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                                  FORM 10-KSB/A
                                 Amendment No. 2


                       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, 1999


          [ ] 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 April 20, 1999: Not Determinable.

Shares outstanding of the registrant's common stock as of April 30, 1999:
19,200,000 shares.


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<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.

     On December 16, 1996, a majority of the issued and outstanding voting
securities of the Company, by written consent, approved a 1 for 20 reverse split
of the Company's common stock and authorized an amendment to the Company's
Articles of Incorporation to change its authorized common shares to 25,000,000
shares of common stock and its par value to $.001 per share. The Amendment was
filed with the Nevada Secretary of State on December 18, 1996 and the reverse
stock split was effective on December 23, 1996.

(B)  BUSINESS OF THE COMPANY

     GENERAL

     The Company has developed a patented French fries 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.

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     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 and
serving cups (with salt and ketchup packets attached). 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.

DESIGN AND MANUFACTURING

     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. Then-current management of the Company decided
to abandon the original device. The Company then 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.


                                       2


<PAGE>

     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, Premier and the Company amended the original manufacturing
contract (the "Premier Amendment"). The Premier Amendment described the terms
under which Premier would: (i) manufacture the 10 beta models of the new machine
and (ii) 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 (not including the $350,000 paid by the Company for the 10 prototype
machines). The current balance due Premier is $350,000, after $100,000 payments
in each of July 1996, July 1997 and January 1998. Premier will also receive $250
per Machine manufactured by a third party. Management and the Board of Directors
agreed to these terms with Premier based upon the potentially prohibitive costs
to the Company resulting from protracted litigation (monetary and otherwise) and
the agreement of Premier to waive any rights it may have to manufacture the
machine.

     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. The first 25 units will be produced
by a subcontract manufacturer located in Ivyland, PA. Tasty Fries is also
considering a manufacturing facility in the State of New Hampshire.

     The Company completed the final stages of beta testing of its Machines in
the last quarter of the fiscal year ended January 31, 1996 and completed certain
modifications to and enhancements of the Machine based upon such tests.


                                       3

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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. Consider that 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: (i) ensure the consistency and quality of the machine's
critical parts and (ii) greatly reduce the unit costs of both the individual
parts and the overall machine, as production volume increases. As with the
Company's overall business plan, the tooling process itself has been delayed
over the past 12-18 months due to the lack of capital available to complete the
process.

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 (although the pre-production
model's full cycle time is approximately 120 seconds). The utilization of a
state-of-the-art combination of computer driven mechanics makes this possible.
Attached to the bottom of the vended cup are individually prepackaged portions
of ketchup and salt.

     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.


                                       4

<PAGE>


     The Machine requires a 220-volt electrical connection and is equipped with
modern computer technology using microprocessors and sensors. If the machine
operator desires, the Machine can communicate with a central data base, 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 Machines have been designed to be repaired on-site without the
necessity of being returned to the manufacturer. It is anticipated that ongoing
maintenance will be limited, and 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 and additional cups (with condiment
packages attached) 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 POTATO PRODUCT

     The Company's proprietary Potato Product for use in the Machine was
developed in 1995 by a third party contractor. Management estimates that the
cost to establish a manufacturing line to produce the Potato Product is
significant. Due to the considerable costs involved and the current availability
of another potato product that is comparable with the Company's Potato Product
for use in the Machine, 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 vary from territory to territory,
but essentially require an up-front payment and minimum annual payments usually
over the life of the contract. Most 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.


                                       5

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     The Company has, to date, 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 9
distributorships, which have not been terminated or reacquired. The
distributor's obligations to make further payments, after tendering the initial
deposit required upon execution of the distributorship agreement, are
conditioned on the Company's ability to ship its Machines and related products.
Management believes that once commercial production of Machines is commenced and
distributors notified and required to place orders for Machines, some of such
distributors may be financially unable to do so or may simply elect not to
purchase Machines and effectuate their respective agreement.

     The Company has retained the services of Claridge Capital Corporation to
assist with the Marketing and Sales of the Machine. Claridge had been
instrumental in developing and maintaining the Company's web site
(www.tastyfries.com) and introducing the Company to the marketplace.

CALIFORNIA FOOD & VENDING, INC.

     In May 1991, the Company (via its predecessor, Adelaide Holdings, Inc.)
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 two companies decided to
create an alliance in which one entity would design and build a machine, while
the other company marketed the unit. The original joint venture agreement called
for CFV to develop and manufacture a French fry vending machine which the
Company would then market on a global basis. In March 1992, the two parties
subsequently amended the original agreement and effectively switched roles in
the transaction, so that the Company would design, develop and manufacture a
French fry machine, which CFV would then have primary responsibility for
marketing.

     In March 1993, California Food & Vending initiated a legal action against
the Company, for lack of performance under their agreements. In February 1995,
the Company reached a settlement agreement with CFV, which supersedes an
arbitration award from October 1994 granted in CFV's favor. The settlement
agreement provides for: (i) payment to CFV of a royalty per machine sold
consisting of $350 per machine for the first 500 machines sold and 35% of the
gross profit for machines sold thereafter, up to a limit of $500 per machine;
(ii) payment to CFV of a royalty consisting of $.25 for each pound of potato
product sold; (iii) issuance of an option to CFV for the purchase of 100,000
post-split shares of the Company's common stock at an exercise price of $2.00
per share (on a post-split basis) through February 1, 1999; (iv) CFV shall
receive an aggregate of $2,000,000 payable from 50% of all domestic and
international gross distribution fees received by the Company until paid in
full, and thereafter 25% of all international distribution fees received by the
Company; and (v) the granting to CFV of the distribution rights for the Machine
for the State of California (the documentation and specific terms of the
distribution agreement have not been determined). The royalties, fees, and
profits payable in the future to CFV could become material, but there is no way
to assign a dollar figure to this payable since it will be based on future
Company sales. These royalties will be expensed by the Company when incurred.

                                       6


<PAGE>

LEASE FINANCING

     In September 1996, the Company entered into a vendor agreement (the "Vendor
Agreement") with Forrest Financial Corp., a leasing company, to provide lease
financing to distributors and others who may wish to lease Machines rather than
purchase them outright. The Vendor Agreement provides that up to $15 million
will be made available to qualified lessees for this purpose. The Leasing
Company has since qualified approximately 1,400 vending companies, which it
believes have the financial capability and experience to lease Machines from the
Leasing Company and place them in geographically desirable locations. The
Company believes that lease financing will be an important element of its
strategic plan, as leasing is a very prevalent financing structure used in the
vending industry.

COMPETITION

     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 currently viewed as competitors
or which may become competitors in the future, have more capital and greater
resources than the Company. Currently, the Company is aware of at least three
competitors in the French fry vending machine business: Ore-Ida, TEGE and
Vendotech.

     Ore-Ida, a U.S.-based major manufacturer and distributor of frozen potato
products, has developed a machine that uses frozen, precut French fries, which
are heated by a hot-air system. Ore-Ida has spent many years and considerable
capital in the development of their machine. They have been marketing their
machine domestically and abroad for a number of years. The Vendotech machine
also uses precut frozen fries, which it cooks in oil. Vendotech has a marketing
alliance with McCain's, a large Canadian potato producer. Because both the
Ore-Ida machine and the Vendotech machine are based on a premise of using
frozen, precut fries, the Company believes that they are not truly comparable
technologies. In contrast the Company's Machine cooks French fries which are
not, and have never been frozen; rather, its French fries are made fresh for
every serving from dehydrated potatoes which are mixed with water and cooked
only when a vend is actually purchased.

     TEGE, a Swiss company, uses a dehydrated potato powder, which is used to
form French fries, which are then cooked in oil. TEGE has recently announced
that they have begun limited commercial production and have placed a number of
beta units on location in the United Kingdom. TEGE's current marketing strategy
is focused on four primary European markets.

     Management believes, although no assurances are given, that due to current
customer 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 and serving cups (with
ketchup and salt packets attached


                                       7

<PAGE>



to the bottom). 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 its potato product from a single source. The Company
currently has no contract (exclusive or otherwise) or licensing rights to
purchase the potato product from this supplier. The loss of the availability of
the potato product from the current supplier may have an adverse effect on the
Company's business. The Company is in the process of attempting to identify
alternative sources for its potato product. At such time in the future as may be
warranted by the success of the Company's business, the Company may elect to
enter into the production of its own proprietary potato product or enter into
contract manufacturing for the same. SEE "POTATO PRODUCT."

PATENTS AND PROPRIETARY RIGHTS

     The Machine's inventor, Edward C. Kelly, President and Chief Executive
Officer of the Company, 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, Israel, Brazil and the European
Patent office (which currently represents 17 European countries).

     Management intends to seek patent, trademark and related legal protection
in the future where it deems the same to be beneficial. However, such 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 the Company's 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 will receive
UL and NSF approvals 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. In this regard, management has begun the process of obtaining UL
certification. The Company is also seeking certification from the National
Automatic Merchandising Association ("NAMA"). Management has been advised that
all certifications and approvals should be applied for upon commercial
production and would not be issued until such time. Management believes,
although no assurance is given, that the required approvals from UL, NAMA and
the various regulatory agencies are obtainable and is not currently aware of
anything that will delay the necessary approvals.

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<PAGE>

     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.

RESEARCH AND DEVELOPMENT COSTS

     For the fiscal years ended January 31, 1999 and 1998, the Company incurred
$585,417 and $533,458, respectively, in costs and expenses relating to the
research and development of its machine.

PERSONNEL

     As of April 30, 1998, the Company had a total of five 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, if any, which remains constant 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 significant properties. Since June 1994, it has leased
executive office space at the premises located at 650 Sentry Parkway, Suite One,
Blue Bell, Pennsylvania 19422. The Company's current lease commitments total
approximately $3,628 per month until May 31, 1999. At the present time,
management believes that this office space is sufficient; however, the Company
may require additional space during the next 12 months.

ITEM 3. LEGAL PROCEEDINGS.

CALIFORNIA FOOD AND VENDING

     On August 17, 1998 California Food and Vending, Inc. ("CFV") filed a
multi-count law suit in the United States District Court for the Central
District of California against the Company. CFV asserted, in essence, that Tasty
Fries and its Chief Executive Officer, Edward C. Kelly, breached the terms of
the settlement reached with it in the prior litigation by failing to sell
distributorships, failing to accede to CFV's to maintain its option at the
pre-reverse split level notwithstanding the fact that the Company's stock went
through a reverse split after the settlement and misrepresenting the Company's
condition at the time of the settlement. CFV's First Amended Complaint was
dismissed with leave to amend only some of the counts. It is the opinion of the
Company's counsel that CFV's lawsuit lacks merit and that the Company will
prevail.

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<PAGE>

PRIZE FRIZE LITIGATION-DISMISSED, ON APPEAL

     On August 28, 1996, the Company, Edward C. Kelly and Premier Design, Ltd.
were added as defendants to a civil lawsuit 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 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 Mr. Kelly; the case was dismissed on June 2, 1997.
The plaintiffs are appealing the dismissal.

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 1997
          -----------
          First Quarter                            $2.09              $1.00
          Second Quarter                           $1.94              $1.00
          Third Quarter                            $1.69              $ .69
          Fourth Quarter                           $1.38              $ .47

          FISCAL 1998
          -----------
          First Quarter                            $ .95              $ .51
          Second Quarter                           $ .85              $ .45
          Third Quarter                            $1.30              $ .38
          Fourth Quarter                           $ .59              $ .32

          FISCAL 1999
          -----------
          February 1 through April 27              $ .91              $ .24

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<PAGE>

(B)  HOLDERS.

     The approximate number of record holders of the Company's common stock as
of April 30, 1999 is 1,155.

(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, vegetable cooking oil and
serving cups (with salt and ketchup packets attached). The Company's long-term
profitability and success will be driven by 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 manufacture an initial quantity of 25 Machines. Management currently
estimates that a portion of these initial Machines will be sold to third parties
(existing distributors and others) and a number of them will be owned and
operated by the Company. The Company intends to place its Machines in locations
within the greater Philadelphia area, or as close to the Company's offices as
possible.

     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.

     Based upon the Company's internal projections, the Company should receive
sufficient cash flow to support the modest expansion of operations over the next
12 months. Although management cannot assure the ultimate success of its plan,
it is reasonably confident that it will enable the Company to continue its
business and grow modestly.

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<PAGE>


Liquidity and Capital Resources

     Since its inception, the Company has had no revenues from operations and
has relied almost exclusively on stockholder loans, limited distribution
deposits and sales of securities to raise working capital to fund operations. At
January 31, 1999, the Company had approximately $66,394 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 have 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 have a maturity date of
November 5, 2000. 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 is $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 expire April 12, 2001. The Company also
issued 150,000 post-split shares of restricted stock as a

                                       12


<PAGE>

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, 1999, the Company has received $800,000 of
the total $1,500,000 financing and 1,600,000 of the total 3,000,000 shares have
been released. SEE "SUBSEQUENT EVENTS."

     Although management currently estimates that the April 1998 financing will
allow it to proceed with its current plan of operation, 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, 1999, 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 Years ending January 31, 1998 & 1999

     The Company had no revenues for the fiscal years ended January 31, 1998 and
1999. From fiscal 1997 to 1998, travel and entertainment expenses decreased
approximately 61% from approximately $147,372 in 1997 to approximately $57,656
in 1998 primarily due to significant decrease in business related travel.
Consulting expenses decreased from approximately $1,159,964 in fiscal 1997 to
$172,600 in fiscal 1998. The decrease in consulting expenses was primarily due
to the Company's reduced dependence on consultants to provide financial,
business and marketing expertise. Payroll and payroll taxes decreased
approximately 10% from approximately $640,267 in fiscal 1997 to approximately
$573,814 in fiscal 1998. The decreased payroll and payroll tax expense resulted
primarily from the release of personnel in 1998. Management believes, although
it cannot be assured, that it has made significant inroads in stabilizing its
operating and overhead costs and should be able to move forward with its
business plan as discussed herein.

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 expiration date of January 5,
2001. The warrants were issued as part of the termination of the stock purchase
agreement from April 1996. SEE "SUBSEQUENT EVENTS."

                                       13

<PAGE>


ITEM 7. FINANCIAL STATEMENTS.

     Audited, consolidated balance sheets as of January 31, 1999 and 1998, and
related statements of operations, stockholders' equity (deficiency) and cash
flows for the years then ended and for the period from October 18, 1985
(inception) to January 31, 1999 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             63         President, Chief Executive Officer,
                                       Treasurer and Chairman of the Board*

Leonard J. Klarich          65         Vice President, Secretary and Director*

Jurgen A. Wolf              65         Director*

Ian D. Lambert              54         Director

Kurt R. Ziemer              44         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.


                                       14

<PAGE>


     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 the President
of International Tasty Fries, Inc., a stockholder in the Company and, until
November 1996, was President of Yukon Spirit Mines Ltd. (now doing business as
Gainey Resources Ltd.). International Tasty Fries and Yukon are affiliated
entities. International Tasty Fries has a distributorship agreement with the
Company for a number of European countries; Yukon's 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 is
a director of five publicly-traded companies of which only the Company is a
reporting company. Prior to that time, he was an Information Systems executive
with MacMillan Bloedel Ltd. and also the Manager, Systems Consulting for the
Vancouver office of Deloitte Haskins & Sells. SEE "CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS" AND "SUBSEQUENT EVENTS."

     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.

                                       15

<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.

     None.

ITEM 10. EXECUTIVE COMPENSATION

(A)  GENERAL

(B)  SUMMARY COMPENSATION TABLE

                                                             ONE-TIME
                            ANNUAL COMPENSATON (1)         COMPENSATION
                         -------------------------    ------------------------
                          Fiscal Year
      Nane &                Ended                                  Restricted
Principal Position        January 31,     Salary       Bonus       Stock (2)
------------------       ------------    ---------    --------   -------------
Edward C. Kelly              1999        $267,000
President, CEO               1998        $289,000         $0     $1,031,250 (4)
& Chairman (3)               1997        $240,000         $0

Christopher A.               1998        $ 93,750         $0
Plunkett, EVP (5)

Leonard J. Klarich           1999        $ 12,400         $0
Secretary, Director          1998        $ 60,000         $0
& Vice President (6)         1997        $ 40,000         $0

(1)  There were no long-term incentive payments made in the year ended January
     31, 1999.

(2)  Value of restricted stock grants are determined by using the closing bid
     price of the Company's common stock on the date of issuance.


                                       16

<PAGE>


(3)  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 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.

(4)  Represents the value assigned to a restricted stock grant of 1,500,000
     post-split shares made to Mr. Kelly on September 11, 1997, pursuant to the
     terms of the Stock Purchase Agreement from April 1996.

(5)  Mr. Plunkett served as Executive Vice President of the Company from June
     1997 through June of 1998.

(6)  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; and (iv) an option
     to purchase 50,000 post-split shares of common stock granted by the Board
     of Directors on October 1, 1996 exercisable for $4.00 per share until
     October 1, 1999.

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

     OPTION GRANTS IN THE FISCAL YEAR ENDED JANUARY 31, 1999

                                                     Percent of Total
                          Number of Securities       Options Granted
                          Underlying Options         to Employee in
         Name                  Granted                 Fiscal Year
         ----             ---------------------      -----------------
     Edward C. Kelly           1,000,000(1)                100%
     7/1/98

(1)  Mr. Kelly was issued, by the Board of Directors, a stock option to purchase
     an aggregate of 1,000,000 shares of common stock. SEE "EXECUTIVE
     COMPENSATION TABLE."

                                       17


<PAGE>


(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.

     The Directors were not entitled to compensation prior to September 18,
     1995. At the Board of Directors meeting held on September 18, 1995, the
     Board voted to approve payment of annual directors' fees of $10,000 per
     director plus reasonable expenses commencing as of such date. Payments for
     the fiscal years ending January 31, 1999 and 1998 have been accrued on a
     pro rata basis each year and will be paid when the Company is financially
     able to do so.

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

     On October 1, 1994, the Company entered into an employment agreement with
Edward C. Kelly, its then President and Treasurer. The employment agreement was
for a three-year term commencing retroactively to October 1, 1993 and was
automatically renewable for additional one-year terms after expiration on
September 30, 1996. The employment agreement was subsequently amended effective
May 1, 1995. SEE EXHIBIT 13.1. On June 16, 1997, the Company executed an
employment agreement with Christopher Plunkett who joined the Company as
Executive Vice President. On June 15, 1998 Mr. Plunkett's employment was
terminated with the Company.

(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 April 30, 1998, 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                                 1,568,650                8.1%
650 Sentry Parkway, Suite One
Blue Bell, PA  19422  (1)

                                       18


<PAGE>


Name & Address of                           Amount & Nature of        Percent
 Beneficial Owner                           Beneficial Ownership      of Class
-------------------                         --------------------      --------
Lancaster Investment Corporation                2,200,000               11.4%
11 Waterfront Estates, Estates Drive
Lancaster, PA  17602  (2,3)

L. Eric Whetstone                                539,000                 2.8%
11 Waterfront Estates, Estates Drive
Lancaster, PA  17602  (3,4)

Whetstone Ventures Corporation, Inc.             277,000                 1.4%
11 Waterfront Estates, Estates Drive
Lancaster, PA  17602  (3)

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

(1)  Does not include an option for 50,000 post-split shares of common stock
     granted by the Board of Directors on October 1, 1996 exercisable until
     October 1, 1999 at $4.00 per share. Does not include an option for
     1,000,000 post-split shares of common stock granted by the Board of
     Directors on July 1, 1998 exercisable until July 1, 2000 at $.50 per share.

(2)  Does not include 1,400,000 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, 1999, $800,000 of the total
     $1,500,000 financing has been received and 1,600,000 of the total 3,000,000
     shares have been released. SEE "LIQUIDITY AND CAPITAL RESOURCES" AND
     "SUBSEQUENT EVENTS."

(3)  Lancaster Investment Corporation and Whetstone Ventures Corp. are both
     affiliates of L. Eric Whetstone. In aggregate, the 3,016,000 shares
     currently owned by these three parties represent 15.71% of the outstanding
     shares of the Company. Upon completion of the April 1998 financing, these
     three parties will own 4,416,000 total shares, representing 23% of the
     then-outstanding shares. SEE "CHANGES IN CONTROL" AND "SUBSEQUENT EVENTS."

(4)  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 30, 1999, the beneficial common
     stock ownership of all directors, executive officers, and of all directors
     and officers as group:


                                       19

<PAGE>


Name & Address of                           Amount & Nature of         Percent
 Beneficial Owner                          Beneficial Ownership       of Class
------------------                         --------------------       --------
Edward C. Kelly                               1,568,650                  8.17%
650 Sentry Parkway, Suite One
Blue Bell, PA  19422  (1)

Leonard J. Klarich                               45,000                   .24
839 Claybrook Court
Knoxville, TN  37923  (2)

Jurgen A. Wolf                                  107,361                   .56
1285 West Pender Street
Vancouver, B.C. Canada  (3)

Ian D. Lambert                                  374,952                  1.95%
c/o International Tasty Fries, Inc.
595 Howe Street, Suite 602
Vancouver, B.C.  V6C 2T5  (4)

Kurt R. Ziemer                                  171,528                  1.12%
599 Valley View Drive
New Holland, PA  17557  (5)

All Officers and Directors                    2,269,483                 12.04%
as a group  (5 persons)

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

* less than 1%

(1)  Does not include an option for 50,000 post-split shares of common stock
     granted by the Board of Directors on October 1, 1996 exercisable until
     October 1, 1999 at $4.00 per share. Does not include an option for
     1,000,000 post-split shares of common stock granted by the Board of
     Directors on July 1, 1998 exercisable until July 1, 2000 at $.50 per share.

(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) an option for 50,000 post-split
     shares of common stock granted by the Board of Directors on October 1, 1996
     exercisable for $4.00 per share until October 1, 1999.

(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


                                       20

<PAGE>


     until December 15, 2006, automatically granted to each non-employee
     director under the 1995 Stock Option Plan; (iii) an option for 50,000
     post-split shares of common stock granted by the Board of Directors on
     October 1, 1996 exercisable at $4.00 per share until October 1, 1999.

(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; and (iii) an option for 50,000 post-split shares of common
     stock granted by the Board of Directors on October 1, 1996 exercisable at
     $4.00 per share until October 1, 1999. SEE "CERTAIN RELATIONSHIPS AND
     RELATED TRANSACTIONS."

(5)  Does not include 680 post-split shares underlying an option exercisable at
     $2.45 per share until December 15, 2006, automatically granted to each
     non-employee director under the 1995 Stock Option Plan. Mr. Ziemer's option
     has been prorated to reflect the date he was appointed to the Board of
     Directors on October 4, 1996.

(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.

     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, is the
President and a shareholder of International Tasty Fries, Inc., a stockholder in
the Company and, until November 1996, was President of Yukon Spirit Mines Ltd.
(now doing business as Gainey Resources Ltd.). International Tasty Fries and
Yukon are affiliated entities. International Tasty Fries has a distributorship
agreement with the Company for a number of European countries; Yukon's
distribution agreement was reacquired by the Company in April 1998. Because of
the potentially conflicting interests that Mr. Lambert may face, given his role
as President of one of the Company's distributors and a director of the Company,
Mr. Lambert may find it necessary to recuse himself from certain strategic
discussions in the normal course of business.


                                       21

<PAGE>

     In May of 1995, the Company loaned an officer/director $50,000 at 10%
interest per annum. The loan was repaid in accordance with a payment plan over
the current and past fiscal years. The balance due the Company at January 31,
1999 and 1998 was $0 and $24,747, respectively.

     In August of 1996, the Company loaned a different officer/director $50,000
at 10% interest per annum. The loan was repaid in accordance with a payment plan
over the current and past fiscal years. The balance due the Company at January
31, 1999 and 1998 was $0 and $5,630, respectively.

     In the normal course of its business, the Company occasionally has legal
services performed by one of Mr. Kelly's sons. The Company believes that the
compensation paid for and services received in connection with such services are
comparable to those it could expect to receive from other attorneys.

SUBSEQUENT EVENTS

     In January 1998, during the normal course of business, the Company reached
an agreement to re-acquire one of its territorial distributorships from Yukon
Spirits Mines, Ltd. (now doing business as Gainey Resources, Ltd.). The
agreement was subject to approval by Yukon's shareholders and the Vancouver
Stock Exchange. Yukon's distribution agreement included 23 U.S. states and seven
European countries. As consideration, the Company issued 250,000 post-split
shares of restricted stock and 100,000 warrants to purchase common stock. The
warrants have an exercise price of $.66 per share and expire on December 30,
2000. The transaction closed in April 1998.

     In April 1998, the Company entered into an agreement to receive $1,500,000
in proceeds from the sale of restricted stock to Lancaster Investment
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 shares of
common stock at an exercise price of $1.90; the warrants expire April 12, 2001.
In connection with the transaction, the Company also issued 150,000 post-split
shares of restricted stock to L. Eric Whetstone as a commission on the
transaction. The Company and the investor have entered into an escrow agreement
for this transaction. As of January 31, 1999, $800,000 has been received by the
Company and 1,600,000 shares have been released to the investor. The terms of
this financing call for the Company to file a registration statement with the
Securities and Exchange Commission within 30 days of signing, which was April
13, 1998. The Company intends to register all of the restricted common shares
and warrant shares issued and/or granted under this transaction in a
registration statement as soon as is practicable. SEE "CHANGES IN CONTROL."


                                       22

<PAGE>



                              REPORTS ON FORM 8-K.

     Forms 8-K dated June 3, 1997 and November 5, 1997 are hereby incorporated
by reference.

                                       23


<PAGE>


                                   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.                                /s/ EDWARD C. KELLY
Date:  April 28, 1999                      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.


/s/ EDWARD C. KELLY                                  August 4, 2000
-----------------------------------
Edward C. Kelly, Chairman, CEO
President, Treasurer & Director


/s/ LEONARD J. KLARICH
-----------------------------------                 August 4, 2000
Leonard J. Klarich, Vice President,
Secretary & Director


/s/ JURGEN A. WOLF
-----------------------------------                 August 4, 2000
Jurgen A. Wolf, Director


/s/ IAN D. LAMBERT
-----------------------------------                 August 4, 2000
Ian D. Lambert, Director


/s/ KURT N. ZIEMER
-----------------------------------                 August 4, 2000
Kurt N. Ziemer, Director