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|Securities and Exchange CommissionWashington,
D.C. 20549


Form 10-QSB
|----------------------------------------------------------------------

|[X] |  | Quarterly
Report Pursuant to Section 13 or 15 (D) of the Securities Exchange Act of 1934
|--- |  | ----------------------------------------------------------------------------------------

|For Quarter Ended June 30, 2000


Or
|------------------------------------

|[_] |  | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Transition Period from
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|________
to _______


Commission file number
33-948884


Coates
International, Ltd.(Exact Name of Registrant as
Specified in its Charter)


Delaware 22-2925432
(State or other Jurisdiction of (I.R.S. Employer Incorporation or Organization)
Identification No.)


Highway 34 &Ridgewood
Road, Wall Township, New Jersey 07719 (Address of Principal Executive Office) (Zip Code)


(732) 449-7717
(Registrants telephone number including area code)




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 requirement s for the past 90
days.


Yes [X]   No [_]


The number of shares of
Registrants Preferred Stock Series A, $ 0.001 par value, outstanding as of
June 30, 2000 was 6,572,424 shares.


CIL has a short operating
history, during which it has primarily devoted its attention to developing the
technology associated with the Coates Systems. 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.
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|CIL is currently
manufacturing components for high performance automotive engines modified with
the Coates System on a limited basis at its Wall Township, New Jersey,
manufacturing facility. Except as may be set forth herein, CIL has not sold any
automotive engines or components during the quarter ended June 30, 2000. 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.


CILs ability to generate
revenues and achieve profitable operations is principally dependant upon the
execution if sub-license agreements with engine manufacturers and retrofitters
and upon the Companys successful marketing and sales of high performance
automotive, motorcycle and marine racing engines. CIL is actively attempting to
market its and is in communication with various persons and entities that may be
interested in acquiring sub-licenses to use the technology. CIL continues to
aggressively pursue the marketing of Coates System technology to potential
sub-licensees worldwide.


On September 29, 1999, the
Company entered into a License Agreement with Well to Wire Energy, Inc. (WTW), a
Canadian oil and gas corporation, whereby the Company granted to WTW a use
license exclusive in Canada for the use of the Coates Spherical Rotary Valve
System in connection with a natural gas fueled engine that generates
electricity. The licensing fee is $5,000,000, and the Company is also to receive
a royalty equal to 5 percent of the gross profits which WTW derives from all
sources. The Company (CIL), which retains the exclusive right to manufacture the
engine for WTW, received in October 1999, a $41,000,000 order comprising both
co-generation systems and engines. The consummation of the License agreement
with WTW and finalization of WTWs orders for the generator engines is contingent
upon the successful validation of the prototype generator engine incorporating
the Coates System.


The anticipated proceeds to
be derived from the sale of the $5,000,000 license to Well to Wire Energy, Inc.
following successful validation should offset the general and administrative
expenses for the twelve months ending March 31, 2001 which are estimated at
$100,00 per month or $1,200,000. Moreover, although management is confident that
its generator engine developed for WTW will achieve operational validation,
there can be no assurances that such operational validation will be achieved.


On July 2, 2000, the first
855 cubic inch natural gas prototype built for Well to Wire Energy, Inc. was
completed. This engine was fired up on July 4, 2000. The engine ran
successfully, and was dismantled a number of times over a period of ten days.
After full assessment of this engine, a number of recommendations were made for
the first production field engines. The engine was delivered to Well to Wire
Energy, Inc. on July 22, 2000. CIL is now in the process of manufacturing the
first field engines for Well to Wire Energy, Inc. of Canada. The cost of the
prototype was $5,000,000. Well to Wire Energy, Inc. has paid CIL a total of
$985,000, of which $250,000 is a license deposit, and $735,000 is a prototype
deposit.
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|The private offering
reported in the previous 10-QSB was cancelled by the Company, and all other
arrangements and pending arrangements other than WTW Energy licensing
agreements, have been put on hold because management believes that the
co-generator opportunity in Canada is the most significant. WTW has paid to date
a $985,000 deposit and signed a $5,000,000 license. CIL management expects to
start production of its co-generator engine for the oil and gas companies on a
significantly large scale. Both WTW, CIL and another oil and gas company are in
high level talks regarding a joint venture.


It is the intention of CIL
to fund its business plan by borrowings and the sale of equity and/or debt
instruments, and through the sale of sub-licenses. All of these financing
vehicles will be pursued simultaneously. It is not presently known which, if
any, of these alternatives will be utilized, whether they are available to CIL,
and if available, in what combination or in what amounts.


LIQUIDITY AND CAPITAL
RESOURCES


The Companys balance
sheet and financial condition did not change materially during the quarter.


PART II - OTHER
INFORMATION


Item 1 LEGAL PROCEEDINGS



The response to this item can be
found in the Companys annual report on Form 10-KSB, Item 3, for the year ended
December 31, 1999.


Item 2 - CHANGES IN SECURITIES AND
USES OF PROCEEDS - None


Item 3 - DEFAULTS UPON SENIOR
SECURITIES - None


Item 4 - SUBMISSION OF MATTERS TO A
VOTE OF SECURITIES HOLDERS - None


Item
5 - OTHER INFORMATION None


Item 6 - EXHIBITS AND REPORTS ON
FORM 8-K


(b) The Company did not file any
current reports on form 8-K during the quarter ended March 31, 2000
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|Coates International,
Ltd.(A Development Stage Company)


Financial Statements


June 30, 2000
|----------------------------------------------------------------------------------------------

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|Coates International,
Ltd.(A Development Stage Company)Index to the Financial StatementsJune 30, 2000
|-----------------------------------------------------------------------------------------------------

|                                            | Page
|------------------------------------------- | ----
|                                            |     
|Financial Statements                        |     
|Condensed Balance Sheet                     |     
|Condensed Statements of Operations          |     
|Condensed Statements of Cash Flows          |     
|Notes to the Condensed Financial Statements |     

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|Coates International,
Ltd.(A Development Stage Company)Condensed Balance SheetJune 30, 2000(Unaudited)
|------------------------------------------------------------------------------------------------------

|                                                                                   | 
|---------------------------------------------------------------------------------- | 
|Assets                                                                             | 
|Current Assets                                                                     | 
|Cash                                                                               | 
|Restricted cash                                                                    | 
|Prepaid insurance                                                                  | 
|Due from related parties                                                           | 
|Deferred tax benefit                                                               | 
|                                                                                  
|Total Current Assets                                                               | 
|                                                                                  
|Property, Plant and Equipment - Net of accumulated depreciation of $419,794        | 
|                                                                                  
|Other Assets                                                                       | 
|Mortgage loan costs, net of accumulated amortization of $53,246                    | 
|Deposits                                                                           | 
|                                                                                  
|Total Assets                                                                       | 
|                                                                                  
|Liabilities and Stockholders Equity                                               | 
|                                                                                  
|Current Liabilities                                                                | 
|Current portion of mortgage payable                                                | 
|Accounts payable and accrued expenses                                              | 
|Accrued interest payable                                                           | 
|Deposits payable                                                                   | 
|Due to stockholders                                                                | 
|                                                                                  
|Total Current Liabilities                                                          | 
|Mortgage payable, net of current portion                                           | 
|                                                                                  
|Stockholders Equity                                                               | 
|Preferred stock, Series A, $.001 par value, 14,000,000 shares authorized - voting, | 
|non-cumulative convertible, 6,572,424 shares issued and outstanding                | 
|Common stock, $.001 par value, 20,000,000 shares authorized - no shares issued     | 
|Additional paid-in capital                                                         | 
|Deficit accumulated during the development stage                                   | 
|                                                                                  
|Total Stockholders Equity                                                         | 
|                                                                                  
|Total Liabilities and Stockholders Equity                                         | 
|                                                                                  

See notes to the condensed financial
statements.

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|Coates International,
Ltd.(A Development Stage Company)Condensed Statements of Operations
|-----------------------------------------------------------------------------------------

|                                  | Three Months Ended June 30, | Six Months EndedJune 30, | Period FromAugust 31,1988 (Date ofInception)Through June 30,
|--------------------------------- | --------------------------- | ------------------------ | ------------------------------------------------------------
|
|Revenue                           |                             | $345,000                 |                                                             
|                                 
|Operating Expenses:               |                            
|Research and development costs    |                             | 58,307                   |                                                             
|Research and development costs -  |                            
|related party                     |                             | 44,187                   |                                                             
|General and administrative        |                            
|expenses                          |                             | 125,957                  |                                                             
|Depreciation and amortization     |                            
|expense                           |                             | 9,712                    |                                                             
|                                 
|Total Operating Expenses          |                             | 238,163                  |                                                             
|                                 
|Income (Loss) From Operations     |                             | 106,837                  |                                                             
|                                 
|Other Income (Expense):           |                            
|Interest income                   |                             | 877                      |                                                             
|Interest expense                  |                             | (35,705                  | )                                                           
|                                 
|Total Other Income (Expense)      |                             | (34,828                  | )                                                           
|                                 
|Net Income (Loss) Before Benefit  |                            
|From Income Taxes                 |                             | $72,009                  |                                                             
|                                 
|Benefit From Income Taxes         |                             |                         |                                                             
|                                 
|Net Income (Loss)                 |                             | 72,009                   |                                                             
|                                 
|Income (Loss) Per Share           |                             | $0.01                    |                                                             
|Weighted Average Number of Shares |                            
|Outstanding                       |                             | 6,572,424                |                                                             

See notes to the condensed financial
statements.

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|Coates International,
Ltd.(A Development Stage Company)Condensed Statements of Cash Flows
|-----------------------------------------------------------------------------------------

|                                          | Six Months Ended June 30, | Period FromAugust 31,1988 (Date ofInception)ThroughJune 30,
|----------------------------------------- | ------------------------- | -----------------------------------------------------------
|
|Cash Flows From Operating Activities      |                           | $(240,289                                                  
|                                         
|Cash Flows From Investing Activities      |                           | (10,000                                                    
|                                         
|Cash Flows From Financing Activities      |                          
|Proceeds from mortgage payable            |                           |                                                           
|Repayment of mortgage payable             |                           | (3,647                                                     
|Nonrefundable deposit from sale of land   |                           | 15,000                                                     
|Proceeds of additional paid-in capital    |                           |                                                           
|Proceeds from issuance of stock           |                           |                                                           
|Payment for treasury stock                |                           |                                                           
|Loans from stockholders                   |                           |                                                           
|Payment for mortgage loan costs           |                           |                                                           
|                                         
|Net Cash Provided by Financing Activities |                           | 11,353                                                     
|Net Decrease (Increase) in Cash           |                           | (238,936                                                   
|Cash - Beginning of Periods               |                           | 356,163                                                    
|                                         
|Cash - End of Periods                     |                           | $117,227                                                   
|                                         

See
notes to the condensed financial statements.

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|Coates International,
Ltd.(A Development Stage Company)Notes to the Condensed Financial Statements



BASIS OF PRESENTATION


The accompanying unaudited condensed
financial statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Item 310 of
Regulation S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for
the six months ended June 30, 2000 and 1999 are not necessarily indicative of the results
that may be expected for the years ended December 31, 2000 and 1999. The unaudited
condensed financial statements should be read in conjunction with the consolidated
financial statements and footnotes thereto included in the Companys annual report on
Form 10-K for the year ended December 31, 1999.


RELATED PARTY TRANSACTION


Subcontract Labor - The Company
subcontracts its project expense (payroll, insurance and supplies) from an entity in
which George J. Coates (an officer and director of the Company) is the sole stockholder.
During the six months ended June 30, 2000 and 1999, $88,375 and $22,102, respectively,
were paid for these services.
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