Securities and Exchange Commission



Washington, 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, 2002



Or



[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange

Act of 1934 For the Transition Period from



________ 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 requirements for the past 90 days.

Yes [X] No [  ]

As of  June 30, 2002, there were 265,049,240 shares of the Registrant's common stock were issued and outstanding.





COATES INTERNATIONAL, LTD









INDEX



Page

Number

PART  1  -  FINANCIAL INFORMATION

Item 1	Financial Statements (unaudited)						1

Consolidated Balance Sheet

- June 30, 2002								   	2

Consolidated Statements of Operations

- Six months ended June 30, 2002 and 2001				   	3

Consolidated Statements of Cash Flows

- Six months ended June 30, 2002 and 2001				   	4

Notes to Consolidated Financial Statements					5



Item 2  Management's Discussion and Analysis of Financial Condition

and Results of Operations							6-10



PART II  -  OTHER INFORMATION							   11



SIGNATURES								   		   12



Coates International, Ltd.



Financial Statements



June 30, 2002







Coates International, Ltd.

Index to the Financial Statements

June 30, 2002













Page



Financial Statements

Condensed Balance Sheet		1

Condensed Statements of Operations		2

Condensed Statements of Cash Flows		3

Notes to the Condensed Financial Statements		4

Coates International, Ltd.

Condensed Balance Sheet

June 30, 2002

(Unaudited)



|Assets                                                                                                        |  |  |   |             
|------------------------------------------------------------------------------------------------------------- |  |  | - | ------------
|Current Assets                                                                                                |  |  |   |             
|Cash                                                                                                          |  |  | $ | 2,106,277   
|Inventory                                                                                                     |  |  |   | 230,163     
|Deferred offering costs                                                                                       |  |  |   | 44,870      
|Total Current Assets                                                                                          |  |  |   | 2,381,310   
|Property, Plant and Equipment - Net of accumulated depreciation of $494,855                                   |  |  |   | 1,610,737   
|Other Assets                                                                                                  |  |  |   |             
|Mortgage loan costs, net of accumulated amortization of $42,159                                               |  |  |   | 22,701      
|Deposits                                                                                                      |  |  |   | 2,500       
|Total Assets                                                                                                  |  |  |   | 4,017,248   
|Liabilities and Stockholders' Equity (Deficit)                                                                |  |  |   |             
|Current Liabilities                                                                                           |  |  |   |             
|Current portion of mortgage payable                                                                           |  |  |   | 4,770       
|Accounts payable and accrued expenses                                                                         |  |  |   | 890,772     
|Due to officer                                                                                                |  |  |   | 8,400       
|Total Current Liabilities                                                                                     |  |  |   | 903,942     
|                                                                                                              |  |  |   |             
|License deposits                                                                                              |  |  |   | 1,440,000   
|Mortgage payable, net of current portion                                                                      |  |  |   | 877,387     
|Total Liabilities                                                                                             |  |  |   | 3,221,329   
|Stockholders' Equity (Deficit)                                                                                |  |  |   |             
|Common stock, $.0000025 par value, 1,000,000,000 shares authorized,265,049,240 	shares issued and outstanding |  |  |   | 661         
|Additional paid-in capital                                                                                    |  |  |   | 14,572,731  
|Retained earnings (deficit)                                                                                   |  |  |   | (13,777,473)
|Total Stockholders' Equity (Deficit)                                                                          |  |  |   | 795,919     
|Total Liabilities and Stockholders' Equity (Deficit)                                                          |  |  | $ | 4,017,248   



See notes to the condensed financial statements.

Coates International, Ltd.

Condensed Statements of Operations



|                                                     |                           |             |      |              
|---------------------------------------------------- | ------------------------- | ----------- | ---- | -------------
|Three Months Ended
June 30,                          | Six Months Ended
June 30,
|2002                                                 |                           | 2001        | 2002 |              
|                                                     |                           | (Unaudited) |      | (Unaudited)  
|                                                     |                           |             |      | (As Restated)
|Revenue                                              | $                         | -           | $    | -            
|Operating Expenses:                                  |                           |             |      |              
|Research and development costs                       |                           | 121,256     |      | 116,337      
|General and administrative expenses                  |                           | 1,155,322   |      | 127,638      
|Depreciation and amortization expense                |                           | 13,949      |      | 12,940       
|Total Operating Expenses                             |                           | 1,290,527   |      | 256,915      
|Income (Loss) From Operations                        |                           | (1,290,527) |      | (256,915)    
|Other Income (Expense):                              |                           |             |      |              
|Interest income                                      |                           | 4,505       |      | 71           
|Interest expense                                     |                           | (23,185)    |      | (39,344)     
|Gain on sale of equipment                            |                           | 2,800       |      | -            
|Total Other Income (Expense)                         |                           | (15,880)    |      | (39,273)     
|                                                     |                           |             |      |              
|Net Income (Loss) Before Benefit
From Income Taxes   |                           | (1,306,407) |      | (296,188)    
|                                                     |                           |             |      |              
|Benefit From Income Taxes                            |                           | -           |      | -            
|Net Income (Loss)                                    | $                         | (1,306,407) |      | (296,188)    
|(Loss) Per Share                                     | $                         | 0.00        |      | 0.00         
|Weighted Average Number of Common Shares Outstanding |                           | 264,850,996 |      | 264,391,640  

See notes to the condensed financial statements.

Coates International, Ltd.

Condensed Statements of Cash Flows



|                                          |   |            
|----------------------------------------- | - | -----------
|Six Months Ended
June 30,                
|2002                                      |   | 2001       
|                                          |   | (Unaudited)
|Cash Flow From Operating Activities       | $ | (114,309)  
|Cash Flow From Investing Activities       |   | (25,893)   
|Cash Flow From Financing Activities       |   |            
|Proceeds from issuance of common stock    |   | 1,542,500  
|Proceeds from officers loan               |   | -          
|Repayment of note payable                 |   | -          
|Repayment of mortgage payable             |   | (10,350)   
|Net Cash Provided by Financing Activities |   | 1,532,150  
|Net Increase (Decrease) in Cash           |   | 1,391,948  
|Cash  Beginning of Periods                |   | 714,329    
|Cash - End of Periods                     | $ | 2,106,277  

































See notes to the condensed financial statements.



Coates International, Ltd.

Notes to the Condensed Financial Statements



NOTE 1 -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, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002.  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, 2001.

NOTE 2 - RESTATEMENT OF PRIOR PERIOD RESULTS

The Company has restated its financial statements for the six months ended June 30, 2001.  The restated financial results reflect errors in its accounting procedures related to revenue recognition.  The impact of these adjustments on the Company's financial results as originally reported is summarized below:



|                            |   | Six Months Ended
June 30, 2001
|--------------------------- | - | ------------------------------
|                            |   | As Reported                   
|Retained earnings (deficit) | $ | (10,626,554)                  
|Revenue                     |   | 580,000                       
|Net income (loss)           |   | 61,461                        
|Income (loss) per share     |   | 0.00                          

NOTE 3 - PATENTS

In April 2002, the Company paid $333,000 and issued 20,700 shares of common stock valued at $414,000 as repayment to various individuals for maintenance and protection of the Company's patents.













Item 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS



Except for historical information, the Company's reports to the Securities and Exchange Commission on Form 10-KSB and Form 10-QSB and periodic press releases, as well as other public documents and statements, contain "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the statements. These risks and uncertainties include general economic and business conditions, development and market acceptance of the Company's products, current dependence on Well to Wire Energy, Inc. and other risks and uncertainties identified in the Company's reports to the Securities and Exchange Commission, periodic press releases, or other public documents or statements.

Readers are cautioned not to place undue reliance on forward-looking statements. The Company undertakes no obligation to republish or revise forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events.

Background

Coates International Ltd. (CIL, or the Company) is a Delaware corporation organized in October 1991 by George J. Coates as the successor in interest to a Delaware corporation of the same name incorporated in August 1988.

CIL has completed the development of a spherical rotary valve SRV Engine (the  "Coates SRV Engine"),  the  development  of which was  initiated  by its founder,  George J. Coates, for use in internal combustion engines of all types. With respect to the Coates SRV Engine, seven applicable United States patents (the  "Coates Patents") have been issued to George J. Coates.  CIL holds an exclusive license from George J. Coates and his son Gregory Coates, to manufacture, sell and grant sub-licenses with respect to products based on the Coates Patents, within all of the countries, their territories and possessions, comprising  North  America,  South  America and Central  America  (the  "License Areas").  Agreements between George J. Coates, Gregory Coates, and CIL also contain certain non-compete clauses and rights relative to royalties received from Nicholson McLaren or from Noble Motor Sport.

CIL has a 14-year operating history, during which it has primarily devoted its attention to developing the technology associated with the Coates SRV Engine.



Agreements with Well to Wire Energy, Inc.

On September 29, 1999, CIL signed a license agreement (the "License Agreement") with Well to Wire Energy, Inc. ("WWE"), an oil and gas company in Canada, to license the exclusive use of V-8 cylinder engines modified with the Coates System to be fueled by natural gas to generate electrical power for the Country ofCanada (the "License Agreement") against payment of $5,000.000, of which a deposit payment in the amount of $300,000 was made. The agreement also provides for development and delivery of certain prototype engines under a separate research and development agreement between CIL and WWE, referred to as the "R&D Agreement", and stipulates that following the testing and delivery of the third prototype - a production model Coates Generator Engine - the balance of the license fee in the amount of $4,700,000 would be paid in 16 quarterly payments beginning 180 days after delivery.



Following due diligence investigation of the proposed applications for the production of electrical energy and the location of the engines in the natural gas fields or generation sites, it was agreed between CIL and Well to Wire Energy, Inc. that a larger engine modified with the Coates System would be more appropriate. Accordingly, CIL and Well to Wire agreed that CIL would research and develop a natural gas fed, 855 cubic inch, 6 cylinder, industrial electric generator engine(the "Coates Generator Engine").

Pursuant to further negotiations, CIL and WWE agreed that WWE would pay to CIL a $5,000,000 fee to research and develop a production model of the Coates Generator Engine. As part of the understanding between CIL and WWE under the R&D Agreement, CIL would develop a total of three prototype engines meeting these new specifications: two testing prototypes and one production model prototype. To date, Well to Wire Energy, Inc. has made aggregate payments of $1,200,000 to CIL for these prototypes, $250,000 of which was paid in calendar 1999; $845,000 of which was paid in fiscal year 2000, and $105,000 was paid during the first quarter in fiscal year 2001. The balance of  $3,800,000 is due to be paid by from Well to Wire Energy, Inc. 180 days after delivery of the production model.



CIL has completed the construction and delivery of the first two prototypes and the basic construction of the third prototype, representing the production version of the Coates Generator Engine.  The first two prototype Coates Generator Engines were delivered to Well to Wire Energy, Inc. in December, 2000 and April, 2001, respectively. The third prototype engine is currently undergoing testing which is expected to be completed in the third quarter 2002.



Preliminary Agreements with 1107 N.W. Central Avenue, Inc. and Gary Sommer

In March 2002, CIL and George J. Coates arrived at a preliminary understanding with 1107 N.W. Central Avenue, Inc. and Gary Sommer (together hereinafter referred to as "1107") that culminated in drafts for two re-license agreements which will, subject to completion, convey to 1107 exclusive rights to market non-exclusive end-user licenses for Coates CSRV engine technology in certain markets and relative to certain applications, subject to payment by 1107 of non-refundable deposit payments against total license fees aggregating $50,000,000. The agreements also would call for on-going royalty payments accruing to CIL on future manufacturing under the end-user licenses of combustion engines incorporating the Coates CSRV engine technology.  If 1107, for any reason, was unable to complete the transactions within a specified time period, any deposits paid would be converted into common stock of CIL at the conversion rate of $7.00 per share.







Pursuant to the understanding, 1107 has paid to CIL the sum of $500,000 as a non-refundable deposit.  Such deposit has been recognized in the March 31, 2002, balance sheet as a non-current liability, will, however, be reclassified as income or equity, depending on the final outcome of the above transactions, after the re-license agreements have been finalized.



Agreement with McLean, England and Associates, LLC

During the first quarter CIL negotiated a license arrangement with McLean, England and Associates, LLC ("McLean") which, on April 12, 2002, produced a final agreement that calls for $25,000,000 in license fees for specific uses of the Coates CSRV engine technology in certain applications, within the United States of America.  Payment of the license fee is contingent upon the successful completion of tests of two prototype engines fitted with the CSRV system.  The two prototype engines are currently in development. At the time of this submission, McLean has paid CIL a non-refundable deposit of $565,000 against the license fee, of which $25,000 and $540,000 were received during the first and second quarters, respectively. The entire amount of $565,000 has been recognized in the balance sheet at June 30, 2002, as a non-current liability, to be re-classified in subsequent periods as income.

Preliminary Agreement with Dominion International

During the quarter ended June 30, 2002 CIL commenced negotiations with a European-based group, Dominion International ("Dominion") for a license arrangement agreement covering specific uses of the Coates CSRV engine technology in certain applications, within the territory of the United States.  During the quarter, Dominion paid CIL a non-refundable deposit of $75,000, to be applied against the license fee and which amount has been recognized in the balance sheet at June 30, 2002, as a non-current liability; to be re-classified as income in future periods after the parties performed in accordance with the terms of the finalized agreement.

Results of Operations for the Three and Six Months Periods Ended June 30, 2002 and 2001

CIL's currently anticipated sources of revenues are the payments due to CIL from WWE under the R&D Agreement and the License Agreement, and the payments made and to be made under the agreements with 1107, McLean and Dominion.  During the quarter ended June 30, 2002 the Company received $615,000 in payments from McLean and Dominion, however, due to the fact that the underlying agreements had not been finalized at the end of the period, all such payments were not recognized as income but classified as a non-current liability. By comparison, during the first quarter in 2001, the Company had received $105,000 in license payments from Well to Wire Energy, Inc. pursuant to the R&D Agreement, which amounts were recorded by the Company as revenues. Further payments are not scheduled until the completion of the testing and delivery to WWE of the third prototype, production model Coates Generator Engine.  CIL has completed the basic construction of this production model and currently expects completion of testing and delivery to occur during the third quarter in 2002.







Total operating expenses for the quarter ended June 30, 2002, were $1,290,527 compared to $256,915 for the second quarter in 2001. The large increase was primarily due to CIL's repayment to a group of  shareholders who in the past had financed a portion of the filing and maintenance costs for certain of the patents underlying the Coates CSRV engine technology.  Under the licensing arrangements between the Company and the Coates', the Company is responsible to pay such patent costs.   Accordingly, CIL made a payment of $747,000 of which $333,000 was paid in cash and $414,000 in form of 20,700 shares of the Company's common stock, valued at the pre-split price of $20 per share. The Company made these payments during the second quarter, and recognized the total amount as operating expense.  In addition, the Company incurred certain higher general and administrative expenses, predominantly due to increased staffing, and professional services expense. Research and development costs were substantially the same in both quarters, totaling $121,256 in 2002 and $116,337 in 2001.

The lack of revenues coupled with the increase of operating expenses resulted in a loss from operations of $1,290,527 for the quarter compared to a loss of $256,915 during the same period a year ago. Other non-operating expenses for the three months ended June 30, 2002, amounted to $15,880, attributable to interest expense for the mortgage on the Company's headquarters facility. The net results for the quarter was a loss of $1,306,407 for less than $.01 per share, as compared to a net loss of $296,188 for the second quarter in 2001. The six months results were losses of $1,678,675 or $0.01 per share and $413,539 or a fraction of one cent per share, in2002 and 2001 respectively.

Management expects the license agreements described above to contribute an increasing stream of revenues during the upcoming periods.  There can be no assurance, however, that completion and testing of the various prototype engines can be completed in a satisfactory manner and within the anticipated time frames, and that other contributing factors will not prohibit or delay finalization and consummation of the agreements, in which case revenues in the short run would be limited to certain non-refundable deposit payments.

Liquidity and Capital Resources

During the quarter, the Company received subscription proceeds of $1,310,000 in cash from 12 accredited investors for the issuance of 65,500 pre-split, restricted common shares at prices of $20 per share,  concluding its private placement. In addition, the Company received $615,000 in non-refundable deposit payments against future license agreements.  These cash inflows more than offset losses from operations during the period, and increased cash balances from approximately $1.1 million at March 31, 2002, to approximately $2.1 million at June 30, 2002. Cash has been held in CIL's interest bearing bank accounts.  The improved liquidity manifests itself in the working capital position which showed a positive balance of $1,519,262 at June 30, 2002, as compared to a deficit of $367,851 at March 31, 2002. In all practicality, however, available liquidity reserves are significantly higher, considering that even though the before-mentioned license deposits were classified as current liabilities, they are non-refundable. Aside from these deposits, current liabilities are primarily composed of approximately $700,000 legal fees due one law firm for its representation of CIL in litigation over the past several years.



CIL has completed the basic construction of the last of the three prototype Coates Generator Engines for  WWE, the production model, which is currently undergoing testing in connection with CIL's R&D Agreement and License Agreement with Well to Wire Energy, Inc.  Management expects to be able to complete the testing of the production model and delivery to WWE during the third quarter, after which CIL expects to receive the balance of  $3,800,000 from Well to Wire Energy, Inc under the R&D Agreement. Under the License Agreement, the balance due CIL of $4,700,00 is payable in equal quarterly payments over a four year period, commencing 180 days following delivery to WWE of the third prototype. There can be no assurance, however, that these agreements, as well as those presently in negotiations with the other licensees, will be consummated in accordance with these expectations and that payments will be received as called for in the agreements.



PART II - OTHER INFORMATION

Item 1.    Legal Proceedings

There are no material legal proceedings pending against the Company.

Item 2   CHANGES IN SECURITIES



During the second quarter ended June 30, 2002, the Company issued an aggregate 65,500 Common Shares to 12 accredited investors pursuant to subscription agreements received in connection with its private placement, which concluded in April, 2002, and received subscription proceeds of $1,310,000, for the purchase price of $20 per share.  The private placement was made in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the "1933 Act") provided by Regulation D and Section 4(2) of the 1933 Act in that the number of accredited investors was limited; that the accredited investors were either existing shareholders of CIL or had established business relationships with the Company.  The certificates representing the CIL shares placed contained the appropriate restrictive legends designating such shares as restricted securities, non-transferable and non- saleable other than pursuant to registration under the 1933 Act or pursuant to exemptions therefrom.



In addition, the Company issued 2,200 restricted Common Shares to two individuals for services rendered to the Company.  As well, the Company issued 20,700 restricted Common Shares to several shareholders in repayment of previous loans for patent maintenance costs and expenses.

Item 3   DEFAULTS ON SENIOR SECURITIES

None



Item 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On April 23, 2002, the Board of Directors authorized a four (4) for one (1) forward stock split for all issued and outstanding Common Shares held of record as of 5:00 PM Eastern Time on that date, thereby increasing  the issued and outstanding shares on that date to 264,975,240 Common Shares.

Item 5   OTHER INFORMATION

None

Item 6   EXHIBITS AND REPORTS ON FORM 8-K



(a) Exhibit (3)(i)  Certificate of Incorporation and Amendments thereto, incorporated

herein by reference to Exhibits of previous filings with the Commission.

Exhibit (3)(ii)  By-laws of the Company, incorporated herein by reference to Exhibits of

previous filings with the Commission.

(b)  Reports on Form 8-K:  None



SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934, the Registrant  has duly  caused  this  Form 10-QSB for the quarter ended June 30, 2002 to be  signed  on its  behalf by the undersigned, thereunto duly authorized.







COATES INTERNATIONAL, LTD.





Date:   August 14, 2002

_/s/ George  J. Coates___

George J. Coates, President

Chief Executive Officer and

Chief Financial Office