SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 --------------

                                   FORM 10-QSB

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934.

      For the quarterly period ended March 31, 1997

                                       AND

|_|   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934

      For the Transition period from____________to______________

                         Commission File Number 33-94884

                            COATES INTERNATIONAL LTD.
             (Exact name of registrant as specified in its charter)

    Delaware                                            22-2925432
(State or other jurisdiction of                    (IRS Employer
 incorporation or organization)                     Identification No.)

Highway 34 & Ridgewood Road, Wall Township, New Jersey           07719
(Address of principal executive offices)                        (Zip Code)

Registrant's telephone number, including area code (908) 449-7717


------------------------------------------------------------------------------
(Former name, former address and formal fiscal year if changed since last 
report)

Check whether the registrant (1) has filed all reports required to be filed by 
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.                    Yes            No  X

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the  registrant  filed all  documents  and reports  required to be
filed by Section  12, 13 or 15(d) of the  Securities  and  Exchange  Act of 1934
after the distribution of securities under a plan confirmed by a court.
                         Yes ___        No ___

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the  latest  practicable  date:  5,963,600  shares  of  Series  A
Preferred Stock at March 31, 1997


<PAGE>





                            COATES INTERNATIONAL LTD.

          Quarterly Report on Form 10Q for Quarter Ended March 31, 1997

                         PART I - FINANCIAL INFORMATION


Item 1.          Financial Statements

      Attached.

                                        1

<PAGE>



COATES INTERNATIONAL, LTD.
[A DEVELOPMENT STAGE COMPANY]
------------------------------------------------------------------------------


CONDENSED BALANCE SHEETS
------------------------------------------------------------------------------

<TABLE>

                                                                              March 31,
                                                                       1 9 9 7       1 9 9 6
Assets:
Current Assets:
<S>                                                                  <C>          <C>        
  Cash and Cash Equivalents                                          $   13,053   $    54,846
  Inventory                                                             205,072        41,615
  Prepaid Expenses                                                       10,287            --
                                                                     ----------   -----------

  Total Current Assets                                                  228,412        96,461
                                                                     ----------   -----------

Property, Plant and Equipment - Net                                   1,612,371     1,628,003
                                                                     ----------   -----------

Other Assets:
  Deposit                                                                 2,500         2,500
  Due from Stockholder                                                   12,042        37,746
  Due from Affiliated Companies                                           4,428         2,116
                                                                     ----------   -----------

  Total Other Assets                                                     18,970        42,362
                                                                     ----------   -----------

  Total Assets                                                       $1,859,753   $ 1,766,826
                                                                     ==========   ===========

Liabilities and Stockholders' Equity [Deficit]:
Current Liabilities:
  Amounts Due to Potential Investors                                 $  486,970   $        --
  Redeemable Series A Preferred Stock                                    10,000       496,970
  Mortgage Payable                                                      210,000       250,000
  Accrued Legal Fees                                                  1,333,011       757,442
  Accounts Payable                                                       43,121        50,703
  Accrued Interest                                                      109,408       174,693
  Other Accrued Expenses                                                177,936        92,751
  Due to Stockholder                                                      8,000            --
                                                                     ----------   -----------

  Total Current Liabilities                                           2,378,446     1,822,559
                                                                     ----------   -----------

Commitments and Contingencies                                                --            --
                                                                     ----------   -----------

Stockholders' Equity [Deficit]:
  Common Stock, $.001 Par Value, 20,000,000 Shares
   Authorized - No Shares Issued                                             --            --

  Preferred Stock, Series A, $.001 Par Value, 14,000,000 Shares
   Authorized - Voting, Non-Cumulative Convertible, 5,963,600
   Shares Issued and Outstanding at March 31, 1997 and 1996               5,963         5,963

  Additional Paid-in Capital                                         13,229,537    12,112,287

  Deficit Accumulated During the Development Stage                  (13,754,193) (12,173,983)

  Total Stockholders' Equity [Deficit]                                 (518,693)      (55,733)
                                                                     ----------   -----------

  Total Liabilities and Stockholders' Equity [Deficit]               $1,859,753   $ 1,766,826
                                                                     ==========   ===========

See Notes to Condensed Financial Statements.
</TABLE>

                                         2

<PAGE>



COATES INTERNATIONAL, LTD.
[A DEVELOPMENT STAGE COMPANY]
------------------------------------------------------------------------------


CONDENSED STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------

<TABLE>


                                                                                      For the
                                                                                    Period from
                                                                                     August 31,
                                                                                   1988 [Date of
                                                                                     Inception]
                                                         Three months ended           through
                                                              March 31,               March 31,
                                                              ---------               ---------
                                                       1 9 9 7         1 9 9 6         1 9 9 7
                                                       -------         -------         -------

<S>                                                 <C>             <C>             <C>        
Revenues                                            $        --     $        --     $   687,375
                                                    -----------     -----------     ----------- 

Expenses:
  Research and Development Costs                         71,447         100,782       7,524,353
  General and Administrative Expenses                   292,285         265,390       6,514,526
  Depreciation Expense                                    9,975           9,989         289,353
                                                    -----------     -----------     -----------

  Total Operating Expenses                              373,707         376,161      14,328,232
                                                    -----------     -----------     -----------

  Loss From Operations                                 (373,707)       (376,161)    (13,640,857)
                                                    -----------     -----------     -----------

Other Income [Expense]:
  Interest Income                                             6             460         113,610
  Interest Expense                                       (3,600)        (21,500)       (226,946)
                                                    -----------     -----------     -----------

  Net Other [Expense]                                    (3,594)        (21,040)       (113,336)
                                                    -----------     -----------     -----------

  Net Loss                                          $  (377,301)    $  (397,201)   $(13,754,193)
                                                    ===========     ===========    ============

  Net Loss Per Share                                $      (.06)    $      (.07)
                                                    ===========     ===========

  Weighted Average Number of Shares                   5,963,600       5,963,600
                                                    ===========     ===========

</TABLE>


See Notes to Condensed Financial Statements.

                                         3

<PAGE>



COATES INTERNATIONAL, LTD.
[A DEVELOPMENT STAGE COMPANY]
------------------------------------------------------------------------------


CONDENSED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------

<TABLE>


                                                                                      For the
                                                                                    Period from
                                                                                     August 31,
                                                                                   1988 [Date of
                                                                                     Inception]
                                                         Three months ended           through
                                                              March 31,               March 31,
                                                              ---------               ---------
                                                       1 9 9 7         1 9 9 6         1 9 9 7
                                                       -------         -------         -------

<S>                                                 <C>             <C>             <C>         
  Net Cash - Operating Activities                   $  (321,863)    $    32,307     $(6,411,951)
                                                    -----------     -----------     -----------

Investing Activities:
  Payments for Property and Equipment                        --          (3,170)       (413,032)
  Loans to Stockholders                                      --          (2,060)     (1,208,678)
                                                    -----------     -----------     -----------

  Net Cash - Investing Activities                            --          (5,230)     (1,621,710)
                                                    -----------     -----------     -----------

Financing Activities:
  Proceeds of Additional Paid-in Capital                321,275              --       1,690,566
  Proceeds from Issuance of Stock                            --              --       6,378,148
  Payment for Treasury Stock                                 --              --         (30,000)
  Loans from Stockholder                                     --              --           8,000
                                                    -----------     -----------     -----------

  Net Cash - Financing Activities                       321,275              --       8,046,714
                                                    -----------     -----------     -----------

  Net [Decrease] Increase in Cash and Cash
   Equivalents                                             (588)         27,077          13,053

Cash and Cash Equivalents - Beginning of Periods         13,641          27,769              --
                                                    -----------     -----------     -----------

  Cash and Cash Equivalents - End of Periods        $    13,053     $    54,846     $    13,053
                                                    ===========     ===========     ===========

Supplemental Disclosures of Cash Flow Information:
  Cash paid during the periods for:
   Interest Paid                                    $     3,600     $     5,625     $    49,757
   Taxes Paid                                       $        --     $        --     $        --
</TABLE>


See Notes to Condensed Financial Statements.

                                         4

<PAGE>



COATES INTERNATIONAL, LTD.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO CONDENSED FINANCIAL STATEMENTS
------------------------------------------------------------------------------



[1] Basis of Presentation

The accompanying  unaudited condensed financial statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-Q and Article 10 of Regulation
S-X.  Accordingly,  they do not include  all of the  information  and  footnotes
required by generally  accepted  accounting  principles  for complete  financial
statements. In the opinion of management,  all adjustments [consisting of normal
recurring  accruals]  considered  necessary  for a fair  presentation  have been
included. Operating results for the three month periods ended March 31, 1997 and
1996 are not necessarily  indicative of the results that may be expected for the
years  ended  December  31, 1997 and 1996.  The  unaudited  condensed  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1996.

[2] Additional Paid-in Capital

The  accompanying  financial  statements  have been prepared in conformity  with
generally accepted accounting principles, which contemplates continuation of the
Company  as a  going  concern  and  realization  of  assets  and  settlement  of
liabilities  and  commitments in the normal course of business.  The Company has
met its obligations in 1997 and 1996 primarily  through  capital  infusions from
one of its principal stockholders, Gregory Coates.

[3] Related Party Transaction

Subcontract  Labor - The  Company  subcontracts  its project  expense  [payroll,
insurance  and  supplies]  from an entity  which  George  J.  Coates is the sole
stockholder.  During the three months ended March 31, 1997 and 1996, $52,000 and
$81,956, respectively, were paid for these services.

[4] Commitments and Contingencies

As more fully  discussed in Note 4 to the  financial  statements at December 31,
1996,  George  J.  Coates,  principal  and  controlling  shareholder  and  chief
executive  officer of CIL,  per the  original  consent  order of the Court,  was
ordered  to  pay  up  to  the  first  $773,500  of  amounts  due  to  Rescinding
Shareholders. Per the August 19, 1996, court order, new Potential Investors have
taken the place of the Rescinding Shareholders. To the extent that Mr. Coates is
unable to pay any such amounts to the  Potential  Investors,  CIL is required to
pay same and is thus contingently  liable for such amounts as it may have to pay
should Mr.  Coates not fulfill all or part of his primary  commitment on amounts
due to Potential  Investors.  It is at least reasonably  possible that the above
circumstances  will change in the near term due to future  confirming events and
the effect of any such change would be material to the financial statements.



                  .   .   .   .   .   .   .   .   .   .   .   .




                                        5

<PAGE>



Item 2.    Management's Discussion and Analysis or Plan of Operation

           Coates  International Ltd. ("CIL" or the "Company") has completed the
basic development of a spherical rotary valve system (the "Coates System"),  the
development of which was initiated by its founder,  George J. Coates, for use in
internal  combustion  engines of all types.  With respect to the Coates  System,
seven applicable  United States patents (the "Coates  Patents") have been issued
to George J. Coates. CIL holds a non-exclusive license from George J. Coates and
his son Gregory Coates, to manufacture,  sell and grant sublicenses with respect
to  products  based  on the  Coates  Patents,  within  the  United  States,  its
territories and possessions (the "Licensed Areas"). George J. Coates and Gregory
Coates have also agreed, as long as CIL remains  independent and viable,  not to
compete  with  CIL  in  the  manufacture,  assembly,  use or  sale  of  internal
combustion  engines  utilizing the  technology  falling  within the scope of the
Coates  Patents  in the  Licensed  Areas,  or to grant  any other  exclusive  or
non-exclusive  license in the Licensed  Areas  except  through CIL. In addition,
George J. Coates and Gregory Coates have executed an agreement  granting CIL the
right to retain any monies including  royalties  received from Nicholson McLaren
Engines   Ltd.   (U.K.)   ("Nicholson   McLaren")  or  from  Noble  Motor  Sport
(manufacturer of Ascari racing cars) for  manufacture,  sale, use or assembly of
internal  combustion  engines anywhere in the world using the technology falling
within the scope of the Coates Patents.

           CIL has had a short  operating  history during which it has primarily
devoted its attention to developing  the technology  associated  with the Coates
System.  During such time CIL has also  arranged  for certain  tests in order to
evaluate the effectiveness of the technology.  CIL has also devoted such time in
an attempt to interest various persons and entities in acquiring sub-licenses to
use the technology.

           CIL is currently  manufacturing  high performance  automotive engines
modified  with the Coates System on a limited  basis at its Wall  Township,  New
Jersey manufacturing  facility.  Except as set forth herein, none of the engines
has been  sold.  CIL has  received  numerous  oral and  written  inquiries  from
potential  customers,  expressing  an interest  in  acquiring  high  performance
automotive  racing engines modified with the Coates System. No assurances can be
given  that  these  inquiries  will  result in binding  sales  orders.  After it
completes  manufacture of a sufficient  backlog of such engines,  CIL intends to
attempt to convert  these  inquiries  into binding  sales  orders,  to fill such
orders from its limited inventory of engines and to continue to manufacture on a
limited  basis and market high  performance  automotive,  motorcycle  and marine
racing engines using the Coates System  technology.  CIL also intends to attempt
to sublicense such technology.

Results of Operations from Inception August 31, 1988 through March 31, 1997

           Virtually no revenues  were realized from the inception of operations
through March 31, 1997, as the principal  operations were those of a development
stage company. In July 1991, CIL signed a prototype manufacturing agreement with
Harley-Davidson, Inc. ("Harley Davidson") and commenced to attempt to retrofit a
Harley  Davidson  motorcycle  engine  using the  Coates  technology.  An initial
$150,000 engineering and development fee was paid to CIL by Harley Davidson. CIL
has not, as yet, developed a retrofitted Harley Davidson motorcycle engine using
the Coates technology that is acceptable to Harley Davidson.

           Under the terms of a  February  1994  license  agreement,  a $500,000
initial payment was made by Millwest  Corporation  ("Millwest") for a license of
the technology  and was held in a bank account  entitled  "Coates  International
Licensing." This sum was subsequently paid over to CIL. Pursuant to the terms of
the license  agreement,  Millwest was obligated to make another  payment of $9.5
Million to CIL on or before May 4, 1994. Millwest did not make such payment. CIL
placed  Millwest  on  notice  that it was in  default.  In June  1995,  Millwest
informed CIL of an intention to activate the license  agreement and claimed that
financing has been  arranged to do so but to date,  no additional  payments have
been  received  by CIL from  Millwest  and no  assurances  can be given that any
additional payments will be made.

           CIL did not recognize any revenues during the quarter ended March 31,
1997 or in the corresponding quarter in the prior year. Research and development
expenses  totalled  $71,447 in the  quarter  ended March 31, 1997 as compared to
$100,782 in the corresponding quarter in 1996. Loss from operations and net loss
aggregated  ($373,707)  and ($377,301) in the March 31, 1997 quarter as compared
to ($376,161)  and  ($397,201) in the March 31, 1996  quarter.  CIL  experienced
comparatively  higher research and development  costs in the earlier quarter and
comparatively higher general and administrative expenses in the later quarter.

                                        6

<PAGE>



Liquidity and Capital Resources

           Since  its  inception,  all  of the  development  costs  and  related
operational  costs of CIL have  primarily  been paid through the cash  generated
through  the sale of  stock,  through  capital  contributions  made by George J.
Coates' son,  Gregory Coates and the $500,000  initial  license  payment made by
Millwest.  Capital  contributions  advanced to CIL by Gregory Coates in 1995 and
1996 aggregated $404,549 and $1,132,523  respectively.  Harley Davidson paid CIL
$150,000 as an initial deposit towards a license agreement;  that money has also
been expended by CIL.  Certain of the aforesaid funds generated income from bank
accounts in a depository institution;  that interest income was also expended by
CIL. CIL has incurred  losses as a  development  stage  company from  inception,
August 31, 1988, to March 31, 1997, of ($13,754,193) and at March 31, 1997 had a
negative net worth of ($518,693) and negative working capital of ($2,150,034).

           At March 31,  1996,  CIL had a negative  net worth of  ($55,733)  and
negative  working  capital of  ($1,726,098).  The  decrease  in net worth and in
working  capital  from  March  31,  1996  to  March  31,  1997  was  principally
attributable to a substantial  increase in accrued legal fees at March 31, 1997.
The increase was  attributable to litigation  based on a Securities and Exchange
Commission  action  described in CIL's  annual  report on Form 10-K for the year
ended December 31, 1996.

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

           CIL is currently  manufacturing  high performance  automotive engines
modified  with the Coates System on a limited  basis at its Wall  Township,  New
Jersey manufacturing  facility.  Except as set forth herein, none of the engines
has been  sold.  CIL has  received  numerous  oral and  written  inquiries  from
potential  customers,  expressing  an interest  in  acquiring  high  performance
automotive  racing engines  modified with the Coates System.  After it completes
manufacture of a sufficient  backlog of such engines,  CIL intends to attempt to
convert these inquiries into binding sales orders,  to fill such orders from its
limited  inventory of engines and to continue to  manufacture on a limited basis
and market high  performance  automotive,  motorcycle  and marine racing engines
using the Coates System technology.  Assuming CIL obtains  sufficient  financing
and a sufficient number of orders, CIL management  believes that it will be able
to  produce  racing  engines  using the  Coates  System  technology  at its Wall
Township facility on a limited basis at the rate of approximately 30 engines per
month. CIL expects that the bulk of its initial sales of engines,  to the extent
it is able to  effectuate  same,  will be at a base sales  price in the range of
$25,000 to $30,000 per engine  although  depending on type and size, some of the
engines may be priced as high as $75,000. To achieve such production levels, CIL
will be  required to expand its  production  work force to  approximately  15-20
production workers.

           Assuming its sales develop to a  sufficiently  increased  level,  CIL
intends to establish a full scale production facility (presumably in central New
Jersey),  significantly  larger  than  its  present  facility,  at which it will
manufacture high  performance  racing engines modified with the Coates System on
an assembly line basis. Management estimates that CIL will require approximately
$7,500,000 of additional funding to establish and operate such a facility.  Such
funding  would be  required  to  acquire  the  larger  facility  and  production
machinery,  to prepare assembly lines, castings and molds for manufacturing,  to
acquire inventory  including engine blocks and heads,  crank shafts and bearings
and to employ additional production workers,  mechanics,  machine tool operators
and assembly personnel as well as marketing personnel.

           It is the  intention of CIL to fund its business  plan by  borrowings
and the  sale of  equity  and/or  debt  instruments,  and  through  the  sale of
sub-licenses. All of these financing vehicles will be pursued simultaneously. It
is not presently  known which, if any, of these  alternatives  will be utilized,
whether they are available to CIL, and if available,  in what mixture or in what
amounts.

           In view of its minimal  revenues and recurring losses from operations
since inception,  its deficit  accumulated  during its development stage and its
limited  liquid  assets,  no  assurances  can be given  that CIL will be able to
pursue its business plan. If it does not obtain sufficient liquid assets to fund
such

                                        7

<PAGE>



plan, CIL may be forced to sell its assets or to seek  protection from creditors
through a bankruptcy or similar filing.

Note Regarding Forward-Looking Statements

           This  Quarterly  Report  contains  historical  information as well as
forward-looking  statements.  Statements looking forward in time are included in
this Quarterly  Report  pursuant to the "safe harbor"  provisions of the Private
Securities  Litigation  Reform Act of 1995.  Such  statements  involve known and
unknown risks and  uncertainties  that may cause the Company's actual results in
future periods to be materially different from any future performance  suggested
herein.


                                        8

<PAGE>



                           PART II - OTHER INFORMATION


                                      None



                                        9

<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.

                                 COATES INTERNATIONAL LTD.




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

Dated: October,   1997

                                       10

<PAGE>