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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C 20549



FORM 10-KSB/A3



[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000

OR

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___________to______________

COMMISSION FILE NUMBER 33-94884

COATES INTERNATIONAL, LTD.

__________________________________________________________________

(Exact name of small business issuer as specified in its charter)

DELAWARE                                                       22-2925432

_________________                    ___________________________________________

`(State or other jurisdiction of  incorporation       (IRS Employer incorporation or organization) identification No.)`

or organization

Highway 34 & Ridgewood Road, Wall Township, New Jersey 07719

______________________________        ___________________________

(Address of principal executive offices)                                                         (Zip code)

Issuer's telephone number, including area code (732)  449-7717

Securities registered pursuant to Section 12(b) of the Act:  NONE

Title of Class:  NONE

Securities registered pursuant to Section 12(g) of the Act:  NONE

Title of Class:  NONE

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-ISB or any amendment to this Form 10-KSB. [  ]

Issuer's  revenues for the year ended December 31, 2000 were $845,000.

During the fiscal year ended December 31, 2000, there was no established public trading market for the issuer's Series A Preferred or Common Stock. On December 31, 2000, there were 66,097,910 shares of Common Stock issued and outstanding.



PART I.   COATES INTERNATIONAL LTD.

ITEM 1. DESCRIPTION OF BUSINESS

Background



Coates International Ltd. ("CIL") has completed the basic development of a spherical rotary valve system (the "Coates System") for use in piston driven internal combustion engines of all types. Development of the Coates System was initiated by CIL's founder, George J. Coates, in Ireland in the late 1970's. In 1982, Mr. Coates obtained a patent from the Republic of Ireland for the Mark I version of the Coates spherical rotary valve system for use in piston driven engines. In 1986, George J. Coates emigrated to the United States where he commenced development of the Mark II version and subsequently, the Mark III version of his spherical rotary valve system. Mr. Coates has also been issued a number of U.S. andforeign patents with respect to various aspects of the Coates System and has patent applications pending in several foreign jurisdictions. See "Patents and Licenses".

CIL holds an exclusive license from George J. Coates and his son Gregory Coates, to manufacture, sell and grant sublicenses with respect to products based on the Coates Patent, within all of the countries, their territories and possessions, comprising North America, Central America and South America (the "Licensed Areas"). George J. Coates and Gregory Coates have also agreed, as long as CIL remains independent and viable, not to compete with CIL in the manufacture, assembly, use or sale of internal combustion engines utilizing the technology falling within the scope of the Coates Patents in the Licensed Area, or to grant any exclusive or non-exclusive license in the Licensed Areas except through CIL. In addition, George J. Coates and Gregory Coates have executed an agreement granting CIL the right to retain any monies including royalties received from Nicholson Mclaren or from Noble Motor Sport, manufacturer of Ascari racing cars, for manufacture, sale, use or assembly of internal combustion engines anywhere in the world using the technology falling within the scope of the Coates Patents. "See Patents and Licenses".

CIL has concentrated its efforts since the inception of its predecessor entity in August 1988 to the present date in the research and development of the Coates spherical rotary valve combustion engine technology and has realized insignificant revenues throughout this period. In 1996 CIL realized $73,375 US dollars in revenues paid by Nicholson McLaren in partial payment for 2 high performance racing car engines utilizing the Coates system, which was shipped to Nicholson McLaren by CIL in April 1996. CIL executed a license agreement and a sales representative agreement with Nicholson McLaren. See "Patents and Licensing".

Since its inception, the bulk of the development costs and related operational costs of CIL have been funded primarily through cash generated from the sale of stock, through capital contributions and loans made by Gregory Coates and from several entities for prototype models and licensing fees. As a development stage company, CIL has incurred losses from the inception of the predecessor entity in August 1988 through December 31, 2000 of $11,012,166 and at December 31, 2000, had a net worth of $228,726 and a negative working capital of ($258,221).







NOTE REGARDING FORWARD-LOOKING STATEMENTS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Annual Report contains historical information as well as forward-looking statements. Statements looking forward in time are included in this Annual Report pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks and uncertainties that may cause CIL's actual results in future periods to be materially different from any future performance suggested herein. CIL wishes to caution readers that in addition to the important factors described elsewhere in this Form 10-KSB, the following forward looking statements, among others, sometimes have affected, and in the future could affect, CIL's actual results and could cause CIL's acutal consolidated results during 2000, and beyond, to differ materially from those expressed in any forward-looking statements made by or on behalf of CIL.

Forward-looking statements include, but are not limited to, statements under the following headings; (i) "Business Plan," about inquires from potential customers and the Companys attempts to convert these inquiries into sales orders; (ii) "Business Plan," >about the intention of the Company to fund its business plan by borrowings, sale of financial instruments and sale of sub- licenses; (iii) "Results of Operations," about the Company's plans to place on hold its potential transactions concentrating its efforts in the transaction with Well to Wire Energy, a Canadian company; (iv) "Liquid and Capital Resources," about the company's plan to raise additional capital; (v) "Liquid and Capital Resources," about the contingent nature of the consumation of any agreements with Well to Wire Energy.

BUSINESS PLAN

CIL's ability to generate revenues and achieve profitable operations is principally dependent upon the execution and funding of sub-license agreements with engine manufacturers or retrofitters, and upon the manufacture and sale, by CIL, of combustion engines modified with the Coates System high performance automotive, motorcycle, marine racing engines, and other types of combustion engines. CIL is actively attempting to market its technology and is in communication with various persons and entities that may be interested in acquiring sub- licenses to use the technology.

License Agreement - Well to Wire Energy, Inc.

On September 29, 1999, CIL signed a license agreement with Well to Wire Energy, Inc., an oil and gas company in Canada, to license the production 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")..  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.(sometimes referred to as "WWE") that a larger engine modified with the Coates System would be more appropriate. CIL and WWE subsequently agreed that a new and larger prototype engine would be more efficient than the originally conceived 351 cubic inch engine. 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") under the License Agreement. Under the terms of the License Agreement, CIL is entitled to receive a licensing fee in the amount of $5,000,000 and royalties in amounts equal to 5% of the gross profits (defined as sales less cost of sales, plus $400,000) which WWE derives from all sources which use the Coates Generator Engine in Canada.  The term of the License Agreement continues until the expiration of the last to expire patent of the "Patent Rights", including  any "Improvement Patents" added later.  "Patent Rights" under the License Agreement consist of 7 principal patents issued during the period from July 31, 1990 through November 8, 1994 and cover the main design and function of the Coates spherical rotary valve and its assembly, with each such patent extending for 17 years from its patent application date; "Improvement Patents" currently consist of 3 additional patents issued in February, 1997 (covering valve apparatus for steam turbines), in September, 2001 (covering the exhaust system), with the most recent "Improvement Patent" being issued in October, 2001 (covering the cooling system).  This most recently issued Improvement Patent, covering the cooling system for the Coates spherical rotary valve technology, which was issued on October 30, 2001, is  valid for 20 years from its application date, extending through  September 30, 2020.  Accordingly and unless extended by future "Improvement Patents", the current expiration date of the License Agreement with WWE is September 30, 2020.



R&D Agreement - Well to Wire Energy, Inc.

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 (this research and development agreement between CIL and WWE is referred to as the "R&D Agreement").  On July 21, 2000, CIL and WWE memorialized the R&D Agreement in the form of a signed invoice, a copy of which is annexed hereto as Exhibit 10.8.  The July 21, 2000 invoice served as the new R&D Agreement and as an amendment to the License Agreement by substituting the Coates Generator Engine for the earlier engine specifications.

During1999, Well to Wire Energy, Inc. made two payments, aggregating  $300,000 as deposits under the License Agreement and a payment of $250,000 applied against the $5,000,000 fee dueunder the R&D Agreement.



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, including the $250,000 payment made to CIL in 1999, Well to Wire Energy, Inc. has made aggregate payments of $1,200,000 to CIL for these prototypes under  the R&D Agreement, $250,000 of which was paid in calendar 1999;   $845,000 of which was paid in fiscal year 2000, and; $105,000 was paid in fiscal year 2001.

The $5,000,000 research and development fee due CIL under the R&D Agreement was negotiated as the fee CIL required in order to research and develop the three prototype Coates Generator Engines for WWE. This negotiated fee was not based upon any reimbursement formula tied to  CIL's costs or expenses incurred during the research and development project  but represents CIL's negotiated price for the project, without adjustments of any kind. Following their negotiation of the R&D Agreement, CIL and WWE have , from time to time, separately negotiated the timing and amounts of the aggregate $1,200,000 WWE payments made to CIL against the $5,000,000 fee over the last several years. These prior WWE payments have been made without reference to a specific payment schedule, all as negotiated from time to time between CIL and WWE.  Accordingly, CIL has recognized and will continue to recognize these WWE payments against the $5,000,000 fee due under the R&D Agreement as revenue when received

CIL has completed the construction of the first  prototype, Coates Generator Engine which was delivered to WWE in December, 2000. Construction of the second prototype is under way and completion of this second prototype is anticipated during the second quarter of 2001. The third prototype, representing the production version of the Coates Generator Engine, is expected to be completed before the end of fiscal year 2001.



Following the testing and delivery of the third prototype, production model, Coates Generator Engine, CIL expects to receive the balance of its license  payment due in the amount of $4,700,000, payable in 16 quarterly payments beginning 180 days after delivery, and the balance due under the R&D Agreementof  $3,800,000 from Well to Wire Energy,  Inc.

It is the intention of management to fund its business operations through, initially, the consummation of the Well to Wire Energy, Inc. License Agreement and R&D Agreement and, thereafter, through private and/or public financings and sales of sub-licenses.



THE COATES SRV ENGINE

The Coates SRV Engine differs from the conventional poppet valve currently used in almost all piston driven automotive, motorcycle and marine engines by changing the method which the air and fuel mixture is delivered to the engine cylinder as well as the method of expelling the exhaust gases after the mixture is ignited. Unlike the poppet valve which protrudes into the engine cylinder, the Coates SRV Engine utilizes spherical valves which do not protrude into the cylinder head but rotate in a cavity formed between a two piece cylinder head. As a result of employing fewer moving parts as compared to the poppet valve and not protruding into the engine cylinder, management believes that the Coates SRV Engine will promote less engine wear and will require less lubrication over the life of the engine. In addition, because the Coates SRV Engine does not employ parts which protrude into the engine cylinder, it is designed with larger openings into the cylinder than the conventional poppet valves so that more fuel and air mixture can be inducted into and expelled from the engine cylinder in a shorter period of time using the Coates SRV Engine, leading to an eligibility to operate the engine faster and an ability to utilize higher compression ratios with lower compression chamber temperatures. Management believes that as a result, engines modified with the Coates SRV Engine will produce more power than similar engines utilizing the poppet valve system. However, there can be no assurance that the Coates SRV Engines will find general acceptance in the marketplace.

The combustion engine has been in use for approximately 100 years and is the most widely used powerpack in the world. There are more than 120 million new combustion engines built in the world every year, and 40 million engines are rebuilt annually. Management of CIL believes that the Coates Engine will be the engine of the future. In the late 1960's and 1970's, most vehicle combustion engines in the USA were running at a compression ratio of 12 to 1 which resulted in an engine efficiency of approximately 55 percent. The rest of the engine's power was lost in friction, pumping and heat loss. When it was found that lead additives in fuel had an adverse effect on the environment, it was removed from the fuel. This caused the poppet valve engines to overheat, raising the temperature in excess of 2500 degrees farenheit and damaging the poppet valves. The answer to this problem was to lower the compression ratios of all engines to 10 to 1 or lower, thus reducing efficiency of the combustion engine to approximately 24 percent. This means less miles per gallon (MPG), lower brake horse power (BHP) and lower torque. The air traveling through the inlet venturi of a combustion engine inlet travels at a speed of up to 450 ft per second. In normally aspirated engines this works, but in poppet valve engines, the BHP and torque decreased as the air traveling in does not increase in speed unless a turbo or supercharger is incorporated. At higher RPM's the poppet valve tends to float or bounce and is unable to service the cylinder and chamber to capacity with air and fuel mixture. This is the reason for adding two extra valves to modern engines including turbos or superchargers. The large overlap is another common defect in poppet valve engines, causing unburned fuel to escape through the exhaust SRV Engine which leads to a loss of power, lower MPG and production of pollution.

The poppet valves' stems are lubricated with engine oil which is burnt off after a short period of running. The stem of the inlet valve system is also lubricated with engine oil, which is washed off and inducted into the combustion chamber with air and fuel mixture. This slows combustion and produces further emissions and eventually clogs the catalytic converter.

Variable valve timing has advantages at lower RPM's as it can shorten the overlap duration of the valves, but the extra moving parts eventually wear. On quick deceleration, it can cause piston and valve contact where serious damage can occur. Poppet valves, if not activated with hydraulic systems, must have clearances readjusted periodically. The poppet valve of the original engine has been used and modified continuously until the present, However, it is the most troublesome part of a combustion engine and has lower efficiency at higher RPM's.

Because the valves rotate away from the combustion chamber and are vented and charged on the opposite side of each sphere, a lower combustion chamber temperature is created, allowing higher compression ratios to be used thus creating an extremely efficient engine. Some of the Coates Spherical Rotary Combustion Engines run at 12 to 1, 13 to 1, 14 to 1, and 15 to 1 compression ratios depending on the application.









PATENTS AND LICENSES

In 1982, George J. Coates obtained a patent from the Republic of Ireland for the Mark I version of the Coates spherical rotary valve SRV Engine for use in piston driven internal combustion engines. In 1986, George J. Coates emigrated to the United States where he commenced development of the Mark II version and subsequently the Mark III version of his spherical rotary valve SRV Engine. Between 1990 and 1994, George J. Coates was issued seven United States patents (the Coates Patents) with respect to various aspects of the Coates SRV Engines including the Mark II and Mark III version. The Coates Patents are as follows:

Date 				    Date

Us Patent No.			Application Filed			Of Patent

4,989,579(Mark I) 		July 26,1982 				February 5,1991 4,953,527Mark II) 		November 14,1998 			September 4,1990

4,989,558 			September 14,1998			February 5, 1991 4,944,261(Mark IIB) 		October 16,1989 			July 31,1990

4,976,232 			December 6,1989 			December 11,1990

5,109,814 			May 10,1991 				May 5,1992

5,361,739(Mark III) 		May 12,1993 				November 8,1994

In addition to the foregoing issued patents, Mr. George Coates has filed U.S. patent applications to obtain protection for further inventions covering (i) the "cooling system" for the spherical rotary valve engine (Serial #:  09/657,788) and (ii) the method and apparatus for "joining pressurized exhaust manifold sections" (Serial #: 09/649,926).

The Mark I, Mark II, Mark IIB, and Mark III patents were also the subject of foreign filings by Mr. Coates who has been issued foreign patents with respect to some of these filings by Austria, Belgium, Denmark, France, Germany, Great Britain, Greece, Italy, Luxembourg, The Netherlands, Spain, Sweden and Switzerland as well as by Australia, Brazil, Canada, Hong King, Japan, Korea, Mexico, Singapore, South Africa, Taiwan, Turkey, Ukraine and Venezuela. Mr. Coates continues to have patent applications pending in some of these as well as other foreign countries.

In February 1995, George J. Coates and his son Gregory Coates each granted CIL a non-exclusive license to manufacture, sell and grant sub-licenses with respect to products based on the Coates Patents within the United States, its territories and possessions in return for a payment of $5,500,000. September 21, 1995, George J. Coates and Gregory Coates amended the existing license agreement and previous amendments thereto, providing for the substitution of the $5.5 million cash payment for the issuance of 275,000 shares Series A stock as the license fee.  At the time, it was determined by the parties that the 275, represented a more accurate valuation of the Coates non-exclusive license transferred than the $5.5 million cash payment.The licenses expire in the event of bankruptcy or similar insolvency of CIL and, in which event, the patents would automatically revert to Mr. Coates and his son. George J. Coates and Gregory Coates have also agreed, as long as CIL remains independent and viable, not to compete with CIL in the manufacture, assembly, use or sale of internal combustion engines utilizing the technology falling within the scope of the Coates Patents in the Licensed Areas, or to grant any other exclusive or non-exclusive license in the Licensed Areas except through CIL. The 275,000 shares of Series A stock were issued to George Coates in 1995. On December 22, 1997, George Coates, Gregory Coates and CIL entered into a new License Agreement, superceding and substitutingthe prior agreement and amendments thereto. This new License Agreement granted CIL an "exclusive" license to manufacture, sell and grant sub-licenses for products covered under the Coates Patents, expanding the territories covered from the original territory of the United States and its territories, identified in the earlier license agreement, to  "all of the countries, their territories and possessions comprising North America, Central America and South America". In consideration of this new license agreement, granting CIL exclusive rights in the expanded license territories, CIL agreed to issue to George Coates an additional 500,000 shares of Series A stock, valued at par, or $500, which were issued in 1997.

In addition, George J. Coates and Gregory Coates have executed an agreement granting CIL the right to retain any monies including royalties received from Nicholson McLaren or from Noble Motor Sport (manufacturer of Ascari racing cars) for manufacture, sale, use or assembly of internal combustion engines anywhere in the world using the technology falling within the scope of the Coates Patents.   In 1996, George J. Coates and Gregory Coates entered into a license agreement with Nicholson McLaren, headquartered in England.  As part of its obligations under this agreement, CIL researched, developed and delivered two high performance, Coates SRV 351 Dyno racing car engines utilizing the Coates spherical rotary valve assembly and was paid an aggregate of 50,000 British pounds.  Although CIL has concentrated its efforts in completing the research and development of its three prototype Coates Generator Engines pursuant to its agreements with Well to Wire Energy, Inc. during the past several years, CIL intends to continue its development efforts with Nicholson McLaren during fiscal year 2002.

EMPLOYEES

At December 31, 2000, CIL employed six (6) employees, including George J. Coates and his son Gregory Coates who perform both management, assembly and research and development functions, and; Bernadette Coates, the spouse of George J. Coates, is employed as administrative manager for the Company.  The financial controller and bookkeeper for the Company is Ms. Shirley Naidel.



ITEM 2. DESCRIPTION OF PROPERTY

CIL's executive offices and testing facility are located in an approximately 25,000 square foot one and one-half story building of concrete and steel construction in a 6 acre site in Wall Township, New Jersey. CIL acquired this property from the George J. Coates 1991 Family Partnership, L.P in 1995. On March 22, 1999, CIL refinanced its property and gave a first mortgage in the amount of $900,000 to Eastern Savings Bank, FSB of New York. The first mortgage requires monthly payments of $12,521 accrued interest at the rate of 15.99 percent, per annum, and its outstanding principal balance and accrued interest become due and payable in March, 2004.

In its development operations, CIL owns and utilizes milling machines, lathes, grinders, hydraulic lifts and presses, tooling, dynamometers and emission testing machines and computerized drafting and printing equipment. All of such equipment is in good condition, reasonable wear and tear excepted.





ITEM 3. LEGAL PROCEEDINGS

There are no material legal proceedings against the Company.



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

CIL did not submit any matter to a vote of its stockholders during the calendar year 2000.

PART II

ITEM 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

There is no established public trading market for CIL's only outstanding class of capital stock, its Common Stock. At December 31, 2000 the approximate number of holders of record of the Common Stock was 804. CIL has not paid any dividends with respect to its Common Stock and anticipated capital requirements make it highly unlikely that any dividends will be paid by CIL in the year 2001 or in the forseeable future.

Recent Sales of Unregistered Securities

During the past three fiscal year periods and through the nine months ended September 30, 2001, the Company privately sold the following unregistered securities in private placements:

Fiscal Year 1999.

During fiscal year 1999, the Company placed an aggregate 14,250 Series A shares to 11 accredited investors in private placements and received a total of $285,000 in subscription proceeds, for the purchase price of $20 per share.  All of these private placements were 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 and 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.

Fiscal Year 2000.

During fiscal year 2000, the Company placed an aggregate 6,800 Series A shares to 4 accredited investors in private placements and received subscription proceeds of $ 150,000, for the purchase price of $20 and $25 per share.  All of these private placements were made in reliance upon the exemption from the registration requirements of the 1933Act 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.



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS



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").  George J. Coates and Gregory Coates have also agreed, as long as CIL remains independent and viable, not to compete with CIL in the manufacture, assembly, use or sale of internal combustion engines utilizing the technology falling within the scope of the Coates Patents in the Licensed Areas, or to grant any other exclusive or non-exclusive license in the Licensed Areas, except through CIL. In addition, George J. Coates and Gregory Coates have executed an agreement granting CIL the right to retain any monies including royalties received from Nicholson McLaren or from Noble Motor Sport (manufacturer of Ascari racing cars) for the manufacture, sale, use or assembly of internal combustion engines anywhere in the world using the technology falling within the scope of Coates Patents.

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. 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.

Results of Operations for the Year Ended December 31, 2000

CIL recognized revenue of $845,000 for the fiscal year ended December 31, 2000, which represents a 240% increase over 1999 revenue of $250,000.  All of this revenue was generated under the R&D Agreement with Well to Wire Energy, Inc. ("WWE") and represents payments made for CIL's research and development of the Coates Generator Engine. These payments were made and have been applied against the $5,000,000 fee due CIL from WWE for the research and development of three prototype Coates Generator Engines. See "Description of Business R&D Agreement-Well to Wire Energy, Inc.".



Operating expenses increased for fiscal year 2000 to $842,337 from $749,972, incurred during fiscal year 1999, due to the approximate 52%increase in general and administrative expenses due principally to increased patent maintenance costs of approximately $27,000 and additional purchases of shop supplies in the approximate amount of $62,000, expended in connection with the construction of the prototype engines for the Well to Wire Energy, Inc. project.







Miscellaneous income of $15,000 generated during fiscal year 2000 represented a nonrecurring, nonrefundable, forfeited real estate deposit made by a third party to the Company on a contract for the sale of the building forming part of the Company's business premises.  Interest expense paid during fiscal year 2000 was $149,548 as compared to $133,471 for the fiscal year ended December 31,1999.  $2,453 of the fiscal year 2000 amount represented interest payments made against a short-term equipment loan with the balance, $147,095, representing payments of interest made by CIL pursuant to the mortgage encumbering the Company's business premises located in Wall, New Jersey.  The $133,471 amount of interest expense paid during fiscal year 1999 entirely represented mortgage interest payments made by CIL on this mortgage.



The outstanding principal balance of the mortgage encumbering the Company's business premises in Wall, New Jersey, was $892,507at December 31, 2000.  Interest accrues on the mortgage principal balance at the per annum rate of 15.99%.  The mortgage debt payments, amortized over a 20-year period, are paid in equal monthly installments of principal and interest in the amount of $12,521, with the outstanding principal balance and accrued interest due on April 1, 2004, as a balloon payment. Company management expects to either refinance this loan or retire the debt completely prior to its due date.  In the event the Company is unable to refinance this mortgage or retire the debt prior to its due date, such failure would have a material adverse effect upon CIL's operations and financial condition.



The 2000 non-operating loss of $131,434 essentially replicated the fiscal year 1999 loss of $131,909, both of which were primarily attributable to interest expenses. During fiscal year 1999, CIL realized and recorded the entire extraordinary gain of $609,902 from the sale of net loss carry-forward tax credits pursuant to the New Jersey Emerging Technology and Biotechnology Financial Assistance Act as an income tax benefit.  Subsequent cash receipts from the sale, during 2000, fell short by the amount of $15,945, which deficiency was recorded during that year as a tax provision.The year concluded with a net loss of $144,716  as compared to the net loss of $21,979 for the previous year.



Liquidity and Capital Resources

Since its inception, all of the development costs and operating expenses of CIL have primarily been financed through the cash generated through the sale of stock, through capital contributions made by George J. Coates' son, Gregory Coates, and through several payments for prototype and license fees made by two entities Millwest Corporation and Well to Wire Energy, Inc. (sometimes referred to as "WWE"). During fiscal year 1999, the Company raised operating capital through the placement of an aggregate 14,250 Series A shares to 11 accredited investors in private placements and received a total of $285,000 in subscription proceeds, for the purchase price of $20 per share. All of these private placements were made in reliance upon the exemptions 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 addition, CIL received WWE payments of $300,000, as deposits under the License Agreement, and a payment of $250,000, representing a payment against the $5,000,000 fee due under the R&D Agreement.

During fiscal year 2000, the Company placed an additional aggregate 6,800 Series A shares with 4 accredited investors in private placements, receiving subscription proceeds of

$150,000, for the purchase price of $20 and $25 per share.  All of these private placements were made in reliance upon the exemptions from the registration requirements of the 1933Act provided by Regulation D and Section 4(2) of the 1933 Act. Supplementing this capital were WWE payments in the aggregate amount of $845,000 made during this fiscal year pursuant to its R&D Agreement with CIL.

The outstanding principal balance of the mortgage encumbering the Company's business premises in Wall, New Jersey, was $892,507 at December 31, 2000.  Interest accrues on the mortgage principal balance at the per annum rate of 15.99%.  The mortgage debt payments, amortized over a 20-year period, are paid in equal monthly installments of principal and interest in the amount of $12,521, with the outstanding principal balance and accrued interest due on April 1, 2004, as a balloon payment. Company management  expects to either refinance this loan  or retire the debt completely out of revenues prior to its due date. In the event the Company is unable to refinance this mortgage or retire the debt prior to its due date, such failure would have a material adverse effect upon CIL's operations and financial condition.



The Company has completed the construction of the first two prototype engines incorporating the Coates SRV technology (the "Coates Generator Engine") in connection with the Company's R&D Agreement and License Agreement with Well to Wire Energy, Inc.  Following the testing and delivery of the production model prototype, Coates Generator Engine, CIL expects to receive the balance of  $3,905,000 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 of the third prototype Coates Generator Engine to WWE. Delivery is expected to occur during the first quarter of 2002.

At December 31, 2000, current liabilities exceeded current assets by $258,221. The majority of the $922,831 of current liabilities are represented by an accrual composed of a legal fee due one law firm for its representation of CIL in litigation over the past several years. The law firm has, in prior periods, accepted limited payments from CIL and is expected to continue to do so for the foreseeable future.



Until receipt of the WWE payments, management plans to finance its on-going operations through a combination of private and public offerings of its securities. If necessary, George J. Coates will continue to advance funds to CIL in order for it to meet its operational cash requirements.  In the event CIL is not successful in raising capital through targeted private or public offerings of its securities, and it has not generated sufficient revenues to fund its operations, such events would have a material adverse effect on CIL's financial condition and plan of operations.



ITEM 7.  FINANCIAL STATEMENTS

The Company's Financial Statements and Notes to Financial Statements are attached hereto as Exhibit A and incorporated herein by reference.



ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in or disagreements with the Registrant's independent auditors during the last two years.

ITEM 9  DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL

PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

At December 31, 2000 the executive officers and directors of CIL were as follows:

Name				Position			Term(s) of Office

-----------------------		------------------------			-----------------------

George J. Coates  age    60 	President, Treasurer, Chief Executive

Officer, Chief Financial Officer and

Director 				From Inception to

present

Richard W. Evans age   69 	Secretary and Director 		May, 1996 until present

Michael J. Suchar age   47 	Director				May, 1996 until present

George J. Coates has been employed by CIL since its inception as president and chief executive officer. Mr. Coates is an Irish citizen but has been granted resident alien status in the United States. He served two apprenticeships in Europe while attending the College of Technology, and as an Associate member of the S.A.E. He received The City and Guilds of London for electrical and mechanical engineering. He is a former management director of SCR motor engineers of Europe and holds the certificates of Ministry of Transport in the United Kingdom. He worked as an engineer for Rolls Royce and Mercedes Benz, and holds approximately 300 patents worldwide. He invented coolant disc brakes, invented a hydraulic suspension, invented and patented the Coates SRV Engine, and invented and patented a turbine engine.







Seven and one-half years ago, the SEC commenced proceedings against Mr. Coates and CIL in the United States District Court, Southern District of New York, which has been settled. The SEC brought a civil action against CIL,  Mr. George Coates and related parties for alleged breaches of federal securities laws in connection with certain private placements that occurred in the early 1990's.  Initially, the Court froze the assets of CIL and George J. Coates, appointing a special master to manage CIL's  business affairs.  Thereafter, CIL and George J. Coates negotiated a settlement with the SEC and a consent judgment was signed by CIL and Mr. Coates.  The principal settlement provisions of this final consent judgment required:  Mr. Coates to transfer ownership of CIL's Wall Township business premises to CIL; permitted Mr. Coates to retain title to the Coates Patents as long as he reimbursed the Company for the costs associated therewith, and;  CIL's commitment to undertake a registered rescission offer to certain  private placement investors.  George J. Coates agreed to use up to approximately $800,000  of his own funds first to buy back CIL stock from those investors who chose rescission, with any required further rescission funds necessary to complete the rescission offer to be paid by CIL.  The rescission offer was completed in 1997 with only 32 of the 328 private placement investors electing to rescind their investment. The 32 rescinding investors received $1,270,000 of rescission funds out of approximately $6,500,000 invested by these investors.  Following the rescission, the Court dismissed the special master and the Company continued under the control of Mr. Coates.  The Court is expected to conclude the proceedings during fiscal year 2001.

Richard W. Evans became a director of CIL in May 1996, Dr. Evans, who holds an ED.D degree from Rutgers University, was a Supervisor a Highland Park School in Highland Park, New Jersey, a post held for more than the preceding five years until his retirement in June 1996. Dr. Evans will not devote a substantial portion of his working time to the business of CIL.

Michael J. Suchar became a director of CIL in May 1996. Dr. Suchar, who holds a Doctor of Dental Surgery degree from the Temple University Dental School, has been a practicing pediatric dentist for more than the preceding five years. Dr. Suchar will not devote a substantial portion of his working time to the business of CIL.

Compliance with Section 16(a) of the Exchange Act

CIL's only class of outstanding capital stock, its Common Stock, is not registered pursuant to Section 12 of the Exchange Act so that fillings of Forms 3,4, and 5 in compliance with such Section are not required.

ITEM 10.  EXECUTIVE COMPENSATION

None of CIL's executive officers has an employment contract with CIL. With respect to each of calendar years 1998, 1999, and 2000, no executive officer had compensation paid or accrued in excess of $100,000 for any such year except for George J. Coates, CIL's Chief Executive Officer, while compensation was as follows:













SUMMARY COMPENSATION TABLE

Annual Compensation Year ended Name December 31 Salary

Name			Position		Year			   Salary

-------			---------			-----			-------------

George J. Coates	President, Chief Executive

Officer and Chief Financial

Officer				2000			$183,548

1999			$183,548

1998 			$186,947

CIL had agreed to pay a $5,500,000 license fee to George J. Coates in consideration for his grant to CIL of a non-exclusive license. See, Item 1, Business, "Patents and Licenses". The fee was payable at management's discretion but in no event later than February 17, 1998. In September, 1995,  this arrangement was modified. CIL and George J. Coates agreed that instead of the $5,500,000 payment, CIL would issue 275,000 shares of Series A Preferred to Mr. Coates as the license fee. On December 22, 1997, George Coates, Gregory Coates and CIL entered into a new License Agreement, superceding the prior agreement and amendments thereto. This new License Agreement granted CIL an "exclusive" license to manufacture, sell and grant sublicenses for products covered under the Coates Patents, expanding the territories covered from the original territory of the United States and its territories to "all of the countries, their territories and possessions comprising North America, Central America and South America". In consideration of this exclusive and expanded license, CIL agreed to issue to George Coates 500,000 shares of Series A stock which were issued in 1997. The shares were issued to Mr. Coates in November 1998. To date, no employee stock options have been granted by CIL.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT

The following table sets forth as of December 31, 2000 the ownership of CIL Common Stock by (i) each person known by CIL to be beneficial owner of more than 5 percent of the outstanding Common Stock, (ii) each director and executive officer of CIL who owned shares, and (iii) all directors and executive officers as a group.

Title			Name and Address of		Amount and Nature of	Percent

of Class		Beneficial Owner		Beneficial Ownership (1)	of Class

----------		--------------------------		-------------------------------	-----------

Common Stock	George J. Coates* 		51,889,240 shares		 78.50%

Gregory Coates* 		  3,530,630 shares 		   5.3 %

Richard W. Evans* 		     165,000 shares		 .0025 %

Michael J. Suchar* 		       50,000 shares		  .001 %

All directors and

executive officers

as a Group (3 persons)	 55,634,870 shares	    	    84.15%

*c/o CIL, Highway 34 & Ridgewood Road, Wall Township, New Jersey 07719

(1)  Includes 489,240 shares owned by Mr. Coates- spouse, Bernadette  Coates, beneficial ownership of which is disclaimed by George J. Coates.

ITEM 12  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CIL paid $222,549 and $211,589, respectively, during fiscal years 1999 and 2000 to Coates Precision Engineering, Inc., a company owned by George J. Coates, for  services rendered  to CIL in connection with CIL's  research and development of the Coates Generator Engine. During fiscal year  2001, George J. Coates made loans to CIL at various times to assist in financing  CIL's operations, which aggregate outstanding amount at September 30, 2001

was $80,900. These borrowings are in the form of demand loans which carry no nterest and are repaid from time to time depending upon CIL'\'s available cash. It is the intention of Mr. Goerge J. Coates to assist the Company with its cash requirements in the form of loans as needed in the future  even though Mr. Coates is not legally obligated to do so.

`ITEM 13   EXHIBITS AND REPORTS ON FORM 8-K`

F-1	Independent auditors report and financial statements for the fiscal years ended December 31, 2000 and 1999.

The following Exhibits are hereby incorporated by reference into this Form 10-KSB for the fiscal

year ended December 31, 2000, from (1) the Company's Registration Statement filed on Form S-1

with the   Securities and Exchange Commission on November 1, 1995, File No. 33-94884 (2) and the

Company's Form 10-SB Registration Statement and Amendment No. 1 thereto previously filed

with the Commission.

(a) Exhibits

3.1 		CIL's Restated Certificate of Incorporation

3.1(i)	Certificate of Amendment to Certificate of Incorporation filed with the Secretary of State, State of Delaware on May 22, 2000.

3.1(ii)	Certificate of Amendment to Certificate of Incorporation filed with the Secretary of State, State of Delaware on August 31, 2001.

3.2		CIL's By-Laws

4.1 		Form of Certificate for CIL's Series A Non-Cumulative Convertible Preferred Stock

10.1 	Deed dated February 21, 1995 transferring title to CIL's Principal Facility at Route 34

10.2	Assumption and Indemnification Agreement dated February 21, 1995 between the partnership and CIL.

10.3 	License Agreement dated December 22, 1997 between George J. Coates and CIL. George J. Coates and CIL and First and Second Amendments thereto dated July 17, 1995.

10.4 	Third Amendment dated September 21, 1995 to License Agreement dated February 17, 1995 between George J. Coates and CIL.

10.5 	License Agreement dated February 22, 1993 between Gregory Coates and CIL and First Amendment thereto dated July 17, 1995.

10.6	License Agreement, Dated September 29, 1999, with Well to Wire Energy, Inc.

10.7	Amendment No. 1 to License Agreement, Dated April 6, 2000.

10.8	Amendment No. 2 to License Agreement, Dated July 21, 2000.

10.9	License Agreement, dated April 19, 1996, by and between the Company and Nicholson McLaren Engines, Ltd.

(b)	No reports on Form 8-K were filed during the last quarter of the fiscal year ended December 31, 2000.





SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Amendment No.3 to its Form 10-KSB for the fiscal year ended December 31, 2000 to be signed on its behalf by the undersigned, thereunto duly authorized.

DATE:February 22, 2002				 COATES INTERNATIONAL LTD.

/s/ George J. Coates_______

George J. Coates, President

Chief Executive Officer and

Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.

SIGNATURE 				TITLE 				DATE

-----------------				---------					---------

_/s/ George J. Coates

George J. Coates 		 	Director, Chief		February 22, 2002

Executive Officer,

President, and

Chief Financial Officer



_/s/ Richard W. Evans

Richard W. Evans			 Director 			February 22, 2002



_/s/ Michael J. Suchar

Michael J. Suchar			 Director			February 22 , 2002



Coates International, Ltd.



Financial Statements



December 31, 2000 and 1999



As Restated

Coates International, Ltd.

Index to the Financial Statements

December 31, 2000 and 1999

As Restated













Page



Auditors- Report  		1



Financial Statements



Balance Sheet		2



Statements of Operations		3



Statement of Stockholders - Equity		4



Statements of Cash Flows		5-6



Notes to the Financial Statements		7-11





Independent Auditors- Report



To the Board of Directors and Shareholders of

Coates International, Ltd.



We have audited the balance sheet of Coates International, Ltd. as of December 31, 2000 and the related statements of operations, stockholders- equity and cash flows for the years ended December 31, 2000 and 1999.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.





In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Coates International, Ltd. as of December 31, 2000, and the results of their operations, and cash flows for the years ended December 31, 2000 and 1999 in conformity with generally accepted accounting principles.





/s/ Rosenberg Rich Baker Berman & Company

Bridgewater, New Jersey

February 13, 2001

except for Note 15,as to

which the date is January 3, 2002

and Notes 3, 7 and 16 as to which

the date is February 22, 2002

Coates International, Ltd.

Balance Sheet

December 31, 2000

As Restated



|Assets                                                                                                  |  |  |   |             
|------------------------------------------------------------------------------------------------------- |  |  | - | ------------
|Current Assets                                                                                          |  |  |   |             
|Cash                                                                                                    |  |  | $ | 340,821     
|Restricted cash                                                                                         |  |  |   | 112,000     
|Inventory                                                                                               |  |  |   | 205,357     
|Prepaid insurance                                                                                       |  |  |   | 6,432       
|Total Current Assets                                                                                    |  |  |   | 664,610     
|Property, Plant and Equipment - Net of $440,128 of accumulated depreciation                             |  |  |   | 1,625,892   
|Other Assets                                                                                            |  |  |   |             
|Mortgage loan costs, net of accumulated amortization of $22,701                                         |  |  |   | 42,159      
|Deposit                                                                                                 |  |  |   | 2,500       
|Total Assets                                                                                            |  |  |   | 2,335,161   
|Liabilities and Stockholders- Equity                                                                    |  |  |   |             
|Current Liabilities                                                                                     |  |  |   |             
|Current portion of mortgage payable                                                                     |  |  |   | 8,903       
|Note payable                                                                                            |  |  |   | 58,731      
|Accounts payable                                                                                        |  |  |   | 45,485      
|Accrued expenses                                                                                        |  |  |   | 691,321     
|Accrued interest payable                                                                                |  |  |   | 118,391     
|Total Current Liabilities                                                                               |  |  |   | 922,831     
|License Deposit                                                                                         |  |  |   | 300,000     
|Mortgage payable, net of current portion                                                                |  |  |   | 883,604     
|Total Liabilities                                                                                       |  |  |   | 2,106,435   
|Stockholders' Equity                                                                                    |  |  |   |             
|Preferred stock, Series A, $.001 par value 14,000,000 shares authorized - no shares 		issued            |  |  |   | -           
|Common stock, $.0001 par value, 200,000,000 shares authorized - 66,097,910shares issued and outstanding |  |  |   | 6,609       
|Additional paid-in capital                                                                              |  |  |   | 11,234,283  
|Accumulated deficit                                                                                     |  |  |   | (11,012,166)
|Total Stockholders' Equity                                                                              |  |  |   | 228,726     
|Total Liabilities and Stockholders' Equity                                                              |  |  |   | $2,335,161  

See notes to the financial statements.

Coates International, Ltd.

Statements of Operations







|                                               |   |                 
|---------------------------------------------- | - | ----------------
|Years Ended December 31,                      
|2000
As Restated                               |   | 1999
As Restated
|                                               |   |                 
|Research and Development Revenue               | $ | 845,000         
|Operating Expenses:                            |   |                 
|Research and development costs                 |   | 389,128         
|Research and development costs - related party |   | 39,000          
|General and administrative expenses            |   | 367,967         
|Depreciation                                   |   | 33,270          
|Amortization                                   |   | 12,972          
|Total Operating Expenses                       |   | 842,337         
|Income (Loss) From Operations                  |   | 2,663           
|Other Income (Expense):                        |   |                 
|Miscellaneous income                           |   | 15,000          
|Interest income                                |   | 3,114           
|Interest expense                               |   | (149,548)       
|Total Other Income (Expense)                   |   | (131,434)       
|Loss Before Benefit From Income Taxes          |   | (128,771)       
|(Provision for) Benefit From Income Taxes      |   | (15,945)        
|Net Loss                                       | $ | (144,716)       
|(Loss) Earnings Per Share                      | $ | 0.00            
|Weighted Average Number of Shares              |   | 66,078,329      











See notes to the financial statements.

Coates International Ltd.

Statement of Stockholders- Equity

As Restated





|                                                      | Common Stock

Shares              Amount | Series A Preferred Stock

Shares                     Amount | Additional
Paid-In
Capital
|----------------------------------------------------- | ---------------------------------------- | ----------------------------------------------------------- | --------------------------
|                                                      |                                          |                                                             |                           
|Balance - December 31, 1998                           | -                         -              | 6,597,961          $    6,598                               | $  10,812,300             
|                                                      |                                          |                                                             |                           
|Purchase of treasury stock (at cost)                  | -                         -              | -                            -                              | (12,997)                  
|                                                      |                                          |                                                             |                           
|Sale of treasury stock                                | -                        -               | -                            -                              | 149,993                   
|                                                      |                                          |                                                             |                           
|Issuance of stock                                     | -                        -               | 6,750                    7                                  | 134,993                   
|                                                      |                                          |                                                             |                           
|Net loss for the year                                 | -                       -                | -                          -                                | -                         
|                                                      |                                          |                                                             |                           
|Balance - December 31, 1999                           | -                       -                | 6,604,711         $   6,605                                 | $ 11,084,289              
|                                                      |                                          |                                                             |                           
|Purchase of treasury stock (at cost)                  | -                       -                | -                          -                                | -                         
|                                                      |                                          |                                                             |                           
|Sale of treasury stock                                | -                       -                | -                          -                                | 39,998                    
|                                                      |                                          |                                                             |                           
|Issuance of stock                                     | -                       -                | 4,800                 4                                     | 109,996                   
|                                                      |                                          |                                                             |                           
|Exchange of Series A Preferred Stock
for Common Stock | 66,097,910   $ 6,609                     | (6,609,011)         (6,609)                                 | -                         
|                                                      |                                          |                                                             |                           
|Net loss for the year                                 | -                        -               | -                        -                                  | -                         
|                                                      |                                          |                                                             |                           
|Balance - December 31, 2000                           | 66,097,910    $ 6,609                    | -                  $     -                                  | $ 11,234,283              







































See notes to the financial statements.



Coates International Ltd.

Statement of Stockholders- Equity

As Restated - Cont'd.

|                                                      | Treasury Stock
Shares              Amount | Retained Earnings
(Deficit) | Total
Stockholders'
Equity (Deficit)
|----------------------------------------------------- | ----------------------------------------- | --------------------------- | ------------------------------------
|                                                      |                                           |                             |                                     
|Balance - December 31, 1998                           | (6,250)           $   (6)                 | $ (10,845,471)              | $ (26,579)                          
|                                                      |                                           |                             |                                     
|Purchase of treasury stock (at cost)                  | (3,250)                (3)                | -                           | (13,000)                            
|                                                      |                                           |                             |                                     
|Sale of treasury stock                                | 7,500                    7                | -                           | 150,000                             
|                                                      |                                           |                             |                                     
|Issuance of stock                                     | -                       -                 | -                           | 135,000                             
|                                                      |                                           |                             |                                     
|Net loss for the year                                 | -                       -                 | (21,979)                    | (21,979)                            
|                                                      |                                           |                             |                                     
|Balance - December 31, 1999                           | (2000)          $   (2)                   | $ (10,867,450)              | $ 223,442                           
|                                                      |                                           |                             |                                     
|Purchase of treasury stock (at cost)                  | -                      -                  | -                           | -                                   
|                                                      |                                           |                             |                                     
|Sale of treasury stock                                | 2,000                  2                  | -                           | 40,000                              
|                                                      |                                           |                             |                                     
|Issuance of stock                                     | -                      -                  | -                           | 110,000                             
|                                                      |                                           |                             |                                     
|Exchange of Series A Preferred Stock
for Common Stock | -                      -                  | -                           | -                                   
|                                                      |                                           |                             |                                     
|Net loss for the year                                 | -                      -                  | (144,716)                   | (144,716)                           
|                                                      |                                           |                             |                                     
|Balance - December 31, 2000                           | -                    -                    | $ (11,012,166)              | $  228,726                          
|                                                      |                                           |                             |                                     







































See notes to the financial statements.

Coates International, Ltd.

Statements of Cash Flows



|                                                                                      |   |                 
|------------------------------------------------------------------------------------- | - | ----------------
|Years Ended December 31,                                                             
|2000
As Restated                                                                      |   | 1999
As Restated
|                                                                                      |   |                 
|Cash Flows From Operating Activities                                                  |   |                 
|Net (Loss) Income                                                                     | $ | (144,716)       
|Adjustments to Reconcile Net (Loss) Income to Net Cash Used in 		Operating Activities |   |                 
|Depreciation                                                                          |   | 33,270          
|Amortization                                                                          |   | 12,972          
|Deferred taxes                                                                        |   | 251,000         
|Changes in Assets and Liabilities                                                     |   |                 
|(Increase) Decrease in                                                                |   |                 
|Inventory                                                                             |   | (205,357)       
|Prepaid insurance                                                                     |   | 457             
|Due to/from affiliates                                                                |   | 79,061          
|Increase (Decrease) in                                                                |   |                 
|License deposit                                                                       |   | -               
|Accounts payable and accrued expenses                                                 |   | (157,599)       
|Accrued interest payable                                                              |   | (101)           
|Total Adjustments                                                                     |   | 13,703          
|Net Cash Used in Operating Activities                                                 |   | (131,013)       
|Cash Flows from Investing Activities                                                  |   |                 
|Payments for property and equipment                                                   |   | (74,000)        
|Net Cash Used in Investing Activities                                                 |   | (74,000)        
|Cash Flows From Financing Activities                                                  |   |                 
|Proceeds from mortgage payable                                                        |   | -               
|Repayment of mortgage payable                                                         |   | (3,060)         
|Payment for mortgage loan costs                                                       |   | -               
|Proceeds from reissuance of stock                                                     |   | 40,000          
|Proceeds from issuance of stock                                                       |   | 110,000         
|Proceeds from note payable                                                            |   | 75,000          
|Repayment of note payable                                                             |   | (16,269)        
|Loans from stockholder                                                                |   | (16,000)        
|Net Cash Provided by Financing Activities                                             |   | 189,671         
|Net Decrease (Increase) in Cash                                                       |   | (15,342)        
|Cash - Beginning of Periods                                                           |   | 356,163         
|Cash - End of Periods                                                                 | $ | 340,821         



See notes to the financial statements.

Coates International, Ltd.

Statements of Cash Flows - Cont'd.





|                                                  |   |                 
|------------------------------------------------- | - | ----------------
|Years Ended December 31,                         
|2000
As Restated                                  |   | 1999
As Restated
|                                                  |   |                 
|Supplemental Disclosures of Cash Flow Information |   |                 
|Cash paid during the periods for:                 |   |                 
|Interest paid                                     | $ | 149,648         
|Income taxes paid                                 | $ | 200             

































































See notes to the financial statements.



Coates International, Ltd.

Notes to the Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Organization

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

CIL has developed a spherical rotary valve system (the"Coates System") for use in piston driven internal combustion engines of all types and is manufacturing on a limited scale basis at its Wall Township, New Jersey facility.  CIL also has an exclusive license to sell and grant sublicenses with respect to products using the Coates System based on the Coates Patents.  The Company was in the development stage through December 31, 1999.  The year 2000 is the first year during which it is considered an operating company.

Inventory

Inventory is valued at the lower of cost (determined on a first in, first out basis) or market.

Property, Plant & Equipment

Property, plant and equipment are stated at cost.  Depreciation is computed using the straight line method over the estimated useful life of the assets:  40 years for building and building improvements, 5 to 7 years for machinery and equipment and 5 to 10 years for furniture and fixtures.  Repairs and maintenance expenditures which do not extend the useful lives of the related assets are expensed as incurred.

In the event that facts and circumstances indicate that long-lived assets may be impaired, an evaluation of recoverability would be performed and, accordingly, a determination of the write-down related to the specific assets made.

Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding and assumes the conversion of the Series A Preferred Stock into Common Stock.  The Company has no options, warrants or other convertible securities outstanding, thus, basic and diluted earnings (loss) per share are the same for the fiscal years ended December 31, 1999 and December 31, 2000.

Revenue Recognition

The Company has not generated revenue from the sales of engines.  Revenue from the granting of sub-licenses is recognized when earned, generally commencing upon its utilization by the licensee over the period of time that the sub-license has been granted (i.e. upon expiration of the Company's patent protection period which expires at the earliest in 2007, using the straight-line method.  Revenue from research and development activities is recognized when earned provided that financial risk has been transferred from the Company to its customer.  Revenue recognized in 2000 and 1999 is derived solely from research and development activities.

Advertising Costs

Advertising costs are charged to operations when incurred.  Advertising expense was $12,356 and $72,000 for the years ended December 31, 2000 and 1999, respectively.

Research and Development

Research and development costs are charged to operations as incurred.





Coates International, Ltd.

Notes to the Financial Statements





NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued



Income Taxes

In accordance with the provisions of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), deferred taxes are recognized for operating losses that are available to offset future taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to realized.  The Company incurred net operating losses for financial-reporting and tax-reporting purposes.  Accordingly, the benefit from income taxes has been mostly offset by a valuation allowance against the related deferred tax asset for the year ended December 31, 1998.



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 reporting period.  Actual results could differ from those estimates.



NOTE 2 - CONCENTRATIONS OF CREDIT AND BUSINESS RISK

The Company maintains cash balances in several financial institutions.  Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000, of which the Company's accounts may, at times, exceed the federally insured limits.



The Company entered into a license agreement with a Canadian corporation, whereby the Company is granting an exclusive license for the use of the Coates Engine in connection with the conversion of natural gas to electricity in Canada. The licensing fee is $5,000,000 and the Company also receives a royalty equal to 5% of the gross profit which is derived from all sources.  The Company also retains the exclusive right to manufacturing both the engine and generator components for sale to the Canadian corporation.  The revenues generated for years ended December 31, 2000 and 1999 are entirely attributable to the Canadian corporation.  The loss of this customer would have a material adverse effect on the Company's business and operations.



Development of the Coates System technology was initiated by GJC, CIL's founder, President  and controlling stockholder  in the late 1970's and development efforts have been conducted continuously since such time.  From July 1982 through May 1993, seven U.S. patents as well as a number of foreign patents were issued to GJC with respect to the Coates System.  Since the inception of CIL in 1988, all aspects of the business have been completely dependent upon the activities of GJC, who does not have an employment contract with CIL.  The loss of GJC's availability or services due to death, incapacity or otherwise would have a material adverse effect on the Company's business and operations.



NOTE 3  - LICENSE DEPOSIT

Effective September 29, 1999 the Company entered into a License Agreement with a Canadian corporation.  Pursuant thereto, the Company has received a license deposit of $300,000.  Upon satisfying certain conditions pursuant to the license agreement, the Company will be entitled to additional quarterly payments over a four year period.



Revenue attributable to the above license payments will  commence being recognized at such time as all conditions have  been met and utilization has begun by the licensee. Thereafter, such revenue will be recognized over the term  of the Company's patent protection period which currently expires September 30, 2020.



NOTE 4 - RESTRICTED CASH

The Company placed $112,000 in an escrow account (pursuant to a court order) of net proceeds raised from a 48,000 CIL Series A Preferred Stock private placement offering in July 1997.  The funds were escrowed for the payment of interest due to two former stockholders.



NOTE 5 - INVENTORY



Inventory consists of work in process valued at $205,357 at December 31, 2000.



Coates International, Ltd.

Notes to the Financial Statements

NOTE 6 - PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at cost, less accumulated depreciation, consists of the following at December 31, 2000:

|Land                            |  |  | $ | 920,550   |  | 
|------------------------------- |  |  | - | --------- |  | 
|Building                        |  |  |   | 579,450   |  | 
|Building improvements           |  |  |   | 201,671   |  | 
|Machinery and equipment         |  |  |   | 325,054   |  | 
|Furniture and fixtures          |  |  |   | 39,295    |  | 
|                                |  |  |   | 2,066,020 |  | 
|Less:  Accumulated depreciation |  |  |   | 440,128   |  | 
|Total                           |  |  | $ | 1,625,892 |  | 

Depreciation expense amounted to $33,270 and $26,997 for the years ended December 31,2000 and 1999, respectively.

NOTE 7 - ACCRUED EXPENSES

Accrued expenses at December 31, 2000 is comprised of the following

|Legal Fees                                  |  |  | $  542,834 | 
|------------------------------------------- |  |  | ---------- | 
|Accounting Fees                             |  |  | 25,000     | 
|Patent Legal Fees                           |  |  | 39,770     | 
|Audit Fees - prior auditors (1995 and 1996) |  |  | 31,975     | 
|Audit Fees - prior auditors (1997)          |  |  | 77,040     | 
|Audit Fees - prior auditors (1997)          |  |  | $  716,619 | 

NOTE 8 - NOTE PAYABLE

The note payable represents a bank loan with interest at 13.64% due in equal monthly installments of $6,907 including interest through September 2001, secured by equipment with a net book value of $66,600.

NOTE 9 - MORTGAGE PAYABLE

Interest at 15.99% per annum due in equal monthly installments of $12,521 including interest, due on April 1, 2004 secured by land and building with a net book value of $1,552,621.

|                                            |  |  | $ | 892,507 |  | 
|------------------------------------------- |  |  | - | ------- |  | 
|Less current maturities                     |  |  |   | 8,903   |  | 
|Mortgage payable, net of current maturities |  |  | $ | 883,604 |  | 

Total maturities of mortgage payable are as follows:

|Year Ending December 31, |   |         |  |  |  | 
|------------------------ | - | ------- |  |  |  | 
|2001                     | $ | 8,903   |  |  |  | 
|2002                     |   | 10,435  |  |  |  | 
|2003                     |   | 12,232  |  |  |  | 
|2004                     |   | 860,937 |  |  |  | 
|                         | $ | 892,507 |  |  |  | 





Coates International, Ltd.

Notes to the Financial Statements

NOTE 10 - CAPITAL STOCK

During the year, the Company increased its authorized shares of common stock from 20,000,000 to 200,000,000 and changed the par value per common share from $0.001 to $0.0001.  The Company also converted all shares of its Series A preferred stock into common stock, on the basis of ten shares of common stock for each share of Series A preferred stock.

The earnings per share calculation for the year ended December 31, 1999 has been restated to reflect the above.

NOTE 11 - INCOME TAXES

The income tax (provision) benefit is comprised of the following:



|                                  |  |  |   | Year Ended December 31,
|--------------------------------- |  |  | - | -----------------------
|                                  |  |  |   | 2000                   
|State current (provision) benefit |  |  | $ | (15,945)               
|State deferred benefit            |  |  |   | -                      
|                                  |  |  | $ | (15,945)               

In 1998, the State of New Jersey enacted legislation allowing emerging technology and/or biotechnology companies to sell their unused New Jersey Net Operating Loss ("NOL") Carryover and Research and Development Tax Credits ("R&D Credits) to corporate taxpayers in New Jersey.  During 1999, the Company entered into an agreement under which it retained a third party broker to identify a buyer for its NOL Carryover.  The total anticipated net proceeds of this transaction $609,902) was recorded as a current deferred tax asset and benefit for the year ending December 31, 1999.

Due to limitations placed by the State of New Jersey on the total amount of NOL Carryover and R&D Credits eligible to be sold in any one year, the sale of only a portion of the Company's NOL Carryover ($358,902), which was received in 1999 funds was recorded as a current tax benefit in the December 31, 1999 financial statements.  The sale of the remaining balance of the Company's NOL Carryover ($235,033), which was recorded as an estimated deferred tax benefit of $251,000 at December 31, 1999 was received in 2000.  This resulted in a current tax provision of $15,945 at December 31, 2000.

The Company's total deferred tax asset and valuation allowance are as follows at December 31, 2000:

|                                  |  |  |   |          
|--------------------------------- |  |  | - | ---------
|                                  |  |  |   |          
|Total deferred tax asset, current |  |  | $ | 4,239,951
|Less valuation allowance          |  |  |   | 4,239,951
|Net deferred tax assets, current  |  |  | $ | -        

The differences between income tax benefits in the financial statements and the tax benefit computed at the U. S. Federal statutory rate of 34% at December 31, 2000 are as follows:

|Tax benefit         |  | 34   | % |  |  | 
|------------------- |  | ---- | - |  |  | 
|Valuation allowance |  | (30) | % |  |  | 
|Effective tax rate  |  | 4    | % |  |  | 
|                    |  |      |   |  |  | 

At December 31, 2000, the Company has available approximately $10,316,657 of net operating losses to carryforward which may be used to reduce future federal taxable income and expire between December 31, 2003 and 2020.

At December 31, 2000 the Company has available approximately $2,931,190 of net operating losses to carryforward which may be used to reduce future state taxable income and begin to expire December 31, 2004.



NOTE 12 - LICENSES



The Company has incurred legal and related costs associated with licenses.  Such costs amounted to $107,232 and $80,586  for the years ended December 31, 2000 and 1999.  As the probable future economic benefit of such costs is uncertain, they have been expensed.





NOTE 13 - RELATED PARTY TRANSACTIONS



The Company subcontracts its project expense from certain entities of which GJC is the sole shareholder.  During the years ended December 31, 2000 and 1999, the Company paid $222,549 and $211,589, respectively, for these services.



NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS



Cash, Accounts Payable and Accrued Expenses

The carrying amount approximates fair value because of the short maturity of these instruments.



Limitations

`Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision.  Changes in assumptions could significantly affect the estimates.`



NOTE 15 - RESTATEMENT OF PRIOR PERIOD RESULTS

The Company has restated its financial statements for the years ended December 31, 2000 and 1999.  The restated financial results reflect the correction of errors in its accounting procedures related to revenue recognition and equity transactions, the nature of which are a misclassification of a license deposit as revenue and bookkeeping omissions of certain equity transactions, respectively.   The impact of these adjustments on the Company's financial results as originally reported is summarized below:



Coates International, Ltd.

Notes to the Financial Statements





NOTE 15 - RESTATEMENT OF PRIOR PERIOD RESULTS, Continued





|                            |   | Years Ended December 31,
|--------------------------- | - | ------------------------
|                            |   | 2000                    
|                            |   | As Reported             
|Retained earnings (deficit) | $ | (10,688,006)            
|Revenue                     |   | 845,000                 
|Net income (loss)           |   | (122,211)               
|Income (loss) per share     |   | (0.002)                 





NOTE 16 - CONTINGENCIES

Research and Development Agreement

The Company has entered into a research and development agreement with a Canadian corporation. (the "R&D Agreement").  The R&D Agreement requires the payment of $5,000,000 to the company for research, development and delivery of three prototype Coates Generator Engines which revenue will be recognized by the Company as received since the financial risk has been transferred from the Company to its customer.  Pursuant to the terms of this R&D Agreement, the Company only has the right to receive the present outstanding balance of $3,800,000 due thereunder upon testing and delivery of the last of three prototype engines.  Further, the Company has no obligation to repay any of the $1,200,000 of payments previously received under this agreement regardless of the outcome of its research and development activities.  The performance period during which the Company is required to conduct such activities has been extended from time to time by mutual agreement.

Major customer

Revenues in 2000 and 1999 were derived from a single customer.