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COINLESS SYSTEMS, INC. - 10QSB - QUARTERLY REPORT
Date Filed: 11/08/2000
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 September 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
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(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 September 30, 2000, the Company had 16,624,854 shares of its $.001 par
value common stock issued and outstanding.
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PART 1 - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ITEM 1 Financial Statements Page
------ -------------------- ----
<S> <C> <C>
Unaudited Condensed Consolidated Balance Sheet A/T - September 30, 2000 2
Unaudited Condensed Consolidated Statements of Operations for the three month
periods ended September 30, 2000 and September 30, 1999 3
Unaudited Condensed Consolidated Statements of Cash Flows for the nine-month
period ended September 30, 2000 4
Notes to Condensed Consolidated Financial Statements 5
</TABLE>
1
COINLESS SYSTEMS, INC. AND SUBSIDIARY
Consolidated Balance Sheet - September 30, 2000
Unaudited
ASSETS
Current Assets:
Cash and Equivalent 1,386,652
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Deposits 102,800
Total Current Assets 1,489,452
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Equipment, Net of Accumulated Depreciation of $58,854. 149,104
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Other Intangible Assets, Net of Accumulated
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Amortization of 3,841. 25,316
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Total Assets 1,663,872
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LIABILITIES & SHAREHOLDER EQUITY
Current Liabilities:
Accounts Payable 1,119,319
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Notes Payable (Current Portion) 351,511
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Long-Termination Liabilities 285,945
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Total Liabilities 1,756,775
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Shareholders Equity
Common Stock, 75,000,000 authorized $.001 per value
16,624,854 shares issued and Outstanding 18,525
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Additional Paid in Capital 3,046,097
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Deficit Accumulated during the development stage 3,157,525)
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Total Shareholders Equity (92,903)
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Total Liabilities and Shareholders Equity 1,663,872
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2
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COINLESS SYSTEMS, INC. AND SUBSIDIARY
Consolidated Statement of Operations
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
30-Sep-00 30-Sep-99 30-Sep-00 30-Sep-99
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenue 0 194,190 0 624,052
Cost of Goods Sold 0 122,575 0 358,953
--------- --------- ---------- ---------
Gross Profit 0 71,615 0 265,099
Operating Expenses 381,636 309,471 1,107,738 738,715
--------- --------- ---------- ---------
Operating Loss (381,636) (237,856) (1,107,738) (473,616)
Other Income and Expenses
Interest Income 16,695 4,099 44,984 12,291
Interest Expense (21,659) (8,603) (63,832) (28,893)
Other Income 0 (2,963) 995 7,127
--------- --------- ---------- ---------
Total Other Income (Expense) (4,964) (7,467) (17,853) (9,475)
========= ========= ========== =========
Net Loss (386,600) (245,323) (1,125,591) (483,091)
Basic & Diluted Net
Loss Per Share 0.004 0.001 0.007 0.003
Basic & Diluted Weighted
Average Number of Common Shares Outstanding 15,971,498.
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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COINLESS SYSTEMS, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Cash flow from operating activities:
Net Loss (1,125,610)
Adjustments to reconcile loss to net
Cash provided by operating activities:
Depreciation & Amortization 39,352
Decrease in Notes Receivable 67,224
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 (218,044)
Increase Inventories (130,057)
Increase Deposits (29,992)
Increase Accounts Payable 107,047
Increase Accrued Expenses 296,595
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Net Cash Used by Operating Activities (513,707)
Cash Flow from Investing Activities
Increase in Loans Receivable (693,765)
Increase in Fixed Assets (163,342)
Sales of Assets 7,042
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Net Cash Used by Investing Activities (850,065)
Cash Flow from Financing Activities 96,365
Increase in Notes Payable 100,033
Issuance of Common Stock 1,103,000
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Net Cash Provided by Financing Activities 1,299,398
Net Increase/(Decrease) in Cash (64,374)
Cash at Beginning of Year 26,852
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Cash at End of Year (37,522)
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Supplemental Disclosure
Interest Paid 23,456
Taxes Paid 30,534
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COINLESS SYSTEMS, INC. AND SUBSIDIARY
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 nine months ended September 30, 2000
and September 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
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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
5
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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 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 adjustments) considered necessary for a fair presentation have been
included. Operating results for the nine months ended September 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 SUBSIDIARY
(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
Supplemental Cash Flow Information Nine Months Ending
September 30, 2000
Cash paid for:
Interest $23,456.00
Taxes $30,534.00
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
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There are no outstanding stock options. However, the Company has issued 100,000
warrants convertible by April 30, 2003.
ITEM 2. Management's Discussion and Analysis or Plan of Operation
During the third quarter of this year, Spirit Mountain Casino approved
TickeTrak(R) for production and discussions began to develop an installation
schedule.
The software development of our Ticket Accounting System (TAS) is proceeding on
schedule.
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To improve investor relations, we entered into an Agreement with Travis Morgan
Securities, Inc. who is a full-service investment banking and brokerage firm.
Retained to provide services ranging from preparation of Research Reports and
the distribution of such information to Broker-Dealer and Investment Banking
community, to providing guidance in maximizing shareholder value. Effective
September 28, CSI was added to Cashcowmag.com, a free financial website.
From a sales and marketing standpoint, a P.O. was issued by Infinity Group of
Albuquerque, New Mexico for 500 TickeTrak OEM units; estimated value in excess
of $325,000.00.
An Agreement was reached with Tekbilt Gaming for the installation of TickeTrak
Coinless Gaming devices in their Multiple Game Touch Screen and Video Slot
Machines. As part of the Agreement, Tekbilt Gaming will market and distribute
TickeTrak throughout South America and Europe.
C.S.I. is participating in the World Gaming Congress & Expo in October 2000.
The space will demonstrate all of the advantages of TickeTrak in a casino floor
environment, utilizing a variety of manufacturers' slot machines.
ITEM 3. Discussion and Analysis of Financial Conditions and Results of
Operations.
There is no Operating Revenues from Operations because of the sale of certain
assets of D.S.G., Inc.
We have begun production of TickeTrak(R) units for the beta test at Spirit
Mountain Casino and units for shipment to Infinity Group.
Revenues for these units will be reportable in the fourth quarter.
RESULTS OF OPERATIONS:
Nine months ended September 30, 2000 compared to nine months ended September 30,
1999:
Revenues for the nine months ended September 30, 2000 were non-existent due to
the sale of certain assets of D.S.G., Inc.
Operating expenses increased $72,165.00 over the same quarter 1999. This
increase was caused by additional engineering overhead and increased marketing
expenses.
Other income and expenses: Interest income increased $12,596.00 and interest
expense increased $13,056.00 creating a net decrease of $2,503.00 over same
quarter 1999.
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The following table presents the nine months ending September 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 nine 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
Nine Months Ended September 30:
2000 1999
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Revenues 0 100.0
Cost of Goods Sold 0 57.5
Gross Profit 0 42.5
Operating Expense (1,107.7) (118.4)
Operating Profit (Loss) (1,107.7) (75.9)
Other Income Expense
Interest Expense (6.4) (4.6)
Interest Income 4.5 1.9
Other Income .9 1.1
Total Other Income (.9) (1.6)
Net Income (Loss) (1,108.7) (77.5)
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LIQUIDITY AND CAPITAL RESOURCES:
Additional capital requirements for the production of TickeTrak will be raised
from debt financing and deposit from sale orders.
CSI is currently negotiating a line of credit.
CAUTIONARY NOTICE
This report contains forward-looking statements in which management shares its
knowledge and judgment about factors that it believes may materially affect
Company performance in the future. Terms expressing future expectations,
enthusiasm or caution about future potential and anticipated growth in sales,
revenues and earnings and like expressions typically identify such statements.
All forward-looking statements, although made in good faith, are subject to the
uncertainties inherent in predicting the future. They are necessarily
speculative, and unforeseen factors such as unusual production problems,
competitive pressures, failure to gain the acceptance of regulatory authorities
and other adverse government action, customer resistance and general
deterioration in economic conditions cause results to be materially poorer than
any that may be projected. Forward-looking statements speak only as of the date
they are made, and readers are warned that the Company undertakes no obligation
to update or revise such statements to reflect new circumstances or
unanticipated events as they occur.
Readers are urged to carefully review and consider disclosures made by the
Company in this and other reports that discuss factors germane to the Company's
business. See particularly the Company's report on Forms 10-K, 10-Q and 8-K
filed with the Securities & Exchange Commission.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceeding
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ITEM 2. Changes in Securities and Use of Proceeds
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<TABLE>
<CAPTION>
Common Paid In
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Shares Stock Capital
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<S> <C> <C> <C>
Balance at June 30, 2000 15,649,854 $15,650.00 $2,773,971.00
Sale of Securities 975,000 2,875.00 272,126.00
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Balance at September 30, 2000 16,624,854 $18,525.00 $3,046,097.00
</TABLE>
ITEM 3. Defaults Upon Senior Securities
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Inapplicable
ITEM 4. Submission of matters to a Vote of Security Holders
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Inapplicable
ITEM 5. Other Information
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Inapplicable
ITEM 6. Exhibits and Reports
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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)
/s/ Darryl D. Dorsett
Date: November 8, 2000 By: ------------------------------------------
Darryl D. Dorsett
Its: Chief Financial Officer and Secretary
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