10-Q 1 form10q93003.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the period ended September 30, 2003 (__) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the transition period ___________ to _________________ Commission File Number 0-25127 COINLESS SYSTEMS, INC. (Exact name of small business issuer as specified in its charter) Nevada 91-1715373 (State or other jurisdiction (IRS Employer Identification No.) of Incorporation or organization) 5333 South Arville, Suite 209, Las Vegas, NV 89118 (Address of principal executive offices) (702) 248-1429 (Issuer's telephone number) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X__ No _____ As of September 30, 2003, the Company had approximately 63,474,425 shares of its $.0001 par value common stock issued and outstanding. Forward Looking Statements This Form 10-QSB contains forward-looking statements, including statements regarding our expectations of our future operations. For this purpose, any statements contained in this Form 10-QSB that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate," or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control. hese factors include, but are not limited to, economic conditions generally and in the industries in which we may participate, competition within our chosen industry, including competition from much larger competitors, technological advances, and the failure by us to successfully develop business relationships. In addition, these forward-looking statements are subject to our successful completion of the research and development of our technologies; successful commercialization and mass production of our technologies and applications; successful protection of our patents; and effective significant industry competition from various entities whose research and development, financial, sales and marketing and other capabilities far exceeds ours. In light of these risks and uncertainties, you are cautioned not to place undue reliance on these forward-looking statements. We note that the safe harbor contained in the Private Securities Litigation Reform Act of 1995 is not applicable to the disclosure in this Form 10-QSB. Coinless Systems, Inc. & Subsidiary Quarterly Report on Form 10QSB For the Quarterly Period Ended September 30, 2003 INDEX Page Part I Financial Information: Item 1. Financial Statements (unaudited) Consolidated Balance Sheet at September 30, 2003 4 Consolidated Statements of Operation Nine Months ended September 30, 2003 and 2002 5 Consolidated Statements of Cash Flows Nine Months ended September 30, 2003 and 2002 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Controls and Procedures 11 Part II Other Information 11 Item 1. Legal Proceedings 11 Item 2. Changes in Securities and Stockholders' Deficit 12 Item 3. Defaults upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Exhibits & Reports on Form 8K 14 Certifications 20 Signatures 24 Coinless Systems, Inc. & Subsidiary Consolidated Balance Sheet September 30, 2003 Unaudited Assets Current Assets Cash $ 45 Accounts Receivable 4,117 Inventory 22,523 Prepaid Expenses 0 ------- Total Current Assets 26,685 Property & Equipment, Net of Accumulated Depreciation of $181,705 69,491 Intangible and Other Assets 38,446 ------- Total Assets $ 134,622 ======= Liabilities & Stockholders' Deficit Current Liabilities Accounts Payable and Other Accrued Expenses $ 514,561 Accrued Payroll 160,526 Payroll & Sales Tax Payable 743,323 Notes Payable Due to Third Parties, Current 124,537 Notes Payable Due on Demand, Related Parties 346,620 Capital Lease Obligations, Current Portion 31,135 Net Current Liabilities of Discontinued Operations 227,108 ------- Total Current Liabilities $ 2,147,810 Long-Term Debt Notes Payable due to Third Parties $ 210,000 Capital Lease Obligations 20,756 ------- Total Long-Term Debt 230,756 ------- Total Liabilities $ 2,378,566 --------- Stockholders' Deficit Common Stock, $0.001 per value; 75,000,000 Shares Authorized 63,474,435 shares issued and outstanding $ 63,474 Paid-In Capital 6,083,332 Stock Subscription Receivable, Net of Allowance for loan loss of $129,319 (200,000) Unamortized Expenses (Contra-Equity) 0 Accumulated Deficit (8,190,750) Total Shareholders' Deficit (2,243,944) --------- Total Liabilities & Stockholders' Deficit $ 134,622 ======== See Notes to Financial Statements Coinless Systems, Inc. And Subsidiary Consolidated Statement of Operations For Quarters Ending September 30, 2003 & 2002 Unaudited

See Notes to Financial Statements Coinless Systems, Inc. And Subsidiary Consolidated Statement of Cash Flow Unaudited For the Period Ended September 30 2003 2002 Cash Flow from Operating Activities: Net Loss $(649,664) $(1,400,112) Less: Income (Loss) from Discontinued Operations 0 65,865 Extraordinary Gain on Extinguishment of Debt 11,676 0 (Loss) from Continuing Operations (637,988) (1,334,247) Adjustments to Reconcile Net (Loss) to Net Cash (used in) Operating Activities: Depreciation and Amortization 36,450 40,693 Stock for Services 0 695,352 Amortization of Non-Cash Expenses 24,527 (126,259) Gain on Sale of Assets 0 0 Impairment of Stock Subscription in Receivable 129,319 0 (Increase) Decrease in: Accounts Receivable 7,162 (766) Repairs 4,470 168,705 Inventory 0 412,728 Deposits and Others 3,633 ( 69) Intangible Assets (5,000) (3,000) Accounts payable and Accrued Expenses 60,507 79,106 Other Liabilities 0 0 ------- ------- Net Cash (used in) Operating Activities from Continuing Operations (261,116) (135,553) Cash Flow from Investing Activities: Decrease in Loans Receivable 0 7,245 ------- ------- Cash Flow from Investing Activities 0 7,245 Cash Flow from Financing Activities: Negative Cash Balance (35,550) Proceeds from issuing of Common Stock 64,501 121,000 Increase from Notes Payable to Related Parties 0 68,618 Increase from Notes Payable to Third Parties 0 0 Decrease in Notes Payable - Related Parties 61,965 0 Net (repayments) to Capital Leases (18,601) (26,224) ------- -------- Net Cash (used in)Continuing Operations 7,172 135,089 Net Cash Provided by Discontinued Operations 0 65,865 ------- -------- Net Increase (Decrease) in Cash 7,172 2,536 Cash Balance Beginning of Period (7,127) 0 Cash Balance at End of Period $ 45 $ 2,536 ========= ======= Supplemental Disclosure Interest Paid $ 28,605 $ 32,480 Taxes Paid 0 8,258 See Notes to Financial Statements COINLESS SYSTEMS, INC. AND SUBSIDIARY (Notes to Unaudited Consolidated Financial Statements) NOTE 1 - BASIS OF PRESENTATION AND ORGANIZATION. Basis of Presentation The accompanying consolidated financial statements of Coinless Systems Inc. and its subsidiary ("the Company") for the Nine months ended September 30, 2003 and September 30, 2002 have been prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-QSB and Article 10 of Regulation S-X. These financial statements have not been audited by an independent accountant, but include all adjustments (consisting of normal recurring adjustments) which are, in Management's opinion, necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. Certain information and footnote disclosures normally included in financial statements, in accordance with generally accepted accounting principles, have been omitted pursuant to requirements of the Securities and Exchange Commission. Management believes that the disclosures included in the accompanying interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10KSB for the preceding fiscal year. Organization The accompanying consolidated financial statements consist of Coinless Systems Inc, a Nevada Corporation and DSG, Inc., a California Corporation. Principals of Consolidation The accompanying consolidated financial statements include the amounts of the Company's wholly-owned subsidiary, DSG, Inc. (100%). All significant inter- company transactions have been eliminated in consolidation. Interim Periods The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10QSB, to the best of the company's ability due to a lack of some information of the prior operations of the Company, and do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of the Company's management, all adjustments (consisting of normal recurring adjustment) considered necessary for a fair presentation have been included. Operating results for the Nine months ended September 30, 2003 are not necessarily indicative of results for future periods. These statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-KSB for the year ended December 31, 2002. COINLESS SYSTEMS, INC. AND SUBSIDIARIES (Notes to Unaudited Consolidated Financial Statement) (continued) NOTE 2 - RECLASSIFICATION Certain amounts in the previously presented financial statement have been reclassified to conform to the current period presentation. NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION Supplemental Cash Flow Information Nine Months Ending September 30, 2003 Cash paid for: Interest $ 0. NOTE 4 - NET INCOME (LOSS) PER SHARE In accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," basic net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. NOTE 5 - IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS In April 1998, the American Institute of Certified Public Accounts ("AICPA") issued Statement of Position ("SOP") 98-5 entitled "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires entities to expense as incurred all start-ups that are not otherwise capitalizable as long-lived. The Company had previously accepted this "SOI" as to Patent and R&D expenses. No Reclassification is necessary. NOTE 6 - STOCK OPTIONS The company currently has no Stock Options Outstanding. ITEM 2. Management's Discussion and Analysis of Plan of Operation. Through a License Agreement, with a gaming technology company, CSI will receive a fee for each Ticket Management System which is utilized in their new gaming device used in the Native American gaming market. Availability of this device should be available during the first quarter 2004. We will continue to reduce expenses and will maintain administrative services so as to meet all S.E.C. and NASDAQ reporting requirements. RESULTS OF OPERATIONS Three months Ended September 30, 2003 Compared to September 30, 2002. Sales. There were no revenues from continuing operations for either comparable periods. Operating Expenses. Operating expenses from continuing operations decreased $297,811 to $63,092 for the three months ended September 30, 2003 compared to $360,903 in the comparable period prior year. The decrease is due to reduction of legal and professional fees of $186,476; salaries of $98,086; rent of $21,541; administrative expenses of $19,618; marketing expenses of $8,072 and other expenses of $6,210. The only area of increase was stock related and public relations expenses of $42,192. For the three month period ending September 30, 2003, operating expenses from continuing operations consisted of legal and professional fees of $42,674; salaries of $0; rent expenses of $0; administrative expenses of $5,391; marketing expenses of $571; depreciation/amortization expenses of $11,436 and other expenses of $3,020. Loss from Continuing Operations. The loss from continuing operations decreased by $235,181, to $136,901 in this period compared to $372,082 for the comparable period the prior year. The decrease resulted from new management's reduction in overhead operating expenses as set forth above. Interest and Other Income. Interest and other income decreased $2,076 to $0 for the current period from $2,076 for the comparable period in the prior year. Interest Expense. Interest expense increased $61,179 to $74,434 in the current period from $13,255 in the comparable period in the prior year. This increase relates to borrowing operating funds in previous periods at unusually high interest rates. Net Profit (Loss) from Discontinued Operations. During the three months ended September 30, 2003 and 2002, the company had no net profit or loss from discontinued operations. Extraordinary Gain. During the three months ended September 30, 2003 and 2002, the Company had no extraordinary gains. Net Loss. The Net Loss decreased by $235,181 to $136,901 in this period compared to $372,082 for the comparable period the prior year. Nine months ended September 30, 2003 compared to Nine months ended September 30, 2002. Sales: There were no revenues from continuing operations for either comparable periods. Operating Expenses: Operating Expenses from continuing operations decreased $1,012,263 to $423,995 for the nine months ended September 30, 2003, compared to $1,436,258 in the comparable period prior year. The decrease is due to reduction in Professional fees of $380,091; stock related and public expenses of $290,779; salaries of $210,445; taxes of $47,717; rent expense of $39,350; marketing expenses of $24,290; administrative expenses of $14,448; depreciation/amortization expense of $4,263 and insurance expenses of $880. For the nine month period ending September 30, 2003 operating expenses consisted of professional fees of $189,786; stock related and public relations of $5,845; salaries of $83,813; taxes of $9,053; rent expense of $28,720; marketing expense of $1,583; administrative expense of $58,230; depreciation/amortization of $36,450; and insurance expense of $10,560. Loss from Continuing Operations: The loss from continuing operations decreased $804,637, to $661,340 in this period compared to $1,465,977 for the comparable period for the prior year. The decrease resulted from new management's reduction in overhead operating expenses as set forth above. Interest and Other Income: Interest and other income decreased $12,755 to $0 for the current period from $12,755 for the comparable period in the prior year. Interest Expense: Interest expense increased $197,020 to $239,494 for the current period from $42,474 in the comparable period the prior year. This increase relates to borrowing operating funds in previous periods, at unusually high interest rates. Net Profit (Loss) from Discontinued Operations: Net profit from discontinued operations decreased from $65,865 to $0 in the current period compared to $65,865 in the comparable prior year period. Extraordinary Gain: The company had an extinguishment of debt in the current period of $11,676 compared to $0 in the prior year period. Net Loss: Net loss decreased $750,448 to $649,664 in this period compared to $1,400,112 for the comparable period the prior year. Liquidity and Capital Resources: Coinless Systems, Inc. currently has no revenue flow, thus has no cash flow. We are currently able to meet our S.E.C & NASDAQ Regulations, so our stock will not be delisted. Coinless Systems' current liabilities exceed its current assets by $2,121,125 and its total liabilities exceed its total assets by $2,243,944. We are unable to make any forecasts as to future revenues until we receive projections from our licensed affiliate upon completion of their gaming platform. Because of the stock price, we are unable to draw any funds from our Equity Line of Credit. ITEM 3 - Controls and Procedures. During the quarter ended September 30, 2003, we did not make any significant changes in our internal controls or in other factors that could significantly affect these controls CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1955 This document includes various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Sections 21E of the Securities Exchange Act of 1934, as amended, which represents our expectations or beliefs concerning future events. Statements containing expressions such as "believes," "anticipates," or "expects," used in our press releases and periodic reports on Form 10-KSB 10-QSB filed with the Commission, are intended to identify forward-looking statements. All forward-looking statements involve risks and uncertainties. Although we believe our expectations are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurances that actual results will not materially differ from expected results. We caution that these and similar statements included in this report are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors include those discussed in our annual report on Form 10-KSB or the year ended December 31, 2002. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward- looking statements to reflect events or circumstances after the date hereof. PART II OTHER INFORMATION ITEM 1 Legal Proceedings: Complaint filed on January 31, 2002 by Breakout Investment Marketing LLC, alleging breach of contract. Complaint settled during settlement hearing whereby CSI will pay Breakout Investment Marketing, LLC the sum of one dollar ($1.00) for each license fee received, total amount not to exceed sixty thousand dollars ($60,000). Complaint filed on June 13, 2003 by Gregory F. Mullally. July 24, 2003 motion to dismiss was declined; awaiting trial date. Management knows of no other pending legal matters. ITEM 2 Changes in Securities and Stockholders Deficit: For Quarter Ended September 30, 2003

ITEM 3 Defaults Upon Senior Securities: None ITEM 4 Submission of Matters to a vote of security holders: None ITEM 5 Other Information: Certain Relationships and Related Transactions: On August 1, 2003, company issued a Demand Note with a 6.5% annual rate of interest to Legal iGaming, a Nevada Corporation, in the principal amount of $12,750. On September 1, 2003, company issued a Demand Note, with a 6.5% annual rate of interest to Legal iGaming, a Nevada Corporation, in the principal amount of $12,750. On September 30, 2003, company issued a Demand Note with a 6.5% annual rate of interest to Legal iGaming, a Nevada Corporation, in the principal amount of $12,750. Subsequent Occurrence: On August 28, 2003, Daniel Weyker resigned from our Board of Directors. ITEM 6 Exhibits and Reports on Form 8-K: Exhibit A - Promissory Note Exhibit B - Promissory Note Exhibit C - Promissory Note Exhibit 99.1 - Certifications Reports on Form 8-K We did not file any reports on Form 8-K EXHIBIT A PROMISSORY NOTE $12,750 August 30, 2003 For value received, the undersigned, Coinless Systems, Inc. ("the Promisor"), promises to pay upon demand to the order of Legal iGaming, ("the Payee") located at 5333 South Arville, Suite 209, Las Vegas, NV 89118 (or at such other place as the Payee may designate in writing) the sum of $12,750 with interest from August 1, 2003 on the unpaid principal at a rate of 6.5% interest per annum. All payments on this Note shall be applied first in payment of accrued interest and any remainder in payment of principal. The Promisor reserves the right to prepay this Note (in whole or in part) prior to the due date with no prepayment penalty. If any payment obligation under this Note is not paid when demanded, the Promisor promises to pay all costs of collection, including reasonable attorney fees, whether or not a lawsuit is commenced as part of the collection process. If any of the following events of default occur, this Note shall become due immediately, without demand or notice: 1) the failure of the Promisor to pay the principal and any accrued interest in full upon demand; 2) the filing of bankruptcy proceedings involving the Promisor as a Debtor; 3) the application for appointment of a receiver for the Promisor; 4) the making of a general assignment for the benefit of the Promisor's creditors; 5) the insolvency of the Promisor; or 6) the misrepresentation by the Promisor to the Payee for the purpose of obtaining or extending credit; or 7) the sale or merger of Corporation. If any or more of the provisions of this Note are determined to be unenforceable, in whole or in part, for any reason, the remaining provisions shall remain fully operative. All payments of principal and interest on this Note shall be paid in the legal currency of the United States. Promisor waives presentment of payment, protest, and notice of protest and nonpayment on this Note. No renewal or extension of this Note, delay in enforcing any right of the Payee under this Note, or assignment by Payee of this Note shall affect the liability of the Promisor. All rights of the Payee under this Note are cumulative and may be exercised concurrently or consecutively at the Payee's option. Payee may, at their option, convert this note into Common Stock of CSI, as per Resolution of the Board of Directors, dated February 4, 2000. This Note shall be construed in accordance with the laws of the State of Nevada. Signed this 1st day of August 2003 in Las Vegas, Nevada. Promissor Coinless Systems, Inc. By: ________________________________ Michael Saunders Acting Interim President By: ________________________________ Darryl D. Dorsett Chief Financial Officer EXHIBIT B PROMISSORY NOTE $12,750.00 September 1, 2003 For value received, the undersigned, Coinless Systems, Inc. ("the Promisor"), promises to pay upon demand to the order of LegaliGaming, ("the Payee") located at 5333 South Arville Street, Suite 209, Las Vegas, NV 89118 (or at such other place as the Payee may designate in writing) the sum of $12,750.00 with interest from September 1, 2003 on the unpaid principal at a rate of 6.5% interest per annum. All payments on this Note shall be applied first in payment of accrued interest and any remainder in payment of principal. The Promisor reserves the right to prepay this Note (in whole or in part) prior to the due date with no prepayment penalty. If any payment obligation under this Note is not paid when demanded, the promisor promises to pay all costs of collection, including reasonable attorney fees, whether or not a lawsuit is commenced as part of the collection process. If any of the following events of default occur, this Note shall become due immediately, without demand or notice: 1) the failure of the Promisor to pay the principal and any accrued interest in full upon demand; 2) the filing of bankruptcy proceedings involving the Promisor as a Debtor; 3) the application for appointment of a receiver for the Promisor; 4) the making of a general assignment for the benefit of the Promisor's creditors; 5) the insolvency of the Promisor; or 6) the misrepresentation by the Promisor to the Payee for the purpose of obtaining or extending credit; or 7) the sale or merger of Corporation. If any or more of the provisions of this Note are determined to be unenforceable, in whole or in part, for any reason, the remaining provisions shall remain fully operative. All payments of principal and interest on this Note shall be paid in the legal currency of the United States. Promisor waives presentment of payment, protest, and notice of protest and nonpayment on this Note. No renewal or extension of this Note, delay in enforcing any right of the Payee under this Note, or assignment by Payee of this Note shall affect the liability of the Promisor. All rights of the Payee under this Note are cumulative and may be exercised concurrently or consecutively at the Payee's option. Payee may, at their option, convert this note into Common Stock of CSI, as per Resolution of the Board of Directors, dated February 4, 2000. This Note shall be construed in accordance with the laws of the State of Nevada. Signed this 1st day of September 2003 in Las Vegas, Nevada. Promissor Coinless Systems, Inc. By: ________________________________ Michael Saunders Acting Interim President By: ________________________________ Darryl D. Dorsett Chief Financial Officer EXHIBIT C PROMISSORY NOTE $12,750.00 September 30, 2003 For value received, the undersigned, Coinless Systems, Inc. ("the Promisor"), promises to pay upon demand to the order of Legal iGaming, ("the Payee") located at 5333 South Arville Street, Suite 209, Las Vegas, NV 89118 (or at such other place as the Payee may designate in writing) the sum of $12,750.00 with interest from September 30, 2003 on the unpaid principal at a rate of 6.5% interest per annum. All payments on this Note shall be applied first in payment of accrued interest and any remainder in payment of principal. The Promisor reserves the right to prepay this Note (in whole or in part) prior to the due date with no prepayment penalty. If any payment obligation under this Note is not paid when demanded, the Promisor promises to pay all costs of collection, including reasonable attorney fees, whether or not a lawsuit is commenced as part of the collection process. If any of the following events of default occur, this Note shall become due immediately, without demand or notice: 1) the failure of the Promisor to pay the principal and any accrued interest in full upon demand; 2) the filing of bankruptcy proceedings involving the Promisor as a Debtor; 3) the application for appointment of a receiver for the Promisor; 4) the making of a general assignment for the benefit of the Promisor's creditors; 5) the insolvency of the Promisor; or 6) the misrepresentation by the Promisor to the Payee for the purpose of obtaining or extending credit; or 7) the sale or merger of Corporation. If any or more of the provisions of this Note are determined to be unenforceable, in whole or in part, for any reason, the remaining provisions shall remain fully operative. All payments of principal and interest on this Note shall be paid in the legal currency of the United States. Promisor waives presentment of payment, protest, and notice of protest and nonpayment on this Note. No renewal or extension of this Note, delay in enforcing any right of the Payee under this Note, or assignment by Payee of this Note shall affect the liability of the Promisor. All rights of the Payee under this Note are cumulative and may be exercised concurrently or consecutively at the Payee's option. Payee may, at their option, convert this note into Common Stock of CSI, as per Resolution of the Board of Directors, dated February 4, 2000. This Note shall be construed in accordance with the laws of the State of Nevada. Signed this 30th day of September 2003 in Las Vegas, Nevada. Promissor Coinless Systems, Inc. By: /s/ Michael Saunders Michael Saunders Acting Interim President By: /s/ Darryl D. Dorsett Darryl D. Dorsett Chief Financial Officer SECTION 302 CERTIFICATION Pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. ss. 1350, as adopted), I, Darryl D. Dorsett, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Coinless Systems, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 21, 2003 /s/ Darryl D. Dorsett Darryl D. Dorsett Chief Financial Officer SECTION 302 CERTIFICATION Pursuant to Section 302 of the Public Company Accounting Reform and Investor Protection Act of 2002 (18 U.S.C. ss. 1350, as adopted), I, Michael Saunders, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Coinless Systems, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiary, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 21, 2003 /s/ Michael Saunders Michael Saunders Interim President SIGNATURE In accordance with requirements of the Exchange Act, the Registrar caused this report to be signed on its behalf by the undersigned, hereunto duly authorized. COINLESS SYSTEMS, INC. Registrant By: /s/ Darryl d. Dorsett Darryl D. Dorsett Its: Chief Financial Officer, Chairman & Corporate Secretary DATE: November 21, 2003 /s/ Michael Saunders Michael Saunders Interim President/Director -----END PRIVACY-ENHANCED MESSAGE-----

COINLESS SYSTEMS INC 10-Q