<PAGE>

                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                  FORM 10-QSB

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

                 For the quarterly period ended March 31, 2000

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

                 For the transition period from              to

                        Commission file Number 000-21749


                    ADVANCED AERODYNAMICS & STRUCTURES, INC.
       (Exact name of small business issuer as specified in its charter)


       Delaware                                               95-4257380
  State or other jurisdiction of                             (I.R.S. Employer
   incorporation or organization)                             Identification

                            3205 Lakewood Boulevard
                          Long Beach, California 90808
                    (Address of principal executive offices)

                                 (562) 938-8618
                          (Issuer's telephone number)


     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.

                              YES [X]      NO [_]

  As of April 15, 2000, the issuer had outstanding 50,000 shares of Series A 5%
Cumulative Convertible Preferred Stock, 6,999,676 shares of Class A Common
Stock, 1,900,324 shares of Class B Common Stock, 4,000,000 shares of Class E-1
Common Stock and 4,000,000 shares of Class E-2 Common stock.
<PAGE>

                    ADVANCED AERODYNAMICS & STRUCTURES, INC.

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                             Page
<S>                                          <C>
PART I.    FINANCIAL INFORMATION

Item 1.  Financial Statements                 3
Item 2.  Plan of Operations                   9

PART II.  OTHER INFORMATION                  12

Item 6.  Exhibits and Reports on Form 8-K    12
</TABLE>

                                       2
<PAGE>

                    ADVANCED AERODYNAMICS & STRUCTURES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                                 BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                                                  March 31,
                                                                                                                    2000
                                                                                                                ------------
<S>                                                                                                             <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                                                                     $  2,261,000
  Short term investments                                                                                           2,853,000
  Prepaid expenses and other current assets                                                                          138,000
                                                                                                                ------------
   Total current assets                                                                                            5,252,000
Property, Plant and equipment, net                                                                                11,913,000
Other assets                                                                                                         194,000
                                                                                                                ------------
   Total assets                                                                                                 $ 17,359,000
                                                                                                                ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Accounts payable                                                                                              $    428,000
  Capital lease obligation current portion                                                                           241,000
  Other accrued liabilities                                                                                          597,000
                                                                                                                ------------
   Total current liabilities                                                                                       1,266,000
Capital lease obligation, long term                                                                                9,570,000
Deferred revenue                                                                                                   1,774,000
                                                                                                                ------------
   Total liabilities                                                                                              12,610,000
                                                                                                                ------------
Stockholders' equity
  Preferred Stock, par value $.0001 per share; 5,000,000 shares authorized; no shares issued and                          --
     outstanding
  Series A 5% Cumulative Convertible Preferred Stock, par Value $.0001 per share; 100,000 shares                   5,000,000
     authorized; 50,000 Shares outstanding
  Class A common, par value $.0001 per share; 60,000,000 shares authorized; 6,999,676 shares issued and                1,000
     outstanding
  Class B Common Stock, par value $.0001 per share; 10,000,000 shares authorized; 1,900,324 shares                        --
     issued and outstanding
  Class E-1 Common Stock; par value $.0001 per share; 4,000,000 shares authorized; 4,000,000 shares                       --
     issued and outstanding
  Class E-2 Common Stock; par value $.0001 per share; 4,000,000 shares authorized; 4,000,000 shares                       --
     issued and outstanding
Warrants to purchase common stock                                                                                         --
    Public Warrants                                                                                                  473,000
    Class A Warrants                                                                                              11,290,000
    Class B Warrants                                                                                               4,632,000
Additional paid-in capital                                                                                        35,202,000
Accumulated other comprehensive loss                                                                                  (4,000)
Deficit accumulated during the development stage                                                                 (51,845,000)
                                                                                                                ------------
Total stockholders' equity                                                                                         4,749,000
Total liabilities and stockholder's equity                                                                      $ 17,359,000
                                                                                                                ============
</TABLE>

                 See accompanying notes to financial statements

                                       3
<PAGE>

                    ADVANCED AERODYNAMICS & STRUCTURES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
                                                                         Three Months Ended         Period from January
                                                                              March 31,                   26, 1990
                                                                                                       (inception) to
                                                                                                         March 31,
                                                                         1999            2000              2000
                                                                    -------------   -------------   --------------------
<S>                                                                 <C>             <C>             <C>
Interest income                                                      $    118,000          48,000           $  2,791,000
Other income                                                                1,000           3,000              1,325,000
                                                                    -------------   -------------   --------------------
                                                                          119,000          51,000              4,116,000
Cost and expenses:
Research and development costs                                          1,578,000         384,000             31,150,000
General and administrative expenses                                       809,000         779,000             18,657,000
Loss on disposal of assets                                                     --              --                755,000
Realized loss on sale of investments                                           --          43,000                 73,000
Interest expense                                                           74,000         278,000              3,623,000
In-process research and development acquired                                   --              --                761,000
                                                                    -------------   -------------   --------------------
                                                                        2,461,000       1,484,000             55,019,000
                                                                    -------------   -------------   --------------------
Loss before extraordinary item                                         (2,342,000)     (1,433,000)           (50,903,000)
Extraordinary loss on retirement of Bridge Notes                               --              --               (942,000)
                                                                                                    ---------------------
Net loss                                                             $ (2,342,000)   $ (1,433,000)           (51,845,000)
                                                                    =============   =============   ====================
Loss per share before extraordinary item                             $       (.26)   $       (.16)
                                                                    -------------   -------------
Net loss per share                                                   $       (.26)   $       (.16)
                                                                    -------------   -------------
Weighted average number of shares outstanding                           8,900,000       8,900,000
                                                                    =============   =============
</TABLE>

                See accompanying notes to financial statements.

                                       4
<PAGE>

                    ADVANCED AERODYNAMICS & STRUCTURES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                       Statement of Stockholders' Equity
<TABLE>
<CAPTION>
                                       Preferred Stock           Class A               Class B            Class E-1
                                    Shares       Amount     Shares      Amount     Shares    Amount    Shares      Amount
<S>                               <C>           <C>         <C>        <C>       <C>         <C>      <C>         <C>
Common stock issued                             $       --              $    --    418,094   $  --    836,189     $   --
Common stock issued in exchange
 for in-process research and
 development                                                                       201,494      --    402,988         --
Imputed interest on advances
 from stockholder
Conversion of stockholder
 advances                                                                          598,011      --  1,196,021         --
Conversion of officer loans                                                        187,118      --    374,236         --
Stock issued in consideration
 for services in 1994, 1995,
 and 1996                                                                          595,283      --  1,190,566         --
Imputed interest on advances
 from stockholder
Net proceeds from initial
 public offering of Units                                   6,000,000   $ 1,000
Net proceeds from exercise of
 over- allotment option                                       900,000        --
Warrants issued in connection
 with issuance of Bridge Notes
Net loss from inception to
 December 31, 1996
Balance at December 31, 1996                --          --  6,900,000     1,000  2,000,000      --  4,000,000         --
Adjustment to proceeds from
 initial public offering and
 exercise of overallotment
 option
Net Loss
Balance at December 31, 1997                --              6,900,000     1,000  2,000,000      --  4,000,000         --
Conversion of Class B to A
 Common Stock                                                  99,676              (99,676)
Net Loss
Balance at December 31, 1998                --  $       --  6,999,676    $1,000  1,900,324   $  --  4,000,000     $   --
  Net Loss
Unrealized loss on investments
Comprehensive Loss
Balance at December 31, 1999                --  $       --  6,999,676    $1,000  1,900,324   $  --  4,000,000     $   --
Net proceeds from issuance of
 Preferred stock                        50,000   5,000,000
Unrealized gain on investments
Net Loss
Comprehensive Loss
Balance as of March 31, 2000            50,000  $5,000,000  6,999,676    $1,000  1,900,324   $  --  4,000,000     $   --

<CAPTION>
                                       Common Stock
                                              Class E-2
                                                                                                                Additional
                                                                     Public         Class A        Class B       Paid-In
                                                                                                                 -------
                                       Shares         Amount        Warrants        Warrants       Warrants      Capital
                                                                    --------        --------       --------      -------
<S>                               <C>              <C>              <C>           <C>           <C>          <C>
Common stock issued                    836,189        $    --       $     --      $        --   $       --   $  7,500,000
Common stock issued in exchange
 for in-process research and
 development                           402,988             --                                                     361,000
Imputed interest on advances
 from stockholder                                                                                                 799,000
Conversion of stockholder
 advances                            1,196,021             --                                                  10,728,000
Conversion of officer loans            374,236             --                                                     336,000
Stock issued in consideration
 for services in 1994, 1995,
 and 1996                            1,190,566             --                                                   1,507,000
Imputed interest on advances
 from stockholder                                                                                                  11,000
Net proceeds from initial
 public offering of Units                                                           9,583,000    4,166,000     12,566,000
Net proceeds from exercise of
 over- allotment option                                                             1,707,000      466,000      1,922,000
Warrants issued in connection
 with issuance of Bridge Notes                                       473,000
Net loss from inception to
 December 31, 1996
Balance at December 31, 1996         4,000,000             --        473,000       11,290,000    4,632,000     35,730,000
Adjustment to proceeds from
 initial public offering and
 exercise of overallotment
 option                                                                                                           (78,000)
Net Loss
Balance at December 31, 1997         4,000,000             --        473,000       11,290,000    4,632,000     35,652,000
Conversion of Class B to A
 Common Stock
Net Loss
Balance at December 31, 1998         4,000,000        $    --       $473,000      $11,290,000   $4,632,000   $ 35,652,000
  Net Loss
Unrealized loss on investments
Comprehensive Loss
Balance at December 31, 1999         4,000,000        $    --       $473,000      $11,290,000   $4,632,000   $ 35,652,000
Net proceeds from issuance of
 Preferred stock                                                                                                 (450,000)
Unrealized gain on investments
Net Loss
Comprehensive Loss
Balance as of March 31, 2000         4,000,000        $    --       $473,000      $11,290,000   $4,632,000   $ 35,202,000

<CAPTION>
                                   Accumulated       Deficit
                                      Other        Accumulated
                                   Comprehensive    During the
                                      Loss          Development        Total
                                                                    ------------
                                                      Stage
                                                      -----
<S>                               <C>            <C>             <C>
Common stock issued                               $         --   $    7,500,000
Common stock issued in exchange
 for in-process research and
 development                                                            361,000
Imputed interest on advances
 from stockholder                                                       799,000
Conversion of stockholder
 advances                                                            10,728,000
Conversion of officer loans                                             336,000
Stock issued in consideration
 for services in 1994, 1995,
 and 1996                                                             1,507,000
Imputed interest on advances
 from stockholder                                                        11,000
Net proceeds from initial
 public offering of Units                                            26,316,000
Net proceeds from exercise of
 over- allotment option                                               4,095,000
Warrants issued in connection
 with issuance of Bridge Notes                                          473,000
Net loss from inception to
 December 31, 1996                                  24,328,000       24,328,000
Balance at December 31, 1996                       (24,328,000)      27,798,000
Adjustment to proceeds from
 initial public offering and
 exercise of overallotment
 option                                                                 (78,000)
Net Loss                                            (6,625,000)      (6,625,000)
Balance at December 31, 1997                       (30,953,000)      21,095,000
Conversion of Class B to A
 Common Stock
Net Loss                                           (10,118,000)     (10,118,000)
Balance at December 31, 1998                      $(41,071,000     $ 10,977,000
  Net Loss                                          (9,341,000)      (9,341,000)
Unrealized loss on investments      (32,000)                            (32,000)
Comprehensive Loss
Balance at December 31, 1999       $(32,000)      $(50,412,000)    $  1,604,000
Net proceeds from issuance of
 Preferred stock                                                      4,550,000
Unrealized gain on investments       28,000                              28,000
Net Loss                                            (1,433,000)      (1,433,000)
                                                                   ------------
Comprehensive Loss                                                   (1,405,000)
Balance as of March 31, 2000       $(4,000)       $(51,845,000)    $  4,749,000
</TABLE>

                                       5
<PAGE>

                    ADVANCED AERODYNAMICS & STRUCTURES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)

                            STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                   PERIOD FROM
                                                                                 JANUARY 26, 1990
                                                       THREE MONTHS               (INCEPTION) TO
                                                     ENDED MARCH 31,                 MARCH 31,
                                                ---------------------------
                                                    1999             2000              2000
                                                -----------      ----------      ---------------
<S>                                             <C>              <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                       $(2,342,000)    $(1,433,000)     $    (51,845,000)
 Adjustments to reconcile net loss to net                 -               -
  cash used in operating activities:
  Noncash stock compensation expense                      -               -             1,207,000
  Noncash interest expense                                -               -               336,000
  Cost of in-process research and
   development acquired                                   -               -               761,000
  Imputed interest on advances from
   stockholder                                                                            810,000
  Interest income from restricted cash
   invested                                         (10,000)                             (474,000)
  Extraordinary loss on retirement of
   Bridge Notes                                           -               -               942,000
  Depreciation and amortization                     203,000         431,000             4,056,000
  Loss on disposal of assets                                                              755,000
  Realized Loss on sale of investments                               43,000                73,000
  Changes in operating assets and liabilities:
    Increase in prepaid expenses and
     other current assets                            15,000         (62,000)               35,000
    Increase (decrease) in other assets               4,000                              (194,000)
    Increase (decrease) in accounts
     payable                                        512,000          37,000              (960,000)
    Increase (decrease) in accrued
     liabilities                                   (259,000)         58,000             1,704,000
    Increase in deferred revenue                     40,000          50,000             1,540,000
                                                -----------      ----------      ----------------
Net cash used in operating activities            (1,837,000)       (876,000)          (41,254,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
 Increase in construction in progress                                                    (446,000)
 Proceeds from insurance claims upon loss
  of aircraft                                             -               -                30,000
 Proceeds from sales of assets                                                          9,803,000
 Capital expenditures                               (81,000)     (1,312,000)           (7,155,000)
 Purchase of certificate of deposit                                                    (1,061,000)
 Proceeds from redemption of certificate
  of deposit                                                                            1,061,000
 Purchase of investments                                         (2,595,000)          (36,315,000)
 Proceeds from maturities of investments
  in bonds                                                                                828,000
 Proceeds from sale of investments                  353,000       2,055,000            32,557,000
 Restricted cash from long term debt                                                   (8,500,000)
 Decrease in restricted cash                                                              405,000
                                                -----------      ----------      ----------------
Net cash provided by (used in) investing
 activities                                         272,000      (1,852,000)           (8,793,000)
FINANCING ACTIVITIES:
 Adjustment to net proceeds from initial
  public offering and exercise of
  over allotment option
 Net Proceeds from issuance of                                                            (78,000)
  convertible preferred stock & warrants                         4,550,000              4,550,000
 Advances from stockholder                                -              -             10,728,000
 Proceeds from issuance of common stock
  prior to initial public offering                        -              -              7,500,000
 Net proceeds from initial public
  offering and exercise of over-allotment
  option                                                  -              -             30,411,000
 Net proceeds from bridge financing                       -              -              6,195,000
 Net proceeds from loans from officers                    -              -                336,000
 Payments on obligation under Capital
  Lease Obligations                                  (7,000)       (59,000)              (334,000)
 Repayment of bridge financing                            -              -             (7,000,000)
                                                -----------      ---------       ----------------
Net cash (used in) provided by financing
 activities                                          (7,000)     4,491,000             52,308,000
                                                -----------      ---------       ---------------
NET (DECREASE) INCREASE IN CASH AND CASH
 EQUIVALENTS                                     (1,572,000)     1,763,000              2,261,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF
 PERIOD                                           2,153,000        498,000                      -
                                                -----------     ----------       ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD      $   581,000     $2,261,000       $      2,261,000
                                                ===========     ==========       ================
SUPPLEMENTAL CASH FLOW INFORMATION:
 Cash paid for interest                              86,000        278,000              2,254,000
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
 Stockholder advances converted to common
  stock                                                                                10,728,000
 Loans from officer converted to common
  stock                                                                                    36,000
 Common stock issued for noncash
  consideration and compensation                                                        1,507,000
 Liabilities assumed from ASI                                                             400,000
 Common stock issued for in-process
  research and development acquired                                                       361,000
 Equipment acquired under capital leases                                                9,894,000
 Deposit surrendered as payment for rents
  due                                                                                      80,000
 Construction in progress acquired with                                                 8,578,000
  restricted cash
</TABLE>

                                       6
<PAGE>

                    ADVANCED AERODYNAMICS & STRUCTURES, INC.
                        (A Development Stage Enterprise)

                         Notes to Financial Statements
                                  (unaudited)

1.  GENERAL

     In the opinion of the Company's management, the accompanying unaudited
financial statements include all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the financial
position of the Company at March 31, 2000 and the results of operations and cash
flows for the three months ended March 31, 2000 and March 31, 1999 respectively
and for the period from January 26, 1990 (inception) to March 31, 2000.
Although the Company believes that the disclosures in these financial statements
are adequate to make the information presented not misleading, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission. Results of operations for interim periods are not
necessarily indicative of results of operations to be expected for any other
interim period or the full year.

     The financial information in this quarterly report should be read in
conjunction with the audited December 31, 1999 financial statements and notes
thereto included in the Company's annual report filed on Form 10-KSB.

     The Company is a development stage enterprise. On December 3, 1996, the
Company successfully completed an initial public offering to finance the
continued development, manufacture and marketing of its product to achieve
commercial viability. The net proceeds of $30,411,000 from the offering,
including the exercise of the overallottment option, were and will be used to
amend its Federal Aviation Administration ("FAA") Type Certificate for technical
revisions to its product, to obtain a FAA Production Certificate for its
product, to repay borrowings under a bridge loan, to expand the Company's sales
and marketing efforts, to establish a new manufacturing facility, and to acquire
production materials and additional tooling and equipment.

     The Company is currently in the process of developing their product and
obtaining appropriate certification from the Federal Aviation Administration. To
date, the Company has generated no sales revenue and none is projected until the
Company can begin commercial production of their product and the certification
process is complete. Prior to commencing deliveries, the Company will need to,
among other things, complete the development of the JETCRUZER 500 and obtain the
requisite regulatory approvals. Based upon the Company's current development
spending levels, current working capital is insufficient to meet the Company's
needs over the next year.

     The Company's management team has been developing a financial plan to
address its working capital requirements. Additionally, the commencement of
production and the collection of progress payments starting in the third quarter
is imperative to the success of management's financial plan to meet its working
capital requirements. There can be no assurances however, that the current
timetable for completion of the development and certification of the aircraft
will not be delayed beyond the current fiscal year. While there is no assurance
that additional financing will be available, the Company's management believes
that it has developed a financial plan that if  executed successfully, will
substantially improve the Company's ability to meet its working capital
requirements.

2.  NET LOSS PER COMMON SHARE

     The Company's net loss per common share was computed based on the weighted
average number of shares of common stock outstanding during the three-month
periods ended March 31, 2000 and 1999 and excludes all outstanding shares of
Class E-1 and Class E-2 Common Stock because the conditions for the lapse of
restrictions on such shares have not been satisfied. There is no difference
between the loss per common share amounts computed for basic and dilutive
purposes because the impact of convertible preferred stock, options and warrants
outstanding are anti-dilutive.

3.  SALE AND LEASEBACK TRANSACTION

     Pursuant to an Agreement dated May 19, 1999, the Company sold to AP-Long
Beach Airport LLC its leasehold interest in real property located at 3205
Lakewood Boulevard, Long Beach, California, together with the manufacturing
hangar facility (approximately 205,000 square feet) and finished office space
(approximately 22,000 square feet) owned by the Company (collectively, the
"Property"). The cash purchase price was $9,800,000.

     As part of this transaction, the Company and AP-Long Beach Airport LLC
entered into an agreement pursuant to which AP-Long Beach Airport LLC has:
subleased the land to the Company subject to the terms at the original land
lease agreement which was

                                       7
<PAGE>

assigned to AP Long Beach Airport LLC and leased the manufacturing hangar
facility and finished office space to the Company for an original term of 18
years. The monthly rent under this facility lease is approximately $106,000. The
Company has an option to extend the original term for an additional ten years.
The monthly rent payable during this additional ten year term would be the
market rental value, as agreed by the parties or as determined by a third party
appraiser or broker. The $246,000 gain on the sale of the facility, which was
deferred, is being amortized over the 18-year lease term.

4.  INDUSTRIAL DEVELOPMENT BONDS

     On August 5, 1997, the Company entered into a loan agreement in connection
with industrial development bonds (IDB) issued by the California Economic
Development Financing Authority. The Company had established in the trustee's
favor a bank letter of credit for the principle amount of $8,500,000, plus 45
days accrued interest on the bonds, which was secured by $8,500,000 of Company
restricted cash. The Company had used the proceeds from the IDBs to finance the
construction and installation of the 200,000 square foot manufacturing facility
and related manufacturing equipment.

     On June 1, 1999, the Company retired all the industrial development bonds
using the restricted cash previously held as security for the IDB.

5. PREFERRED STOCK SUBSCRIPTION

     On March 6, 2000, the Company received $4,550,000 in net proceeds related
to an agreement to issue up to 100,000 shares of 5% Cumulative Convertible
Series A Preferred Stock with a par value of $.0001 for the aggregated purchase
price of $10 million and Common Stock Purchase Warrants to purchase Class A
Common Stock at an above market price. For consideration received in the initial
funding, the Company issued 50,000 shares of Preferred stock and 650,000
Warrants and paid $450,000 in commissions and legal fees. Additionally, as
consideration for the transaction a Special Warrant to purchase up to 25,000
shares Class A Common Stock was issued. The remaining $5,000,000 in funding will
not occur until certain criteria have been met, including passing the
pressurization test for the fuselage structure and completion of the
registration of 200% of the Common Stock underlying the Convertible Preferred
Stock. Terms for the Special Warrant are similar to the terms of the Warrants
issued with the Preferred Stock.

     Holders of the Preferred Stock are entitled to receive cash dividends,
payable quarterly and have preferential liquidation rights above all other
issuances of common stock for an amount equal to the stated value.  The
Preferred stock and unpaid dividends are convertible into shares of Common stock
equal to an amount determined by the market value at the date of close of the
common stock, adjusted for changes in the market price prior to the conversion.
The Preferred stockholders do not have voting rights.  The Warrants are callable
in installments after the registration is effective.  The Company has reserved
4,000,000 of its Class A Common Stock for the conversion of the Preferred Stock.

6. SUBSEQUENT EVENT

     On April 18, 2000 the Company signed a Letter of Agreement for an "equity
line" which permits the Company to sell up to $20,000,000 of its common stock
through a Regulation D offering to a private investor.  In connection with this
sale, the Company will issue 250,000 warrants with a three-year life. The
Company expects to close the deal on or before May 5, 2000, and believes it will
be able to begin equity draws in the third quarter of 2000.

                                       8
<PAGE>

ITEM 2.  PLAN OF OPERATIONS

     Certain statements contained in this report, including statements
concerning the Company's future cash and financing requirements, the Company's
ability to raise additional capital, the Company's ability to obtain market
acceptance of its aircraft, the Company's ability to obtain regulatory approval
for its aircraft, and the competitive market for sales of small business
aircraft and other statements contained herein regarding matters that are not
historical facts, are forward looking statements; actual results may differ
materially from those set forth in the forward looking statements, which
statements involve risks and uncertainties, including without limitation to
those risks and uncertainties set forth in the Company's Registration Statement
on Form SB-2 (No. 333-12273) under the heading "Risk Factors."

     The Company is a development stage enterprise organized to design, develop
manufacture and market propjet and jet aircraft intended primarily for business
use.  Since its inception, the Company has been engaged principally in research
and development of its proposed aircraft.  In March 1990, the Company made
application to the FAA for a Type Certificate for the JETCRUZER 450, which
Certificate was ultimately granted in June 1994. The Company has not generated
any operating revenues to date and has incurred losses from such activities. The
Company believes it will continue to experience losses until such time as it
commences the sale of aircraft on a commercial scale.

     Prior to commencing commercial sales of the JETCRUZER 500, the Company will
need to, among other things, complete the development of the aircraft, obtain
the requisite regulatory approvals, hire additional engineering and
manufacturing personnel and expand its sales and marketing efforts.  The Company
estimates that the cost to complete development of the JETCRUZER 500 and obtain
an amendment of its FAA Type Certificate will be approximately $5,000,000.  This
amount includes the cost of equipment and tooling, static and flight testing of
the aircraft and the employment of the necessary personnel to build and test the
aircraft.

     The Company expects to receive progress payments during the construction of
aircraft and final payments upon the delivery of aircraft.  However, the Company
believes it will continue to experience losses until such time as it commences
the sale of aircraft on a commercial scale.

     During 2000 the Company intends to focus its efforts on the following
events:

 .    Passing the FAA pressurization test. One of the major differences between
     the JETCRUZER 500 and the JETCRUZER 450 is that the JETCRUZER 500 is
     pressurized. After the JETCRUZER 500 passes the pressurization test, the
     Company believes that the remaining tests are tests that have previously
     been performed on the JETCRUZER 450 and, therefore, are more likely to be
     successful. While there can be no assurance, the Company believes that the
     pressurization test can be successfully completed in the second quarter of
     the year 2000.

 .    Completing Company high-speed cruise flight-testing to assure customers of
     the JETCRUZER 500's speed.

 .    The commencement of JETCRUZER 500 production. Upon the successful
     completion of the pressurization and Company speed tests, the Company
     immediately will commence production of the first JETCRUZER 500 planes. The
     Company anticipates that production will start in lots of 4 planes per
     month.

 .    The start of progress payment collections. As the Company starts the
     production process, each customer whose plane is being built will be
     requested to make an initial progress payment, as specified in the
     customer's purchase contract. The Company believes that this event will be
     the start of positive cash flow.

 .    Obtaining Type Inspection Authorization (TIA). This event marks the end of
     Company flight tests and means that the FAA will test the plane, using its
     pilots. The Company believes that this event will occur around the middle
     of year 2000.

 .    Obtaining an amended Type Certificate (TC) for the Jetcruzer 500 from the
     FAA. This means that the Company may deliver planes to its customers. The
     Company believes that this event will occur toward the end of year 2000.

 .    Delivering the first JETCRUZER 500. With the delivery of its first plane,
     the Company will record its first sales revenue and cost of goods sold.

 .    Obtaining a production certificate from the FAA. This will allow use of the
     Company's specified inspectors during the production and delivery processes
     of the JETCRUZER 500. This certification should quickly follow the receipt
     of the TC.

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<PAGE>

     The Company entered into a subscription agreement for the sale of up to
$10,000,000 of 5% Cumulative Convertible Series A Preferred Stock, of which the
Company received net proceeds of $4,550,000.  Additionally, The Company signed a
letter of intent to sell and leaseback manufacturing equipment.  This
transaction will generate an additional $1,000,000.

     The Company's management believes that its current working capital with the
additional funding obtained in March 2000 will be sufficient to finance its plan
of operations through the end of the third quarter, by which time the Company
expects to have received the remaining $5,000,000 of Preferred Stock funding and
the $1,000,000 sale/leaseback funding, as well as the initial positive cash flow
from customer progress payments.  However, there can be no assurances that the
current timetable for completion of the development and certification of the
aircraft will not be delayed beyond the current fiscal year.  If the Company's
estimates prove to be incorrect, or additional sources of financing prove to be
unavailable, if needed, the Company will have to curtail its development plans.


LIQUIDITY AND CAPITAL RESOURCES

     At March 31, 2000, the Company had working capital of $3,986,000 and
stockholders' equity of $4,749,000.  Since its inception in January 1990, the
Company has experienced continuing negative cash flow from operations, which,
prior to the December 1996 IPO, resulted in the Company's inability to pay
certain existing liabilities in a timely manner. The Company has financed its
operations through private funding of equity and debt and through the proceeds
generated from its December 1996 initial public offering.

     The Company expects to continue to incur losses until such time, if ever,
as it obtains regulatory approval for the JETCRUZER 500 and related production
processes and market acceptance for its proposed aircraft at selling prices and
volumes which provide adequate gross profit to cover operating costs and
generate positive cash flow. The Company's working capital requirements will
depend upon numerous factors, including the level of resources devoted by the
Company to the scale-up of manufacturing and the establishment of sales and
marketing capabilities and the progress of the Company's research and
development program for the JETCRUZER 500 and other proposed aircraft.

     The Company's management team has developed a financial plan to address its
working capital requirements.  On March 6, 2000, the Company entered into a
series of subscription agreements for the sale of up to $10,000,000 of 5%
Cumulative Convertible Series A Preferred Stock, from which the Company has
received net proceeds of $4,550,000, to date.  Additionally, the Company signed
a letter of intent to sell and leaseback manufacturing equipment.  This
transaction will generate an additional $1,000,000.

     The remaining $5,000,000 in Preferred Stock funding will not occur until
certain criteria have been met, including passing the pressurization test for
the fuselage structure and completion of the registration of 200% of the Common
Stock underlying the Convertible Preferred Stock.  It is anticipated that the
remaining proceeds will be received in two installments:  $2,000,000 in the
second quarter and the final $3,000,000 in the third quarter.

     Also, subsequent to March 31, 2000, the Company signed a Letter of
Agreement for an "equity line" which permits the Company to sell up to
$20,000,000 of its common stock to a private investor.  The Company believes it
will be able to begin equity draws in the third quarter of 2000.

     While there is no assurance that additional financing will be available,
the Company's management believes that it has developed a financial plan that,
if executed successfully, will substantially improve the Company's ability to
meet its working capital requirements.  This financial plan includes the
commencement of production and the collection of progress payments to assist
with the working capital requirements.  However, there can be no assurances that
the current timetable for completion of the commencement of production and
development and certification of the aircraft will not be delayed beyond the
current fiscal year. If the Company's estimates prove to be incorrect, or
additional sources of financing prove to be unavailable, if needed, the Company
may have to curtail its development plans.

     In November 1998 the Company moved into its manufacturing and headquarters
facility.  The primary financing for this project was the Company's obligation
under a loan agreement related to proceeds received from $8,500,000 in the
issuance of Industrial Development Bonds (IDB) by the California Economic
Development Financing Authority (the "Authority"). The Company was required to
provide cash collateral to The Sumitomo Bank, Limited (the "Bank") in the amount
of $8,500,000 for a stand-by letter of credit in favor of the holders of the
IDBs which was to expire on August 5, 2002, if not terminated earlier by the
Company or the

                                       10
<PAGE>

Bank. The IDBs were retired in 1999 and the stand-by letter of credit in favor
of the holders of the IDBs was terminated by the Company.

     In June, 1999, the Company sold its 200,000 square-foot building to The
Abbey Company and leases it back.  The purchase price of the building was
$9,800,000 and the term of the lease is eighteen years plus an option to extend
the lease for an additional ten years.  Monthly payments under the terms of the
leaseback are approximately $106,000 and will be adjusted annually, after the
first year, for changes in the Consumer Price Index, not to exceed 3% per annum.
The rent for periods after the eighteenth year would be at fair market rental
value.

     The Company leases approximately 10 acres of land located on the Long Beach
Airport in Long Beach, California. The lease commenced on January 14, 1999 and
has a term of 30 years with an option to renew for an additional 10 years. The
lease also contains options to lease other airport properties. An escalation
clause in the lease increases the monthly rent to $7,400 beginning July 1999.
The lease contains incremental increases that escalate the monthly rent to
approximately $15,600 after 5 years.

     The Company had no material capital commitments at March, 2000, other than
discussed elsewhere in this report. The Company intends to hire a number of
additional employees, which will require substantial capital resources. The
Company anticipates that it will hire up to 200 employees over the next twelve
months, including engineers and manufacturing technicians necessary to produce
its aircraft.

CHARGE TO INCOME IN THE EVENT OF CONVERSION OF PERFORMANCE SHARES

     In the event the Company attains certain earnings thresholds or the
Company's Class A Common Stock meets certain minimum bid price levels, the Class
E Common Stock will be converted into Class B Common Stock.  In the event any
such converted Class E Common Stock is held by officers, directors, employees or
consultants, the maximum compensation expense recorded for financial reporting
purposes will be an amount equal to the fair value of the shares converted at
the time of such conversion which value cannot be predicted at this time.
Therefore, in the event the Company attains such earnings thresholds or stock
price levels, the Company will recognize a substantial charge to earnings during
the period in which such conversion occurs, which would have the effect of
increasing the Company's loss or reducing or eliminating its earnings, if any,
at that time.  In the event the Company does not attain these earnings
thresholds or minimum bid price levels, and no conversion occurs, no
compensation expense will be recorded for financial reporting purposes.

                                       11
<PAGE>

                           PART II. OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

              27.  Financial Data Schedule


         (b)  Reports on Form 8-K

              None

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<PAGE>

                                   SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                  ADVANCED AERODYNAMICS & STRUCTURES, INC.


                                  By:  /s/ Carl L. Chen
                                       ---------------------------
                                       Carl L. Chen, President


                                  By:  /s/ Dave Turner
                                       ----------------------------
                                       Dave Turner, Chief Financial Officer


Dated:  April 26, 2000

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