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COINLESS SYSTEMS, INC. - 10QSB - QUARTERLY REPORT
Date Filed: 5/15/ 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 March 31, 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.
- --------------------------------------------------------------------------------
(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
------------
(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 [_]
As of March 31, 2000, the Company had 14,427,571 shares of its $.0007 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 - March 31, 2000 2
Unaudited Condensed Consolidated Statements of Operations for the three month
Periods ended March 31, 2000 and March 31, 1999 3
Unaudited Condensed Consolidated Statements of Cash Flows for the three-month
period ended March 31, 2000 4
Notes to Condensed Consolidated Financial Statements 5
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1
COINLESS SYSTEMS, INC. AND SUBSIDIARY
Consolidated Balance Sheet - March 31, 2000
Unaudited
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current Assets:
Cash and Equivalent 1,026,097
----------
Deposits 73,085
----------
Total Current Assets 1,099,182
----------
Equipment, Net of Accumulated Depreciation of 18,413
$47,018. ----------
Other Intangible Assets, Net of Accumulated ----------
Amortization of $6,204. 26,159
----------
Total Assets 1,143,754
----------
LIABILITIES & SHAREHOLDER EQUITY
Current Liabilities:
Accounts Payable 725,096
----------
Notes Payable (Current Portion) 34,960
----------
Long-Termination Liabilities 364,860
----------
Total Liabilities 1,124,916
----------
Seholders Equity
Common Stock, 75,000,000 authorized $.007 per value
14,427,571 shares issued and Outstanding 100,992
-----------
Additional Paid in Capital 2,261,351
-----------
Deficit Accumulated during the development stage (2,343,505)
-----------
Total Shareholders Equity 18,838
-----------
Total Liabilities and Shareholders Equity 1,143,754
-----------
</TABLE>
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COINLESS SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
Mar 31, 2000 Mar 31, 1999
------------ ------------
<S> <C> <C>
Revenue 0 229,632
Cost of Goods Sold 0 (117,753)
-------- --------
Gross Profit 0 111,879
Operating Expenses 309,288 236,492
-------- --------
Operating Loss (309,288) (124,613)
Other Income and Expenses
Interest Income 6,777 0
Interest Expense (10,056) (6,842)
Other Income 995 500
Total Other Income (Expense) (2,284) (6,342)
-------- --------
Net Loss (311,572) (130,955)
Basic & Diluted Net
Loss Per Share (.002) (.001)
Basic & Diluted Weighted
Average Number of Common Shares Outstanding 14,427,571
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
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COINLESS SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Cash Flow from Operating Activities:
Net Loss (311,572)
Adjustments to reconcile loss to net
Cash provided by operating activities:
Depreciation and amortization 21,994
Decrease Accounts Receivable 68,997
Increase Other Receivables (51,578)
Decrease Inventories
Increase Deposits (10,848)
Increase Accounts Payable 48,496
Decrease Accrued Expenses (39,580)
Net Cash used by operating activities (274,091)
Cash flow from investing activities
Decrease in loans receivable 9,432
Increase in fixed assets (1,780)
Sale of Assets 7,042
Net Cash Used by Investing Activities 14,694
Cash Flow from Financing Activities
Increasing Notes Payable 8,760
Issuance of common stock 88,000
Net Cash provided by financing activities 96,760
Net Increase (decrease) in cash (162,637)
Cash A/T - beginning of year 26,852
Cash end of year (135,785)
Supplemental disclosure
Interest paid 6,842
Taxes paid 0
</TABLE>
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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 March 31, 2000 and
March 31, 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 include 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
preceding fiscal year.
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
<PAGE>
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 three months ended March 31, 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
Supplemental Cash Flow Information Three Months Ending
March 31, 2000
Cash paid for:
Interest $6,842
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
The Company is still attempting to raise sufficient working capital to
allow it to distribute the Company's TickeTrak, however, no formal orders other
than Spirit Mountain have as yet been received.
In March, 2000, the Company moved to new corporate office facilities in Las
Vegas, Nevada. This move consolidated our Engineering; Marketing and Corporate
Administration staffs into one facility. To accomplished this relocation, the
company on December 31, 1999 entered into an agreement wherein it transferred
its customer list,
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some physical assets, its phone number and name of its subsidiary DSG, Inc., a
California corporation, to Automatic Data Capture Technologies, Inc., a
California corporation for the total sum of $350,000.00. The method of payment
was $200,000. down and the balance at the rate of $10,000.00 every three months
commencing June 30, 2000. From the first payment, at the closing, the sum of
$50,000.00 was withheld into an escrow to guarantee the payment of past due
California sales taxes; sum of $14,938.10 to transfer to the buyer the deposits
for the former customers of DSG, Inc.; the sum of $36,638.01 to pay off the
Company's factorer and the sum of $3,435.93 to pay off a judgment recorded
against the Company. This left the sum of $94,987.96 paid to DSG, Inc. The
$50,000.00 being withheld will be released to the Company when the Company shows
the buyer that the obligation to the State Board of Equalization of California
has been paid, or may be applied to the payoff of the obligation.
There is no relation between the buyer and the seller, other than they are
in related business, nor is there any relationship between any officer or
director of either company with the other.
The sale by the Company of the assets of its subsidiary DSG, Inc., will
result in DSG, Inc., no longer being able to continue its existing business of
the sale of Bar coding material or services, but will greatly enhance its
ability to market its primary project, to complete the development of its
TickeTrak gaming device and implement a market program to sell the product to
the gaming industry.
Item 3. Management's discussion and analysis of financial condition and results
of operations.
The Company is in the final stages of its TickeTrak develop and will be
demonstrating its device on a number of different manufacturers' gaming machines
in mid-second quarter, 2000. It has had only one sale of TickeTrak to a Native-
American Casino in Oregon.
There will be no revenue from operations because of the sale of certain
assets of its wholly-owned subsidiary DSG, Inc., until additional contracts are
received for the TickeTrak gaming device.
The company has developed significant interest for Coinless Gaming, by the
development of TickeTrak, and feels that after the announced demonstrations,
sales will be forthcoming.
<PAGE>
The following table presents the three months ending March 31, 2000 and
1999, the Consolidated Statements of Operation of the Company expressed as
percentages (%) of total revenue. The results of operations for the first three
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
Three months ended
March 31, 2000
<TABLE>
<S> <C> <C>
2000 1999
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Revenues 0 100.0
Cost of Goods Sold 0 51.3
Gross Profit 0 48.7
Operating Expense (313.9) (102.9)
Operating Profit (Loss) (313.9) (54.2)
Other Income (Expense)
Interest Expense (10.1) (2.9)
Interest Income 6.8 -0-
Other Income 1.0 .2
Total Other Income (Expense) 2.3 (2.7)
Net Income (Loss) (311.6) (56.9)
</TABLE>
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COINLESS SYSTEMS, INC. AND SUBSIDIARIES
(Notes to Unaudited Consolidated Financial Statement)
RESULTS OF OPERATION:
Three months ended March 31, 2000 compared to three months ended March 31, 1999.
Revenues for the three months ended March 31, 2000 were non-existent to the
sale of certain assets of DSG, Inc. (refer to Item 2 - Management's Discussion
and Analysis).
CSI is in a research and development mode during this reporting period. To
address the lack of revenues, the company believes that the advancement to a
production phase, demonstrations of TickeTrak May, 2000, will produce new sales
and revenues in early 2nd quarter, 2000.
Operating expenses, which include additional research and development;
marketing start-up costs; relocation of corporate administration, consolidation
of all departments into one facility and additional administrative overhead,
increased 211.0% for the 2000 quarter from 102.9% for the 1999 quarter.
The decrease in other income and expenses and approximately $4058.00
resulted from an increase in interest income.
Liquidity and Capital Resources:
The Company's capital requirements are for the completion of development
on TickeTrak moving from an R&D status to a production mode and developing a
market network to sell the product.
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
----------------
Inapplicable.
Item 2. Changes in Securities and Use of Proceeds
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<TABLE>
<CAPTION>
CHANGES IN SECURITIES AND USE OF PROCEEDS
Common Paid In
Shares Stock Capital
------ ------- ----------------
<S> <C> <C> <C>
Balance at Dec 31, 1999 7,967,325 $ 55,771 $1,426,071
Issuance of Stock to Acquire
DSG Inc. & D&J Enterprises, Inc. 2,658,499 18,609 33,892
Private Offering 2,959,747 20,718 807,282
Issuance of Stock for Services
Rendered 520,000 3,640 (3,640)
Issuance of Stock for
Employee Incentives 322,000 2,254 (2,254)
---------- -------- ----------
Balance at Mar 31, 2000 14,427,571 $100,992 $2,261,351
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 on Form 8-K
--------------------------------
Inapplicable
</TABLE>
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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: May 15, 2000 By: /s/ DARRYL D. DORSETT
____________________________
Darryl D. Dorsett
Its: Chief Financial Officer and Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> MAR-31-2000
<CASH> (135,785)
<SECURITIES> 0
<RECEIVABLES> 1,099,797
<ALLOWANCES> (2,185)
<INVENTORY> 24,535
<CURRENT-ASSETS> 1,099,182
<PP&E> 1,593
<DEPRECIATION> (47,018)
<TOTAL-ASSETS> 1,143,754
<CURRENT-LIABILITIES> 760,056
<BONDS> 0
0
0
<COMMON> 2,362,343
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,143,754
<SALES> 0
<TOTAL-REVENUES> 6,777
<CGS> 0
<TOTAL-COSTS> 309,288
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,056
<INCOME-PRETAX> (311,572)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 995
<CHANGES> 0
<NET-INCOME> (311,572)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
