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 September 30, 1997

   [ ]                       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 No.)


                             3501 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 November 11, 1997, the issuer had outstanding  6,900,000 shares of Class A
Common  Stock,  2,000,000  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>


                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements


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

                                  Balance Sheet
                                   (unaudited)

<TABLE>
                                          December 31, 1996  September 30, 1997
                                          -------------------------------------
<S>                                       <C>                <C>

Assets
Current Assets:
   Cash and cash equivalents               $24,222,000        $ 6,922,000
   Marketable securities                     2,026,000          4,912,000
   Certificate of deposit                       12,000          1,012,000
   Prepaid expenses and other current 
     assets                                    155,000            445,000
                                         --------------------------------------
         Total current assets               26,415,000         13,291,000

Long-term Assets:
   Restricted cash                                              8,500,000
   Property and equipment, net               1,686,000          2,092,000
   Other assets                                                   689,000
                                         --------------------------------------
         Total long-term assets            $ 1,686,000         11,281,000
                                         ======================================
         Total assets                      $28,101,000        $24,572,000
                                         ======================================
</TABLE>
















                 See accompanying notes to financial statements.


                                        1

<PAGE>


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



                            Balance Sheet (continued)
                                   (unaudited)

<TABLE>
                                                         December 31, 1996   September 30, 1997
                                                         --------------------------------------
<S>                                                       <C>                 <C>
Liabilities and Stockholders' Equity

Current liabilities:
   Accounts payable                                        $   145,000           $   111,000
   Accrued liabilities                                         158,000               443,000
                                                         --------------------------------------
         Total current liabilities                             303,000               554,000

Long-term liabilities:             
   Bonds payable                                                                     170,000
   Deferred revenue                                                                  370,000
                                                         --------------------------------------
         Total long-term liabilities                                                 540,000
                                                         --------------------------------------
         Total liabilities                                     303,000             1,094,000
                                                         --------------------------------------

Stockholders' equity:
   Preferred stock, par value $.0001 per share;
      5,000,000 shares authorized; no shares
      issued and outstanding
   Class  A  Common  Stock,  par  value  $.0001  
      per  share;  60,000,000  shares authorized; 
      6,900,000 shares issued and outstanding                    1,000                 1,000
   Class B Common Stock, par value $.0001 per share;
      10,000,000 shares authorized; 2,000,000 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               473,000
      Class A Warrants                                      11,290,000            11,290,000
      Class B Warrants                                       4,632,000             4,632,000
   Additional paid-in capital (note 5)                      35,730,000            35,652,000
   Deficit accumulated during the development stage        (24,328,000)          (28,570,000)
                                                         --------------------------------------
         Total stockholders' equity                         27,798,000            23,478,000
                                                         --------------------------------------
         Total liabilities and stockholders' equity        $28,101,000           $24,572,000
                                                         ======================================

</TABLE>







                 See accompanying notes to financial statements.


                                        2

<PAGE>


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


                             Statement of Operations
                                   (unaudited)

<TABLE>
                                                                                                            Period from
                                                                                                          January 26, 1990
                                                Three Months Ended               Nine Months Ended         (inception) to
                                                   September 30,                   September 30,            September 30,
                                          -----------------------------------------------------------------------------------------
                                               1996             1997           1996            1997             1997
                                          -----------------------------------------------------------------------------------------
<S>                                         <C>               <C>             <C>            <C>            <C>    
Other income                                $                 $               $   7,000     $    7,000      $     717,000
Investment income                                3,000           243,000          4,000        884,000          1,054,000
                                          -----------------------------------------------------------------------------------------
                                                 3,000           243,000         11,000        891,000          1,771,000
Costs and expenses:
   Research and development costs                              1,781,000                     3,013,000         16,649,000
   Preoperating costs                                                                                             282,000
   General and administrative expenses          249,000          827,000      1,418,000      2,014,000          9,404,000
   Loss on disposal of assets                                                                  106,000            463,000
   Interest expense                             134,000                         319,000                         1,840,000
   In-process research and development
      acquired                                                                                                    761,000
                                          -----------------------------------------------------------------------------------------
                                                383,000        2,608,000      1,737,000      5,133,000         29,399,000
                                          -----------------------------------------------------------------------------------------
Loss before extraordinary item                 (380,000)      (2,365,000)    (1,726,000)    (4,242,000)       (27,628,000)

Extraordinary loss on retirement of Bridge      
      Notes                                                                                                      (942,000)
                                          -----------------------------------------------------------------------------------------
        Net loss                            $  (380,000)     $(2,365,000)   $(1,726,000)   $(4,242,000)      $(28,570,000)
                                          -----------------------------------------------------------------------------------------
Net loss per share                                $(.11)           $(.27)         $(.51)         $(.48)
                                          -----------------------------------------------------------------------------------------
Weighted average number of shares 
     outstanding                              3,400,000        8,900,000      3,400,000      8,900,000
                                          -----------------------------------------------------------------------------------------

</TABLE>









                 See accompanying notes to financial statements.


                                        3

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


                        Statement of Stockholders' Equity

 
<TABLE>
                                                                                        Common Stock
                              Preferred Stock          Class A             Class B              Class B-1            Class B-2
                             Shares     Amount     Shares    Amount     Shares    Amount     Shares    Amount     Shares    Amount
<S>                          <C>        <C>        <C>       <C>        <C>       <C>        <C>       <C>
Common stock issued                                                     418,094    $--       836,189     $--      836,189     $--

Common stock issued in
exchange for in-process
research and development                                                201,494     --       402,988      --      402,988      --

Imputed interest on 
advances from stockholder

Net loss from inception to
December 31, 1994
                             -------------------------------------------------------------------------------------------------------

Balance at December 31,
1994                                                                    619,588     --     1,239,177     --     1,239,177      --

Imputed interest on 
advances from stockholder

Net loss
                             -------------------------------------------------------------------------------------------------------

Balance at December 31,
1995                                                                    619,588     --    1,239,177      --    1,239,177       --

Conversion of stockholder
advances                                                                598,011     --    1,196,021      --    1,196,021       --

Conversion of officer loans                                             187,118     --      374,236      --      374,236       --

Stock issued in consideration
for services in 1994, 1995
and 1996                                                                595,283     --    1,190,566      --    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 overallotment option                             900,000     --

Warrants issued in
connection with issuance of
Bridge Notes

Net loss
                              ------------------------------------------------------------------------------------------------------

Balance at December 31,
1996                                             6,900,000   $1,000   2,000,000     --    4,000,000      --   4,000,000        --

Adjustment to proceeds from
initial public offering and
exercise of overallotment
option

Net loss
                              ------------------------------------------------------------------------------------------------------

Balance at September 30,
1997 (unaudited)                                6,900,000    $1,000   2,000,000     --    4,000,000      --   4,000,000        --
</TABLE>




                 See accompanying notes to financial statements

                                       4
<PAGE>

                     Advanced Aerodynamics & Structure, Inc.
                        (A Development Stage Enterprise)


                  Statement of Stockholder's Equity (continued)


<TABLE>
                                                                                           Deficit
                                 Bridge              Warrants                            Accumulated
                              Warrants to                                Additional       During the
                                Purchase                                  Paid-in         Development
                              Common Stock     Class A      Class B       Capital            Stage           Total
<S>                           <C>              <C>          <C>           <C>           <C>   
 
Common stock issued                                                      $7,500,000                       $7,500,000
     
Common stock issued in
exchange for in-process
research and development                                                    361,000                          361,000
 
Imputed interest on 
advances from stockholder                                                   776,000                          776,000

Net loss from inception to
December 31, 1994                                                                      $(19,252,000)    $(19,252,000)
                            -------------------------------------------------------------------------------------------

Balance at December 31,
1994                                                                      8,637,000     (19,252,000)     (10,615,000)

Imputed interest on 
advances from stockholder                                                    23,000                           23,000

Net loss                                                                                 (1,688,000)      (1,688,000)
                            -------------------------------------------------------------------------------------------

Balance at December 31,
1995                                                                      8,660,000     (20,940,000)     (12,280,000)

Conversion of stockholder
advances                                                                 10,728,000                       10,728,000

Conversion of officer loans                                                 336,000                          336,000

Stock issued in consideration
for services in 1994, 1995
and 1996                                                                  1,507,000                        1,507,000

Imputed interest on advances
from stockholder                                                             11,000                           11,000

Net proceeds from initial
public offering of Units                       $9,583,000  $4,166,000    12,566,000                       26,316,000

Net proceeds from exercise
of overallotment option                         1,707,000     466,000     1,922,000                        4,095,000

Warrants issued in
connection with issuance of
Bridge Notes                     $473,000                                                                    473,000

Net loss                                                                                (3,388,000)       (3,388,000)
                            -------------------------------------------------------------------------------------------

Balance at December 31,
1996                             $473,000     $11,290,000  $4,632,000   $35,730,000   $(24,328,000)      $27,798,000

Adjustment to proceeds from
initial public offering and
exercise of overallotment
option                                                                      (78,000)                         (78,000)

Net loss                                                                               (4,242,000)        (4,242,000)
                           --------------------------------------------------------------------------------------------

Balance at September 30,
1997 (unaudited)                 $473,000     $11,290,000  $4,632,000   $35,652,000   $28,570,000)       $23,478,000

</TABLE>

               See accompanying notes to financial statements

                                        5


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

                            Statement of Cash Flows
                                  (unaudited)
           
  
<TABLE>
                                                                                                       Period from
                                                                                                    January 26, 1990
                                                                     Nine Months Ended               (inception) to
                                                                        September 30,                 September 30,
                                                           -----------------------------------------------------------------------
                                                                  1996               1997                 1997
                                                           -----------------------------------------------------------------------
                                                              (unaudited)         (unaudited)
<S>                                                          <C>                 <C>                 <C>
Cash flows from operating activities:
   Net loss                                                  $(1,726,000)        $(4,242,000)        $(28,570,000)
   Adjustments to reconcile net loss to net cash
   used in operating activities:
      Noncash stock compensation expense                         590,000                  --            1,207,000
      Noncash interest expense                                   105,000                                  336,000
      Cost of in-process research and development
         acquired                                                                                         761,000
      Imputed interest on advances from stockholder               11,000                                  810,000
      Extraordinary loss on retirement of Bridge Notes                                                    942,000
      Depreciation and amortization                              245,000             272,000            2,086,000
      Loss on disposal of assets                                                     106,000              463,000
      Changes in assets and liabilities:
          Decrease (increase) in prepaid expenses and 
              other current assets                                                  (290,000)            (445,000)
          Increase in other assets                                                  (689,000)            (689,000)
          Increase (decrease) in accounts payable                121,000             (34,000)             111,000
          Increase (decrease) in accrued liabilities            (389,000)            285,000              343,000
          Increase in interest payable                          (177,000)
          Increase in deferred revenue                                               370,000              370,000               
          Increase in receivable from officer                   (115,000)       
                                                           -----------------------------------------------------------------------
         Net cash used in operating activities                (1,335,000)         (4,222,000)         (22,275,000)
                                                           -----------------------------------------------------------------------
Cash flows from investing activities:
   Purchased restricted cash                                                      (8,500,000)          (8,500,000)
   Proceeds from insurance claims upon loss of aircraft                                                    30,000
   Proceeds from disposal of assets                                                    3,000                3,000
   Capital expenditures                                                             (787,000)          (4,634,000)
   Purchase of certificate of deposit                              (1,000)        (1,000,000)          (1,012,000)
   Purchase of marketable securities                           (1,499,000)        (6,212,000)          (8,238,000)
   Proceeds from sale of marketable securities                                     3,326,000            3,326,000
                                                           -----------------------------------------------------------------------
         Net cash used in investing activities                 (1,500,000)       (13,170,000)         (19,025,000)
                                                           ------------------------------------------------------------------------
Cash flows from financing activities:
   Advances from stockholder                                                                           10,728,000
   Proceeds from issuance of common stock prior to
      initial public offering                                                                           7,500,000

</TABLE>


                                        6

<PAGE>


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

                      Statement of Cash Flows (continued)
                                  (unaudited)

<TABLE>
                                                                                                       Period from
                                                                                                     January 26, 1990
                                                                     Nine Months Ended                (inception) to
                                                                       September 30,                   September 30
                                                           ------------------------------------------------------------------------
                                                                  1996               1997                  1997
                                                           ------------------------------------------------------------------------
<S>                                                          <C>                  <C>                  <C>
   Net proceeds from initial public offering and
      exercise of over-allotment option                                          (78,000)               30,333,000
   Net proceeds from bridge financing                                                                    6,195,000
   Repayment of bridge financing                                                                        (7,000,000)
   Repayment of obligation under capital leases                 (15,000)                                   (40,000)
   Proceeds from loan from officer                              402,000                                    336,000
   Repayment of loan from officer                              (226,000)
   Repayment of bank note                                      (900,000)
   Repayment of loan from SIDA Corporation                     (110,000)
   Repayment of other short-term loans                         (565,000)
   Proceeds from bridge financing, net of issuance costs      6,195,000
   Increase in deferred offering costs                         (586,000)
   Proceeds from bonds                                                           170,000                   170,000
                                                           ------------------------------------------------------------------------
        Net cash provided by financing activities             4,195,000           92,000                48,222,000
                                                           ------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents          1,360,000      (17,300,000)                6,922,000
Cash and cash equivalents at beginning of period                 --           24,222,000                        --
                                                           ------------------------------------------------------------------------
Cash and cash equivalents at end of period                  $ 1,360,000      $ 6,922,000               $ 6,922,000
                                                           ========================================================================
Supplemental cash flow information:
   Cash paid for interest                                                                              $   694,000
                                                                                                 
Supplemental disclosure of noncash investing and
   financing activities:
   Stockholder advances converted to common stock           $10,728,000                                $10,728,000
   Loan from officer converted to common stock              $   336,000                                $   336,000
   Common stock issued for noncash consideration
       and compensation                                     $ 1,507,000                                $ 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                                                             $    40,000
   Deposit surrendered as payment for rents due                                                        $    80,000
                                                                                                
</TABLE>





                 See accompanying notes to financial statements.


                                        7

<PAGE>


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


                          Notes to Financial Statements

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 September 30, 1997 and the results of operations
     and cash  flows for the nine  months  ended  September  30,  1997 and 1996.
     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, 1996  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 the  offering  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.

2.   Net Loss Per Share

     The Company's net loss per share was computed based on the weighted average
     number  of shares of common  stock  outstanding  during  the three and nine
     month  periods  ended   September  30,  1996  and  1997  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.

     Pursuant to Securities and Exchange  Commission Staff  Accounting  Bulletin
     No. 83,  certain common stock  equivalents  issued by the Company have been
     included as  outstanding in net loss per share  computations  for the three
     and nine month periods ended September 30, 1996.  Common stock  equivalents
     were not included in the net loss per share  computation  for the three and
     nine month periods ended September 30, 1997 as their effect on net loss per
     share is antidilutive.

     In February 1997, the Financial Accounting Standards Board issued Statement
     of Financial  Accounting  Standards ("SFAS") No. 128, "Earnings per Share."
     SFAS No. 128  establishes  standards for computing and presenting  earnings
     per share ("EPS") and supersedes APB Opinion No. 15,  "Earnings per Share."
     It replaces the  presentation  of primary EPS with a presentation  of basic
     EPS. It also requires dual presentation of basic and diluted EPS on the

                                       8
<PAGE>

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


                          Notes to Financial Statements


     face  of the  income  statement  for  all  entities  with  complex  capital
     structures and requires a  reconciliation  of the numerator and denominator
     of the  basic EPS  computation  to the  numerator  and  denominator  of the
     diluted EPS computation. SFAS No. 128 will become effective for the Company
     for the year ending  December 31, 1997.  The impact of the adoption of SFAS
     No.  128 on the  Company's  financial  statements  is  not  expected  to be
     material.


3.   Stock Option Plan

     On March 4, 1997,  options  to  purchase  210,000  shares of Class A Common
     Stock were granted,  at an exercise price of $5 per share, by the Company's
     Board of Directors to certain employees,  officers,  consultants and agents
     of the Company.  On May 27,  1997,  options to purchase  100,000  shares of
     Class A Common Stock were granted to the President, at an exercise price of
     $5.00 per share.

4.   Industrial Development Bonds

     On August 5, 1997,  the  Company  entered  into a loan  agreement  with the
     California  Economic  Development  Financing  Authority for the issuance of
     $8,500,000 in variable rate demand  industrial  development bonds ("IDBs").
     The Company will use the proceeds from the IDBs to finance the construction
     and  installation  of a 200,000  square  foot  manufacturing  facility  and
     related manufacturing equipment.

     The Company was required to provide cash collateral to a bank in the amount
     of  $8,500,000  for an  irrevocable  direct-pay  letter of  credit  for the
     payments of principal and interest.  The letter of credit,  unless extended
     or terminated by the Company or the bank, will expire on August 5, 2002.

5.   Land Lease for Manufacturing and Headquarters Facility

     On  October  17,  1997 the  Company  entered  into a Lease  Agreement  (the
     "Lease") with the City of Long Beach (the "Landlord"),  whereby the Company
     leased from the Landlord approximately 10 acres of land located on the Long
     Beach Airport.  The purpose of the Lease is to effectuate the  construction
     of an  approximately  200,000 square foot  manufacturing  and  headquarters
     facility.   The  Lease  also  contains   options  to  lease  other  airport
     properties.  The monthly rent under the Lease is $4,500, which monthly rent
     escalates to approximately $15,600 after five (5) years.

     The Lease term  commences on November 15, 1997 (subject to extension by the
     Landlord) but not until all  "Conditions to Commencement of Term" have been
     met.  The lease term is 30 years with an option to renew for an  additional
     10 years.

6.   Contract to Construct a Manufacturing and Headquarters Facility

     On October 29, 1997, the Company  entered into an agreement with Commercial
     Developments  International/West  (Design/Builder)  whereby  Design/Builder
     shall design and build an approximately  200,000 square foot  manufacturing
     and headquarters  facility. The contract sum for this project is "Cost plus
     Fixed Fees" with a  Guaranteed  Maximum  Price of  $6,300,000.  Any savings
     realized upon  completion  and  acceptance of the project will be shared by
     the Design/Builder  and the Company.  The Company believes that the project
     will be completed in the second quarter of 1998.



                                       9
<PAGE>

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


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 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 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. As a result,  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,  establish an  appropriate  manufacturing
facility, 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  $8,000,000.  This amount includes the cost of
equipment and tooling (estimated at approximately $1,500,000), static and flight
testing  of  the  aircraft  (estimated  at  approximately  $2,500,000)  and  the
employment of the necessary  personnel to build and test the aircraft (estimated
at approximately $4,000,000).

     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.

     Through the end of the third quarter of 1998, the Company  intends to focus
its efforts in the following areas: (i) the completion of the development of the
JETCRUZER 500, including, among other things, adding a larger engine, completing
the  pressurization,  environmental  systems,  and de-icing  capabilities of the
aircraft,  obtaining  autopilot  certification,  and  lengthening the aircraft's
fuselage;  (ii)  obtaining an amendment to the  Company's  Type  Certificate  to
include the JETCRUZER 500,  including the manufacture of FAA conformed models of
the JETCRUZER 500 and static and flight testing;  (iii) building a manufacturing
facility capable of producing the JETCRUZER 500 on a commercial scale, including
establishing a production line in such facility,  acquiring production inventory
and  additional  equipment,  and  tooling and  computer  hardware  and  software
systems;  (iv)  obtaining a production  certificate  from the FAA and commencing
commercial  production of the JETCRUZER  500; (v) expanding the Company's  sales
and marketing  staff and  increasing  its marketing  efforts with respect to the
JETCRUZER 500; and (vi) increasing the Company's engineering,  manufacturing and
administrative  staff in  anticipation  of increased  development and production
activities.  The Company  believes  that the net proceeds from the December 1996
IPO will be sufficient to finance its plan of operations  through  approximately
the third  quarter  of 1998,  based  upon the  current  status  of its  business
operations,  its current plans and current economic and industry conditions.  If
the Company's estimates prove to be incorrect,  however, then during such period
the Company may have to seek additional  sources of financing,  reduce operating
costs and/or curtail growth plans.

Liquidity and Capital Resources

     At September 30, 1997, the Company had working  capital of $12,737,000  and
stockholders'  equity of  $24,572,000.  Since its inception in January 1990, the
Company has experienced  continuing  negative cash flow from operations,  which,
prior to its recent 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 its December 1996 IPO.

                                       10
<PAGE>

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




     The Company expects its cash  requirements to increase in the future due to
higher expenses associated with product development,  the scale-up of production
(including  capital  investment in production  equipment),  intensification of a
sales and  marketing  program,  the hiring of  personnel  and other  anticipated
operating activities. The Company also 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  expects that the net  proceeds of the  December  1996 IPO will
enable it to meet its  liquidity and capital  requirements  at least through the
third quarter of 1998, by which time the Company expects to have received a type
certificate  and a production  certificate  for the  JETCRUZER 500 and commenced
commercial  production  and sale of the JETCRUZER  500. Such proceeds are being,
and will be used primarily for amendment of the Type  Certificate,  the purchase
of equipment and tooling,  the  establishment of a manufacturing  facility,  and
sales and marketing.  The Company's capital requirements are subject to numerous
contingencies  associated  with  development  stage  companies.  Specifically if
delays are  encountered in amending the current Type  Certificate,  the time and
cost  of  obtaining  such  certification  may  be  substantial,  may  render  it
impossible for the Company to complete such new or amended certification and may
therefore  have a  material  and  adverse  effect on the  Company's  operations.
Further,  if the Company has not completed the  development of the JETCRUZER 500
or  received  the  required  regulatory  approvals  and  successfully  commenced
commercial  sales of its aircraft by the third quarter of 1998,  the Company may
require  additional  funding to fully implement its proposed  business plan. The
Company has no commitments  from any third parties for any future  funding,  and
there can be no assurance  that the Company will be able to obtain  financing in
the future from bank  borrowings,  debt or equity  financing or other sources on
terms acceptable to the Company or at all. In the event necessary financing were
not obtained,  the Company would be materially and adversely  affected and might
have to cease or substantially reduce operations.

     The Company had no other material capital commitments at September 30, 1997
other than as discussed in this report.  The Company intends to hire a number of
additional employees and to establish a larger manufacturing  facility,  both of
which will require substantial  capital resources.  The Company anticipates that
it will  hire  approximately  10  employees  over the next  six  months  and 150
employees  over  the  next 21  months,  including  engineers  and  manufacturing
technicians necessary to produce its aircraft.



                                       11
<PAGE>

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



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.

Financing of Manufacturing and Headquarters Facility

     On August 5, 1997, the Company  entered into agreements with the California
Economic Development  Financing Authority (the "Authority"),  The Sumitomo Bank,
Limited  (the "Bank") and  Rauscher  Pierce  Refnes,  Inc.  (the  "Underwriter")
whereby the Authority issued $8,500,000 in industrial development bonds ("IDBs")
to the  Authority  and loaned the proceeds to the Company.  The Bank  provided a
letter of credit to support the payment of  principal  and  interest on the IDB.
The  Company  will use the  loan  proceeds  from  the IDBs for the  acquisition,
construction and equipping of an approximately 200,000 square foot manufacturing
and headquarters facility located in the City of Long Beach, California.

     The Company  was  required to provide  cash  collateral  to 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 stand-by letter of credit will expire on August 5, 2002, if not
terminated earlier by the Company or the Bank.

Item 5.  Other Information

Land Lease for Manufacturing and Headquarters Facility

     On  October  17,  1997 the  Company  entered  into a Lease  Agreement  (the
"Lease")  with the City of Long  Beach (the  "Landlord"),  whereby  the  Company
leased  from the  Landlord  approximately  10 acres of land  located on the Long
Beach Airport.  The purpose of the Lease is to effectuate the construction of an
approximately 200,000 square foot manufacturing and headquarters  facility.  The
Lease also contains options to lease other airport properties.  The monthly rent
under the Lease is $4,500, which monthly rent escalates to approximately $15,600
after five (5) years.

     The Lease term  commences on November 15, 1997 (subject to extension by the
Landlord) but not until all  "Conditions to Commencement of Term" have been met.
The lease term is 30 years with an option to renew for an additional 10 years.

Contract to Construct a Manufacturing and Headquarters Facility

     On October 29, 1997, the Company  entered into an agreement with Commercial
Developments  International/West  (Design/Builder)  whereby Design/Builder shall
design  and  build  an  approximately  200,000  square  foot  manufacturing  and
headquarters  facility.  The  contract  sum for this project is "Cost plus Fixed
Fees" with a Guaranteed  Maximum Price of $6,300,000.  Any savings realized upon
completion  and  acceptance of the project will be shared by the  Design/Builder
and the Company.  The Company believes that the project will be completed in the
second quarter of 1998.


                                       12
<PAGE>
                    ADVANCED AERODYNAMICS & STRUCTURES, INC.
                        (A Development Stage Enterprise)


                           PART II - OTHER INFORMATION

Item 6.  Exhibits and Reports of Form 8-K

         (a)      Exhibits:


Exhibit No.       Description                                          
-------------------------------------------------------------------------------

*    3.1          Certificate of Incorporation
**   3.2          Bylaws
*    3.3          Amendment to Certificate of Incorporation
*    4.1          Specimen Certificate of Class A Common Stock
*    4.2          Warrant Agreement (including form of Class A and 
                  Class B Warrant Certificates
*    4.3          Form of Underwriter's Unit Purchase Option
*   10.1          Form of Indemnification Agreement
**  10.2          Amended 1996 Stock Option Plan
*   10.3          Employment Agreement dated as of May 1, 1996 between 
                  the Company and Dr.  Carl L. Chen
*   10.4          Agreement of Merger dated July 16, 1996 between 
                  Advanced Aerodynamics and Structures, Inc., 
                  California corporation, and Advanced Aerodynamics 
                  & Structures, Inc., a Delaware corporation
**  10.5          Lease dated December 19, 1996 between Olen 
                  Properties Corp., a Florida corporation, and the Company
*** 10.6          Standard Sublease dated June 27, 1997 with Budget 
                  Rent-a-Car of Southern California
*** 10.7          Standard Sublease dated July 16, 1997 with Budget 
                  Rent-a-Car of Southern California
*** 10.8          Standard Industrial/Commercial Multi-Tenant Lease-Gross
                  dated March 12, 1997 with the Golgolab Family Trust
    10.9          Loan Agreement dated as of August 1, 1997 between the
                  Company and the California Economic Development Authoroity
    10.10         Indenture of Trust dated as of August 1, 1997 between 
                  the California Economic Development Authority and
                  First Trust of California, National Association
****10.11         Official Statement dated August 5, 1997
    10.12         Letter of Credit issued by The Sumitomo Bank, Limited
    10.13         Reimbursement Agreement dated as of August 1, 1997 
                  between the Company and The Sumitomo Bank, Limited
    10.14         Purchase Contract dated August 1, 1997 by and among
                  Rauscher Pierce Refnes, Inc., the California Economic
                  Development Authority and the Treasurer of the State
                  of California, and approved by the Company
    10.15         Remarketing Agreement dated as of August 1,1997
                  between the Company and Rauscher Pierce Refnes, Inc.
    10.16         Blanket Letters of Representations of the California
                  Economic Development Authority and First Trust of
                  California, National Association
    10.17         Tax Regulatory Agreement dated as of August 1, 1997
                  by and among the California Economic Development
                  Authority, the Company and First Trust of California,
                  National Association
    10.18         Custody, Pledge and Security Agreement dated as of August 1, 
                  1997 between the Company and The Sumitomo Bank, Limited
    10.19         Investment Agreement dated August 5, 1997 by and
                  between the Company and The Sumitomo Bank, Limited
    10.20         Specimen Direct Obligation Note between the Company
                  and The Sumitomo Bank, Limited
****10.21         Lease Agreement dated October 17, 1997 between the
                  Company and the City of Long Beach
****10.22         Construction Agreement dated October 29,1997 between the
                  Company and Commercial Developments International/West
    11.1          Statement re: Computation of Per Share Earnings
    27            Financial Data Schedule

   * Incorporated by reference to the Company's  Registration  Statement on Form
SB-2 (333-12273) declared effective by the Securities and Exchange Commission on
December 3, 1996.

   **  Incorporated  by reference to the  Company's  Report on Form 10-KSB filed
with the Securities and Exchange Commission on March 31, 1997.

   *** Incorporated by reference by the Company's Post-Effective Amendment No. 1
to Form SB-2  Registration  Statement  filed with the  Securities  and  Exchange
Commission on August 5, 1997.

   ****  Filed  by paper  pursuant  to the  Company's  request  for a  temporary
hardship exemption relating to this report.

         Reports on Form 8-K:

          During the quarter  ended  September  30, 1997,  the Company filed one
report on Form 8-K dated October 30, 1997 and  incorporated  by  reference.  The
Form 8-K was filed due to a change in the Company's independent accountant.


                                       13

<PAGE>


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


                                   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.

Dated:  November 14, 1997               ADVANCED AERODYNAMICS & STRUCTURES, INC.


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


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







                                       14