<PAGE>

                    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 period ended March 31, 2002

       (_)      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
---------------------------------              ---------------------------------
(State or other jurisdiction                   (IRS Employer Identification No.)
of Incorporation or organization)

             3720 West Oquendo Road, Suite 101, Las Vegas, NV 89118
--------------------------------------------------------------------------------
                    (Address of principal executive offices)
                                  702 891-9195
                           (Issuer's telephone number)

                                 NOT APPLICABLE
--------------------------------------------------------------------------------
              (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 May 15, 2002, the Company had approximately 29,945,902 shares of its
$.0001 par value common stock issued and outstanding.

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                           FORWARD LOOKING STATEMENTS

This Form 10-QSB contains forward-looking statements, including statements
regarding our expectations of our future operations. For this purpose, any
statements contained in this Form 10-QSB that are not statements of historical
fact may be deemed to be forward-looking statements. Without limiting the
foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"estimate," or "continue" or comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, and actual results may differ materially depending on a
variety of factors, many of which are not within our control. These factors
include, but are not limited to, economic conditions generally and in the
industries in which we may participate, competition within our chosen industry,
including competition from much larger competitors, technological advances, and
the failure by us to successfully develop business relationships. In addition,
these forward-looking statements are subject to our successful completion of the
research and development of our technologies; successful commercialization and
mass production of our technologies and applications; successful protection of
our patents; and effective significant industry competition from various
entities whose research and development, financial, sales and marketing and
other capabilities far exceeds ours. In light of these risks and uncertainties,
you are cautioned not to place undue reliance on these forward-looking
statements. We note that the safe harbor contained in the Private Securities
Litigation Reform Act of 1995 is not applicable to the disclosure in this Form
10-QSB.

                                       2

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<TABLE>

                              PART 1 - FINANCIAL INFORMATION

ITEM 1   FINANCIAL STATEMENTS
------   --------------------

                           COINLESS SYSTEMS, INC. AND SUBSIDIARY
                        CONSOLIDATED BALANCE SHEET - MARCH 31, 2002
                                         UNAUDITED

                                          ASSETS
<S>                                                                   <C>           <C>
CURRENT ASSETS:
          Cash and Equivalent                                         $    10,406
          Notes Receivable                                                336,653
          Inventories                                                      22,528
          Deposits                                                         13,127
                                                                      ------------
               Total Current Assets                                                     382,714

          Equipment, Net of Accumulated Depreciation of  $94,906.         114,317
          Other Intangible Assets, Net of Accumulated
              Amortization of $24,200.                                     56,054
                                                                      ------------
                    Total Fixed Assets                                                  170,371
                                                                                    ------------
                    Total Assets                                                        553,085
                                                                                    ============

                        LIABILITIES & SHAREHOLDER EQUITY
CURRENT LIABILITIES:
          Accounts Payable & Other Accrued Expenses                       583,533
          Payroll and Sales Tax Payable                                   628,791
          Notes Payable, Current Portion                                  131,631
          Capital Lease Obligations, Current Portion                       33,488
                                                                      ------------
                    Total Current Liabilities                                         1,377,443

          Notes Payable, Long-Term                                         29,138
          Capital Lease Obligations, Long-Term                             63,979
                                                                      ------------
                    Total Long-Term Liabilities                                          93,117
                                                                                    ------------
                    Total Liabilities                                               $ 1,470,560

SHAREHOLDERS EQUITY
          Common Stock, 75,000,000 authorized $.001 per value
           29,945,902 shares issued and Outstanding                        31,945
          Paid-In Capital                                               5,282,215
          Unamoritized Expenses (Contra-Equity)                          (234,021)
          Accumulated Deficit                                          (5,997,614)
                                                                      ------------
                    Total Shareholders Deficit                                         (917,475)
                                                                                    ------------
Total Liabilities and Shareholders Equity                                           $   553,085
                                                                                    ============
</TABLE>

                                            3

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                     COINLESS SYSTEMS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                    UNAUDITED

                                                   THREE MONTHS ENDED
                                             MAR 31, 2002      MAR 31, 2001
                                             ------------      ------------

Sales                                            290,024                 0

Cost of Sales                                   (224,159)                0
                                             ------------      ------------

Gross Profit                                      65,865                 0

Operating Expenses                              (360,062)         (430,959)
                                             ------------      ------------

Loss from Operations                            (294,197)         (430,959)

Other Income and Expenses
Interest and Other Income                          7,697            11,857
    Interest Expense                             (23,244)          (33,094)
                                             ------------      ------------

 Total Other Income (Expense)                    (15,547)          (21,237)
                                             ------------      ------------

Net Loss                                        (309,744)         (452,196)

Per Share of Common Stock
Net Loss - Basic/Diluted                          -0.013            -0.024

      Weighted Average Number of Shares       29,945,902        18,748,374

                                       4

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                      COINLESS SYSTEMS INC. & SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (UNAUDITED)

                                                  MAR 31, 2002      MAR 31, 2001
                                                    ---------        ---------
CASH FLOW FROM OPERATING ACTIVITIES
    NET LOSS                                        (309,744)        (452,196)

CASH PROVIDED BY OPERATING ACTIVITIES:
    DEPRECIATION & AMORTIZATION                       13,561           10,124
    DECREASE IN ACCOUNTS RECEIVABLE                  (12,704)          (7,149)
    STOCK FOR SERVICES                               245,214                0
    INCREASE IN INTANGIBLE ASSETS                     41,928                0
    DECREASE PATENT RIGHTS                            (3,000)               0
    DECREASE IN PREPAIDS                             (56,973)               0
    DECREASE ACCCOUNTS PAYABLE                      (215,232)               0
    INCREASE ACCOUNTS PAYABLE                              0          157,420
    INCREASE ACCRUED EXPENSES                         73,407          140,033
    DECREASE INVENTORY                               412,728                0
    INCREASE INVENTORY                                     0             (420)
                                                    ---------        ---------

NET CASH USED BY OPERATING ACTIVITIES                189,185          137,890

CASH FLOW FROM INVESTING ACTIVITIES
    DECREASE IN LOANS RECEIVABLE                      (2,697)         (39,685)
                                                    ---------        ---------

NET CASH USED BY INVESTING ACTIVITIES                 (2,697)         (39,685)

CASH FLOW FROM FINANCING ACTIVITIES
    DECREASE IN NOTES PAYABLE                       (193,865)          (7,687)
    DECREASES IN CAPITAL LEASES                       (7,131)          (6,803)
    SALE OF STOCK                                     47,760                0
                                                    ---------        ---------

NET CASH PROVIDED BY FINANCING ACTIVITIES           (153,236)         (14,490)

NET INCREASE/(DECREASE) IN CASH                       33,252         (192,065)

CASH AT BEGINNING OF QUARTER                         (35,550)         211,690

CASH AT END OF QUARTER                                (2,298)          19,625

SUPPLEMENTAL DISCLOSURE
    INTEREST PAID                                      7,145           18,664
    TAXES PAID                                             0                0

                                       5

<PAGE>

                      COINLESS SYSTEMS, INC. AND SUBSIDIARY
              Notes to Unaudited Consolidated Financial Statements

NOTE 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, 2002 and
March 31, 2001 have been prepared in accordance with generally accepted
accounting principles and with the instructions to Form 10-QSB 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 10KSB 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 CONSOLIDATION

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.

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, 2002 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-KSB for the year ended December 31, 2001.

                                       6

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                     COINLESS SYSTEMS, INC. AND SUBSIDIARIES
              (NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENT)

NOTE 2 - RECLASSIFICATION

Certain amounts in the previously presented financial statement have been
reclassified to conform to the current period presentation.

NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION

         Supplemental Cash Flow Information               Three Months Ending
                                                             March 31, 2002
         Cash paid for:
           Interest                                            $ 14,969.00

NOTE 4 - 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.

NOTE 5 - 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.

NOTE 6 - STOCK OPTIONS

Stock Option executed January 1, 2002 to the benefit of John Stoll. Employee
option must be exercised by February 1, 2003, but not before January 1, 2003.
Option is for 100,000 shares of 144R Common Stock, a strike price of $0.19 per
share.

                                       7

<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION

During this quarter, Mr. John Stoll joined our management team as Vice President
of Sales & Marketing. Prior to joining the Company, Mr. Stoll has held the
positions of Vice President of Sales & Marketing with Gaming Systems
International (GSI) and over ten (10) years as Director of Sales & Marketing
with The United States Playing Card Company (USPC) out of Cincinnati, Ohio.
During his successful career, he has held many different management positions
and has been responsible for the development of a number of new products and
concepts.

With the signing of a Cross-License Agreement by IGT, terms of which include
that when installing verification type printers in their gaming devices, only
units purchased from CSI licensed suppliers will be used.

During this quarter, the following gaming device manufacturers have signed
License Agreements for use of our patented `832' "Scan After Print" technology:
Alliance Gaming Corporation; Aristocrat Technologies; Atronic Americas, LLC;
Cyberdine Gaming, Inc.; Innovative Gaming, Inc.; Konami Gaming; Sigma Game,
Inc.; Tekbilt and Williams Gaming.

Two of the top coinless gaming ticket printer manufacturers, Money Controls Ltd.
and Seiko/Future Logic have signed a fee-per-unit produced License Agreement.
Negotiations with the third printer manufacturer is currently in discussion.

To position ourselves for an aggressive marketing campaign for ticket business,
CSI has entered into a letter of intent to form a Joint Venture with B&D Litho,
Inc., an Arizona Printing Company, to manufacture and distribute, coinless
gaming tickets, utilizing our patented process UVAShield coating. The Joint
Venture company will be named Coinless Systems Printing Company, LLC.

It is anticipated that revenues from ticket sales will commence in mid-second
quarter 2002.

RESULTS OF OPERATION:

Three months ended March 31, 2002 compared to three months ended March 31, 2001.

Revenues increased $290,024 over the comparable period 2001. This revenue was
from sale of component parts of our Verification System (TickeTrak(R)). Although
the gross margin was lower than our projected margins, we had to concede our
pricing due to the change in our Business Plan. This represents a one-time
revenue recognition, as the sale of the component part no longer represents our
current business revenue recognition model.

Operating expenses decreased to $360,062 in this fiscal quarter 2002 compared to
$430,959 in the comparable prior year period.The decrease is due primarily to
the change in our Business Plan; Engineering expenses decreased $82,921 and
Marketing expenses increased $2,235. Due to increased travel expenses for visits
to various regulatory agencies to demonstrate our "Scan After Print"(TM)
Technology, administrative expenses decreased $12,278, due primarily to our
elimination of research and development. Professional fees and public relations
expenses increased $21,667. This increase was caused by management consulting
agreements and additional legal expenses.

LIQUIDITY AND PLAN OF OPERATIONS

We have relied primarily upon private placements and subscription sales of stock
to fund our continuing activities and acquisitions. To a limited extent, we have
also relied upon borrowing from the Company's Chief Executive Officer, Dennis
Sorenson, and through a related party stockholder. Until we generate revenue
from sales and licensing of technology, which we believe we may begin recording
as early as by the end of the second quarter of this year, or we receive a large
infusion of cash from institutional investor(s), we intend to continue to rely
upon these methods of funding our operations during the next year. We intend to
satisfy our capital requirements for the next 12 months by continuing to pursue
private placements to raise capital, using our common stock as payment for
services in lieu of cash where appropriate, borrowing as appropriate, and our
cash on hand. However, we do not know if those resources will be adequate to
cover our capital requirements.

                                       8

<PAGE>

PART II -  OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS:

           A lawsuit was filed against the Company by TransAct Technologies,
           Inc. on July 26, 2001. Plaintiff withdrew lawsuit March 11, 2002;

           Complaint filed on January 31, 2002 by Breakout Investment Marketing
           LLC, an Arizona Limited Liability Company, in Superior Court of
           Arizona, in the County of Maricopa, alleging breach of contract. CSI
           believes the claim lacks merit and intends to vigorously defend
           against such Complaint.

           On March 25, 2002, CSI filed Complaint against Gene Newton, an
           individual previously retained by CSI as a consultant, in San
           Bernardino Superior Court, State of California, alleging causes of
           action for conversion and defamation. Mr. Newton responded by filing
           a Cross-Complaint against CSI alleging various labor and employment
           claims. CSI believes Mr. Newton's claims are without merit and
           intends to vigorously defend against the Cross Complaint.

           On March 29, 2002, complaint filed in Superior Court of the State of
           California, County of Riverside by Derryl W. Crossman, Attorney for a
           number of Plaintiffs. On April 10, 2002, CSI was dismissed from the
           suit.

           On April 10, 2002, CSI filed a complaint in Superior Court of
           California, County of Los Angeles, against "CASINOINTHENO," a user of
           an on-line discussion board commonly known as "Raging Bull." CSI has
           served a subpoena upon Lycos, the company operating the Raging Bull
           website, to produce the identity of "casinointheno". Currently, the
           complaint alleges that casinointheno published defamatory statements
           which are libelous, false and unprivileged. No responsive pleadings
           as been filed

ITEM 2.    CHANGES IN SECURITIES AND STOCKHOLDER EQUITY

On February 5, 2002, we sold 240,000 shares of our common stock to Management
Programs, Inc., an accredited investor, at a share price of $.20 per share. The
shares were issued to accredited investor(s) as defined under Regulation D and
were exempt from Registration pursuant to Section 4(2) of the Securities Act.

On March 20, 2002, we issued 500,000 shares to Alfred Doi, Ph.D., who is
currently a director of our Company, for consulting services in connection with
testing of the UVAShield. The shares were issued to accredited investor(s) as
defined under Regulation D and were exempt from Registration pursuant to Section
4(2) of the Securities Act.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                        9

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ITEM 5.    OTHER INFORMATION

           CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

           On January 1, 2002, Company entered into Employment Agreement with
John Stoll as Vice President of Sales & Marketing. Terms of Agreement are
thirty-six month term at annual salary of $100,000.00. Hiring incentive of
100,000 shares 144R Common Stock with additional option to purchase 100,000
shares 144R Common Stock at a strike price of $0.19 per share.

           On January 17, 2002, the Company issued a Demand Note with an 8.5%
annual rate of Interest to Dennis & Janice Sorenson, in the principal amount of
$30,000.00.

           On February 20, 2002, the company issued a Demand Note with an 8.5%
annual rate of interest to Dennis & Janice Sorenson, in the principal amount of
$11,000.00.

           On March 7, 2002, the Company issued a Demand Note with an 8.5%
annual rate of interest to Management Programs, Inc., a Nevada Corporation, in
the principal amount of $15,000.00;

           The Company completed payoff of Note Payable to Spirit Mountain
Development Corporation, of $250,000.00. This Note, with accrued interest was
paid off as follows:

                        January 15, 2002                     $ 50,000.00
                        February 13, 2002                     100,000.00
                        March 15, 2002                        100,000.00
                        March 27, 2002                         28,349.58
                                                             -----------
                            Total Payoff                     $278,349.58
                                                             ===========

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT NO.           DESCRIPTION
-----------           -----------

10.1             Form of Confidential Disclosure & Licensing Agreement

10.2             Form of License Agreement

10.3             Employment Agreement, John W. Stoll, January 1, 2002

10.4             Promissory Note Dated February 20, 2002 in favor of Dennis and
                 Janice Sorenson for $11,000

10.5             Promissory Note Dated March 7, 2002 in favor of Management
                 Programs, Inc. for $15,000

10.6             Promissory Note Dated January17, 2002 in favor of Dennis and
                 Janice Sorenson for $30,000

                                       10

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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, 2002                   By:   /S/ DARRYL D. DORSETT
                                          --------------------------------------
                                                      DARRYL D. DORSETT

                                      Its:  Chief Financial Officer & Corporate
                                            Secretary

/S/ DENNIS W. SORENSON
------------------------------------
Dennis W. Sorenson
Chief Executive Officer/Chairman

                                       11