products in both domestic and international markets through a
combination of exclusive, territorial distributorships and traditional sales to
established companies in the vending industry. The Company may also own and
operate machines itself.

    The existing distributorship agreements essentially require an up-front
payment and minimum annual payments usually over the life of the contract.
Distributors must also pay a specified sum 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 Company has sold or granted an aggregate of 15 territorial
distributorships. In the course of normal business, some of these
distributorships have been reacquired by the Company and others have been
terminated due to default on behalf of the distributor. There are currently 3
distributorships, which have not been terminated or reacquired. The
distributors' obligations to make further payments, after tendering the initial
deposit required upon execution of the distributorship agreement, is conditioned
on the Company's ability to ship its Machines and related products. Management
believes that once commercial production of Machines is commenced and the
distributors' are notified and required to place orders for Machines, some
distributors' may be financially unable to do so or may simply elect not to
purchase Machines and effectuate their respective agreement.

    The Company retained the services of Claridge Capital Corporation to assist
with Marketing, Sales and web site development and maintenance. Claridge's
services were effectively terminated in November 2001. The Company hired IC Ads,
Inc. to develop and maintain the Company's new web site (www.tastyfries.com).

CALIFORNIA FOOD & VENDING, INC.

    In May 1991, the Company entered into a joint venture agreement with
California Food & Vending ("CFV"), another vending and food service company with
a high interest in the research and development of a French fry vending machine.
The companies planned to work together in the manufacturing and marketing of a
French fry machine. Disputes arose between the parties, litigation was
instituted by CFV and in July 1999 the disputes were settled and the litigation
dismissed. Pursuant to the settlement agreement, the Company regained
distributorship rights for the State of California; agreed to pay CFV the sum of
$1,000,000 which has been paid; issue 250,000 shares of our common stock to CFV;
and CFV will receive $350 for each of the first 500 machines produced and $450
per machine indefinitely thereafter and $.25 for each pound of potato product
sold by Tasty Fries. On January 21, 2002, the Company and CFV entered into a
settlement agreement extinguishing any and all CFV's future royalties, including
but not limited to payments for machines produced and potato product. The
Company is obligated to pay CFV a total of $1,500,000 payable in quarterly
installments over a two year term.


                                       4


<PAGE>


COMPETITION

    The technology in Tasty Fries' machine has been awarded U.S. patent
#5,537,916 issued June 23, 1996. Other attempts to bring a French fry vending
machine to market have not utilized the Company's patented technology. Tasty
Fries process of using dehydrated potato distinguishes it from the competition.
Most attempts use either a frozen or pre-cooked potato and are heated by
microwave or convection oven. Tasty Fries' patented process is unique and
management believes produces the best tasting product. The Company faces
competition from other suppliers of French fries, including fast food outlets.
The Company 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 may be viewed as competitors or may become competitors in the
future.

    Management believes, although no assurances are given, that due to current
demand for French fried potatoes, that there may be additional competition in
the future in the area of French fry vending.

AVAILABILITY OF RAW MATERIALS

    The raw materials or inputs used by the machine in the production of each
serving of fries are: potato product, cooking oil, water, serving cups and
condiments. Management believes that the oil, condiments and serving cups used
in the dispensing of French fries are readily available from its current
suppliers. In the event that one or more of these materials were to be
unavailable from a current supplier, the Company is confident that comparable
substitute products would be available from other suppliers. The Company
presently purchases potato product from Nestle Netherlands BV and has entered
into a contract with them for the purchase of the product. At such time in the
future as may be warranted by the success of the business, the Company may elect
to enter into the production of its own proprietary potato. SEE "POTATO
PRODUCT."

PATENTS AND PROPRIETARY RIGHTS

    The Machine's inventor, Edward C. Kelly, is Tasty Fries' President and Chief
Executive Officer and was issued a patent by the U.S. Patent and Trademark
office in July 1996. In addition, the Company is seeking, but has not yet
received, patent protection in Canada, Japan, and the European Patent office
(which currently represents 17 European countries). The Company has applied and
has received patent protection in Israel and Brazil; the Company is awaiting
examinations of the European application; the Canadian and Japanese applications
have been deferred, the Company can not estimate when these patents will be
granted.

    The Company intends to seek patent, trademark and related legal protection
in the future where it deems the same to be beneficial. However, legal
protections and precautions do not prevent third party development of
competitive products or technologies. There can be no assurance that the legal
precautions and other measures taken by the Company will be adequate to prevent
misappropriation of our proprietary technology. Notwithstanding the foregoing,
the Company does not intend to be solely dependent upon patent protection for
any competitive advantage. The Company expects to rely on its technological
expertise and the early entry into the marketplace of its products to further
enhance its position as a leader in the field and protect its technologies.

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's design complies with National Sanitation Foundation ("NSF") guidelines
as well as Underwriter's Laboratory ("UL") standards. The Machine has received
UL (Underwriter's Laboratory), NAMA ( National Automated Merchandising
Association) approval and will receive NSF approval prior to sale and
installation. The Company 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. Management believes,
although no assurance is given, that the required approvals from various
regulatory agencies are obtainable and are 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.


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<PAGE>


RESEARCH AND DEVELOPMENT COSTS

    For the fiscal years ended January 31, 2002 and 2001, the Company incurred
$1,760,000 and $1,094,000, respectively, in costs and expenses relating to the
research and development of its machine.

    The Company could incur additional research and development costs over the
next year should a counter top model of our French fry vending machine be
introduced. No decision has been made regarding introduction of such a model.
Projected costs to design and develop this model should not exceed $300,000 as
much of the technology can be transferred from the standard vending machine.

PERSONNEL

    As of January 31, 2002, the Company had a total of three full-time
employees. Additional employees are expected to be hired during the next 12
months if the Company's proposed plan of operation is successful and there is
sufficient cash flow from operations to support such additional expense. If
hired, such additional employees may include a director of marketing, 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.

ITEM 2. PROPERTIES.

    The Company owns no 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 Company's current lease commitments total
approximately $2,085 per month until May 31, 2002. At the present time,
management believes that this office space is sufficient; however, the Company
may require additional space during the next 12 months. The Company also rented
2,500 square feet of space in an industrial park in Portsmouth, NH on a month to
month lease at $850 per month, in November 2001 the Company ceased all business
activities in New Hampshire and no longer leases any property within the State.

ITEM 3. LEGAL PROCEEDINGS.

    On August 28, 1996, the Company, Edward C. Kelly and Premier Design, Ltd.
were added as defendants to a civil law suit in the Riverside County Branch of
the Superior Court of the State of California brought by Prize Frize, Inc.,
William Bartfield and Larry Wirth. The suit also named as defendants
approximately 25 other parties, all allegedly involved, in some manner, in the
pursuit of the French fry machine concept and/or business. The case was removed
to Federal Court. The Company successfully moved for dismissal of the claim on
behalf of itself and Mr. Kelly; the case was dismissed on June 2, 1997. The
Federal Court reversed the dismissal on appeal and the case was remanded to
State Court. The plaintiffs' claim against Tasty Fries was severed. The claims
against Edward C. Kelly and Premier Design, Ltd. were dismissed. The claim
brought by Prize Frize asserted that the Company usurped its trade secrets by
developing a French fry vending machine, which utilized the Basic American Food
potato product. The Company denied the allegations and vigorously defended the
litigation. It was the opinion of the Company's counsel that Prize Frizes'
lawsuit lacked merit and that the Company would prevail. As of October 1, 2001,
a Settlement and Mutual General Release "Settlement Agreement") was entered into
by and between the Company and Prize Frize, Inc. Under the Settlement Agreement,
Prize Frize agreed to dismiss the litigation and release all claims, known and
unknown, against the Company and its officers and directors. The Company paid no
monies to Prize Frize in consideration for the Settlement Agreement or the
dismissal of the action. The Company, however, granted Prize Frize a right of
first refusal to supply all the Company's requirements for a Basic American Food
("BAF") potato product known as "Russet Fries" in the quantities requested by
the Company and at its best possible and commercially reasonable price offered
by any BAF distributor. If, however, Prize Frize is unable or unwilling to
provide the Company with necessary quantities of the Russet Frize at said
prices, the Company may purchase the Russet Fries from another source. Pursuant
to the Settlement Agreement the litigation was subsequently dismissed with
prejudice.


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<PAGE>


California Food & Vending

    In May 1991, the Company entered into a joint venture agreement with
California Food & Vending ("CFV"), another vending and food service company with
a high interest in the research and development of a French fry vending machine.
The companies planned to work together in the manufacturing and marketing of a
French fry machine. Disputes arose between the parties, litigation was
instituted by CFV and in July 1999 the disputes were settled and the litigation
dismissed. Pursuant to the settlement agreement, the Company regained
distributorship rights for the State of California; agreed to pay CFV the sum of
$1,000,000 which has been paid; issue 250,000 shares of our common stock to CFV;
and CFV will receive $350 for each of the first 500 machines produced and $450
per machine indefinitely thereafter and $.25 for each pound of potato product
sold by Tasty Fries. On January 21, 2002, the Company and CFV entered into a
settlement agreement extinguishing any and all CFV's future royalties, including
but not limited to payments for machines produced and potato product. The
Company is obligated to pay CFV a total of $1,500,000 payable in quarterly
installments over a two year term.

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.

PART II.

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

    The common stock of the Company is quoted on the OTC Bulletin Board, under
the symbol "TFRY." 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 inter-dealer quotations, without retail
markup, markdown or commission and may not be reflective of actual transactions.

                                          High Bid        Low Bid
                                          --------        -------
               FISCAL 2000
               -----------
               First Quarter               $ .87           $ .25
               Second Quarter              $ .78           $ .42
               Third Quarter               $ .84           $ .35
               Fourth Quarter              $ .73           $ .34

               FISCAL 2001
               -----------
               First Quarter               $ .73           $ .38
               Second Quarter                .54             .35
               Third Quarter                 .57             .32
               Fourth Quarter                .44             .20

               FISCAL 2002
               -----------
               First Quarter                 .47             .24
               Second Quarter                .37             .14
               Third Quarter                 .27             .10
               Fourth Quarter                .58             .09


(B) HOLDERS.

    The approximate number of record holders of the Company's common stock as of
January 31, 2002 is 1,311.


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<PAGE>


(C) DIVIDENDS.

    The Company 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 Company's business.

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

    PLAN OF OPERATION

    The Company's basic business model is to market the Machines and the
ancillary products that are required to prepare each serving of French fries.
These ancillary products include the potato product, cooking oil, serving cups
and condiments. The Company's long-term profitability and success will be driven
to a significant degree by the revenue and accompanying profit to the Company
associated with each and every vended portion sold from its installed base of
Machines.

    With that business model in mind, the Company's current plan of operation is
to market its products in both domestic and international markets through a
combination of exclusive, territorial distributorships and traditional sales to
established companies in the vending industry. The Company may also own and
operate machines itself. Five machines were installed and operated in and around
Portsmouth New Hampshire. The five machines were in operation for approximately
11 months. An additional 20 machines were assembled and ready for field testing.
However, in November 2001 the Company ceased all business dealings in New
Hampshire, pulled its machines from the field and transported them along with
the Company's manufacturing equipment to ACE Metal Products, Inc. in Turlock
California for the first run production.

    Management believes that, once in full production, the business cycle of the
Company will allow it to operate in a cash positive fashion. That is, the
Company will require a significant advance payment from its customers with
receipt of each order; therefore providing a good portion of the capital
necessary to fund the procurement of essential component parts for machine
production. If management is incorrect in this assumption, the Company's capital
needs for manufacturing may be greater than currently anticipated. In this
event, the Company will be required 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
Company.

Liquidity and Capital Resources

    At January 31, 2002, the Company had approximately $121,000 in cash.

    In June 1997, the Company received $1,000,000 from three non-"U.S. Persons,"
as defined in Regulation S, in exchange for notes convertible into the Company's
common stock. The financing was completed pursuant to Section 903(c)(2) of
Regulation S under the Securities Act of 1933. Pursuant to the terms of the
financing, the Company issued 1,142,857 shares of common stock to be held in
escrow, pending the potential conversion of notes. The notes bear interest at 7%
annually and had a maturity date of May 14, 2000. In connection with the
financing, the Company also issued 250,000 common stock purchase warrants. In
September 1997, the note holders converted an aggregate of $397,679 of principal
into 700,000 shares of common stock. In November 1997, the Company issued an
additional 380,000 shares of common stock to be held in escrow for potential
conversion of notes. As of January 31, 1998, the aggregate outstanding principal
balance of the convertible notes was $602,321. The remaining 822,857 shares of
common stock in escrow were not deemed to be outstanding as of January 31, 1998.
In February 1998, an additional 444,000 shares of common stock were issued into
escrow, pending conversion of the notes. During the year ended January 31, 1999
the Company issued 1,480,280 shares of common stock in satisfaction of the
remaining $602,321 of convertible notes.

    In November 1997, in a separate transaction, the Company received $1,600,000
from six non-"U.S. persons," as defined in Regulation S, in exchange for notes
convertible into the Company's common stock. The financing was completed
pursuant to Section 930(c)(2) of Regulation S under the Securities Act of 1933.
Pursuant to the terms of the financing, the Company issued 2,400,000 shares of
common stock to be held in escrow, pending the potential conversion of notes.
The notes bear interest at 6% annually and had a maturity date of November 5,
2000.


                                       8


<PAGE>


In connection with the financing, the Company also issued 720,000 common stock
purchase warrants. As of January 31, 1998, the aggregate outstanding principal
balance of the convertible note was $1,600,000. The 2,400,000 shares of common
stock in escrow were not deemed to be outstanding as of January 31, 1998. In
February 1998, an additional 960,000 shares of common stock were issued into
escrow pending the conversion of the notes. During the year ended January 31,
1999 the Company issued 4,105,870 shares of common stock in satisfaction of
these convertible notes.

    In January 1998, the Company and a private investment corporation, a former
investor in the Company from April 1996, terminated the stock purchase agreement
that had been the basis for the original investment in 1996, due to lack of
performance on the investor's part. SEE "CONSULTANTS & ADVISORS."

    In April 1998, the Company entered into an agreement to receive $1,500,000
in proceeds from the sale of restricted stock to a U.S. corporation. The Company
issued 3,000,000 post-split shares of common stock as consideration. The Company
also issued warrants to purchase 1,500,000 post-split shares of common stock at
an exercise price of $1.90; the warrants expired April 12, 2001. The Company
also issued 150,000 post-split shares of restricted stock as a commission on the
transaction. The Company and the investor have entered into an escrow agreement
for this transaction and the shares were issued into escrow, pending funding. As
of January 31, 2002, the Company has received $1,425,000 of the total $1,500,000
financing and 2,850,000 of the total 3,000,000 shares have been released. The
balance of the April 1998 financing agreement has been terminated by both
parties.

    The Company will need to raise additional capital to enter into full-scale
production. If the Company is unable to obtain the desired funding from any
source, 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.

    Subsequent to January 31, 2002, the Company has issued additional shares and
warrants to purchase common stock to various parties as payment for services
rendered. The Company intends to continue this practice.

Results of Operations Fiscal Year Ending January 31, 2002, 2001 and 2000

    The company is still in the development stage and, as a result, has not
realized any revenues, which would include the fiscal years ended January 31,
2002, 2001 and 2000.

    As a result of the company's financial condition, it frequently issues
common stock to acquire various service. When the issue price is below the
current market price, the company incurs stock purchase expense. In the years
ended January 31, 2002, 2001 and 2000, stock purchase discount expense was
$503,500, $993,300, and $471,907.

    The company maintains a staff of several personnel. Salary and related
payroll tax expense for the years ended January 31, 2002, 2001 and 2000 were
$525,000, $402,000 and $396,000, respectively. The increase from 2001 to 2002
was due substantially to bonus payments made to two employees and a salary
increase.

    The company is dependent upon outside consultants to provide research and
development, financial, and marketing expertise. As a result, expenses can
fluctuate from year to year. Consulting expenses for the years ended January 31,
2002, 2001 and 2000 were $1,760,000, $1,028,000 and $1,765,000, respectively.

    The company incurs legal fees in connection with business negotiations and
contract preparation, as well as certain instances of litigation. Legal expenses
for the years ended January 31, 2002, 2001 and 2000 were $118,000, $525,000 and
$642,000, respectively.

    The loss from operations for the years ended January 31, 2002, 2001 and 2000
was ($3,833,000), ($3,793,000) and ($5,784,000), respectively.


                                       9


<PAGE>


Consultants & Advisors

    The Company has in the past, and will in the future, retain consultants with
significant experience in areas such as marketing, advertising and financing.

    In April 1996, the Company engaged L. Eric Whetstone to provide business
consulting services. As compensation for these services, Mr. Whetstone received
a one-time grant of 250,000 shares of restricted stock and an annual grant of
37,500 shares of restricted stock for the five-year period of the consulting
agreement. In January 1998, the Company accelerated the payment of the annual
compensation to Mr. Whetstone called for over the term of the five-year contract
and issued him 175,000 shares of restricted stock. Also in January 1998, Mr.
Whetstone was issued a warrant to purchase 1,000,000 shares of common stock. The
warrants have an exercise price of $1.90 and an original expiration date of
January 5, 2001. The warrants have since been extended until January 2004.

    The Company has in the past and continues to engage the services of USIS
International Capital Corporation ("USIS") to provide business consulting
services and to assist the Company with the introduction of its machine to the
marketplace.

    The Company retained the services of Claridge Capital Corporation to assist
with the Marketing, Sales and maintenance of the Company's web site. Claridge's
services were effectively terminated in November 2001. The Company hired IC Ads,
Inc. to develop and maintain the Company's new web site (www.tastyfries.com).

ITEM 7. FINANCIAL STATEMENTS.

    Audited balance sheets as of January 31, 2002 and 2001, and the related
statements of operations, of stockholders' equity deficiency and of cash flows
for the years ended January 31, 2002, 2001 and 2000 and for the period from
October 18, 1985 (inception) to January 31, 2002 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.

PART III.

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

(A) IDENTIFICATION OF DIRECTORS & EXECUTIVE OFFICERS

The current directors of the Company 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
Company are as follows:

                                                      Positions with
     Name                    Age             Company
     ----                    ---         --------------
  Edward C. Kelly             65         President, Chief Executive Officer,
                                         Treasurer and Chairman of the Board*


                                       10
<PAGE>


  Leonard J. Klarich          67         Vice President, Secretary and Director*

  Jurgen A. Wolf              67         Director*

  Ian D. Lambert              56         Director

  Kurt R. Ziemer              46         Director

* 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.

EDWARD C. KELLY - Mr. Kelly has been President of the Company 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 (by a 2/3 majority vote of shareholders)
in June 1996. From January 1994 until June 10, 1994 he was Executive Vice
President of the Company. Mr. Kelly has been involved in the engineering and
design of the machine since 1993 and was awarded a U.S. patent in July 1996. Mr.
Kelly owned and operated Mega Products Corporation, a subcontract manufacturing
company, from 1970 through 1994. Mega serviced companies including IBM, GE,
Dupont, Gulf & Western and Kulick & Soffa.

LEONARD J. KLARICH - Since September 1995, Mr. Klarich has been a director of
the Company and also was a consultant to management from March through May 1996.
Mr. Klarich was retained as Executive Vice President of the Company in June 1996
to assist in the day-to-day operations of the Company, with specific emphasis on
distribution networks, distributors and marketing. In June 1997, his title was
changed to Vice President. 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 plastics manufacturing company with revenue
in excess of $40 million upon his sale of the company. Prior thereto, he spent a
number of years as a chief operating officer of companies in need of turnaround
due to financial concerns.

JURGEN A. WOLF - Mr. Wolf has been a director of the Company 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. From August 1992 to
March 1993, Mr. Wolf was a director of Yukon Spirit Mines Ltd. (currently known
as Gainey Resources Ltd.). Mr. Wolf is also a director of four Canadian public
companies, which include: Consolidated Gulfside Industries, Ltd., Shoreham
Resources, Ltd., U.S. Oil Inc. and Key Capital Group, Inc.

IAN D. LAMBERT - Mr. Lambert was appointed as a director of the Company in July
1995 and was re-elected to the Board in September 1995. He is a Director of
Quotemedia.com, Inc. ( formerly International Tasty Fries, Inc.) and until
November 1996 was President of Yukon Spirit Mines Ltd. (subsequently renamed
Gainey Resources Ltd.). Quotemedia.com and Gainey Resourses Ltd. are or were
affiliated entities. Quotemedia.com has a distributorship agreement with the
Company for a number of European countries; Gainey's (Yukon Spirit Mines, Ltd.)
distribution agreement was reacquired by the Company in April 1998. Mr. Lambert
has been involved with the financing and management of numerous resource and
industrial based public companies, both in Canada and the U.S., since the early
1980's, and currently his positions in reporting companies include: Director,
Covik Development Corp., (oil & gas exploration), April 1990 to present;
Director, Trade Winds Resourses, Ltd. (mineral exploration), April 1990 to
present; Director LiteWave Corp. (affinity marketing), February 1999 to present;
Director, Sunorca Development Corp. (energy development), December 2000 to
present; Director Quotemedia.com, Inc. (Quotestream software developer), May
1994 to present; Secretary Centurion Health Corpotation (medical services/clinic
operations). SEE "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".

KURT R. ZIEMER - 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 Company. 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.


                                       11

<PAGE>


(B) DIRECTORSHIPS.

    The current directors hold no other directorships in any Company 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 Company
registered as an investment Company under the Investment Company Act of 1940,
except as disclosed herein.

(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES.

    None.

(D) FAMILY RELATIONSHIPS.

    Louis M. Kelly, Esquire was hired by the company as Operations Manager. Mr.
    Kelly has served as outside counsel to the Company and has a working
    knowledge of the business. Mr. Kelly is the son of Edward C. Kelly,
    President and CEO of the Company.


ITEM 10. EXECUTIVE COMPENSATION

(A) GENERAL

(B) SUMMARY COMPENSATION TABLE

                             ANNUAL COMPENSATION (1)

                             Fiscal Year
  Name &                       Ended                                  Restricted
Principal Position           January 31,        Salary       Bonus      Stock
------------------          ------------       --------      -----    ----------
                               2002            $240,000       $0
                               2001            $240,000       $0
Edward C. Kelly                2000            $240,000       $0
President, CEO
& Chairman (2)

Leonard J. Klarich             2001            $      0       $0
                               2000            $      0       $0
                               1999            $ 12,400       $0
Secretary, Director
& Vice President (3)

(1) There were no long-term incentive payments made in the year-ended January
    31, 2002.


(2) 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.
    This table does not include: (i) accrued director compensation of
    approximately $833 per month since September 1995; (ii) a restricted stock
    award of 9,206 post-split shares granted to Mr. Kelly as a component of his
    compensation for the fiscal year ended January 31, 1996; (iii) options
    granted to each board member on October 1, 1996


                                       12

<PAGE>


    by the Board of Directors for 50,000 post-split shares of restricted common
    stock exercisable for three years at $4.00 per share and an option granted
    for 1,000,000 post-split shares of common stock exercisable for two years at
    .50 per share.


(3) This table does not include: (i) accrued director compensation of
    approximately $833 per month since September 1995; (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.

(C) OPTIONS/S.A.R. GRANTS TABLE

    OPTION GRANTS IN THE FISCAL YEAR ENDED JANUARY 31, 2002

    Each of our Director's received a seven year option to purchase 50,000
    shares of our common stock at an exercise price of $.45.

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

    None.

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

    None.

(F) COMPENSATON OF DIRECTORS.

    Directors are compensated by payment of an annual fee and grant of stock
    options. Each director receives an annual fee of $10,000. Each director also
    receives an option exercisable for seven years to acquire 50,000 shares of
    Tasty Fries common stock for each year of service commencing June 10, 1994.
    The exercise price is equal to the closing bid price of our stock on June
    9th proceeding each year of service. Exercise prices range from $.45 to
    $8.20 per share.

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

    In July, 2001, the Board of Directors approved the terms of an Employment
    Agreement for the Company's Chief Executive Officer. The Employment
    Agreement is for a period of ten years from its date of execution. The
    Employment Agreement provides for an annual salary, to be increased by 10%
    each year. In addition, the Chief Executive Officer is granted the right to
    acquire up to 1,000,000 shares of the Company's restricted Common Stock for
    each full year of his employment with the Company, commencing with the year
    beginning June 10, 1994. The acquisition price for such stock shall be the
    closing price of the stock on June 9 (or the closest business day thereto)
    of each such full year. He has the right to exercise this option at any time
    up to seven years from the date his right to acquire stock vests. The
    agreement also provides for compensation arrangement in the case of
    temporary disability, death and permanent disability.


                                       13

<PAGE>


(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 January 31, 2002, the ownership of
    common stock by persons known to the Company who own beneficially more than
    5% of the outstanding shares of common stock:

       Name & Address of                  Amount & Nature of           Percent
       Beneficial Owner                  Beneficial Ownership         of Class
      -------------------                --------------------         ---------
     Edward C. Kelly                             2,020,000               3%
     650 Sentry Parkway, Suite One
     Blue Bell, PA  19422  (1)

     Whetstone Ventures Corp.                    2,895,500               5%
     11 Waterfront Estates, Estates Drive
     Lancaster, PA  19601  (2,3)

     L. Eric & Ilona Whetstone                   2,985,500               5%
     11 Waterfront Estates, Estates Drive
     Lancaster, PA  19601  (3)

     David Rights
     1095 Rydal Road
     Rydal, PA 19046                             4,800,000               8%

     Ahmad Zhobi
     U.A.E.                                      3,900,000               7%

     Zekra Zhobi                                 2,680,000               4%

-----------

(1) Does not include an option for 100,000 shares of common stock granted by the
    Board of Directors on July 1, 1998 exercisable until July 21, 2001 @ $.50
    per share; options for 300,000 shares expiring ratably between June 10, 2002
    and June 10, 2008 at exercise prices ranging from $.45 to $8.20 per share.
    Options pursuant to Employment Contract. SEE "EMPLOYMENT CONTRACTS AND
    TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS


                                       14

<PAGE>


(2) Does not include 900,000 additional shares issued to Lancaster Investments
    pursuant to the terms of the April 1998 financing. These additional shares
    are being held in escrow pending the complete funding of the transaction and
    will be released from escrow on a pro-rata basis as the financing is
    completed. As of January 31, 2001, $1,425,000 of the total $1,500,000
    financing has been received and 2,850,000 of the total 3,000,000 shares have
    been released. The balance of the April 1998 financing agreement has been
    terminated by both parties. SEE "LIQUIDITY AND CAPITAL RESOURCES".

(3) Includes 150,000 post-split shares of common stock issued to L. Eric
    Whetstone in connection with the April 1998 financing from Lancaster
    Investment Corp.

(B) SECURITY OWNERSHIP OF MANAGEMENT

    The following table sets forth, as of April 26, 2001, the beneficial common
    stock ownership of all directors, executive officers, and of all directors
    and officers as group:

   Name & Address of                  Amount & Nature of          Percent
   Beneficial Owner                  Beneficial Ownership         of Class
   -----------------                 --------------------         ---------
 Edward C. Kelly                            2,020,000                 3%
 650 Sentry Parkway, Suite One
 Blue Bell, PA  19422  (1)

 Leonard J. Klarich                           180,000                 0
 839 Claybrook Court
 Knoxville, TN  37923  (2)

 Jurgen A. Wolf                                                       0
 1285 West Pender Street
 Vancouver, B.C. Canada  (3)

 Ian D. Lambert                               281,978                 0
 c/o International Tasty Fries, Inc.
 595 Howe Street, Suite 602
 Vancouver, B.C.  V6C 2T5  (4)

 Kurt R. Ziemer                               804,576                 1%
 599 Valley View Drive
 New Holland, PA  17557  (5)

 All Officers and Directors                 3,286,554                 5%
 as a group  (5 persons)

 * less than 1%


                                       15


<PAGE>


(1)  Does not include an option for 300,000 shares expiring ratably between June
     10, 2002 and June 10, 2008 at exercise prices ranging from $.45 to $8.20
     per share. Options pursuant to Employment Contract. SEE "EMPLOYMENT
     CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS

(2)  Does not include: (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) options for 300,000 shares
     expiring ratably between June 10, 2002 and June 10, 2008 at exercise prices
     ranging from $.45 to $8.20 per share.

(3)  Does not include: (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) options for 250,000 shares
     expiring ratably between June 10,2002 and June 10, 2008 at exercise prices
     ranging from $.45 to $8.20 per share.

(4)  436,952 post-split shares were issued to International Tasty Fries, Inc. in
     1995 as consideration for a financing. Mr. Lambert is the President of
     International Tasty Fries and is a shareholder of that company. Does not
     include: (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. options for 250,000 shares expiring ratably between June
     10,2002 and June 10, 2008 at exercise prices ranging from $.45 to $8.20 per
     share.

(5)  Does not include 680 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 and options for 200,000 expiring
     ratably between June 10, 2002 and June 10, 2008 at exercise prices ranging
     from $.45 to $8.20 per share. Mr. Ziemer's option has been prorated to
     reflect the date he was appointed to the Board of Directors on October 4,
     1996.

(C) CHANGES IN CONTROL.

     In connection with the Subscription Agreement dated April 13, 1998 between
     the Company and Lancaster Investment Corp., the Company granted Whetstone
     Ventures, Inc. the right to name one of the five directors to the Board of
     Directors of Tasty Fries, Inc. Together with a previous right of
     appointment (from the April 1996 stock purchase agreement), Whetstone
     Ventures, Inc. may appoint two members to the Board of Directors of Tasty
     Fries, Inc. Subsequently, the balance of the April 1998 financing agreement
     was terminated by both parties with Whetstone Ventures, Inc.'s right of
     appointment being recinded by the Company.

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

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    Mr. Ian Lambert, a director of the Company since July 1995. He is a Director
of Quotemedia.com (formerly International Tasty Fries, Inc.), and until November
1996, was President of Yukon Spirit Mines Ltd. (now doing business as Gainey
Resources Ltd.). Quotemedia.com and Gainey Resources Ltd. are or were are
affiliated entities. Quotemedia.com has a distributorship agreement with the
Company for a number of European countries; Gainey's distribution agreement was
reacquired by the Company in April 1998. Mr. Lanbert has been involved with


                                       16

<PAGE>


the financing and management of numerous resource and industrial based public
companies, both in Canada and the U.S., since the early 1980's, and currently
his positions in reporting companies include: Director, Covik Development Corp.,
(oil & gas exploration), April 1990 to present; Director, Trade Winds Resources
Ltd., (mineral exploration) April 1990 to present; Director, Dimensions West
Engery Inc., (oil & gas production) April 1990 to present; Director, Lite Wave
Corp., (affinity marketing) February 199 to present; Director, Sunorca
Development Corp. (energy development) December 2000 to present; Director,
Quotemedia.com, Inc. (Quotestream software developer) may, 1994 to present;
Secretary, Centurion Health Corporation (medical services/clinic operations).

SUBSEQUENT EVENTS

NONE

REPORTS ON FORM 8-K.

    Forms 8-K dated May 19, 1999, June 17, 1999, July 20, 1999, August 11, 1999,
October 14, 1999 November 20, 1999 and March 20, 2001 are hereby incorporated by
reference.

SIGNATURES

    In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

TASTY FRIES, INC.
Date as of filing                        By: -----------------------------
                                                 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 Company and in the capacities and on the
dates indicated.

                                                   April 30, 2002
-------------------------------------
Edward C. Kelly, Chairman, CEO
President, Treasurer & Director

                                                   April 30, 2002
-------------------------------------
Leonard J. Klarich, Vice President,
Secretary & Director

                                                   April 30, 2002
-------------------------------------
Jurgen A. Wolf, Director

                                                   April 30, 2002
-------------------------------------
Ian D. Lambert, Director

                                                   April 30, 2002
-------------------------------------
Kurt N. Ziemer, Director


                                       17

<PAGE>




                                TASTY FRIES, INC.

                          (A DEVELOPMENT STAGE COMPANY)
                                 _____________

                              Financial Statements

                  Years Ended January 31, 2002, 2001, and 2000

<PAGE>


                               TASTY FRIES, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                               TABLE OF CONTENTS

                                                                  Page

     Independent Auditor's Report                                 1 - 2
     Balance Sheets                                                 3
     Statements of Operations                                       4
     Statements of Changes in Stockholders' Equity Deficiency     5 - 9
     Statements of Cash Flows                                    10 - 11
     Notes to Financial Statements                               12 - 22


<PAGE>


                          INDEPENDENT AUDITOR'S REPORT

                                                                  April 12, 2002

Board of Directors and Stockholders
Tasty Fries, Inc.
Blue Bell, Pennsylvania

    We have audited the accompanying balance sheets of Tasty Fries, Inc. (A
Development Stage Company) as of January 31, 2002 and 2001, and the related
statements of operations, of changes in stockholders' equity deficiency, and of
cash flows for the years then ended and for the period from October 18, 1985
(inception) to January 31, 2002. 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 audit. The financial
statements of Tasty Fries, Inc. (A Development Stage Company) for the year ended
January 31, 2000, and for the period from October 18, 1985 (inception) to
January 31, 2000 were audited by other auditors, whose report dated March 31,
2000 on those statements was unqualified and included an explanatory paragraph
that described their substantial doubt about the Company's ability to continue
as a going concern as discussed in Note 1 to the financial statements. The
statements of operations, of changes in stockholders' equity deficiency and of
cash flows for the period from October 18, 1985 (inception) to January 31, 2002
include costs and expenses of $19,185,066 and other expense of $2,521,100 which
relate to periods reported on by the other auditors. Our opinion on the
statements of operations, of changes in stockholders' equity deficiency and of
cash flows for the period from October 18, 1985 (inception) to January 31, 2002,
insofar as it relates to the amounts reported upon by the other auditors, is
based solely on the report of the other auditors.

    We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. 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 audit provides a
reasonable basis for our opinion.


<PAGE>


    In our opinion, the balance sheets as of January 31, 2002 and 2001 and the
related statements of operations, of changes in stockholders' equity deficiency
and of cash flows for the years then ended and, based on our audit and the
report of other auditors, the statements of operations, of stockholders' equity
deficiency and of cash flows for the period from October 18, 1985 (inception) to
January 31, 2002, present fairly, in all material respects, the financial
position of Tasty Fries, Inc. (A Development Stage Company) as of January 31,
2002 and 2001 and the results of its operations and its cash flows for the
periods then ended, in conformity with accounting principles generally accepted
in the United States of America.

    The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has not generated any revenues, has incurred
net losses since its inception and has a working capital and stockholders'
equity deficiency as of January 31, 2002. These factors raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 1. The financial statements do not
include any adjustments that might result in the outcome of this uncertainty.


                                                       GOLDENBERG ROSENTHAL, LLP

Jenkintown, Pennsylvania


                                        2

<PAGE>


                               TASTY FRIES, INC.
                          (A Development Stage Company)
                                 BALANCE SHEETS
--------------------------------------------------------------------------------


                                                           January 31
                                                   ----------------------------
     ASSETS                                            2002            2001
                                                   ------------    ------------
Current assets
  Cash ..........................................  $    120,566    $     86,978
  Prepaid expense ...............................        24,598            --
                                                   ------------    ------------
  Total current assets ..........................       145,164          86,978

Furniture and office equipment, net of
  accumulated depreciation of $74,062 in 2002 and
  $67,641 in 2001 ...............................         3,633          10,054

Other assets
  Royalty rights ................................     1,500,000            --
                                                   ------------    ------------
Total Assets ....................................  $  1,648,797    $     97,032
                                                   ============    ============
     LIABILITIES AND STOCKHOLDERS' EQUITY
       DEFICIENCY

Current liabilities
  Accounts payable and accrued expenses .........  $    739,783    $    565,064
  Current maturities of long-term debt ..........       600,000            --
  Stockholder loan payable ......................       312,566         270,000
                                                   ------------    ------------
  Total current liabilities .....................     1,652,349         835,064
                                                   ------------    ------------
Long-term debt, net of current maturities .......       750,000            --
Unearned revenue ................................       320,000         320,000
                                                   ------------    ------------
                                                      1,070,000         320,000
                                                   ------------    ------------
Commitments and contingencies

Stockholders' equity deficiency
  Common stock, $.001 par value
    Authorized 100,000,000 shares
    Issued and outstanding 59,171,758 shares
      in 2002 and 40,734,011 shares in 2001 .....        59,171          40,734
  Additional paid-in capital ....................    28,261,075      24,400,084
  Deficit accumulated in the development stage ..   (29,331,798)    (25,498,850)
                                                   ------------    ------------
                                                     (1,011,552)     (1,058,032)
  Less: Subscription receivable .................       (62,000)           --
                                                   ------------    ------------
  Total stockholders' equity deficiency .........    (1,073,552)     (1,058,032)
                                                   ------------    ------------
Total Liabilities and Stockholders' Equity
  Deficiency ....................................  $  1,648,797    $     97,032
                                                   ============    ============


                       See notes to financial statements


                                        3
<PAGE>


<TABLE>
<CAPTION>

                                             TASTY FRIES, INC.
                                       (A Development Stage Company)
                                          STATEMENTS OF OPERATIONS
                                YEARS ENDED JANUARY 31, 2002, 2001 AND 2000
                           AND OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 2002
----------------------------------------------------------------------------------------------------------

                                               Cumulative                Year Ended January 31
                                                 Since        --------------------------------------------
                                               Inception          2002            2001            2000
                                              ------------    ------------    ------------    ------------
<S>                                           <C>             <C>             <C>             <C>
Revenues ..................................   $       --      $       --      $       --      $       --
                                              ------------    ------------    ------------    ------------
Costs and expenses
  Research, machine and product development      5,528,301       1,759,899       1,094,067         144,403
  Selling, general and administrative .....     19,572,151       1,529,532       1,531,888       5,113,797
                                              ------------    ------------    ------------    ------------
  Total costs and expenses ................     25,100,452       3,289,431       2,625,955       5,258,200
                                              ------------    ------------    ------------    ------------
Loss before other income (expense) ........    (25,100,452)     (3,289,431)     (2,625,955)     (5,258,200)
                                              ------------    ------------    ------------    ------------
Other income (expense)
  Interest income .........................         21,274            --              --              --
  Forfeited distributor deposits ..........         15,000            --              --              --
  Stock purchase discount .................     (2,277,552)       (503,500)       (993,350)       (471,907)
  Interest expense ........................     (1,990,068)        (40,017)       (173,379)        (53,550)
                                              ------------    ------------    ------------    ------------
  Total other income (expense) ............     (4,231,346)       (543,517)     (1,166,729)       (525,457)
                                              ------------    ------------    ------------    ------------
Net loss ..................................   $(29,331,798)   $ (3,832,948)   $ (3,792,684)   $ (5,783,657)
                                              ============    ============    ============    ============
Net loss per share of common stock ........                         ($0.08)         ($0.12)         ($0.27)
                                                              ============    ============    ============
Weighted average shares outstanding .......                     46,957,387      30,905,531      21,341,885
                                                              ============    ============    ============

</TABLE>


                                     See notes to financial statements


                                                     4
<PAGE>


<TABLE>
<CAPTION>

                                         TASTY FRIES, INC.
                                   (A Development Stage Company)
                     STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY
                         OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 2002
-------------------------------------------------------------------------------------------------

                                                                         Deficit
                                                                       Accumulated       Total
                                                                         in the      Stockholders'
                                            Common       Additional    Development       Equity
                                            Stock     Paid-in Capital     Stage       (Deficiency)
                                         -----------  ---------------  -----------   ------------
<S>                                      <C>            <C>            <C>            <C>
Balance, February 1, 1991 ............   $   157,307    $  (156,307)   $      --      $     1,000

Issued 1,114,679 shares for note
  conversion .........................        11,147        113,853           --          125,000

Net loss for the year ended
  January 31, 1992 ...................          --             --         (198,425)      (198,425)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 1992 ............       168,454        (42,454)      (198,425)       (72,425)

Issued 4,275,000 shares ..............        42,750        457,250           --          500,000

Issued 150,000 shares for services ...         1,500         36,000           --           37,500

Net loss for the year ended
  January 31, 1993 ...................          --             --         (773,304)      (773,304)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 1993 ............       212,704        450,796       (971,729)      (308,229)

Issued 7,600,000 shares ..............        76,000        464,000           --          540,000

Issued 220,000 shares for services ...         2,200           --             --            2,200

Redeemed 3,145,000 shares ............       (31,450)        31,450           --             --

Net loss for the year ended
  January 31, 1994 ...................          --             --         (658,820)      (658,820)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 1994 ............       259,454        946,246     (1,630,549)      (424,849)

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

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

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

Net loss for the year ended
  January 31, 1995 ...................          --             --       (2,148,933)    (2,148,933)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 1995
  (carried forward) ..................       322,270      2,075,490     (3,779,482)    (1,381,722)

(continued)

</TABLE>


                                 See notes to financial statements


                                                 5
<PAGE>


<TABLE>
<CAPTION>

                                         TASTY FRIES, INC.
                                   (A Development Stage Company)
                      STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY
                         OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 2002
-------------------------------------------------------------------------------------------------

(continued)

                                                                         Deficit
                                                                       Accumulated       Total
                                                                         in the      Stockholders'
                                            Common       Additional    Development       Equity
                                            Stock     Paid-in Capital     Stage       (Deficiency)
                                         -----------  ---------------  -----------   ------------
<S>                                      <C>            <C>            <C>            <C>
Balance, January 31, 1995
  (brought forward) ..................       322,270      2,075,490     (3,779,482)    (1,381,722)

Issued 21,815,000 shares .............       218,150      1,054,350           --        1,272,500

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

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

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

Reverse stock split ..................      (620,885)       620,885           --             --

Net loss for the year ended
  January 31, 1996 ...................          --             --       (1,384,488)    (1,384,488)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 1996 ............         3,120      4,266,355     (5,163,970)      (894,495)

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

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

Net loss for the year ended
  January 31, 1997 ...................          --             --       (2,172,260)    (2,172,260)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 1997
  (carried forward) ..................         4,700      6,097,275     (7,336,230)    (1,234,255)

(continued)

</TABLE>


                                 See notes to financial statements


                                                 6
<PAGE>


<TABLE>
<CAPTION>

                                        TASTY FRIES, INC.
                                   (A Development Stage Company)
                      STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY
                         OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 2002
-------------------------------------------------------------------------------------------------

(continued)

                                                                         Deficit
                                                                       Accumulated       Total
                                                                         in the      Stockholders'
                                            Common       Additional    Development       Equity
                                            Stock     Paid-in Capital     Stage       (Deficiency)
                                         -----------  ---------------  -----------   ------------
<S>                                      <C>            <C>            <C>            <C>
Balance, January 31, 1997
  (brought forward) ..................         4,700      6,097,275     (7,336,230)    (1,234,255)

Issued 1,500,000 shares for
  non-recurring compensation .........         1,500      1,029,750           --        1,031,250

Issued 167,083 shares ................           167         80,650           --           80,817

Issued 955,000 shares for services ...           955      1,317,545           --        1,318,500

Issued 43,750 shares for
  litigation settlement ..............            44         54,644           --           54,688

Issued 700,000 shares for
  convertible notes ..................           700        566,979           --          567,679

Issued 452,772 shares for
  repayment of notes payable .........           452        523,587           --          524,039

Issued 120,000 shares for
  repayment of notes payable,
  officer/director ...................           120        175,830           --          175,950

Net loss for the year ended
  January 31, 1998 ...................          --             --       (5,074,155)    (5,074,155)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 1998 ............         8,638      9,846,260    (12,410,385)    (2,555,487)

Issued 2,251,307 shares ..............         2,252      1,299,526           --        1,301,778

Issued 5,586,150 shares for
  convertible notes ..................         5,586      3,129,504           --        3,135,090

Issued 42,704 shares for
  interest on convertible notes ......            43         26,385           --           26,428

Issued 1,226,815 shares for services .         1,227        490,652           --          491,879

Issued 250,000 shares for
  repurchase of distributorship ......           250        124,750           --          125,000

Net loss for the year ended
  January 31, 1999 ...................          --             --       (3,512,124)    (3,512,124)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 1999
  (carried forward) ..................        17,996     14,917,077    (15,922,509)      (987,436)

(continued)

</TABLE>


                                 See notes to financial statements


                                                 7
<PAGE>


<TABLE>
<CAPTION>

                                         TASTY FRIES, INC.
                                   (A Development Stage Company)
                      STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY
                         OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 2002
-------------------------------------------------------------------------------------------------

(continued)

                                                                         Deficit
                                                                       Accumulated       Total
                                                                         in the      Stockholders'
                                            Common       Additional    Development       Equity
                                            Stock     Paid-in Capital     Stage       (Deficiency)
                                         -----------  ---------------  -----------   ------------
<S>                                      <C>            <C>            <C>            <C>
Balance, January 31, 1999
  (brought forward) ..................        17,996     14,917,077    (15,922,509)      (987,436)

Issued 3,789,000 shares ..............         3,789      1,624,291           --        1,628,080

Issued 250,000 shares for
  litigation settlement ..............           250        124,750           --          125,000

Issued 6,184,405 shares for services .         6,184      2,799,214           --        2,805,398

Issued 500,000 shares for
  repurchase of distributorship ......           500        249,500           --          250,000

Net loss for the year ended
  January 31, 2000 ...................          --             --       (5,783,657)    (5,783,657)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 2000 ............        28,719     19,714,832    (21,706,166)    (1,962,615)

Issued 3,660,000 shares ..............         3,660      1,228,140           --        1,231,800

Issued 3,155,000 shares for services .         3,155      1,312,312           --        1,315,467

Issued 4,000,000 shares for
  repayment of note payable ..........         4,000      1,596,000           --        1,600,000

Issued 1,200,000 shares for
  payment of accrued expenses ........         1,200        548,800           --          550,000

Net loss for the year ended
  January 31, 2001 ...................          --             --       (3,792,684)    (3,792,684)
                                         -----------    -----------    -----------    -----------

Balance, January 31, 2001
  (carried forward)       ............        40,734     24,400,084    (25,498,850)    (1,058,032)

(continued)

</TABLE>


                                 See notes to financial statements


                                                 8
<PAGE>


<TABLE>
<CAPTION>

                                         TASTY FRIES, INC.
                                   (A Development Stage Company)
                      STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY DEFICIENCY
                         OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 2002
-------------------------------------------------------------------------------------------------

(continued)

                                                                         Deficit
                                                                       Accumulated       Total
                                                                         in the      Stockholders'
                                            Common       Additional    Development       Equity
                                            Stock     Paid-in Capital     Stage       (Deficiency)
                                         -----------  ---------------  -----------   ------------
<S>                                      <C>            <C>            <C>            <C>
Balance, January 31, 2001 ............        40,734     24,400,084    (25,498,850)    (1,058,032)

Issued 6,200,000 shares ..............         6,200        835,800           --          842,000

Issued 747,500 shares for
  litigation settlement ..............           747        113,928           --          114,675

Issued 10,010,247 shares for services         10,010      2,542,743           --        2,552,753

Issued 1,480,000 shares for
  repayment of note payable ..........         1,480        368,520           --          370,000

Net loss for the year ended
  January 31, 2002 ...................          --             --       (3,832,948)    (3,832,948)
                                         -----------    -----------   ------------    -----------

Balance, January 31, 2002 ............   $    59,171    $28,261,075   $(29,331,798)   $(1,011,552)
                                         ===========    ===========   ============    ===========

</TABLE>


                                 See notes to financial statements


                                                 9
<PAGE>


<TABLE>
<CAPTION>

                                                      TASTY FRIES, INC.
                                                 (A Development Stage Company)
                                                   STATEMENTS OF CASH FLOWS
                                         YEARS ENDED JANUARY 31, 2002, 2001, AND 2000
                                     AND OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 2002
-----------------------------------------------------------------------------------------------------------------------------

                                                                     Cumulative              Year Ended January 31
                                                                       Since        -----------------------------------------
                                                                     Inception         2002           2001           2000
                                                                    ------------    -----------    -----------    -----------
<S>                                                                 <C>             <C>            <C>            <C>
Cash flows from operating activities ............................   $(29,331,798)   $(3,832,948)   $(3,792,684)   $(5,783,657)
  Net loss
  Adjustments to reconcile net loss to net cash used in operating
    activities
      Depreciation and amortization .............................        310,918          6,421         10,204        141,869
      Common stock issued for services ..........................     10,203,835      2,049,254      1,316,317      2,805,398
      Common stock issued for litigation settlement .............        764,364        114,675           --          125,000
      Stock purchase discount ...................................      2,277,552        503,500        993,300        471,907
      Common stock issued for interest on convertible notes .....      1,129,196           --             --             --
      Common stock issued for repurchase of distributorships ....        250,000           --             --          250,000
      Accrued interest on notes and convertible notes payable ...        438,594         40,017           --             --
      (Increase) decrease in assets
        Prepaid expenses ........................................        (24,598)       (24,598)          --             --
        Other assets ............................................           --             --             --          123,313
      Increase (decrease) in liabilities
        Accounts payable and accrued expenses ...................      1,249,766        134,702        340,638       (297,175)
        Unearned revenue ........................................        320,000           --             --           59,000
                                                                    ------------    -----------    -----------    -----------

  Net cash used in operating activities .........................    (12,412,171)    (1,008,977)    (1,132,225)    (2,104,345)
                                                                    ------------    -----------    -----------    -----------

Cash flows from investing activities
  Purchase of furniture and office equipment ....................        (77,695)          --             --           (7,519)
  Loan costs ....................................................       (236,856)          --             --             --
                                                                    ------------    -----------    -----------    -----------

  Net cash used in investing activities .........................       (314,551)          --             --           (7,519)
                                                                    ------------    -----------    -----------    -----------

Cash flows from financing activities
  Proceeds from convertible notes payable .......................      2,600,000           --             --             --
  Issuance of common stock ......................................      8,960,173        780,000      1,257,200      1,156,173
  Costs of raising capital ......................................       (318,700)          --         (318,700)          --
  Notes payable, net ............................................      1,525,816        262,566        270,000        900,000
  Officer/director note .........................................         80,000           --             --             --
                                                                    ------------    -----------    -----------    -----------

  Net cash provided by financing activities .....................     12,847,289      1,042,566      1,208,500      2,056,173
                                                                    ------------    -----------    -----------    -----------

Increase (decrease) in cash (carried forward) ...................        120,567         33,589         76,275        (55,691)

(continued)


                                               See notes to financial statements

</TABLE>


                                                              10
<PAGE>


<TABLE>
<CAPTION>

                                                    TASTY FRIES, INC.
                                              (A Development Stage Company)
                                                 STATEMENTS OF CASH FLOWS
                                       YEARS ENDED JANUARY 31, 2002, 2001, AND 2000
                                   AND OCTOBER 18, 1985 (INCEPTION) TO JANUARY 31, 2002
------------------------------------------------------------------------------------------------------------------------

(continued)

                                                                  Cumulative              Year Ended January 31
                                                                    Since        ---------------------------------------
                                                                  Inception         2002           2001          2000
                                                                 ------------    -----------    ----------   -----------
<S>                                                                 <C>             <C>            <C>            <C>
Increase (decrease) in cash (brought forward) ................        120,567         33,589        76,275       (55,691)

Cash, beginning of period ....................................           --           86,978        10,703        66,394
                                                                 ------------    -----------    ----------   -----------

Cash, end of period ..........................................   $    120,567    $   120,567    $   86,978   $    10,703
                                                                 ============    ===========    ==========   ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION

    Cash paid during the period for interest .................   $     54,803    $      --      $     --     $     8,952
                                                                 ============    ===========    ==========   ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES

    Issuance of common stock for services ....................   $ 10,203,835    $ 2,049,254    $1,316,317   $ 2,805,398
    Issuance of common stock for conversion of note payable ..      2,675,000           --            --            --
    Issuance of common stock for repurchase of distributorship        475,000           --            --         250,000
    Issuance of common stock for litigation settlement .......        764,364        114,675          --         125,000
    Accrued interest on notes payable ........................        438,594         40,017          --            --
    Issuance of common stock to pay accrued expenses .........        550,000           --         550,000          --
    Issuance of common stock to pay note payable .............      1,270,000        370,000       900,000          --
    Acquisition of royalty rights ............................     (1,500,000)    (1,500,000)         --            --
    Note payable, royalty rights .............................      1,500,000      1,500,000          --            --
    Issuance of common stock for subscription receivable .....         62,000         62,000          --            --

</TABLE>


                                            See notes to financial statements


                                                            11



<PAGE>


                               TASTY FRIES, INC.
                         (A DEVELOPMENT STAGE COMPANY)
                         NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 1                  The Company is a development stage company since it has
DESCRIPTION OF          not completed designing, testing, and manufacturing its
BUSINESS                sole product, a vending machine that will cook and
                        dispense french fries. For the past four years the
                        Company has been tooling and producing its first 25
                        machines. This process has been extended for a long
                        period of time as a result of limited working capital.
                        The costs associated with the production of 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 from the
                        sale of its french fry vending machine since inception
                        and its ability to continue as a going concern is
                        dependent on the continuation of financing to fund the
                        expenses relating to successfully manufacturing and
                        marketing the vending machine. Management is currently
                        in negotiations with several funding sources to provide
                        the working capital necessary to: (i) begin commercial
                        production of the machines, and (ii) bring them to
                        market, at which time the Company believes that
                        sufficient cash will be generated to support its
                        operations. Management cannot assure the ultimate
                        success of the above plan.

NOTE 2                  FURNITURE AND OFFICE EQUIPMENT AND DEPRECIATION
SUMMARY OF
SIGNIFICANT             Furniture and office equipment are stated at cost.
ACCOUNTING              Depreciation is determined using the straight-line
POLICIES                method over the estimated useful lives of the
                        equipment, ranging from 3 to 7 years. Depreciation
                        expense for the years ended January 31, 2002, 2001, and
                        2000 was $6,421, $10,204, and $12,037, 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.



                                       12

<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 2                  IMPAIRMENT OF LONG-LIVED ASSETS
SUMMARY OF
SIGNIFICANT             In accordance with Statement of Financial Accounting
ACCOUNTING POLICIES     Standards ("SFAS") No. 121, "Accounting for the
(continued)             Impairment of Long-Lived Assets and for Long-Lived
                        Assets to be Disposed of", assets are generally
                        evaluated on a market-by-market basis in making a
                        determination as to whether such assets are impaired. At
                        each year-end, the Company reviews its long-lived assets
                        for impairment based on estimated future nondiscounted
                        cash flows attributable to the assets. In the event such
                        cash flows are not expected to be sufficient to recover
                        the recorded value of the assets, the assets are written
                        down to their estimated fair values.

                        INCOME TAXES

                        Income taxes are provided for the tax effects of
                        transactions reported in the financial statements and
                        consists of taxes currently due plus deferred taxes
                        related primarily to differences between the bases of
                        balance sheet items for financial and income tax
                        reporting. The Company determines the deferred tax asset
                        generated by net operating loss carryforwards. All
                        deferred tax assets are evaluated and a valuation
                        allowance, if necessary, is established.

                        UNEARNED REVENUE

                        Unearned revenue represents amounts received for
                        distribution rights of the vending machines, which the
                        Company is still in the process of developing and
                        testing. The Company records these amounts 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.

                        USE OF ESTIMATES

                        The preparation of financial statements in conformity
                        with accounting principles generally accepted in the
                        United States of America requires management to make
                        estimates and assumptions that affect the amounts
                        reported in its financial statements and accompanying
                        notes. Actual results could differ from those estimates.

                        CONCENTRATION OF CREDIT RISK

                        The Company occasionally maintains deposits in banks in
                        excess of federally insured limits. The risk is managed
                        by maintaining all deposits in high quality financial
                        institutions.


                                       13


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 2                  LOSS PER SHARE
SUMMARY OF
SIGNIFICANT             In March, 1997, the Financial Accounting Standards Board
ACCOUNTING POLICIES     issued SFAS No. 128, "Earnings Per Share". The statement
(continued)             requires the Company to disclose both basic earnings per
                        share and diluted earnings per share for annual and
                        interim periods ending after December 15, 1997. Basic
                        earnings per share is based on the weighted average
                        number of common shares outstanding, while diluted
                        earnings per share is based on the weighted average
                        number of common shares and common share equivalents
                        that would arise from the exercise of options and
                        warrants or conversion of convertible securities. The
                        Company incurred losses from operations in 2002, 2001,
                        and 2000; therefore, basic and diluted earnings per
                        share have been computed in the same manner since the
                        exercise of warrants and the conversion of the
                        convertible notes payable would be antidilutive.

                        RECENT ACCOUNTING PRONOUNCEMENTS

                        There are no recently issued accounting pronouncements
                        that are expected to have a significant impact on the
                        Company's financial statements.

NOTE 3                  Vending machines are carried at the lower of market or
VENDING                 net realizable value. Net realizable value is defined as
MACHINES                estimated selling price of the machines less predictable
                        costs of completion and disposal. Since the predictable
                        cost of completion exceeds the estimated selling price
                        the vending machines are stated at zero.

NOTE 4                  As of January 31, 2002, the Company had two demand notes
SUBSCRIPTIONS           receivable resulting from the sale of common stock.
RECEIVABLE              These notes total $62,000 and are non-interest bearing.
                        The notes have been presented in the accompanying
                        balance sheet as subscriptions receivable reducing
                        stockholders' equity.

NOTE 5                  In June, 1997, the Company received $1,000,000 in
CONVERTIBLE             exchange for notes convertible into the Company's common
NOTES PAYABLE           stock. These convertible notes bear interest at the rate
                        of 7% per annum and were due May 14, 2000. The holders
                        of these notes were entitled, at their option, to
                        convert any or all of the principal into the Company's
                        common stock at a conversion price for each share of
                        common stock equal to 70% of the average closing bid
                        price of common stock for the five business days
                        immediately preceding the date of receipt of notice of
                        conversion. The convertible debt was discounted for the
                        beneficial conversion feature, additional paid in
                        capital was increased by the discounted amount, and the
                        discount was amortized using the interest method over
                        the term of the convertible debt or ratably when
                        conversion occurs. The discount is fully amortized.
                        Pursuant to the terms of the financing, the Company
                        issued 1,142,857 shares of common stock to be held in
                        escrow, pending the potential conversion of notes.


                                       14


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



NOTE 5                  In September, 1997, the note holders converted an
CONVERTIBLE             aggregate of $397,679 of principal into 700,000 shares
NOTES PAYABLE           of common stock. In November, 1997, the Company issued
(continued)             an additional 380,000 shares of common stock to be held
                        in escrow for potential conversion of notes. In
                        February, 1998, an additional 444,000 shares of common
                        stock were issued into escrow, pending conversion of the
                        notes. During the year ended January 31, 1999, the
                        Company issued 1,480,280 shares of common stock in
                        satisfaction of the remaining $602,321 of convertible
                        notes.

                        In November, 1997, in a separate transaction, the
                        Company received $1,600,000 in exchange for notes
                        convertible into the Company's common stock. These
                        convertible notes bear interest at the rate of 6% per
                        annum and were due May 14, 2000. The holders of these
                        notes were entitled, at their option, to convert any or
                        all of the principal into the Company's common stock at
                        a conversion price for each share of common stock equal
                        to 70% of the average closing bid price of common stock
                        for the five business days immediately preceding the
                        date of receipt of notice of conversion. These
                        convertible notes were also recorded in the method
                        described in the second preceding paragraph. The
                        discount is fully amortized. Pursuant to the terms of
                        the financing, the Company issued 2,400,000 shares of
                        common stock to be held in escrow, pending the potential
                        conversion of notes.

                        In February, 1998, an additional 960,000 shares of
                        common stock were issued into escrow, pending conversion
                        of the notes. During the year ended January 31, 1999,
                        the Company issued 4,105,870 shares of common stock in
                        satisfaction of these convertible notes.

NOTE 6                  During the year ended January 31, 2000, the Company
UNEARNED                issued 500,000 shares of common stock to reacquire an
REVENUE                 existing distributorship valued at $41,000. The Company
                        also received $100,000 as a deposit on the machines in
                        production. As of January 31, 2002 and 2001, unearned
                        amounts related to distribution rights were $210,000 and
                        deposits on machines totalled $110,000.

NOTE 7                  As of January 31, 2002, the Company entered into an
ROYALTY RIGHTS          agreement to settle a liability under a modified
                        judgement in which the Company re-acquired royalty
                        rights from California Food and Vending, Inc. for
                        $1,500,000 (see Notes 9 and 11). Amortization of the
                        royalty rights will be based on sales of vending
                        machines and potato product. Amortization has not yet
                        begun as of January 31, 2002.


                                       15


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 8                  As of January 31, 2001, the Company had received
DEMAND NOTES            $270,000 through a loan made to the Company by a
PAYABLE                 stockholder. The loan bears interest at 18% per annum
                        and was repaid in June 2001 by issuance of common stock.
                        As of January 31, 2002, the following loans were
                        outstanding:

          Officer, interest at 7.5%, without
            established repayment terms ............    $ 64,000

          Stockholder, non-interest bearing,
            without established repayment terms ....      50,000

          Stockholder, non-interest bearing,
            without established repayment terms ....     198,566
                                                        --------
                                                        $312,566
                                                        ========


NOTE 9
NOTES
PAYABLE

          California Food & Vending, Inc. -
            installment note payable over 24
            months with accrued interest at 8%,
            final payment due January, 2004.          $1,350,000

          Less current maturities ..................     600,000
                                                      ----------
          Long-term debt, net of current
            maturities .............................  $  750,000
                                                      ==========


NOTE 10                 During the years ended January 31, 2002, 2001, and 2000,
COMMITMENTS             the Company incurred $29,096, $25,680, and $42,946,
                        respectively, for the rental of office space. The
                        Company's current lease commitments total approximately
                        $3,000 per month until May 31, 2002.


                                       16


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



NOTE 11                 CALIFORNIA FOOD & VENDING, INC.
LITIGATION
                        In May, 1991, the Company entered into a joint venture
                        agreement with California Food & Vending, Inc. ("CFV"),
                        another vending and food service company with a high
                        interest in the research and development of a french fry
                        vending machine. The companies planned to work together
                        in the manufacturing and marketing of a french fry
                        machine. Disputes arose between the parties, litigation
                        was instituted by CFV and in July, 1999 the disputes
                        were settled and the litigation dismissed. Pursuant to
                        the settlement agreement, the Company regained
                        distributorship rights for the State of California;
                        agreed to pay CFV the sum of $1,000,000 which has been
                        paid; issue 250,000 shares of Company common stock to
                        CFV; and CFV will receive $350 for each of the first 500
                        machines produced and $450 per machine thereafter and
                        $.25 for each pound of potato product sold by Tasty
                        Fries, Inc.

                        As of January 31, 2002, the Company re-acquired all of
                        the royalty rights from CFV for $1,500,000, payable in
                        installments through January, 2004 (see Notes 7 and 9).

                        PRIZE FRIZE LITIGATION

                        On August 28, 1996, the Company, the President of the
                        Company and Premier Design, Ltd., were added as
                        defendants to a civil law suit in the Riverside County
                        Branch of the Superior Court of the State of California
                        brought by Prize Frize, Inc. ("Prize Frize"), William
                        Bartfield and Larry Wirth. The suit also named as
                        defendants approximately 25 other parties, all allegedly
                        involved, in some manner, in the pursuit of the french
                        fry vending machine concept and/or business. The case
                        was removed to Federal Court. The Company successfully
                        moved for dismissal of the claim on behalf of itself and
                        its President; the case was dismissed on June 2, 1997.
                        The dismissal was reversed on appeal by the Federal
                        Court and the case was remanded to State Court. The
                        plaintiffs' claim against Tasty Fries was severed. The
                        claims against the President of the Company and Premier
                        Design, Ltd. were dismissed. The claim brought by Prize
                        Frize asserted that the Company has usurped its trade
                        secrets by developing a French fry vending machine,
                        which utilizes the basic American food potato product.

                        As of October 1, 2001, a Settlement Agreement and Mutual
                        General Release ("Settlement Agreement") was entered
                        into by and between the Company and Prize Frize, Inc.
                        Under the Settlement Agreement, Prize Frize agreed to
                        dismiss the litigation and released all claims, known
                        and unknown, against the Company and its officers and
                        directors. The Company paid no


                                       17


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 11                 PRIZE FRIZE LITIGATION (continued)
LITIGATION
(continued)             monies to Prize Frize in consideration for the
                        Settlement Agreement or the dismissal of the action. The
                        Company, however, granted Prize Frize a right of first
                        refusal to supply all of the Company's requirements for
                        a Basic American Food ("BAF") potato product known as
                        "Russet Fries" in the quantities requested by the
                        Company, at the times and places requested by the
                        Company and at the best possible and commercially
                        reasonable price offered by any BAF distributor. If,
                        however, Prize Frize, is unable or unwilling to provide
                        the Company with necessary quantities of the Russet
                        Fries at said prices, the Company may purchase the
                        Russet Fries from another source. Pursuant to the
                        Settlement Agreement the litigation was subsequently
                        dismissed with prejudice.


NOTE 12                 As of September 18, 1995, the Company established an
STOCK OPTION            incentive stock option plan (the "Plan") and presently
PLAN                    has reserved 1,500,000 shares of the Company's common
                        stock for issuance under the Plan. During the year ended
                        January 31, 1999 the Company granted 1,000,000 options
                        to employees. These options have an exercise price of
                        $.50 and vest immediately. In the year ended January 31,
                        2000, 500,000 options were granted to certain
                        non-employee directors of the Company. These options
                        have an exercise price of $.50 and vest immediately.
                        Each Board member also was granted a 50,000 share option
                        for each year of service to the Tasty Fries Board. Each
                        Board member will receive a 50,000 share option for each
                        full year of service to the Company, commencing with the
                        year June 10, 1994 and ending on the date the Board
                        member resigns or otherwise is removed from office. The
                        exercise price for such stock option shall be the
                        closing price of the stock on June 9, or the closest day
                        thereto, of each such year. Each board member is granted
                        the right to exercise his option at any time up to seven
                        years from the date his right to acquire stock vests.
                        All issuances were granted at not less than fair market
                        value of the Company's common stock at time of grant.

                        In March, 2000, the Board of Directors approved a stock
                        option plan for a key employee who shall receive a
                        30,000 share option for each full year of service to the
                        Company, commencing with the year beginning June 10,
                        1994 and ending on the date she resigns or is otherwise
                        removed from office. The acquisition price for such
                        stock shall be the closing price of the stock on June 9
                        (or the closest business day thereto) of each such year.
                        This employee is granted the right to exercise this
                        option to acquire the Company's stock at any time up to
                        seven years from the date her right to acquire stock
                        vests.

                                       18


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

NOTE 12                 Options dated December 31, 1999 with an expiration date
STOCK OPTION            of December 31, 2001 and an option dated June 1, 1998
PLAN                    with an expiration date of July 1, 2000 were both
(continued)             extended and remain effective with a new expiration date
                        of December 31, 2004. The number of shares per Option
                        (100,000) remain the same as does the exercise price
                        ($.50).

                        In November 2001 and January 2002, the Board of
                        Directors approved the issuance of 200,000 and 500,000
                        options, respectively to the chief operating officer, at
                        $.10 per share and $.43 per share, respectively.

                        As of January 31, 2002 and 2001, no options have been
                        exercised.

                        Transactions in the Plan are as follows:

<TABLE>
<CAPTION>
                                                                             Weighted
                                                                              Average
                                                              Exercise       Exercise
                                                               Price          Price
                                                             Per Vested     Per Vested
                                    Granted      Vested        Common         Common
                                     Shares      Shares        Stock          Share
                                    -------    ---------     ----------     -----------
<S>                                <C>         <C>                             <C>
Balance, February 1, 1999 ......   1,012,926   1,012,926                        $.52

Activity during the year
 ended January 31, 2000 .......    1,750,000   1,750,000    $.45 to $8.20      $1.70
                                   ---------   ---------

Balance, January 31, 2000 .....    2,762,926   2,762,926                       $1.26

Activity during the year
 ended January 31, 2001 .......      180,000     180,000         $.45           $.45
                                   ---------   ---------

Balance, January 31, 2001 .....    2,942,926   2,942,926                       $1.22

Activity during the year
 ended January 31, 2002 .......      700,000     700,000    $.10 to $.43        $.34
                                   ---------   ---------

Balance, January 31, 2002 .....    3,642,926   3,642,926                       $1.05
                                   =========   =========

</TABLE>

                                       19


<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------



NOTE 12                 The Company accounts for stock-based compensation in
STOCK OPTION            accordance with Statement of Financial Accounting
PLAN (continued)        Standards No. 123, Accounting for Stock-Based
                        Compensation, which permits the use of the intrinsic
                        value method described in Accounting Principles Board
                        ("APB") Opinion No. 25, Accounting for Stock Issued to
                        Employees, and requires the Company to disclose the pro
                        forma effects of accounting for stock-based compensation
                        using the fair value method as described in the optional
                        accounting requirements of SFAS No. 123. As permitted by
                        SFAS No. 123, the Company will continue to account for
                        the stock-based compensation under APB Opinion No. 25,
                        under which the Company has recognized no compensation
                        expense.

                        Had compensation cost for the Company's stock option
                        plan been determined based on the fair value of the
                        Company's common stock at the dates of awards using the
                        Black-Scholes value method of SFAS No. 123, the
                        Company's net loss and net loss per common share would
                        have been adjusted to the pro forma amounts as follows:

                                           Year Ended January 31
                                 ------------------------------------------
                                    2002           2001           2000
                                 ------------   ------------   ------------
Net loss
    As reported ...........     ($3,832,948 )  ($3,792,684 )  ($5,783,657 )
    Pro forma .............     ( 3,878,948 )  ( 3,844,284 )  ( 6,212,402 )
Net loss per common share
    As reported ...........     (       .08 )  (       .12 )  (       .27 )
    Pro forma .............     (       .08 )  (       .12 )  (       .29 )

                        Significant assumptions used to calculate the fair value
                        of the awards are as follows:

                                           Year Ended January 31
                                 ------------------------------------------
                                    2002           2001           2000
                                 ------------   ------------   ------------
Risk free interest rates of           5.00%          6.00%          6.00%
    return ................
Expected option life ......       84 months      84 months      84 months
Volatility ................             50%            50%            50%
Expected dividends ........           --              --             --


NOTE 13                 On July 29, 1991, the Board of Directors authorized
PREFERRED STOCK         5,000,000 shares of preferred stock at a par value of
                        $.001 per share. No shares of preferred stock have been
                        issued.


                                       20

<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 14                 As of January 31, 2002 and 2001, the Company had
OPTIONS AND             32,350,000 and 11,225,000 warrants and 10,475,680 and
WARRANTS ISSUED         9,775,680 options, respectively, to purchase common
AND OUTSTANDING         stock outstanding. The warrants and options are
                        exercisable at share prices between $.40 and $8.20 per
                        share and expire at various dates through December,
                        2007.

NOTE 15                 The Company has approximately $16,000,000 in net
INCOME TAXES            operating loss carryforwards, which can be used to
                        offset future taxable income. The net operating loss
                        carryforwards expire through 2020.

                        The components of the Company's deferred tax assets as
                        of January 31, 2002 and 2001 are as follows:

                                                   2002            2001
                                                ----------     -----------
       Net operating loss carryforwards ..      $7,400,000     $ 6,800,000
       Valuation allowance ...............      (7,400,000)     (6,800,000)
                                                ----------     -----------

       Deferred tax asset ................      $       --     $        --
                                                ==========     ===========

                        The valuation allowance increased by $600,000 and
                        $580,000 in the years ended January 31, 2002 and 2001,
                        respectively.

                        There are no significant differences between taxes
                        computed at the federal statutory rate and the provision
                        for income taxes for the years ended January 31, 2002,
                        2001, and 2000.

NOTE 16                 In April, 1998, the Company entered into an agreement to
APRIL 1998              receive $1,500,000 in proceeds from the sale of
FINANCING               restricted stock to a U.S. corporation. The Company
                        issued 3,000,000 shares of common stock as consideration
                        for the investment. The Company also issued warrants to
                        purchase 1,500,000 shares of common stock at an exercise
                        price of $1.90; the warrants expired April 12, 2001. The
                        Company also issued 150,000 shares of restricted stock
                        as a commission on the transaction. The Company and the
                        investor have entered into an escrow agreement for this
                        transaction and all of the shares were issued into
                        escrow, pending funding. As of January 31, 2002,
                        $1,425,000 of the $1,500,000 in proceeds has been
                        received by the Company and 2,850,000 of the 3,000,000
                        shares of restricted common stock held in escrow have
                        been released to the investor. The balance of the April
                        1998 financing agreement has been terminated by both
                        parties.


                                       21
<PAGE>


                                TASTY FRIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                          NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


NOTE 17                 The Company accrued Board of Directors' fees for the
DIRECTORS' FEES         years ended January 31, 1997 through January 31, 2002 in
                        the amount of $310,000. Interest has not been accrued on
                        the unpaid balance.

                        The following shares of stock were issued to retire
                        $300,000 of this liability:

              January 2001      500,000 shares at $.40 each    $200,000
              November 2001     909,890 shares at $.11 each     100,000
                                                               --------
                                                               $300,000
                                                               ========

NOTE 18                 In July, 2000, the Board of Directors approved the terms
EMPLOYMENT AGREEMENT    of an Employment Agreement for the Company's Chief
                        Executive Officer. The Employment Agreement is for a
                        period of ten years from its date of execution. The
                        Employment Agreement provides for an annual salary, to
                        be increased by 10% each year. In addition, the Chief
                        Executive Officer is granted the right to acquire up to
                        1,000,000 shares of the Company's restricted Common
                        Stock for each full year of his employment with the
                        Company, commencing with the year beginning June 10,
                        1994. The acquisition price for such stock shall be the
                        closing price of the stock on June 9 (or the closest
                        business day thereto) of each such full year. He has the
                        right to exercise this option at any time up to seven
                        years from the date his right to acquire stock vests.
                        The agreement also provides for compensation arrangement
                        in the case of temporary disability, death and permanent
                        disability.

NOTE 19                 The Company conducts nondirect response advertising and
ADVERTISING             utilizes a website to market its product. These costs
EXPENSE                 are expensed as incurred. Advertising costs for the
                        years ended January 31, 2002 and 2001 were $105,717 and
                        $3,000, respectively.


                                       22