DELAWARE
|
3714
|
22-2925432
|
(State
of Incorporation)
|
(Primary
Standard
Classification
Code)
|
(IRS
Employer ID No.)
|
Title
of Each Class of
Securities to
be Registered
|
Amount
to Be
Registered(1)
|
Proposed
Maximum
Offering
Price
Per
Share
(1)(2)
|
Proposed
Maximum
Aggregate
Offering Price (2)
|
Amount
of
Registration
Fee
|
|||||||||
Common
Stock,
$0.0001
par value
|
15,000,000
|
|
$
1.23
|
$
18,450,000
|
|
$
566.42
|
|||||||
Common
Stock, $0.0001 par value
|
630,000
|
|
$
1.23
|
|
$
774,900
|
|
$
23.79
|
||||||
Common
Stock, $0.0001 par value
|
266,667
|
|
$
1.23
|
$
328,000
|
|
$
10.07
|
|||||||
Common
Stock, $0.0001 par value
|
3,333,333
|
|
$
1.23
|
|
$
4,100,000
|
|
$
125.87
|
||||||
Total
|
19,230,000
|
|
$
1.23
|
23,652,900
|
|
$
726.14
|
TABLE
OF CONTENTS
|
PAGE
|
|||
PART
I
|
||||
Item
3. Summary Information and Risk Factors
|
2
|
|||
Item
4. Use of Proceeds
|
6
|
|||
Item
7. Selling Securityholders
|
6
|
|||
Item
8. Plan of Distribution
|
8
|
|||
Item
9. Legal Proceedings
|
9
|
|||
Item
10. Directors, Executive Officers, Promoters and Control
Persons
|
9
|
|||
Item
11. Security Ownership of Certain Beneficial Owners and
Management
|
12
|
|||
Item
12. Description of Securities
|
14
|
|||
Item
13. Interests of Named Experts
|
15 | |||
Item
14. Disclosure of Commission Position of Indemnification for Securities
Act Liabilities
|
15
|
|||
Item
15. Organization Within Last Five Years
|
16
|
|||
Item
16. Description of Business
|
16
|
|||
Item
17. Management’s Discussion and Analysis
|
21 | |||
Item
18. Description of Property
|
25
|
|||
Item
19. Certain Relationships and Related
Transactions
|
25
|
|||
Item
20. Market for Common Equity and Related Stockholder
Matters
|
26
|
|||
Item
21. Executive Compensation
|
27
|
|||
Item
22. Financial Statements
|
29
|
|||
Item
23. Changes in and Disagreements with Accountants
|
29 | |||
PART
II
|
||||
Item
24. Indemnification of Directors and Officers
|
30
|
|||
Item
25. Other Expenses of Issuance and Distribution
|
30
|
|||
Item
26. Recent Sales of Unregistered Securities
|
31
|
|||
Item
27. Exhibits.
|
32
|
|||
Item
28. Undertakings.
|
32
|
|||
Signatures
|
34
|
|||
COMMON
SHARES OUTSTANDING PRIOR TO OFFERING
|
|
Common
Stock, $0.0001 par value
|
266,894,278 (1)
|
|
|
Common
Stock Offered by Selling Securityholders
|
19,230,000
|
|
|
Use
of Proceeds
|
We
will not receive any proceeds from the sale by the Selling Securityholders
of shares in this offering, except upon drawdowns made pursuant to
the
equity line. See “Item 4. Use of Proceeds.”
|
|
|
Risk
Factors
|
An
investment in our common stock involves a high degree of risk and
could
result in a loss of your entire investment.
|
|
|
OTC
Symbol
|
COTE.OB
|
|
|
Executive
Offices
|
Currently,
our executive offices are located at
Highway
34 & Ridgewood Road
Wall
Township, New Jersey 07719, and our telephone number is
(732)
449-7717
|
For
the Three Months Ended March 31,
|
For
the Year Ended December 31,
|
||||||||||||
|
2007
|
2006
|
2006
|
2005
|
|||||||||
(Unaudited)
|
(Unaudited)
|
||||||||||||
STATEMENT
OF OPERATIONS
|
|
||||||||||||
Revenues
|
$
|
-
|
$
|
-
|
$
|
565,000
|
$
|
-
|
|||||
Total
Operating Expenses
|
520,488
|
392,179
|
1,867,440
|
894,964
|
|||||||||
Net
Loss
|
616,388
|
489,610
|
1,662,699
|
1,272,033
|
|||||||||
|
|
As
of
March
31, 2007
|
As
of
December
31, 2006
|
|||||
(Unaudited)
|
|||||||
BALANCE
SHEET DATA
|
|
|
|||||
|
|
|
|||||
Cash
|
$ |
255,059
|
$ |
254,242
|
|||
Total
Assets
|
2,436,014
|
2,395,420
|
|||||
Total
Liabilities
|
5,613,114
|
5,376,133
|
|||||
Stockholders’
Deficiency
|
(3,177,101
|
)
|
(2,980,713
|
)
|
|
·
|
developing
our engineering, administrative and marketing and sales
organizations;
|
|
|
|
|
·
|
expanding
manufacturing capacity;
|
|
·
|
conducting
testing of the Coates Engine and obtaining requisite governmental
approvals;
|
|
|
|
|
·
|
expanding
our research and development programs with respect to the basic CSRV
technology and applying the CSRV technology to engines for different
applications; and
|
|
·
|
implementation
of new systems, processes and procedures to support
growth.
|
|
·
|
results
of testing of the Coates Engine;
|
|
|
|
|
·
|
performance
of the Coates Engine in the field;
|
|
·
|
improvements
in competitive engines; and
|
|
|
|
|
·
|
changes
in general conditions in the economy or the financial
markets.
|
Name
|
Number
of Shares Beneficially
Owned
Prior to Offering
(1)
|
Number
of Shares Offered
|
Number
of Shares Beneficially Owned After the Offering
|
|||||||
Dutchess
Private Equities Fund, Ltd.
(2)
|
15,000,000
|
15,000,000
|
0
|
|||||||
Dr.
Roland L. Bergeron
|
15,000
|
15,000
|
(3)
|
0
|
||||||
Charles
L Casagrande
|
15,000
|
15,000
|
(4)
|
0
|
||||||
Fernando
F. Monteiro
|
105,000
|
105,000
|
(5)
|
0
|
||||||
Harry
R. and Ann C. Carter
|
30,000
|
30,000
|
(6)
|
0
|
||||||
Eric
Grieb
|
15,000
|
15,000
|
(7)
|
0
|
||||||
David
J. Quaglia
|
30,000
|
30,000
|
(8)
|
0
|
||||||
Alberto
and Marylin Monteiro
|
15,000
|
15,000
|
(9)
|
0
|
||||||
Kenneth
G. Gamble
|
300,000
|
300,000
|
(10)
|
0
|
||||||
Benjamin
F. Jones
|
15,000
|
15,000
|
(11)
|
0
|
||||||
Henry
R. and Dorothea Stanke
|
30,000
|
30,000
|
(12)
|
0
|
||||||
Donald
R. and Joanna D. Bergeron
|
15,000
|
15,000
|
(13)
|
0
|
||||||
Michelle
Y. Goudreau
|
15,000
|
15,000
|
(14)
|
0
|
||||||
Ann
Carter Newton
|
15,000
|
15,000
|
(15)
|
0
|
||||||
Stephen
Crosby Newton
|
15,000
|
15,000
|
(16)
|
0
|
||||||
Stephen
Evans (17)
|
4,053,333
|
3,333,333
|
(18)
|
720,000
|
||||||
Frank
J. Adipietro
|
1,032,722
|
222,222
|
(19)
|
810,500
|
||||||
Michael
J. Suchar
|
286,045
|
44,445
|
(20)
|
241,600
|
(1)
|
The
actual number of shares of common stock offered in this prospectus,
and
included in the registration statement of which this prospectus is
a part,
includes such additional number of shares of common stock as may
be issued
or issuable upon draws under the Dutchess Equity Line.
|
(2)
|
Michael
Novielli and Douglas Leighton are the directors of Dutchess Private
Equities Fund, Ltd.
|
(3)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(4)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(5)
|
Represents
70,000 common shares and 35,000 shares underlying warrants by this
securityholder.
|
(6)
|
Represents
20,000 common shares and 10,000 shares underlying warrants by this
securityholder.
|
(7)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(8)
|
Represents
20,000 common shares and 10,000 shares underlying warrants by this
securityholder.
|
(9)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(10)
|
Represents
200,000 common shares and 100,000 shares underlying warrants by this
securityholder.
|
(11)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(12)
|
Represents
20,000 common shares and 10,000 shares underlying warrants by this
securityholder.
|
(13)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(14)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(15)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(16)
|
Represents
10,000 common shares and 5,000 shares underlying warrants by this
securityholder.
|
(17)
|
Mr.
Evans is the son of Richard Evans, a director and Corporate Secretary
of
the Registrant.
|
(18)
|
In
April 2007, the Company sold 2,000,000 shares of its common stock
to
Stephen Evans and received aggregate gross proceeds of $500,000.
In May
2007, the Company sold this shareholder an additional 1,333,333 shares
of
its common stock and received aggregate gross proceeds of $750,000.
These
transactions were private sales of unregistered shares of common
stock
pursuant to stock purchase agreements.
|
(19)
|
Mr.
Aditpietro is a director of the Registrant. Represent 222,222 shares
underlying a convertible note held by the selling security
holder.
|
(20)
|
Mr.
Suchar is a director of the Registrant. Represent 44,445 shares underlying
a convertible note held by the selling security
holder.
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
George
J. Coates
|
|
67
|
|
Director,
Chairman of the Board, Chief Executive Officer and
President
|
|
|
|
|
|
Gregory
Coates
|
|
36
|
|
Director
and President, Technology Division
|
|
|
|
|
|
Barry
C. Kaye
|
|
54
|
|
Director,
Treasurer and Chief Financial Officer
|
|
|
|
|
|
Richard
W. Evans
|
|
75
|
|
Director
and Secretary
|
|
|
|
|
|
Dr.
Frank Adipietro
|
|
49
|
|
Director
*, **
|
|
|
|
|
|
Glenn
Crocker
|
|
58
|
|
Director
*, **, ***
|
|
|
|
|
|
Dr.
Michael J. Suchar
|
|
51
|
|
Director
*, **
|
|
|
|
|
|
Richard
Whitworth
|
|
58
|
|
Director
*, **, ***
|
*
|
Serves
as an independent director.
|
**
|
Serves
as a member of our compensation
committee
|
***
|
Serves
as a member of our audit committee
|
·
|
each
of our executive officers and directors;
|
|
|
·
|
all
of our executive officers and directors as a group; and
|
|
·
|
any
other beneficial owner of more than 5% of our outstanding Common
Stock.
|
|
|
Beneficial
Ownership
|
|
||||||||||
|
|
Outstanding
Shares
Beneficially
|
|
Right
to Acquire Within 60 Days After May 21,
|
|
Shares
Beneficially Owned
|
|
||||||
Name
and Address of Beneficial Owner
|
|
Owned
|
|
2007
|
|
Number
|
|
Percentage
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||
George
J Coates
|
|
|
208,272,760
|
1
|
|
333,333
|
|
|
208,606,093
|
1
|
|
76.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
Coates
|
|
|
14,032,520
|
|
|
166,667
|
|
|
14,199,187
|
|
|
5.24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Frank
Adipietro
|
|
|
1,032,722
|
|
|
0
|
|
|
1,032,722
|
|
|
0.38
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Evans
|
|
|
660,000
|
|
|
0
|
|
|
660,000
|
|
|
0.24
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
J. Suchar
|
|
|
241,600
|
2
|
|
44,444
|
|
|
286,044
|
2
|
|
0.11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barry
C. Kaye
|
25,000
|
25,000
|
0.01
|
%
|
|||||||||
All
executive officers and directors as a group (6 persons)
|
|
|
224,239,602
|
|
|
569,444
|
|
|
224,809,046
|
|
|
82.82
|
%
|
(1)
|
Includes
1,956,960 shares owned by Mr. Coates’ spouse, beneficial ownership of
which is disclaimed by George J. Coates.
|
(2)
|
Includes
20,000 shares owned by Dr. Suchar’s spouse, beneficial ownership of which
is disclaimed by Michael J. Suchar.
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
rights
and warrants
|
Weighted
average exercise price of outstanding options, rights and
warrants
|
Number
of securities remaining available for future issuance under equity
compensation plans excluding securities reflected in column
(a)
|
|||||||
(a)
|
(b)
|
(c)
|
||||||||
Equity
Compensation plans approved by security holders
|
None
|
None
|
None
|
|||||||
Equity
Compensation plans without approval by security holders
|
1,800,000
|
$
|
0.44
|
10,700,000
|
||||||
Total
|
1,800,000
|
$
|
0.44
|
10,700,000
|
|
·
|
Assembly
- to develop assembly lines within our premises. We have been evaluating
various opportunities to expand or acquire additional manufacturing
capacity. When the demand for our products justifies it, we will
take the
required steps in order to increase our work force. We may hire a
significant number of new employees within the next 12 to 24 months
after
production commences.
|
|
·
|
Licensing
the technology to Original Equipment Manufacturers (“OEM”) - to take
advantage of third party manufacturers’ production ability by signing OEM
agreements.
|
|
·
|
We
expect to ship to WWE the third power unit of the generator for up
to 300
kilowatts, depending on the fuel used (the 855 cubic inch, 6 cylinder
industrial electric power generator, incorporating the CSRV Engine,
the
“Generator”). Upon receipt of the Generator, and pending test results
meeting WWE’s expectations, the balance of $3,800,000 on account of the
research and development agreement mentioned above will become due
and
payable by WWE. In addition, 180 days later, the remaining balance
of
$4,700,000 from the September 29, 1999 agreement will become due
and
payable by WWE in 16 equal quarterly
installments.
|
|
·
|
WWE
will have the exclusive right to use, lease, and sell the Generators
that
are based on the CSRV System technology within
Canada.
|
|
·
|
WWE
will have a specified right of first refusal to market the Generators
worldwide.
|
|
·
|
Upon
commencement of the production and distribution of Generators, the
minimum
annual number of Generators to be purchased by WWE in order to maintain
exclusivity is 120. Until otherwise agreed between the parties, the
price
per Generator shall be $150,000. In the event WWE fails to purchase
the
minimum 120 Coates generator engines during any year, WWE will
automatically lose its exclusivity. In such a case, WWE would retain
non-exclusive rights to continue to use the Coates generator engine
in the
territory of Canada.
|
|
·
|
WWE
shall not be required to pay any royalties to us as part of the agreements
between the parties.
|
|
·
|
All
licensed rights under the Coates License Agreement related to the
CSRV
System technology will remain with
Coates
|
·
|
In
April 2007, the Company sold 2,000,000 shares of its common stock
to the
son of a director of the Company and received aggregate gross proceeds
of
$500,000. In May 2007, the Company sold this son of a director an
additional 1,333,333 shares of its common stock and received aggregate
gross proceeds of $750,000. These transactions were private sales
pursuant
to stock purchase agreements.
|
·
|
In
April 2007, we issued a $192,337 principal amount Promissory Note
due
April 4, 2008 to the Coates Trust in consideration for cash proceeds
of
$100,000 and conversion of a non-interest bearing demand loan due
to the
Coates Trust in the amount of $92,337. George J. Coates, Bernadette
Coates
and Gregory Coates are beneficiaries of this Trust. On May 22, 2007
this
note was repaid in full, including accrued interest
thereon.
|
·
|
In
March and April 2007, we issued $120,000 aggregate principal amount
of 10%
Convertible Subordinated Notes, due March 2010 (the “Convertible Notes”)
to two of our outside directors and received proceeds of $120,000.
The
Convertible Notes are convertible into shares of our common stock
at an
initial conversion rate of $0.45 per share. Interest shall accrue
at the
rate of 10% per annum and shall be payable in cash only at maturity.
There
was no beneficial conversion features associated with these convertible
notes.
|
·
|
We
commenced a private placement offering in December 2006 (the “Offering”)
of “Units” consisting of (i) one share of our Series A Convertible
Preferred Stock (the “Preferred Stock”) and (ii) a Warrant to purchase
five thousand shares of our Common Stock at an initial exercise price
of
$1.10 per share (the “Warrants”), and terminated the Offering in March
2007. Aggregate net proceeds from this Offering, which amounted to
$420,000 is being used for working capital purposes. Although 42,000
shares of our Preferred Stock were originally intended to be sold
through
this private placement offering over the period spanning from December
2006 through March 2007, no shares have been issued. We have received
either written approval or a verbal commitment to provide written
approval
from all of the 14 accredited investors in this private placement
offering
to issue ten shares of our common stock for each share of Preferred
Stock
originally subscribed for, in lieu of issuing the Preferred Stock.
Upon
obtaining such written approval from all of these investors, we will
issue
in the aggregate 420,000 shares of our common stock and 42 Warrants
for
the 42 Units sold.
|
Amount
Due Within
|
|||||||||||||||||||
Total
|
2007
|
2008
|
2009
|
2010
|
2011
|
||||||||||||||
Contractual
Obligations
|
|||||||||||||||||||
Sale/Leaseback
Arrangement
(1)
|
$
|
1,917,500
|
$
|
390,000
|
$
|
390,000
|
$
|
390,000
|
$
|
390,000
|
$
|
357,500
|
|||||||
Employment
Agreements
(2)
|
1,266,000
|
263,000
|
263,000
|
263,000
|
263,000
|
214,000
|
|||||||||||||
Demand
Loan due to related party
(3)
|
92,337
|
92,337
|
-
|
-
|
-
|
-
|
|||||||||||||
Total
|
$
|
3,275,837
|
$
|
745,337
|
$
|
653,000
|
$
|
653,000
|
$
|
653,000
|
$
|
571,500
|
·
|
Assembly
- to develop assembly lines within the Company’s premises. The Company has
been evaluating various opportunities to expand or acquire additional
manufacturing capacity. When the demand for our products justifies
it, the
Company will take the required steps in order to increase its work
force.
We may hire a significant number of new employees within the next
12 to 24
months after production commences.
|
·
|
Licensing
the technology to Original Equipment Manufacturers (“OEM”) - to take
advantage of third party manufacturers’ production ability by signing OEM
agreements.
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Non-Qualified
Deferred Compensation Earnings
($)
|
All
Other Compensation
($)
|
Totals
($)
|
|||||||||||||||||
George
J. Coates, President, CEO and Chairman
|
2006
2005
|
183,549
183,549
|
0
0
|
0
0
|
(1)
0
|
0
0
|
0
0
|
(5)(7)
(7)
|
$183,549
$183,549
|
|||||||||||||||||
Mark
D. Goldsmith,
Former
CEO and President
|
2006
2005
|
41,096
0
|
(2)
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
0
0
|
||||||||||||||||
Barry
C. Kaye (3)
CFO and Treasurer
|
2006
2005
|
0
0
|
0
0
|
0
0
|
(3)
0
|
0
0
|
0
0
|
$15,500(6)
3,000(6)
|
15,500
3,000
|
|||||||||||||||||
Gregory
Coates (4),
President,
Technology Division
|
2006
2005
|
82,971
82,971
|
(4)
|
0
0
|
0
0
|
(4)
0
|
0
0
|
0
0
|
(7)
(7)
|
82,971
82,971
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options,
rights
and warrants
|
Weighted
average exercise price of outstanding options, rights and
warrants
|
Number
of securities remaining available for future issuance under equity
compensation plans excluding securities reflected in column
(a)
|
|||||||
|
(a)
|
(b)
|
(c)
|
|||||||
Equity
Compensation plans approved by security holders
|
None
|
None
|
None
|
|||||||
Equity
Compensation plans without approval by security holders
|
1,800,000
|
$
|
0.44
|
10,700,000
|
||||||
Total
|
1,800,000
|
$
|
0.44
|
10,700,000
|
Name
& position
|
|
Annual
compensation
|
|
Number
of stock options
4
|
|
Life
insurance
|
|
Severance
payment
5
|
|
Term
of the Agreement
|
|
|||||
George
Coates, President and Chief Executive Officer
|
|
$
|
183,549
|
1
|
|
1,000,000
|
|
$
|
2,000,000
|
|
|
Three
years salary
6
|
|
|
Five
years
|
|
Gregory
Coates, President Technology Division
|
|
$
|
79,898
|
1
|
|
500,000
|
|
$
|
2,000,000
|
|
|
Two
years salary
6
|
|
|
Five
years
|
|
Mark
D, Goldsmith, former Chief Executive Officer and President
2
|
|
$
|
200,000
|
2
|
|
0
|
2
|
|
None
|
|
|
None
|
|
|
Three
years
|
|
Barry
C. Kaye, Treasurer and Chief Financial Officer
|
|
$
|
0
|
3
|
|
125,000
|
|
|
None
|
|
|
One
year salary
3
|
|
|
Three
years
|
|
1
|
The
annual salary for George J. Coates and Gregory Coates shall be
increased
to $300,000 and $250,000, respectively, at such time that the Board
of
Directors determines that we have Sufficient Capital, as
defined.
|
2
|
In
late March 2007, Mark D. Goldsmith stepped down from his positions
as
Chief Executive Officer and President, and in April 2007, Mr. Goldsmith
resigned his position as a member of the Board of Directors. The
amount of
compensation that could be due Mr. Goldsmith for his employment in
2006
pursuant to the employment agreement, amounted to $41,096. This amount
has
been recorded as an expense in our financial statements in 2006.
Mr.
Goldsmith may attempt to assert claims under this employment agreement.
We
do not intend to make any payments to Mr. Goldsmith in connection
with
this employment agreement.
|
3
|
Mr.
Kaye’s compensation, severance and benefits shall not commence until the
Board of Directors determines that we have Sufficient Capital, as
defined.
At that time, Mr. Kaye’s salary shall be $125,000 per annum. Until Mr.
Kaye’s salary commences, he is being paid for his services by us as a
consultant on a per diem basis. In 2006, Mr. Kaye received $15,500
in
consulting fees from the Company.
|
4
|
These
Options, which were granted on April 18, 2007, expire in October
2021. The
options will be granted with the following vesting schedule:
|
|
·
|
One-third
of the options granted to George J. Coates and Gregory Coates vested
on
April 30, 2007 and the balance shall vest in two equal installments
on
October 23, 2008 and 2009.
|
|
·
|
The
options granted to Mr. Kaye shall vest as follows: 25,000 stock options
vested on April 30, 2007 and the balance in three equal installments
on
October 18, 2007, 2008 and 2009. The options will immediately fully
vest
in the event the employee terminates his employment for a good reason,
or
if we terminate his employment without cause.
|
5
|
The
entitlement for the severance payment is subject to the employee
terminating his employment for a good reason.
|
6
|
The
severance payment shall become effective in the event such termination
for
a good reason occurs after the Board of Directors determines that
we have
Sufficient Capital, as defined.
|
Securities
and Exchange Commission registration fee
|
$
|
726.14
|
||
Federal
Taxes
|
|
-
|
||
State
Taxes and Fees
|
|
-
|
||
Transfer
Agent Fees
|
|
-
|
||
Accounting
fees and expenses
|
|
20,000.00
|
||
Legal
fees and expense
|
|
30,000.00
|
||
Blue
Sky fees and expenses
|
|
-
|
||
Miscellaneous
|
|
-
|
||
Total
|
$
|
50,726.14
|
Exhibit
No.
|
|
Description
|
|
|
|
3.1
@
|
-
|
|
|
|
|
3.1(i)
@
|
-
|
|
|
|
|
3.1(ii)
@
|
-
|
|
|
|
|
3.2
@
|
-
|
|
|
|
|
5.1
@
|
-
|
|
10.6
+
|
-
|
License
Agreement, dated September 29, 1999, with Well to Wire Energy,
Inc.
|
|
|
|
10.7
+
|
-
|
Amendment
No. 1 to License Agreement with Well to Wire Energy Inc. dated April
6,
2000
|
|
|
|
10.8
+
|
-
|
Amendment
No. 2 to License Agreement with Well to Wire Energy Inc. dated July
21,
2000
|
10.11
#
|
-
|
Sublicense
Agreement, dated April 30, 2003, Coates and Coates Motorcycle Company,
Ltd.
|
|
|
|
10.12
&
|
|
Amendment
No. 1 to Sublicense Agreement, dated March 5, 2004, between the Coates
and
Coates Motorcycle Company, Ltd.
|
|
|
|
10.13
^
|
-
|
Confirmation
Letter between the Coates and Well to Wire Energy Inc. dated July
7,
2006
|
|
|
|
10.14
~
|
-
|
2006
Employee Stock Option and Incentive Plan adopted on October 25,
2006
|
|
|
|
10.15
~
|
-
|
License
Agreement between Coates and Coates Trust dated October 23,
2006
|
|
|
|
10.16
*
|
-
|
Amended
and Restated Employment Agreement between Coates and George J. Coates
dated April 6, 2007
|
|
|
|
10.17
*
|
-
|
Amended
and Restated Employment Agreement between Coates and Gregory Coates
dated
April 6, 2007
|
|
|
|
10.18
*
|
-
|
Amended
and Restated Employment Agreement between Coates and Barry C. Kaye
dated
April 6, 2007
|
|
|
|
10.19
*
|
-
|
Amended
and Restated License Agreement between the Coates and George J. Coates
and
Gregory Coates dated April 6, 2007
|
|
|
|
10.20
*
|
-
|
Termination
of License Agreement between Coates and Coates Trust dated April
6,
2007
|
|
|
|
10.21**
|
-
|
Investment
Agreement dated April 26, 2007, by and between the Company and Dutchess
Private Equities Fund, Ltd.
|
10.22**
|
-
|
Registration
Rights Agreement dated April 26, 2007, by and between the Company
and
Dutchess Private Equities Fund, Ltd.
|
23.1
@
|
||
23.2
@
|
||
23.3
@
|
Consent
of Counsel, as in Exhibit 5.1
|
@ | Filed herewith. |
=
|
Incorporated
by reference from the Registration Statement filed on Form S-1 with
the
Securities and Exchange Commission on November 1, 1995, File No.
33-94884.
|
+
|
Incorporated
by reference from the Registration Statement and amendments thereto
filed
on Form 10-SB with the Securities and Exchange Commission, File No.
000-33155.
|
#
|
Incorporated
by reference from the Form 10-QSB for the quarter ended June 30,
2003.
|
&
|
Incorporated
by reference from the Form 10-KSB for the fiscal year ended December
31,
2004.
|
^
|
Incorporated
by reference from the Form 10-QSB for the quarter ended June 30,
2006.
|
~
|
Incorporated
by reference from the Form 10-KSB/A for the fiscal year ended December
31,
2005.
|
*
|
Incorporated
by reference from the Form 10-KSB for the fiscal year ended December
31,
2006
|
**
|
Incorporated
by reference from the Form 8-K filed with the SEC on May 1,
2007
|
|
|
|
By: | /s/ George J. Coates | |
George
J. Coates
|
||
Chairman
of the Board of Directors
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
George J. Coates
George
J. Coates
|
|
Director,
Chairman, Chief Executive Officer and President (principal executive
officer)
|
|
May
31, 2007
|
|
|
|
|
|
/s/
Gregory Coates
Gregory Coates |
|
Director,
President-Technology Division
|
|
May
31, 2007
|
|
|
|
|
|
/s/
Barry C. Kaye
Barry C. Kaye |
|
Director,
Treasurer, Chief Financial Officer (principal financial and accounting
officer)
|
|
May
31, 2007
|
|
|
|
|
|
/s/
Richard W. Evans
Richard W. Evans |
|
Director
and Secretary
|
|
May
31, 2007
|
|
|
|
|
|
/s/
Michael J. Suchar
Michael J. Suchar |
|
Director
|
|
May
31, 2007
|
|
|
|
|
|
/s/
Frank Adipietro
Frank Adipietro |
|
Director
|
|
May
31, 2007
|
|
|
|
|
|
/s/
Glenn Crocker
Glenn Crocker |
|
Director
|
|
May
31, 2007
|
|
|
|
|
|
/s/
Richard Whitworth
Richard Whitworth |
|
Director
|
|
May
31, 2007
|
|
|
|
|
|
Page
|
||||
Financial Statements | ||||
Balance Sheet | F-3 | |||
Statements of Operations | F-4 | |||
Statements
of Stockholders' Deficiency
|
F-5 | |||
Statements of Cash Flows | F-6 | |||
Notes to the Financial Statements | F-7 to F-11 |
Assets
|
||||
Current
Assets
|
||||
Cash
|
$
|
255,059
|
||
Inventory,
net of reserve for obsolescence of $144,889
|
376,723
|
|||
Prepaid
and other assets
|
37,363
|
|||
Total
Current Assets
|
669,145
|
|||
Investment
in related party
|
-
|
|||
Property,
plant and equipment, net of accumulated depreciation of
$774,912
|
1,482,943
|
|||
Deferred
licensing costs, net of accumulated amortization of $5,734
|
86,426
|
|||
Security
deposits
|
197,500
|
|||
Total
Assets
|
$
|
2,436,014
|
||
Liabilities
and Stockholders’ Deficiency
|
||||
Current
Liabilities
|
||||
Accounts
payable and accrued liabilities
|
$
|
1,119,598
|
||
Demand
loan due to related party
|
92,337
|
|||
Non-interest
bearing promissory note
|
49,573
|
|||
Total
Current Liabilities
|
1,261,508
|
|||
License
deposits
|
375,000
|
|||
Finance
obligation
|
3,876,607
|
|||
10%
Convertible note, due March 2010
|
100,000
|
|||
Total
Liabilities
|
5,613,115
|
|||
Commitments
and Contingencies
|
-
|
|||
Stockholders'
Deficiency
|
||||
Preferred
stock, Series A, $0.001 par value 14,000,000 shares authorized, no
shares
issued or outstanding
|
-
|
|||
Common
stock, $.0001 par value, 1,000,000,000 shares authorized,
266,894,278
shares issued and outstanding
|
26,689
|
|||
Subscribed
stock
|
420,000
|
|||
Additional
paid-in capital
|
17,176,155
|
|||
Accumulated
deficit
|
(20,799,945
|
)
|
||
Total
Stockholders' Deficiency
|
(3,177,101
|
)
|
||
Total
Liabilities and Stockholders' Deficiency
|
$
|
2,436,014
|
Three
Months Ended
March
31,
|
|||||||
2007
|
2006
|
||||||
Revenue
|
$
|
-
|
$
|
-
|
|||
Operating
Expenses:
|
|||||||
Research
and development costs
|
80,508
|
-
|
|||||
General
and administrative expenses
|
425,811
|
379,542
|
|||||
Depreciation
and amortization expense
|
14,169
|
12,637
|
|||||
Total
Operating Expenses
|
520,488
|
392,179
|
|||||
Loss
From Operations
|
(520,488
|
)
|
(392,179
|
)
|
|||
Other
Income (Expense)
|
|||||||
Interest
expense, net of interest income of $1,600 and $69 in 2007 and 2006,
respectively
|
(95,900
|
)
|
(97,431
|
)
|
|||
Total
Other Expense
|
(95,900
|
)
|
(97,431
|
)
|
|||
|
|||||||
Loss
Before Income Taxes
|
(616,388
|
)
|
(489,610
|
)
|
|||
|
|||||||
Provision
for income taxes
|
-
|
-
|
|||||
Net
Loss
|
$
|
(616,388
|
)
|
$
|
(489,610
|
)
|
|
Basic
and Diluted Net Loss per share
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
|
Basic
and Diluted Weighted Average Number of
Shares
|
266,894,278
|
266,894,278
|
Three
Months Ended
March
31,
|
|||||||
2007
|
2006
|
||||||
Cash
Flow From Operating Activities
|
$
|
(512,686
|
)
|
$
|
(334,732
|
)
|
|
Cash
Flow From Investing Activities
|
|||||||
Deferred
licensing costs
|
(6,497
|
)
|
(6,694
|
)
|
|||
Net
Cash Used for Investing Activities
|
(6,497
|
)
|
(6,694
|
)
|
|||
Cash
Flow From Financing Activities
|
|||||||
Subscribed
stock
|
420,000
|
-
|
|||||
Proceeds
from issuance of 10% convertible note
|
100,000
|
-
|
|||||
Deferred
offering costs paid
|
-
|
(25,185
|
)
|
||||
Repayment
of related party loan
|
-
|
(45,300
|
)
|
||||
Net
Cash Provided by (Used for) Financing Activities
|
520,000
|
(70,485
|
)
|
||||
Net
Increase (Decrease) in Cash
|
817
|
(411,911
|
)
|
||||
Cash
- Beginning of Period
|
254,242
|
1,928,123
|
|||||
Cash
- End of Period
|
$
|
255,059
|
$
|
1,516,212
|
|||
Schedule
of Supplemental Cash Flow Data:
|
|||||||
Cash
paid for interest
|
$
|
130,000
|
$
|
-
|
|||
Non-cash
financing activities:
|
|||||||
Note
issued for accrued liabilities
|
$
|
49,573
|
$
|
-
|
Historical
stock price volatility
|
180%
|
Risk-free
interest rate
|
4.56%-4.64%
|
Expected
life (in years)
|
4
|
Dividend
yield
|
0.00
|
·
|
Historical
stock price volatility: The Company obtained the volatility factor
for
another publicly traded engine manufacturer that was also in the
research
and development stage.
|
·
|
Risk-free
interest rate: The Company bases the risk-free interest rate on the
interest rate payable on U.S. Treasury securities in effect at the
time of
the grant for a period that is commensurate with the assumed expected
option life.
|
·
|
Expected
life: The expected life of the options represents the period of time
options are expected to be outstanding. The Company has no historical
data
on which to base this estimate. Accordingly, the Company estimated
the
expected life based on its expectation that the executives will be
subject
to frequent black out periods options during which they will be
exercisable and based on the Company’s expectation that it will complete
its research and development phase and commence its initial production
phase. The vesting period of these options was also considered in
the
determination of the expected life of each stock option
grant.
|
As
of
|
||||
March
31,
2007
|
||||
Current
assets
|
$
|
41,078
|
||
Total
assets
|
79,960
|
|||
Current
liabilities
|
(523,904
|
)
|
||
Total
liabilities
|
(1,420,035
|
)
|
||
Stockholders’
deficiency
|
1,340,075
|
For
the Three Months Ended March 31,
|
|||||||
2007
|
2006
|
||||||
Revenue
|
$
|
-
|
$
|
-
|
|||
Operating
expenses
|
171,642
|
217,872
|
|||||
Net
loss
|
(190,257
|
)
|
(223,727
|
)
|
Page
|
||||
Report
of Weiser LLP, Independent Registered Public Accounting
Firm
|
F-14 | |||
Report
of Rosenberg Rich Berman Baker & Company, Independent Registered
Public Accounting Firm
|
F-15 | |||
Financial Statements | ||||
Balance Sheet | F-16 | |||
Statements
of Operations
|
F-17 | |||
Statements of Stockholders' Deficiency | F-18 | |||
Statements of Cash Flows | F-19 | |||
Notes
to the Financial Statements
|
F-20 to F-32 |
|
||||
|
||||
Assets
|
December
31,
2006
|
|||
Current
Assets
|
||||
Cash
|
$
|
254,242
|
||
Inventory,
net of reserve for obsolescence of $144,889
|
350,957
|
|||
Prepaid
and other assets
|
500
|
|||
Total
Current Assets
|
605,699
|
|||
Investment
in related party
|
-
|
|||
Deferred
offering costs
|
15,180
|
|||
Property,
plant and equipment, net of accumulated depreciation of $761,909
|
1,495,946
|
|||
Deferred
licensing costs, net of accumulated amortization of $4,568
|
81,095
|
|||
Security
deposits
|
197,500
|
|||
Total
Assets
|
$
|
2,395,420
|
||
Liabilities
and Stockholders’ Deficiency
|
||||
Current
Liabilities
|
||||
Accounts
payable and accrued liabilities
|
$
|
1,032,189
|
||
Demand
loan due to related party
|
92,337
|
|||
Total
Current Liabilities
|
1,124,526
|
|||
License
deposits
|
375,000
|
|||
Finance
obligation
|
3,876,607
|
|||
Total
Liabilities
|
5,376,133
|
|||
Commitments
and Contingencies
|
-
|
|||
Stockholders'
Deficiency
|
||||
Preferred
stock, Series A, $0.001 par value 14,000,000 shares authorized, no
shares
issued or outstanding
|
-
|
|||
Common
stock, $0.0001 par value, 1,000,000,000 shares authorized,
266,894,278
shares issued and outstanding
|
26,689
|
|||
Additional
paid-in capital
|
17,176,155
|
|||
Accumulated
deficit
|
(20,183,557
|
)
|
||
Total
Stockholders' Deficiency
|
(2,980,713
|
)
|
||
Total
Liabilities and Stockholders' Deficiency
|
$
|
2,395,420
|
For
the Years Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Research
and development revenue
|
$
|
565,000
|
$
|
-
|
|||
Operating
Expenses:
|
|||||||
Research
and development costs
|
437,307
|
18,290
|
|||||
General
and administrative expenses
|
1,373,049
|
819,915
|
|||||
Depreciation
and amortization
|
57,084
|
56,758
|
|||||
Total
Operating Expenses
|
1,867,440
|
894,963
|
|||||
Loss
From Operations
|
(1,302,440
|
)
|
(894,963
|
)
|
|||
Other
Income (Expense):
|
|||||||
Interest
income
|
30,127
|
-
|
|||||
Interest
expense
|
(390,386
|
)
|
(152,609
|
)
|
|||
Equity
loss in related party investment
|
-
|
(260,344
|
)
|
||||
Gain
on sale of investment in related party
|
-
|
47,000
|
|||||
Other
Expense, net
|
(360,259
|
)
|
(365,953
|
)
|
|||
Loss
Before Income Taxes
|
(1,662,699
|
)
|
(1,260,916
|
)
|
|||
Provision
for income taxes
|
-
|
(11,117
|
)
|
||||
Net
Loss
|
$
|
(1,662,699
|
)
|
$
|
(1,272,033
|
)
|
|
Basic
and Diluted Net Loss Per Share
|
$
|
(0.01
|
)
|
$
|
(0.00
|
)
|
|
Basic
and Diluted Weighted Average Number of Shares
|
266,894,278
|
265,996,673
|
|||||
Common
Stock
|
Additional
|
|||||||||||||||
$0.0001
par value per share
|
Paid
in
|
Accumulated
|
Shareholders'
|
|||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Deficiency
|
||||||||||||
Balance,
January 1, 2005
|
265,859,278
|
$
|
26,586
|
$
|
17,001,258
|
$
|
(17,248,825
|
)
|
$
|
(220,981
|
)
|
|||||
Issuance
of common stock for license agreement
|
1,000,000
|
100
|
(100
|
)
|
-
|
-
|
||||||||||
Issuance
of common stock for cash
|
29,000
|
2
|
144,998
|
-
|
145,000
|
|||||||||||
Issuance
of common stock in settlement of accounts payable and accrued
interest
|
6,000
|
1
|
29,999
|
-
|
30,000
|
|||||||||||
Net
loss for the year
|
-
|
-
|
-
|
(1,272,033
|
)
|
(1,272,033
|
)
|
|||||||||
Balance,
December 31, 2005
|
266,894,278
|
26,689
|
17,176,155
|
(18,520,858
|
)
|
(1,318,014
|
)
|
|||||||||
Net
loss for the year
|
-
|
-
|
-
|
(1,662,699
|
)
|
(1,662,699
|
)
|
|||||||||
Balance,
December 31, 2006
|
266,894,278
|
$
|
26,689
|
$
|
17,176,155
|
$
|
(
20,183,557
|
)
|
$
|
(2,980,713
|
)
|
|||||
For
the Years Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Cash
Flows From Operating Activities:
|
|||||||
Net
Loss
|
$
|
(1,662,699
|
)
|
$
|
(1,272,033
|
)
|
|
Adjustments
to Reconcile Net Loss to Net Cash Used in
|
|||||||
Operating
Activities -
|
|||||||
Depreciation
and amortization
|
57,084
|
56,758
|
|||||
Provision
for slow moving inventory and inventory write down
|
262,897
|
-
|
|||||
Gain
on sale of investment in related party
|
-
|
(47,000
|
)
|
||||
Equity
losses from investment in related party
|
-
|
260,344
|
|||||
Changes
in Operating Assets and Liabilities -
|
|||||||
Inventory
|
(204,554
|
)
|
(86,100
|
)
|
|||
Prepaid
expenses
|
191,144
|
(191,644
|
)
|
||||
License
deposits
|
(565,000
|
)
|
|||||
Accounts
payable and accrued liabilities
|
542,163
|
479
|
|||||
Accrued
interest
|
-
|
(12,076
|
)
|
||||
Income
taxes payable
|
(127,156
|
)
|
127,156
|
||||
Net
Cash Used in Operating Activities
|
(1,506,121
|
)
|
(1,164,116
|
)
|
|||
Cash
Flows From Investing Activities:
|
|||||||
Acquisition
of property, plant and equipment
|
(47,070
|
)
|
(3,047
|
)
|
|||
Costs
for patents
|
(30,205
|
)
|
(55,458
|
)
|
|||
Proceeds
from sale of investment - related party
|
-
|
47,000
|
|||||
Security
deposit on leased property
|
-
|
(195,000
|
)
|
||||
Net
Cash Used in Investing Activities
|
(77,275
|
)
|
(206,505
|
)
|
|||
Cash
Flows From Financing Activities:
|
|||||||
Deferred
offering costs paid
|
(45,185
|
)
|
(22,500
|
)
|
|||
Repayment
of loan from related party
|
(45,300
|
)
|
(212,800
|
)
|
|||
Cash
received from finance obligation
|
-
|
3,876,607
|
|||||
Proceeds
from related party loan
|
-
|
200,437
|
|||||
Proceeds
from issuance of stock
|
-
|
145,000
|
|||||
Repayment
of mortgage
|
-
|
(868,182
|
)
|
||||
Net
Cash Provided by (Used in) Financing Activities
|
(90,485
|
)
|
3,118,562
|
||||
Net
Increase (Decrease) in Cash
|
(1,673,881
|
)
|
1,747,941
|
||||
Cash
- Beginning of Period
|
1,928,123
|
180,182
|
|||||
Cash
- End of Period
|
$
|
254,242
|
$
|
1,928,123
|
|||
Schedule
of Supplemental Cash Flow Data:
|
|||||||
Cash
paid for:
|
|||||||
Income
Taxes
|
$
|
141,309
|
$
|
-
|
|||
Interest
|
$
|
227,886
|
$
|
327,185
|
The
CSRV System is designed to replace the intake and exhaust conventional
“poppet valves” currently used in almost all piston-driven, automotive,
motorcycle and marine engines. Unlike conventional valves which protrude
into the engine cylinder, the CSRV System utilizes spherical valves
that
rotate in a cavity formed between a two-piece cylinder head. The
CSRV
System
utilizes significantly fewer moving parts of conventional poppet
valve
assemblies
.
As a result of these design improvements, management believes that
the
engines incorporating the CSRV System (“Coates Engines”) will last
significantly longer and will require less lubrication over the life
of
the engine, as compared to conventional engines. In addition, CSRV’s can
be designed with larger openings into the engine cylinder than
conventional valves so that more fuel and air can be inducted into
and
expelled from the cylinder in a shorter period of time. Larger valve
openings permit higher revolutions-per-minute (RPMs) and permit higher
compression ratios with lower combustion chamber temperatures, allowing
the Coates Engine to produce more power than equivalent conventional
engines. The higher the RPM range, the greater the volumetric efficiency
and thermal efficiency that can be
achieved.
|
Since
the Company’s inception, the Company has been responsible for the
development costs of this technology in order to optimize the value
of the
licensing rights and has incurred related operational costs, the
bulk of
which have been funded primarily through cash generated from the
sale of
stock, through capital contributions, loans made by George Coates,
through
a sale-and-leaseback transaction related to the Company’s principal
facility, and from prototype models and licensing fees. The Company
has
never received any revenues from the sale of engines, has never been
profitable and has incurred substantial losses from operations
.
The Company expects that losses from operations will continue until
the
Coates Engine is successfully introduced into the marketplace, or
the
Company receives substantial licensing revenues. These losses from
operations were substantially related to research and development
of the
Company’s intellectual property rights, patent filing and maintenance
costs and general and administrative
expenses.
|
Raw
Materials
|
$
|
255,846
|
||
Work
in Process
|
240,000
|
|||
Reserve
for slow moving inventory
|
(144,889
|
)
|
||
Total
|
$
|
350,957
|
2006
|
||||
Land
|
$
|
920,550
|
||
Building
|
579,450
|
|||
Building
improvements
|
219,371
|
|||
Machinery
and equipment
|
499,189
|
|||
Furniture
and fixtures
|
39,295
|
|||
2,257,855
|
||||
Less:
Accumulated depreciation
|
(761,909
|
)
|
||
Total
|
$
|
1,495,946
|
Year
Ending December 31,
|
Amount
|
|||
2007
|
$
|
390,000
|
||
2008
|
390,000
|
|||
2009
|
390,000
|
|||
2010
|
390,000
|
|||
2011
|
357,500
|
|||
Total
|
$
|
1,917,500
|
2006
|
||||
Legal
and professional fees
|
$
|
967,917
|
||
Accrued
compensation
|
41,096
|
|||
Other
|
23,176
|
|||
Total
|
$
|
1,032,189
|
Year
Ending December 31,
|
Amount
(1)
|
|||
2007
|
$
|
263,000
|
||
2008
|
263,000
|
|||
2009
|
263,000
|
|||
2010
|
263,000
|
|||
2011
|
214,000
|
|||
Total
|
$
|
1,266,000
|
Name
|
Title
|
Number
of Shares of Common Stock Underlying Non-vested Options
|
Option
Expiration Date
|
|||||||
George
J. Coates
|
Chairman, Chief Executive Officer and President |
1,000,000
|
(1)
|
10/23/2021
|
||||||
Gregory
Coates
|
Director and President, Technology Division |
500,000
|
(1)
|
10/23/2021
|
|
|||||
Barry
C. Kaye
|
Director, Treasurer and Chief Financial Officer |
125,000
|
(2)
|
10/18/2021
|
||||||
All
other employees
|
25,000
|
(4)
|
4/4/2022
|
|||||||
Dr.
Frank J. Adipietro
|
Non-employee Director |
25,000
|
(3)
|
3/28/2022
|
||||||
Glenn
Crocker
|
Non-employee Director |
25,000
|
(3)
|
3/28/2022
|
||||||
Richard
W. Evans
|
Non-employee Director |
25,000
|
(3)
|
3/28/2022
|
||||||
Dr.
Michael J. Suchar
|
Non-employee Director |
25,000
|
(3)
|
3/28/2022
|
||||||
Richard
Whitworth
|
Non-employee Director |
25,000
|
(3)
|
3/28/2022
|
|
|||||
William
Wolf. Esq.
|
Outside General Counsel |
25,000
|
(4)
|
4/4/2022
|
|
|
2006
|
2005
|
|||||
Federal
|
$
|
-
|
$
|
-
|
|||
|
|||||||
State,
net of benefit from sale of tax net operating loss
|
$
|
-
|
$
|
11,117
|
2006
|
||||
Current
deferred tax asset - inventory reserve
|
$
|
83,000
|
||
Non-current
Deferred Tax Assets:
|
||||
Net
operating loss carryforwards
|
5,457,000
|
|||
Gain
on sale of property
|
1,071,000
|
|||
Total
long term deferred tax assets
|
6,528,000
|
|||
Total
deferred tax assets
|
6,611,000
|
|||
Less:
valuation allowance
|
(6,611,000
|
)
|
||
Net
deferred tax assets
|
$
|
-
|
2006
|
2005
|
||||||
|
|||||||
Federal
Tax benefit at the statutory rate
|
34.0
|
%
|
34.0
|
%
|
|||
State
income taxes, net of federal benefit
|
-
|
(6.7
|
)
|
||||
Inventory
reserves
|
(5.0
|
)
|
|
||||
Depreciation
deduction for financial reporting purposes
|
(0.4
|
)
|
|
||||
Sale
of prior year state net operating loss carryforward,
net
of federal tax
|
-
|
6.1
|
|||||
Gain
on sale of property deferred for financial reporting
purposes
|
-
|
(65.0
|
)
|
||||
Equity
in loss of unconsolidated subsidiary not deductible
|
-
|
(7.0
|
)
|
||||
Utilization
of Federal net operating loss carryforward
|
-
|
37.7
|
|||||
Valuation
Allowance
|
(28.6
|
)
|
-
|
||||
Effective
Tax Rate
|
0.0
|
%
|
0.9
|
%
|
Unaudited
|
||||
December
31, 2006
|
||||
Current
assets
|
$
|
87,257
|
||
Total
assets
|
128,526
|
|||
Current
liabilities
|
(496,218
|
)
|
||
Total
liabilities
|
(1,395,511
|
)
|
||
Stockholders’
deficiency
|
1,266,985
|
|||
Unaudited
|
|||||||
Year
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Revenue
|
$
|
-
|
$
|
-
|
|||
Operating
expenses
|
1,379,692
|
1,087,331
|
|||||
Net
loss
|
(1,462,791
|
)
|
(1,083,292
|
)
|
(i) |
The
holders of Common Stock shall be entitled to one vote per share with
respect to all corporate matters.
|
(ii) |
In
case of the liquidation or dissolution of the Corporation, the holders
of
said shares of Common Stock shall be entitled, after payment or provision
for payment of the debts and other liabilities of the Corporation,
and
subject to the prior rights of the Series A preferred Stock, to share
ratably in the remaining net assets of the
Corporation.
|
(i) |
The
holders of Series A Preferred Stock shall be entitled to ten votes
per
share with respect to all corporate matters.
|
(ii) |
In
case of the liquidation or dissolution of the Corporation, the holders
of
said shares of Series A Preferred Stock shall be entitled to receive
payment of the par value therefore, and all accrued and unpaid dividends
thereon, from the assets remaining, after payment of the debts and
liabilities of the Corporation, before any payment shall be made
to the
holders of the shares of any other class; but the holders of the
Series A
Preferred Stock shall not be entitled to participate any further
in the
distribution of the assets of the
corporation.
|
(iii) |
Each
share of the Series A Preferred Stock outstanding after December
31, 1997,
may be converted at any time thereafter,
|
COATES INTERNATIONAL LTD. | ||
|
|
|
By: | /s/ George J. Coates | |
George J. Coates, President |
||
/s/ Richard W. Evans | |||
Richard W. Evans, Secretary |
|||
(i) |
The
holders of Series A Preferred Stock shall be entitled to ten votes
per
share with respect to all corporate
matters.
|
(ii) |
In
case of the
liquidation
or
dissolution
of
the
Corporation,
the
holders of said shares of Series A Preferred Stock shall be entitled
to
receive payment of the par value thereof,
and
all
accrued
and unpaid dividends
thereon,
from the assets remaining, after payment of the debts and liabilities
of
the
Corporation,
before any
payment
shall be made to the
holders
of
the shares of
any
other
class; but the holders of the Series A Preferred A Stock shall not
be
entitled to
participate
any
further
in the
distribution
of
the assets of the
Corporation.
|
(iii) |
Each
share of Series A Preferred Stock outstanding after May 19, 2000
may be
converted at any time thereafter, at the opinion of the
holder
thereof, into ten shares of Common Stock on the following terms
and
conditions. The holder of any shares of the Series A Preferred Stock
may
exercise
their option to convert such shares into shares of Common Stock
by
surrendering
for such purpose to the Corporation, at its principal office or
at
such
other office or agency maintained by the Corporation for that
purpose,
a
certificate or certificates representing the shares of Series A Preferred
Stock to be converted accompanied by written notice stating that
such
holder elects to convert all or a specified whole number of such
shares in
accordance
with the provisions of this paragraph and specifying the name
or
names
into which such holder wished the certificate or certificates for
shares
of
Common Stock to be issued. In case such notice shall specify a name
or
names
other than that of such holder, such notice shall be accompanied
by
a
payment of all transfer taxes payable upon the issuance of shares
of
Common
Stock in such name or names. As promptly as practicable, and
in
any event within five business days after the surrender of such
certificates
and
the receipt of such notice relating thereto, and, if applicable,
payment
of
all transfer taxes, the Corporation shall deliver or cause to be
delivered
(a) certificates representing the number of validly issued, fully
paid and
non-assessable shares of Common Stock of the Corporation into which
the
holder
of the Series A Preferred Stock so converted shall be entitled, and
(b)
if
less than the full number of shares of the Series A Preferred Stock
evidenced by the
sut
endered
certificate or
|
certificates
are being converted, a new certificate or certificates, of like tenor,
for
the number of shares evidenced by such suftendered certificate or
certificates less the number of shares converted. Such conversion
shall be
deemed to have been made at the close of business on the date of
giving of
such notice and such surrender of the certificate or certificates
representing shares of Series A Preferred Stock to be converted so
that
the rights of the holder thereof shall cease except for the right
to
receive Common Stock of the Corporation in accordance herewith, and
the
converting holder shall be treated for all purposes as having become
the
record holder of such
Common
Stock of the Corporation at such time.
|
All shares of Common Stock delivered upon conversion of the Series A Preferred Stock shall be newly-issued shares or treasury shares, shall be duly paid and non-assessable, and shall be free from preemptive rights and free of any lien or adverse claim. |
Upon conversion of any shares of the Series A Preferred Stock, the holder thereof shall not be entitled to receive any accumulated, accrued or unpaid dividends in respect to the shares so converted, providing that such holder shall be entitled to receive any dividends on such shares of the Series A Preferred Stock declared prior to such conversion if such holder held such shares on the record date fixed for the determination of holders of the . Series A Preferred Stock entitled to receive payment of such dividend. |
The Corporation shall at all times reserve and keep available out or its authorized Common Stock the number of shares of Common Stock issuable upon conversion of all outstanding shares of Series A Preferred Stock. |
(d) | No holder of any shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any preemptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized or outstanding capital stock of the Corporation of any class or series, or bonds, certificates or indebtedness, debentures or other securities convertible into or ` exchangable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series. |
And it was further |
RESOLVED, that each outstanding share of this Corporation ' s Series A Preferred Stock on the date of filling of a certificate of amendment of its restated certificate of incorporation with the Delaware Secretary of State shall be automatically converted into shares of Common Stock on the basis of ten (10) shares of Common Stock for each share of Series A Preferred Stock. |
SECOND: That thereafter, in accordance with Section 228 of the General Corporation Law, the necessary number of shares as required by statute were voted in favor of the said amendment and the said conversion of the outstanding Series A Preferred Stock. |
THIRD: That said amendment and said conversion
were duly
adopted in accordance
with
the provisions of Sections 228 and 242 of the General Corporatibn
Law of
the State of Delaware.
|
IN
WITNESS THEREOF, said Coates International Ltd. has caused this
certificate to be
signed
by George J. Coates, its President and attested by Richard W. Evans,
its
Secretary, this 19
th
day of May, 2000.
|
COATES INTERNATIONAL LTD. | ||
|
|
|
By: | /s/ George J. Coates | |
George J. Coates, President |
||
/s/ Richard Evans | |||
Richard
Evans, Secretary
|
|||
COATES
INTERNATIONAL, LTD.
|
||
|
|
|
By: | /s/ George J. Coates | |
George J. Coates, President |
||
/s/ Richard Evans | |||
Richard Evans, Secretary |
|||
COATES
INTERNATIONAL, LTD.
|
||
|
|
|
By: | /s/ George J. Coates | |
George J. Coates, President |
||
/s/ Richard Evans | |||
Richard Evans, Secretary |
|||
|
|
|
Dated: August 14, 2001 | By: | /s/ George J. Coates |
George J. Coates (Stockholder) |
||
COATES INTERNATIONAL, LTD. | ||
|
|
|
Dated: August 15, 2001 | By: | /s/ George J. Coates |
George J. Coates, Director |
||
|
|
|
By: | /s/ Richard W. Evans | |
Richard W. Evans, Director |
||
|
|
|
By: | /s/ Michael J. Suchar | |
Michael J. Suchar, Director |
||
|
|
|
By: | /s/ B. Coates | |
Secretary |
||
ANSLOW
& JACLIN, LLP
|
RICHARD
I. ANSLOW
|
|
Counselors
at Law
|
EMAIL:
RANSLOW@ANSLOWLAW.COM
|
|
GREGG E. JACLIN | ||
EMAIL: GJACLIN@ANSLOWLAW.COM | ||
ANSLOW
& JACLIN, LLP
|
||
|
|
|
By: | /s/ Anslow & Jaclin, LLP | |
ANSLOW
& JACLIN, LLP
|
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