SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A2
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
OR
|_| 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 Number 33-94884
COATES INTERNATIONAL LTD.
(Exact name of small business issuer as specified in its charter)
Delaware 22-2925432
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Highway 34 & Ridgewood Road, Wall Township, New Jersey 07719
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (908) 449-7717
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
None
Securities registered pursuant to Section
12(g) of the Act:
Title of Class
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the issuer's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or in any amendment to
this Form 10-KSB. [ ]
Issuer did not generate any revenues for the year ended December 31, 1997.
During the year ended December 31, 1997, there was no established public trading
market for the issuer's Series A Preferred Stock. On December 31, 1997, there
were 6,564,424 shares of Series A Preferred Stock of the Issuer issued and
outstanding.
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CIL has a short operating history, during which it has primarily devoted its
attention to developing the technology associated with the Coates System. During
such time CIL has also arranged for certain tests in order to evaluate the
effectiveness of the technology. CIL has also devoted much time attempting to
interest various persons and entities in acquiring sub-licenses to use the
technology.
CIL is currently manufacturing high performance automotive engines modified with
the Coates System on a limited basis at its Wall Township, New Jersey,
manufacturing facility. Except as set forth herein, none of the engines has been
sold. CIL has received numerous oral and written inquiries from potential
customers, expressing an interest in acquiring high performance automotive
racing engines modified with the Coates System. No assurances can be given that
these inquiries will result in binding sales orders. CIL intends to aggressively
pursue all inquiries with the goal of obtaining firm orders. CIL's ability to
generate revenues and achieve profitable operations is principally dependent
upon the execution of sub-license agreements with engine manufacturers and
retrofitters and upon the Company's successful marketing and sales of high
performance automotive, motorcycle and marine racing engines. Despite limited
success to-date Coates will continue manufacturing a limited inventory of
automotive engines, and pursue the marketing of Coates System technology. Such
efforts will especially be directed towards sub-licensing of the technology.
Results of Operations from Inception August 31, 1988, through December 31, 1997
Virtually no revenues were realized from the inception of operations through
December 31, 1997, as the principal operations were those of a development stage
company. In July 1991 CIL signed a prototype manufacturing agreement with
Harley-Davidson, Inc. ("Harley Davidson") and commenced to attempt to retrofit a
Harley Davidson motorcycle engine using the Coates technology. An initial
$150,000 engineering and development fee was paid to CIL by Harley Davidson. See
"The Coates System".
Under the terms of a February 1994 license agreement, a $500,000 initial payment
was made by Millwest Corporation ("Millwest") for a license of the technology
and was held in a bank account entitled "Coates International Licensing". The
funds were subsequently transferred over to CIL. Pursuant to the terms of the
license agreement, Millwest was obligated to make another payment of $9,500,000
to CIL on or before May 4, 1994. Millwest did not make such payment. CIL placed
Millwest on notice that it was in default. In June 1995 Millwest informed CIL of
its intention to activate the license agreement and advised that financing has
been arranged, however, to date no additional payments have been received by CIL
from Millwest. No assurances can be given that any additional payments will be
made.
No revenues were recognized during the quarter and year ended December 31, 1997.
During 1996, CIL recognized $37,375 in revenues, representing a partial payment
from Nicholson McLaren Engines Ltd. (U.K.) ("Nicholson McLaren") for two high
performance racing car engines modified with the Coates System, shipped to
Nicholson McLaren.
Operating expenses incurred during the last quarter and the year ended December
31, 1997, amounted to $363,730 and $1,427,798 respectively, compared to $507,425
and $1,564,447 for the same periods in 1996. In addition, the Company during the
last quarter in 1997 issued 500,000 shares of the Company's Series A Preferred
Stock issued to George J. Coates pursuant to an exclusive license agreement
between CIL an George J. Coates (see "Related Party Transactions" in Notes to
Financial Statements). General and administrative expenses net of R&D declined
from $1,315,282 in 1996 to $721,829 in 1997, due to, principally, lay-offs of
CIL's production staff because of lack of funding as well as the result of
ongoing efforts to streamline operations and reduce overhead.
Including the above mentioned, total aggregate operating expenses incurred since
August 31, 1988, amounted to $10,316,962, of which the largest portion pertained
to research and development expenses which total $3,053,222.
After recognizing $4,388 interest expenses, the Company's operations show a net
loss of $1,432,186 or $.24 per share for the year ended December 31, 1997,
compared to a net loss of $1,600,110 or $0.27 per share for the preceding year.
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Total losses since inception in August 1988 through December 31, 1997 amount to
$9,743,717 .
Liquidity and Capital Resources
Since its inception, all of the development costs and operating expenses of CIL
have primarily been financed through the cash generated through the sale of
stock, through capital contributions made by George J. Coates' son, Gregory
Coates, and the $500,000 license payment made by Millwest. Capital contributions
advanced to CIL by Gregory Coates in 1996 and during the year ended December 31,
1997, aggregated $1,132,523 and $953,834, respectively. Harley Davidson paid CIL
$150,000 as an initial deposit towards a license agreement; that money has also
been expended by CIL. Certain of the aforesaid funds generated income from bank
accounts in a depository institution; that interest income was also expended by
CIL.
At December 31, 1997, CIL had a net worth of $547,976 compared to a negative net
worth or capital deficiency of $(488,642) at the beginning of the year. The
working capital deficiency which showed a negative balance of $(2,114,271) at
December 31, 1996, relatively improved to a negative $(1,036,578) at December
31, 1997. These improvements were a result of capital raising efforts throughout
the last year which included capital contributions from Gregory Coates and
certain private placements of the Company's preferred stock as well as debt
restructuring, which altogether contributed an aggregate $2,468,804 to equity, a
figure which does not include $500 in preferred equity realized in connection
with the issuance of 500,000 shares Series A Preferred Stock issued to George J.
Coates pursuant to an exclusive license agreement between CIL and George J.
Coates (see "Related Party Transactions" in Notes to Financial Statements).
The 1997 capital transactions furthermore included (i) the issuance of 48,000
Series A preferred shares in private placement transactions which raised a total
of $960,000 equity; (ii) the issuance of 24,325 Series A preferred shares to
investors who had previously subscribed and paid for such shares, for a
cumulative $496,970 in equity contributions, and; (iii) issuance of a total of
8,000 Series A preferred shares pursuant to the conversion of certain loans and
mortgage liabilities, with such transactions contributing altogether $58,000 to
capital.
In order to further improve the Company's financial situation and provide funds
to meet current obligations and finance the ongoing efforts to market the
Company's products, management plans to raise additional capital through a
combination of private placements and debt issues. While the successful
realization of such plans cannot be assured, management is confident that the
Company's unique patented technology will attract further investments, which
provide the means for continued efforts to obtain firm orders and sub-license
agreements with engine manufacturers and refitters, which ultimately will yield
positive cash flows.
Note Regarding Forward-Looking Statements
This Annual Report contains historical information as well as
forward-looking statements. Statements looking forward in time are included in
this Annual Report pursuant to the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. Such statements involve known and
unknown risks and uncertainties that may cause the Company's actual results in
future periods to be materially different from any future performance suggested
herein.
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Coates International, Ltd.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period From
August 31,
1988 (Date of
Inception)
Through
December 31,
1997
-----------------
Years Ended December 31,
--------------------------------- -----------------
1997 1996
--------------- --------------- -----------------
(Unaudited)
(Restated) (Restated)
--------------- -----------------
Supplemental Disclosures of Cash Flow Information Cash paid
during the periods for:
<S> <C> <C> <C>
Interest paid $ 18,499 $ 18,413 $ 64,656
=============== =============== =================
$ - $ - $ -
Income taxes paid
=============== =============== =================
</TABLE>
Supplemental Schedule of Non-Cash Investing and Financing Activities:
The financial statements at December 31, 1996, include noncash financing
transactions of $40,000 as a result of mortgage payments made by a
shareholder which were treated as additional paid-in capital.
The financial statements at December 31, 1997 and 1996, include a noncash
financing transaction of $486,970 for the respective exchange and
reclassification of redeemable preferred stock to amounts due to certain
stockholders.
The financial statements at December 31, 1996, including a noncash
operating and financing transaction of $67,781 for the payment of interest
to rescission stockholders by a shareholder which was treated as
additional paid-in capital.
The financial statements at December 31, 1997 and 1996, include noncash
investing and financing transactions of $15,688 and $7,500 for the
acquisition of equipment by a shareholder which were treated as additional
paid-in capital.
The financial statements at December 31, 1996, include a noncash operating
and investing transaction of $31,131 for patent costs that were paid on
behalf of CIL's principal stockholder in 1995, which costs were expensed
in 1996 (as research and development) in consideration of a granting of
certain rights to the Company.
The financial statements at December 31, 1997 include a noncash investing
and financing transaction of an $8,000 loan from a stockholder, made in
the prior year was exchanged for 500 shares of Series A preferred stock.
In addition, 2,500 shares of Series A preferred stock was exchanged for a
$50,000 decrease in the mortgage payable.
Land and building amounting to $1,500,000 was transferred to the Company
from the majority stockholder and his family pursuant to a consent
judgment on February 6, 1995. A mortgage of $300,000 was assumed as well
as $1,200,000 recorded in additional paid-in capital.
See notes to the financial statements.
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coat10k2.97a
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Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this Amendment No. 2 to
its Form 10-KSB for the year ended December 31, 1997 to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date COATES INTERNATIONAL LTD.
October 16, 1998 By: s/George J. Coages
George J. Coates, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
s/George J. Coates
George J. Coates Director (Principal Executive October 16, 1998
Principal Financial Officer, Principal
Accounting Officer
s/Richard W. Evans
Richard W. Evans Director October 16, 1998
s/Michael J. Suchar
Michael J. Suchar Director October 16, 1998
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coat10k2.97a
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