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 September 30, 2005

                                       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 |_| No [X]

As of September  30, 2005,  there were  265,894,278  shares of the  Registrant's
common stock were issued and outstanding.



<PAGE>

                           Coates International, Ltd.
                        Index to the Financial Statements
                               September 30, 2005


                                                                            Page

Financial Statements (Unaudited)

  Condensed Balance Sheet .................................................    2

  Condensed Statements of Operations and Other Comprehensive
  Income (Loss) ...........................................................    3

  Condensed Statements of Cash Flows ......................................    4

  Notes to the Condensed Financial Statements .............................    5

Item 2.  Management's  Discussion and Analysis of Financial
         Condition and Results of Operations .............................. 8-12

Item 3.  Controls and Procedures ..........................................   13

PART II  -  OTHER INFORMATION .............................................   13

Item 1.  LEGAL PROCEEDINGS ................................................   13

Item 2.  CHANGES IN SECURITIES ............................................   13

Item 3.  DEFAULTS ON SENIOR SECURITIES ....................................   13

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ..............   13

Item 5.  OTHER INFORMATION ................................................   14

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K .................................   14

SIGNATURES ................................................................   14


                                       1
<PAGE>

                           Coates International, Ltd.
                             Condensed Balance Sheet
                               September 30, 2005
                                   (Unaudited)


Assets

Current Assets
   Cash                                                $      7,832
   Inventory                                                387,133
                                                       ------------
   Total Current Assets
                                                            394,965
Investment - related party                                  362,200
Property, plant and equipment, net of
  accumulated depreciation of $696,180                    1,513,853
Patents, net of accumulated amortization of $395             61,955
Other Assets                                                  2,500
                                                       ------------
      Total Assets                                     $  2,335,473
                                                       ============
Liabilities and Stockholders' Impairment

Current Liabilities
   Current portion of mortgage payable                 $      3,247
   Accounts payable                                          38,377
   Accrued interest payable                                  10,053
   Accrued expenses                                         684,245
   Short term borrowings                                     37,786
   Due to related parties                                   350,437
   License deposits                                         940,000
                                                       ------------
      Total Current Liabilities                           2,064,145
   Mortgage payable, net of current portion                 862,651
                                                       ------------
      Total Liabilities                                   2,926,796
                                                       ------------
Stockholders' Impairment
   Common stock, $.00001 par value,
   1,000,000,000 shares
   authorized, 265,894,278 shares
   issued and outstanding                                     2,693
   Additional paid-in capital                            17,200,152
   Accumulated deficit                                  (18,133,452)
   Accumulated other comprehensive income                   339,284
                                                       ------------
      Total Stockholders' Impairment                       (591,323)
                                                       ------------
      Total Liabilities and Stockholders' Impairment   $  2,335,473
                                                       ============


See notes to the condensed financial statements.


                                       2
<PAGE>

                           Coates International, Ltd.
    Condensed Statements of Operations and Other Comprehensive Income (Loss)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         Three Months Ended                Nine Months Ended
                                                            September 30,                     September 30,
                                                   ------------------------------    ------------------------------
                                                        2005            2004              2005            2004
                                                   -------------    -------------    -------------    -------------
<S>                                                <C>              <C>              <C>              <C>
Revenue                                            $          --    $          --    $          --    $          --
                                                   -------------    -------------    -------------    -------------
Operating Expenses:
  Research and development                                 4,467           19,410           10,918           70,164
d party              --           23,911               --           69,823
  General and administrative expenses
  General and administrative expenses                    131,575          265,522          545,501          810,026
  Depreciation and amortization expense                   12,307           15,816           43,941           50,688
                                                   -------------    -------------    -------------    -------------
      Total Operating Expenses                           148,349          324,659          600,360        1,000,701
                                                   -------------    -------------    -------------    -------------
Loss From Operations                                    (148,349)        (324,659)        (600,360)      (1,000,701)
                                                   -------------    -------------    -------------    -------------

Other Income (Expense)
  Equity loss on investment - related party              (54,059)              --         (237,428)              --
  Interest income                                             --            4,459               --            4,747
  Interest expense                                       (32,068)              --          (93,841)              --
  Gain on Sale of Stock                                   32,000               --           47,000
  Other income - legal settlement                             --          485,336               --          485,336
                                                   -------------    -------------    -------------    -------------
      Total Other Income (Expense)                       (54,127)         489,795         (284,269)         490,083

Income (Loss) Before Income Taxes                       (202,478)         165,136         (884,629)        (510,618)
Income Taxes                                                  --               --               --               --
                                                   -------------    -------------    -------------    -------------
Net Income (Loss)                                  $    (202,478)   $     165,136    $    (884,629)   $    (510,618)
Other Comprehensive Income, net of tax
  Valuation of Investment - related party                 54,059               --          237,428               --
                                                   -------------    -------------    -------------    -------------
Other Comprehensive Income                         $    (148,419)   $          --    $     647,201    $          --
                                                   =============    =============    =============    =============
Net Income (Loss) per share (Basic and diluted)    $           0    $           0    $           0    $           0
                                                   =============    =============    =============    =============
Weighted Average Number of Common
Shares Outstanding                                   265,894,278      265,860,564      265,873,670      265,657,425
                                                   -------------    -------------    -------------    -------------
</TABLE>


See notes to the condensed financial statements.


                                       3
<PAGE>

                           Coates International, Ltd.
                       Condensed Statements of Cash Flows
                                   (Unaudited)


                                                      Nine Months Ended
                                                        September 30,
                                                 -------------------------
                                                     2005           2004
                                                 ---------       ---------
Cash Flow From Operating Activities              $(535,643)      $(850,485)
                                                 ---------       ---------
Cash Flow From Investing Activities
   Acquisition of Fixed Assets                      (2,255)             --
   Sale of Stock in Minority Interest               47,000              --
   Outlays for Patents                             (62,391)             --
   Loans to related party                               --        (314,955)
                                                 ---------       ---------
                                                   (17,646)       (314,955)
                                                 ---------       ---------

Cash Flow From Financing Activities
   Repayment of mortgage                            (2,284)         (2,149)
   Proceeds (repayment) of related party loan      200,437        (100,000)
   Short term borrowings                            37,786              --
   Proceeds from issuance of stock                 145,000         815,000
                                                 ---------       ---------
   Net Cash provided by Financing Activities       380,939         712,851
                                                 ---------       ---------
   Net (Decrease) in Cash                         (172,350)       (452,589)
   Cash - Beginning of Period                      180,182         554,954
                                                 ---------       ---------
   Cash - End of Period                          $   7,832       $ 102,365
                                                 =========       =========


See notes to the condensed financial statements.


                                       4
<PAGE>

                           Coates International, Ltd.
                   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 three and nine months  ended  September  30, 2005 and
2004 are not necessarily  indicative of the results that may be expected for the
years  ended  December  31, 2005 and 2004.  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-KSB for the year ended December 31, 2004,  and its quarterly  reports on Form
10-QSB for the related periods ended March 31, 2005 and June 30, 2005.

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.


RELATED PARTY TRANSACTIONS

On April 30, 2003, the Company  entered into a sublicense  agreement with Coates
Motorcycle.  Prior to the  agreement,  Gregory  Coates,  an officer the Company,
owned 100% of Coates Motorcycle.  Pursuant to the agreement, the Company granted
certain  exclusive  licenses in  exchange  for  approximately  51% of the common
shares of Coates  Motorcycle.  In  addition,  the Company  had an  anti-dilution
right.

During 2004, the Company amended its license agreement with Coates Motorcycle to
expand the license rights granted and to remove the  anti-dilution  provision in
exchange for 1,000,000  common shares of Coates  Motorcycle.  As a result of the
transactions,   the  Company  owned  3,558,000  shares  of  Coates   Motorcycle,
representing  approximately  a 30%  ownership  interest.  During the nine months
ended September 30, 2005, the Company sold 9,400 shares of Coates Motorcycle for
$47,000 and the Company currently owns 3,548,600 shares.

The 30% interest in Coates  Motorcycle  is valued at $-0-,  because that was the
cost basis of the assets and the license agreement exchanged for those shares.

The Company's  investment in Coates  Motorcycle is being accounted for under the
equity method of accounting  for  investments.  As such, the investment is being
carried  at  cost,  adjusted  for the  Company's  proportionate  share  of their
undistributed earnings and losses.


                                       5
<PAGE>

                           Coates International, Ltd.
                   Notes to the Condensed Financial Statements


RELATED PARTY TRANSACTIONS (CONTINUED)

Summarized information for Coates Motorcycle is as follows:


For the Nine Months Ended September 30,     2005        2004
---------------------------------------   --------    --------

  Revenue                                       --          --
  Operating expenses                       820,551     411,672
  Net loss                                (794,244)   (419,868)

As of September 30,                         2005        2004
---------------------------------------   --------    --------
  Current assets                           121,227      26,848
  Total assets                             516,988     177,075
  Current liabilities                     (579,467)   (560,897)
  Total liabilities                       (583,967)   (565,397)
  Stockholders' equity                     (66,979)   (388,322)


The Company  also made loans to Coates  Motorcycle  from time to time to provide
working  capital fot 0 0 r the  development  and testing of  motorcycle  engines
which incorporate the Company's technologies. As of December 31, 2004, the total
outstanding  balance of these loans,  including  accrued interest  thereon,  was
$362,200 and was converted  into 362,200  shares of Preferred  Series A Stock of
Coates  Motorcycle.  This  amount is  reflected  in the  accompanying  condensed
balance sheet as Investment - related party.

During the three month period ended  September  30, 2005,  the Company  received
$55,000 from Coates  Motorcycle as reimbursement  of general and  administrative
expenses  incurred on its behalf.  For the nine month period ended September 30,
2005, a total of $65,991 was received from Coates Motorcycle for such purpose.

George J.  Coates  has made loans to the  Company  at  various  times to provide
working capital,  the outstanding  balance of which is $300,937 at September 30,
2005.  Bernadette  Coates,  George's  wife,  also made  loans to the  Company at
various  times to provide  working  capital,  the  outstanding  balance of which
aggregated  $49,500 at September 30, 2005.  These  borrowings are in the form of
demand loans which carry no interest and are repaid from time to time  depending
upon cash  availability.  It is the  intention of Mr.  George J. Coates and Mrs.
Bernadette Coates to assist the Company with its working capital requirements in
the form of loans as needed in the  future  even,  though  they are not  legally
obligated to do so.


                                       6
<PAGE>

                           Coates International, Ltd.
                   Notes to the Condensed Financial Statements


EQUITY METHOD LOSSES AND IMPAIRMENT OF INVESTMENT IN RELATED PARTY

Emerging  Issues Task Force  ("EITF")  98-13,  "Accounting  by an Equity  Method
Investor for Investee  Losses When the Investor has Loans to and  Investments in
Other Securities of the Investee", requires an investor using the equity method,
that has  reduced  the  value of the  investment  to  $-0-,  but also has  loans
outstanding  or other  forms of equity  such as  preferred  stock to continue to
report  its share of the  losses.  Accordingly,  during  the nine  months  ended
September 30, 2005,  the Company  recorded  losses from its investment in Coates
Motorcycle in the amount of $237,428.

The  Company  computed  its share of the  losses in  accordance  with EITF 99-10
"Percentage  Used to Determine  the Amount of Equity Method  Losses,"  where the
percent ownership was based on the assumed  conversion of the Preferred Series A
Stock held by the Company.

In addition,  in  accordance  with FASB  Statement 115  "Accounting  for Certain
Investments  in Debt and Equity  Securities"  as it relates to EITF  98-13.  The
Company  determined  that the fair value of the  Preferred  Stock was  $362,200.
Accordingly,  the Company recognized other  comprehensive  income of $237,428 to
restore  the  value  of the  Preferred  Stock  to its fair  market  value.  This
Preferred Stock is presented in the  accompanying  balance sheet as Investment -
related party.

SALE OF COMMON STOCK

In July 2004 the Company  issued  50,000 shares of its common stock at $5.00 per
share to an accredited investor for $250,000 in cash.

SETTLEMENT OF LITIGATION

In July 2004 the Company agreed to settle its claims against an accounting  firm
for $225,000. In connection  therewith,  the Company and its attorneys agreed to
evenly divide the insurance proceeds to satisfy the expenses and legal fees owed
to the attorneys pertaining to this litigation.  In addition,  its attorney also
waived  $260,363 of its legal fees.  The Company  realized  net  proceeds in the
amount of $107,500.

SUBSEQUENT EVENTS

At the  end  of  November  2005,  the  Company  entered  into  a  sale/leaseback
arrangement  of the property which houses its principal  offices,  warehouse and
manufacturing facilities. The gross sales price was $4,200,000.  After repayment
of the outstanding  balance of the mortgage loan on the property and expenses of
the transaction,  the Company realized net proceeds of approximately  $3,025,000
which the Company  intends to use for working  capital  purposes.  The new lease
agreement  with the  purchaser,  which is being  accounted  for as an  operating
lease,  provides for monthly rental payments of $32,500 over a five year period.
In addition,  the Company is responsible for all real estate taxes and operating
expenses of the property, including insurance. The lease agreement also provides
the Company  with an option to  repurchase  the  property at any time during the
first three years of the agreement for $5,200,000.

On November 18,  2005,  the Company  entered  into an  agreement  with George J.
Coates, its principal stockholder for the licensing of three technologies in all
countries in North,  Central and South America for the purpose of making,  using
and selling products  falling within the scope of the underlying  patent rights.
The technologies are for a self-adjusting bearing assembly, an improved pressure
regulated valve seal and a cooling system for rotary valve engines.  The term of
the  agreement  expires  upon  the  expiration  of the  underlying  patents.  In
consideration  of the  licensing  of  these  technologies,  the  Company  issued
1,000,000 new shares of its common stock to George J. Coates.


                                       7
<PAGE>

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
of Canada (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.


                                       8
<PAGE>

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 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 has been completed and has been
undergoing testing over the last three years. In the fourth quarter of 2005, CIL
received net proceeds of approximately $3,025,000 from the sale and leaseback of
the property  which houses its principal  offices,  warehouse and  manufacturing
facility.  Such net proceeds  are  intended to be utilized  for working  capital
purposes. In the opinion of management,  such additional working capital will be
sufficient  to enable the Company to  complete  its third  prototype  production
model  Coates  Generator  Engine.   The  remaining  tasks  include  testing  the
functionality,  design  and  components  through  what we  believe to be a final
evaluation protocol.

Agreement with McLean, England and Associates, LLC

During  the first  quarter of 2002 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 of 2002,  respectively.  The entire amount of $565,000
has been  recognized in the condensed  balance sheet at September 30, 2005, as a
current  liability,  which  will be  recognized  as income in future  periods as
earned.

On April 1, 2004, the Company amended its license agreement with McLean, England
and Associates, LLC. Pursuant to this amendment,  McLean, England and Associates
shall take delivery of the no. 1 diesel 855 engine incorporating the Coates CSRV
System from the Company  and,  at  licensee's  own  expense,  undertake  further
required modifications.

In the fourth  quarter of 2005,  CIL  received  net  proceeds  of  approximately
$3,025,000  from  the  sale and  leaseback  of the  property  which  houses  its
principal  offices,  warehouse  and  manufacturing  facility.  In the opinion of
management,  the additional  working  capital  generated  from this  transaction
should be  sufficient  to enable the Company to  finalize  the last phase of the
design,  testing of components and their  composition,  functionality as well as
any continuing  emissions/durability  testing of the McLean truck engine as well
as the third prototype model of the natural gas fueled,  Coates Generator Engine
under the WWE license agreement.


                                       9
<PAGE>

Results of Operations  for the Nine Month  Periods Ended  September 30, 2005 and
2004

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 McLean. Further payments from these sources
are not scheduled until the completion of the testing and delivery to WWE of the
third prototype,  production model Coates Generator  Engine. We have been unable
to finalize our third prototype  production model Coates Generator Engine due to
lack of funds to test the  functionality,  design and components through what we
believe to be our final  evaluation  protocol.  Due to lack of funding,  we have
been unable to finalize the last phase of the design,  testing of components and
their composition,  functionality as well as any continuing emissions/durability
testing of the McLean truck engine.  In the fourth quarter of 2005, CIL received
net  proceeds of  approximately  $3,025,000  from the sale and  leaseback of the
property  which  houses  its  principal  offices,  warehouse  and  manufacturing
facility. In the opinion of management, the additional working capital generated
from this transaction should be sufficient to enable the Company to complete the
final testing under both the WWE R&D  Agreement  and under the  agreements  with
McClean.

No revenues were  generated  during the nine month  periods ended  September 30,
2005 and  2004.  Total  operating  expenses  for the  nine  month  period  ended
September 30, 2005, were $600,360  compared to $1,000,701 for the  corresponding
nine month period in 2004.  Research and  development  expenses were $10,918 for
the  nine  months  ended  September  30,  2005  compared  to  $139,987  for  the
corresponding  nine month  period in 2004.  This  approximate  92%  decrease  in
research and  development  expenses is  attributable  to the  Company's  lack of
available funds to finalize testing for the functionality, design and components
through the final phases of the two  projects for WWE and McLean.  Approximately
$279,889 for the nine month period ended  September 30, 2005  represented  labor
charges.

General and  administrative  expenses  were  $545,504  for the nine months ended
September 30, 2005 compared to $810,026 for the corresponding  nine month period
in 2004. This $597,855, or 33% decrease was a result of the Company's efforts to
preserve its working capital by reducing such expenditures.

The  Company  had a  loss  from  operations  of  ($600,360)  and a net  loss  of
($884,629),  or $0.00 per share for the nine  months  ended  September  30, 2005
compared to a loss from operations of ($1,000,701) and a net loss of ($510,618),
or $0.00 per share for the corresponding nine month period in 2004. The net loss
for the nine month period ended  September 30, 2005 included the Company's share
of losses  based on its  equity  ownership  in Coates  Motorcycle  amounting  to
$237,428.  The net loss for the 2004 nine month  period  included  income from a
legal settlement of $485,336.

Results of Operations  for the Three Month Periods Ended  September 30, 2005 and
2004

No revenues were  generated  during the three month periods ended  September 30,
2005 and 2004.  Total  operating  expenses  for the  three  month  period  ended
September  30, 2005,  were $148,349  compared to $324,659 for the  corresponding
three month period in 2004.  Research and  development  expenses were $4,467 for
the  three  months  ended  September  30,  2005  compared  to  $43,211  for  the
corresponding  three month  period in 2004.  This  approximate  90%  decrease in
research and  development  expenses is  attributable  to the  Company's  lack of
available funds to finalize testing for the functionality, design and components
through the final phases of the two  projects for WWE and McLean.  Approximately
$101,198 for the three month period ended September 30, 2005  represented  labor
charges.


                                       10
<PAGE>

General and  administrative  expenses  were  $131,575 for the three months ended
September 30, 2005 compared to $265,522 for the corresponding three month period
in 2004. This $133,947, or 50% decrease was a result of the Company's efforts to
preserve its working capital by reducing such expenditures.

The  Company  had a  loss  from  operations  of  ($148,349)  and a net  loss  of
($202,478),  or ($0.00) per share for the three months ended  September 30, 2005
compared to a loss from operations of ($324,659) and net income of $165,136,  or
$0.00 per share for the  corresponding  three month period in 2004. The net loss
for the three month period ended September 30, 2005 included the Company's share
of  losses  based on it  equity  ownership  in Coates  Motorcycle  amounting  to
$54,059.  The net income for the 2004 three month period  included income from a
legal settlement of $485,336.

The Company received net proceeds of approximately  $3,025,000 from the sale and
leaseback of the property  which houses its  principal  offices,  warehouse  and
manufacturing  facility  in the  fourth  quarter  of  2005.  In the  opinion  of
management,  the additional  working  capital  generated  from this  transaction
should be  sufficient  to  enable  the  Company  to fund the  completion  of the
prototype  engines under the WWE and McLean  license  agreements,  and depending
upon their  successful  completion,  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

The Company had a cash position of $7,832 at September 30, 2005, an  approximate
92% decrease from the $102,365 cash position for the corresponding  quarter last
year and a decrease of approximately 93% from the $107,513 cash position at June
30, 2005.  CIL's  working  capital  deficit of  $1,669,180 at September 30, 2005
represents a $394,965,  or approximately  58% increase over the $676,949 working
capital  deficit  position at September 30, 2004.  CIL's current  liabilities of
$2,064,145 at September 30, 2005 have  increased by $635,548 over the balance at
September 30, 2004 of  $1,428,597.  In the fourth  quarter of 2005, CIL received
net  proceeds of  approximately  $3,025,000  from the sale and  leaseback of the
property  which  houses  its  principal  offices,  warehouse  and  manufacturing
facility.  Such net proceeds  are  intended to be utilized  for working  capital
purposes.

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. Upon  completion of testing and delivery of this
third  prototype  engine,  CIL expects to receive the balance of $3,800,000 from
Well to Wire Energy, Inc under the R&D Agreement.  Under this License Agreement,
the balance due CIL of $4,700,000 is payable in equal quarterly  payments over a
four year period,  commencing  180 days  following  delivery to WWE of the third
prototype.  As well,  CIL is  scheduled  to receive the license fee payments due
under the McLean  license  when the two truck  engines,  one being  completed by
McLean pursuant to the April 2004 license amendment, and the other truck engine,
which the Company is completing,  are delivered and fully tested. In the opinion
of  management,  the  additional  working  capital  generated  from the sale and
leaseback  transaction  in the fourth  quarter of 2005,  should be sufficient to
enable the Company to  finalize  the third  prototype  production  model  Coates
Generator Engine under the WWE license agreement and the truck engine, under the
McLean license agreement. The remaining tasks include testing the functionality,
design  and  components  through  what we  believe  to be the  final  evaluation
protocols for these two projects. 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 the Company's  expectations  nor that
payments will be received as called for in the agreements.


                                       11
<PAGE>

During the second  quarter of 2003, the Company  organized a subsidiary,  Coates
Motorcycle Company, Ltd. ("Coates Motorcycle"),  to research and develop a heavy
cruiser motorcycle  equipped with the Coates SRV engine. In connection with this
project,  on April 30, 2003, CIL executed and delivered an exclusive  Sublicense
Agreement to Coates Motorcycle in exchange for a 50+% equity ownership  interest
and  anti-dilution  right to  maintain  this  majority  ownership  position.  In
consideration  for its receipt of this exclusive  Sublicense  Agreement,  Coates
Motorcycle  issued  2,550,000  of its  common  shares  to  CIL  and  became  its
subsidiary.  Conjunctively,  George J. Coates,  Gregory G. Coates and the Coates
Trust granted a non-exclusive  license at the same time to Coates Motorcycle for
a minority equity interest without any anti-dilution rights.

On March 5, 2004 this  Sublicense  Agreement  was amended and the  anti-dilution
rights were terminated and the Company  received an additional  1,000,000 shares
of Coates Motorcycle.  In connection with these transactions,  Coates Motorcycle
ceased to  qualify as a  subsidiary  of the  Company.  The  Company's  ownership
interest in Coates Motorcycle was approximately 30% at September 30, 2005.


                                       12
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

      (a)   Evaluation of Disclosure Controls and Procedures.

            Within the 90 days prior to the filing date of this Quarterly Report
on Form 10-QSB, our Chief Executive Officer and our Principal  Financial Officer
evaluated the effectiveness of our disclosure controls and procedures as defined
in Rule  13a-14(c)  under the  Securities  Exchange Act of 1934, as amended (the
"Exchange Act"). Based upon that evaluation, the Chief Executive Officer and the
Principal Financial Officer, have concluded that our current disclosure controls
and procedures are adequate and effective to ensure that information required to
be  disclosed  in the  reports  we file  under  the  Exchange  Act is  recorded,
processed, summarized and reported on a timely basis.

      (b)   Changes in Internal Controls.

            There have been no significant  changes in our internal  controls or
in other factors that could significantly affect internal controls subsequent to
the date of their  evaluation by the Chief  Executive  Officer and the Principal
Financial Officer.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company,  its officers and directors and other related and unrelated parties
have been named as defendants in a lawsuit  brought in the Superior Court of New
Jersey, Law Division,  Ocean County, by a local New Jersey attorney, as a pro se
plaintiff and captioned H. Alton Neff v. George  Coates,  Coates  International,
Ltd. et al, based upon that  plaintiff's  contention  that he is the assignee of
1107 N.W.  Central Avenue,  Inc. 1107 and the Company entered into a Preliminary
Agreement  in relation to the  potential  grant,  by the Company of a license to
1107. The Preliminary Agreement provided that the $500,000 deposit of 1107 would
convert  to the  stock of the  Company  if 1107  did not  make the next  payment
required  by the  Preliminary  Agreement.  1107 did not  make the next  payment;
therefore,  the deposit converted into shares of the Company's restricted common
stock.  Company  management  deems this  lawsuit  without  merit and  intends to
vigorously  defend  this  action and to seek from the  plaintiff  payment of its
legal fees and costs.

Item 2. CHANGES IN SECURITIES

      None

c)    sales of  unregistered  securities  during the quarter ended September 30,
      2005:

      None

Item 3. DEFAULTS ON SENIOR SECURITIES

      None

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

      NONE

                                       13
<PAGE>

Item 5. OTHER INFORMATION

      None

Item 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

      31.1 and 31.2  Certification of the Chief Executive  Officer and Principal
Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

      32.1 and 32.2  Certification  of Chief  Executive  Officer  and  Principal
Financial Officer pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002, 18
U.S.C. Section 1350.

(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  September 30,
2005 to be signed on its behalf by the undersigned, thereunto duly authorized.


Date: January 27, 2006                     COATES INTERNATIONAL, LTD.

By: /s/George J. Coates
    ------------------------------
       George J. Coates, President
       Chief Executive Officer and
       Principal Financial Officer


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