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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 2000
(__) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period ______________ to ____________
Commission File Number 0-25127
COINLESS SYSTEMS, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 91-1715373
--------------------------------- -----------------------------------
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or organization)
3720 West Oquendo Road, Suite 101, Las Vegas, NV 89118
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(Address of principal executive offices)
702 891-9195
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(Issuer's telephone number)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 _____
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As of June 30, 2000, the Company had 15,649,854 shares of its $.0001 par value
common stock issued and outstanding.
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PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1 Financial Statements Page
------ -------------------- ----
<S> <C>
Unaudited Condensed Consolidated Balance Sheet A/T - June 30, 2000 2
Unaudited Condensed Consolidated Statements of Operations for the three month
Periods ended June 30, 2000 and June 30, 1999 3
Unaudited Condensed Consolidated Statements of Cash Flows for the six-month
period ended June 30, 2000 4
Notes to Condensed Consolidated Financial Statements 5
</TABLE>
1
COINLESS SYSTEMS, INC. AND SUBSIDIARY
Consolidated Balance Sheet - June 30, 2000
Unaudited
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and Equivalent 1,299,880
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Deposits 77,377
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Total Current Assets 1,377,257
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Equipment, Net of Accumulated Depreciation of $47,277. 153,282
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Other Intangible Assets, Net of Accumulated
Amortization of $3,471. 25,686
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Total Assets 1,556,225
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LIABILITIES & SHAREHOLDER EQUITY
Current Liabilities:
Accounts Payable 960,726
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Notes Payable (Current Portion) 273,859
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Long-Termination Liabilities 302,945
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Total Liabilities 1,537,530
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Shareholders Equity
Common Stock, 75,000,000 authorized $.001 per value
15,649,854. shares issued and Outstanding 15,650
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Additional Paid in Capital 2,773,971
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Deficit Accumulated during the development stage (2,770,926)
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Total Shareholders Equity 18,695
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Total Liabilities and Shareholders Equity 1,556,225
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</TABLE>
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COINLESS SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Audited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Jun 30, 2000 Jun 30, 1999 Jun 30, 2000 Jun 30, 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue 0 201,660 0 429,862
Cost of Goods Sold 0 (106,543) 0 (236,378)
--------- --------- --------- ---------
Gross Profit 0 95,117 0 193,484
Operating Expenses (416,815) (213,418) (726,103) (429,244)
--------- --------- --------- ---------
Operating Loss (416,815) (118,301) (726,103) (235,760)
Other Income and Expenses
Interest Income 21,512 4,169 28,289 8,192
Interest Expense (32,117) (8,910) (42,173) (20,290)
Other Income 0 9,570 995 10,090
--------- --------- --------- ---------
Total Other Income (Expense) (10,605) 4,829 (12,889) (2,008)
========= ========= ========= =========
Net Loss (427,420) (113,472) (738,992) (237,768)
Basic & Diluted Net
Loss Per Share 0.003 0.001 0.005 0.002
</TABLE>
Basic & Diluted Weighted
Average Number of Common Shares Outstanding 15,034,275.
The accompanying notes are an integral part of these consolidated financial
statements
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COINLESS SYSTEMS, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED
<TABLE>
<S> <C>
Cash flow from operating activities:
Net Loss (738,991)
Adjustments to reconcile loss to net
Cash provided by operating activities:
Depreciation & Amortization 28,743
Decrease in Notes Receivable 70,711
Stock for Stock Promotion 140,550
Stock for merger commission 225,000
Stock for Services 18,000
Stock for DSG Acquisition 52,500
Stock to Retire Debt 43,728
Increase in Prepaids (294,770)
Increase Inventories (58,465)
Increase Deposits (4,722)
Increase Accounts Payable 66,630
Increase Accrued Expenses 178,542
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Net Cash Used by Operating Activities (272,544)
Cash Flow from Investing Activities
Increase in Loans Receivable (598,369)
Increase in Fixed Assets (157,332)
Sales of Assets 7,042
---------
Net Cash Used by Investing Activities (748,659)
Cash Flow from Financing Activities 26,365
Increase in Notes Payable 109,381
Issuance of Common Stock 828,000
Net Cash Provided by Financing Activities 963,746
Net Increase/(Decrease) in Cash (57,457)
Cash at Beginning of Year 26,852
---------
Cash at End of Year (30,605)
Supplemental Disclosure
Interest Paid 16,432
Taxes Paid 30,534
</TABLE>
4
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COINLESS SYSTEMS, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
1. BASIS OF PRESENTATION AND ORGANIZATION:
Basis of Presentation
The accompanying consolidated financial statements of Coinless Systems Inc
and its subsidiary ("the Company") for the three months ended June 30, 2000 and
June 30, 1999 have been prepared in accordance with generally accepted
accounting principles and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. These financial statements have not been audited by an
independent accountant, but include all adjustments (consisting of normal
recurring adjustments) which are, in Management's opinion, necessary for a fair
presentation of the financial condition, results of operations and cash flows
for such periods. However, these results are not necessarily indicative of
results for any other interim period or for the full year.
Certain information and footnote disclosures normally included in
financial statements, in accordance with generally accepted accounting
principles, have been omitted pursuant to requirements of the Securities and
Exchange Commission. Management believes that the disclosures included in the
accompanying interim financial statements and footnotes are adequate to make the
information not misleading, but should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Form 10K for the year ended December 31, 1999.
Organization
The accompanying consolidated financial statements consist of Coinless Systems
Inc, a Nevada Corporation and DSG, Inc., a California Corporation.
Principals of Consolidated
____________________
The accompanying consolidated financial statements include the amounts of the
Company's wholly owned subsidiary, DSG, Inc. (100%). All significant inter-
company transactions have been eliminated in consolidation.
CSI has patented a product called TickeTrak(R) that is designed to replace the
need for coins in casino gaming machines. The replacement product is a bar
coded ticket device that identifies a given transaction on the casinos' host
computer. The player uses the ticket as though it were cash and the patented
verification process assures its acceptability to both casino operators and
customers. No ticket will be issued to a player prior to verification and only
one ticket can be redeemed. TickeTrak can either be sold on an
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OEM basis, for internal installation in new machines or retrofitted to any
existing gaming machine.
Interim periods
________________
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10QSB, to the best of the company's
ability due to a lack of some information of the prior operations of the
Company, and do not include all of the information required by generally
accepted accounting principles for complete financial statements. In the
opinion of the Company's management, all adjustments (consisting of normal
recurring adjustment) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 2000 are not
necessarily indicative of results for future periods. These statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's Form 10-K for the year ended December 31,
1999.
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COINLESS SYSTEMS, INC. AND SUBSIDIARIES
(Notes to Unaudited Consolidated Financial Statement)
RECLASSIFICATION
Certain amounts in the previously presented financial statement have been
reclassified to conform to the current period presentation.
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Supplemental Cash Flow Information Six Months Ending
June 30, 2000
<S> <C>
Cash paid for:
Interest $16,432.
Taxes $30,534.
</TABLE>
NET INCOME (LOSS) PER SHARE
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," basic net income per share is computed by dividing
the net income attributable to common shareholders by the weighted average
number of common shares outstanding during the period.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In April, 1998, the American Institute of Certified Public Accounts ("AICPA")
issued Statement of Position ("SOP") 98-5 entitled "Reporting on the Costs of
Start-Up Activities." SOP 98-5 requires entities to expense as incurred all
start-ups that are not otherwise capitalizable as long-lived. The Company had
previously accepted this "SOI" as to Patent and R&D expenses. No
Reclassification is necessary.
Stock options
___________
There are no outstanding stock options
ITEM 2. Management's Discussion and Analysis or Plan of Operation
During the second quarter of this year, the company devoted a substantial amount
of its effort to completing product tests for several of our customers, the most
important of which is Spirit Mountain. Upon acceptance of these tests, Spirit
Mountain is slated to be the inaugural installation for TickeTrak(R).
Completed during the same timeframe was an on-site visit to work with casino
personnel who assisted us over a period of 2-3 weeks in "Casinoizing" the
product. As a result of
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this testing process, engineering modifications were initiated, which will make
TickeTrak a far better product with much more reliability coupled with ease of
operation enhancements, which will make it far more user friendly to the gaming
public.
In addition, we solidified our relationship with Gaming Systems International
who is developing the Ticket Accounting System (TAS) that is specifically
designed around TickeTrak. TAS will allow us to put in a stand-alone computer
system at any casino and run side-by-side with the slot accounting systems that
are currently in place. GSI, in exchange for an agreement on exclusivity for
the State of California, agreed to buy 10,000 TickeTrak devices for resale in
that state over the next three-year timeframe.
From a Sales & Marketing standpoint, in the last quarter, we have attended the
NIGA Conference in Portland, Oregon and the Southern Gaming Conference in
Biloxi, MS and participated in the Slot Operations Convention, put on by UNLV in
Las Vegas. The result from these has substantially increased the enthusiasm
about TickeTrak as well as opened up additional opportunities for the media/
tickets. During the third quarter of 2000, we will be making an all-out effort
to take these leads and turn them into bonafide sales.
CSI has also made serious excursionary trips to the state of Washington were
there has been considerable interest in our product. We have been asked to work
with some of the manufacturing suppliers who have put slot machines/slot systems
into that state. The purpose of which would be to unify each site to use a
single form of media that is universal to the casino and more importantly,
offers the Ticket Verification System of TickeTrak.
ITEM 3. Management
Discussion and Analysis of Financial Conditions and Results of Operations.
There is no revenue from operations because of the Sale of Certain Assets of
D.S.G., Inc. We are in the final states of preparing product prototypes for
testing for Spirit Mountain Casino in early third quarter. Upon approval of
these prototypes, production will commence on units for Beta Test at the Casino
site.
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COINLESS SYSTEMS, INC. AND SUBSIDIARIES
(Notes to Unaudited Consolidated Financial Statement)
RESULTS OF OPERATION:
Six months ended June 30, 2000 compared to six months ended June 30, 1999:
Revenues for the three months ended June 30, 2000 were non-existent due to
the Sale of Certain Assets of D.S.G., Inc.
Operating expenses increased $203,397.00 over the same quarter 1999. This
increase is mainly for additional engineering overhead to bring TickeTrak to a
production phase.
The following table presents the six months ending June 30, 2000 and 1999,
the Consolidated Statements of Operation of the Company expressed as percentages
(%) of total revenue. The results of operations for the first six months of
2000 are not necessarily indicative of the results to be expected for the full
year ending December 31, 2000.
PERCENTAGE OF TOTAL REVENUE
Six months ended
June 30, 2000
<TABLE>
<CAPTION>
------------------------------------------------------------------------
2000 1999
------------------------------------------------------------------------
<S> <C> <C>
Revenues 0 100.0
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Cost of Goods Sold 0 54.9
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Gross Profit 0 45.1
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------------------------------------------------------------------------
Operating Expense (726.1) (99.81)
------------------------------------------------------------------------
Operating Profit (Loss) (726.1) (54.81)
------------------------------------------------------------------------
Other Income (Expense)
------------------------------------------------------------------------
Interest Expense (42.2) (4.7)
------------------------------------------------------------------------
Interest Income 28.3 1.9
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Other Income 1.0 2.3
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Total Other Income (Expense) (12.9) (.05)
------------------------------------------------------------------------
------------------------------------------------------------------------
Net Income (Loss) (738.9) (55.3)
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
9
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LIQUIDITY AND CAPITAL RESOURCES:
Additional capital requirements for the production of TickeTrak units will
be raised from related party financing and possible sale of capital stock as
well as sale order deposits.
Statements made herein are not historical facts but are forward-looking
statements and are subject to a number of risk factors, including the gaming's
public acceptance of the coinless system's technology into coinless gaming. The
costs and delays experienced in the course of developing software, the amount
and rate of growth of administrative expenses associated with building the
infrastructure needed for future growth, the availability, amount, type and cost
of financing for the Company and general economic conditions and other factors.
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PART II - OTHER INFORMATION
Item 1. Legal Proceeding
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Vendor liens totalling $89,239 have been filed against subsidiary D.S.G.,
Inc. This figure is reflected in consolidated balance sheet.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
<TABLE>
<CAPTION>
Common Paid In
---------------------------
Shares Stock Capital
------------- ------------ --------------
<S> <C> <C> <C>
Balance at March 31, 1999 14,427,571. $100,992. $2,261,351.
Issuance of Stock for Employee Incentives 29,000. 29. (29.)
Issuance of Stock for Services Rendered 806,000. 806. 382,744.
Issuance of Stock for Forgiveness of Debt 437,283. 437. 43,291.
Adj. to Authorized Par Value -- (86,614.) 86,614.
----------- --------- -----------
Balance at June 30, 2000 15,649,854. $ 15,650. $2,773,971.
</TABLE>
Item 3. Defaults Upon Senior Securities
-------------------------------
Inapplicable
Item 4. Submission of matters to a Vote of Security Holders
---------------------------------------------------
Inapplicable
Item 5. Other Information
-----------------
Inapplicable
Item 6. Exhibits and Reports
--------------------
Inapplicable
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SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
COINLESS SYSTEMS, INC.
-----------------------------------------
(Registrant)
Date: August 7, 2000 By: /s/ Darryl D. Dorsett
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Darryl D. Dorsett
Its: Chief Financial Officer and Secretary
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