FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


               [X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                        For Quarter Ended March 31, 1998

                                       OR

               [ ]TRANSITION REPORT PURSUANT O 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 (I.R.S. Employer
               Incorporation or Organization) Identification No.)

          Highway 34 & Ridgewood Road, Wall Township, New Jersey 07719
               (Address of Principal Executive Office) (Zip Code)

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


Indicate by check mark 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  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

    The number of shares of Registrant's Preferred  Stock Series A,  $0.001 par
        value,  outstanding as of March 31, 1998,  was 6,572,424 shares.

                                                      




<PAGE>






                           COATES INTERNATIONAL, LTD.
                          [A DEVELOPMENT STAGE COMPANY]




                                      INDEX


                                                                   Page
                                                                  Number

PART  1  -  FINANCIAL INFORMATION

Item 1   Financial Statements (unaudited)

         Balance Sheet
          - March 31, 1998                                           3

         Statements of Operations
          - Three months ended March 31, 1998 and 1997
            and since inception                                      4

         Statements of Cash Flows
          - Three months ended March 31, 1998 and 1997
             and since inception                                     5

         Notes to Consolidated Financial Statements                  6


Item 2  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                 7 - 8


PART II  -  OTHER INFORMATION                                        9


SIGNATURES                                                          10

EXHIBIT AND REPORTS ON FORM 8-K                                     11

FINANCIAL DATA SCHEDULE                                             14


                                        2




<PAGE>



PART I  - Item 1

                           Coates International, Ltd.
                          (A Development Stage Company)
                                  Balance Sheet
                                 March 31, 1998
                                   (Unaudited)


<TABLE>
<CAPTION>
      Assets                                    
Current Assets 
<S>                                                                                    <C>             
   Cash                                                                                $         32,690
   Restricted cash                                                                              112,000
                                                                                          --------------

      Total Current Assets                                                                      144,690
                                                                                          --------------

Property, Plant and Equipment - Net                                                            1,580,448
                                                                                           --------------

Other Assets
   Deposit                                                                                         2,500
                                                                                           --------------

      Total Assets                                                                             1,727,638
                                                                                           ==============

      Liabilities and Stockholders' Equity

Current Liabilities
   Mortgage payable                                                                               160,000
   Accounts payable and accrued expenses                                                          910,139
   Accrued interest payable                                                                       106,559
   Due to stockholder                                                                              12,462
                                                                                            --------------

        Total Current Liabilities                                                                1,189,160
                                                                                            --------------

Stockholders' Equity
   Preferred stock, Series A, $.001 par value, 14,000,000 shares authorized - voting,    
      non-cumulative convertible, 6,572,424 shares issued and outstanding                             6,572
   Common stock, $.001 par value, 20,000,000 shares authorized - no shares issued                         -
   Additional paid-in capital                                                                    25,528,229
   Deficit accumulated during the development stage                                            (24,996,323)
                                                                                             --------------

        Total Stockholders' Equity                                                                  538,478
                                                                                             --------------
                                                                                           $      1,727,638
        Total Liabilities and Stockholders' Equity
                                                                                             ==============
</TABLE>

See notes to the condensed financial statements.

                                        3




<PAGE>




                           Coates International, Ltd.
                          (A Development Stage Company)
                            Statements of Operations


<TABLE>
<CAPTION>

                                                        
                                                                                            Period From
                                                                                             August 31,
                                                                                           1988 (Date of
                                                                                             Inception)
                                                                                              Through
                                                                                             March 31,
                                                                                                1998
                                                                                          ----------------
                                                             Three Months Ended
                                                                  March 31,
                                                      ---------------------------------   ----------------
                                                           1998              1997
                                                      ---------------   ---------------   ----------------
                                                        (Unaudited)       (Unaudited)       (Unaudited)
                                                      ---------------   ---------------   ----------------

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

Operating Expenses:
   Research and development costs                              92,740            71,447         18,211,323
   General and administrative expenses                         89,393           292,285          7,033,463
   Depreciation expense                                         1,606             9,975            321,276
                                                      ---------------   ---------------   ----------------

      Total Operating Expenses                                183,739           373,707         25,566,062
                                                      ---------------   ---------------   ----------------

   Loss From Operations                                     (183,739)         (373,707)       (24,878,687)
                                                      ---------------   ---------------   ----------------

Other Income (Expense):
   Interest income                                                 94                 6            124,960
   Interest expense                                           (3,600)           (3,600)          (242,596)
                                                      ---------------   ---------------   ----------------

      Total Other Income (Expense)                            (3,506)           (3,594)          (117,636)
                                                      ---------------   ---------------   ----------------

   Net Loss                                          $      (187,245) $       (377,301) $     (24,996,323)
                                                      ===============   ===============   ================

   Net Loss Per Share                                $         (0.03) $          (0.06)
                                                      ===============   ===============
                                                            6,571,091         5,963,600
   Weighted Average Number of Shares
                                                      ===============   ===============
</TABLE>







See notes to the condensed financial statements.

                                        4




<PAGE>



                           Coates International, Ltd.
                          (A Development Stage Company)
                            Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                                         Period From
                                                                                         August 31,
                                                                                        1988 (Date of
                                                                                         Inception)
                                                                                           Through
                                                                                          March 31,
                                                                                            1998
                                                                                      -----------------
                                                          Three Months Ended
                                                               March 31,
                                                   --------------------------------   -----------------
                                                        1998              1997
                                                   ---------------   --------------   -----------------
                                                     (Unaudited)      (Unaudited)        (Unaudited)
                                                   ---------------   --------------   -----------------

<S>                                              <C>               <C>               <C>               
Cash Flows From Operating Activities             $       (180,306) $      (321,863)  $      (8,171,480)
                                                   ---------------   --------------   -----------------

Cash Flows From Investing Activities                             -                -         (1,621,710)
                                                   ---------------   --------------   -----------------

Cash Flows From Financing Activities
    Proceeds of additional paid-in capital                  48,747          321,275           2,356,185

    Proceeds from issuance of stock                        129,000                -           7,467,148
    Payment for treasury stock                                   -                -            (30,000)
    Loans from stockholder                                       -                -              32,547
                                                   ---------------   --------------   -----------------
    Net Cash Provided by Financing Activities              177,747          321,275           9,825,880
                                                   ---------------   --------------   -----------------

    Net Increase (Decrease) in Cash                        (2,559)            (588)              32,690
    Cash - Beginning of Periods                             35,249           13,641                   -
                                                   ---------------   --------------   -----------------
    Cash - End of Periods                        $          32,690 $         13,053  $           32,690
                                                   ===============   ==============   =================
</TABLE>







See notes to the condensed financial statements.

                                        5




<PAGE>




                           Coates International, Ltd.
                          (A Development Stage Company)
                   Notes to the Condensed Financial Statements



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 Item 310 of Regulation
    S-B.  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 months ended March 31, 1998
    and 1997 are not necessarily  indicative of the results that may be expected
    for the years ended  December  31, 1998 and 1997.  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, 1997.

RELATED PARTY TRANSACTION

    Subcontract  Labor - The Company  subcontracts its project expense (payroll,
    insurance and supplies) from an entity in which George J. Coates is the sole
    stockholder.  During the three months ended March 31, 1998 and 1997, $25,121
    and $52,000, respectively, were paid for these services.

COMMITMENTS AND CONTINGENCIES

     The Company is a defendant  in various  lawsuits  incident to the  ordinary
   course of business  which are not possible to determine the probable  outcome
   or the amount of liability,  if any, under these  lawsuits.  However,  in the
   opinion of  management,  the  disposition  of these  lawsuits will not have a
   material  adverse  effect on the  Company's  financial  position,  results of
   operations, or cash flows.


                                        6




<PAGE>





ITEM 2        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
              CONDITION AND RESULTS OF OPERATIONS

Coates  International  Ltd.  ("CIL" or the "Company") is a Delaware  corporation
organized in October 1991 by George J. Coates, as the successor in interest to a
Delaware  corporation  of  the  same  name  incorporated  in  August  1988  (the
"Predecessor   Entity").   As  a  result  of  a  dispute  with  certain   former
employee-directors  who claimed to own  approximately  nine % of the Predecessor
Entity's  outstanding  capital stock, the Predecessor  Entity was reorganized in
November 1991. Pursuant to the reorganization,  all of the Predecessor  Entity's
assets  subject to  liabilities  were  distributed  to CIL,  the  non-litigating
stockholders of the Predecessor  Entity became the  stockholders of CIL, and the
Predecessor Entity was dissolved.

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

CIL has 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 much time attempting 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. CIL intends to aggressively
pursue all inquiries  with the goal of obtaining  firm orders.  CIL's ability to
generate  revenues and achieve  profitable  operations is principally  dependent
upon the  execution of  sub-license  agreements  with engine  manufacturers  and
retrofitters  and upon the  Company's  successful  marketing  and  sales of high
performance  automotive,  motorcycle and marine racing engines.  Despite limited
success  to-date  Coates will  continue  manufacturing  a limited  inventory  of
automotive engines,  and pursue the marketing of Coates System technology.  Such
efforts will especially be directed towards sub-licensing of the technology.


                                        7




<PAGE>





Results of Operations for the Quarters Ended March 31, 1998 and 1997

No revenues were recognized  during the quarters ended March 31, 1998, and 1997.
During the last quarter,  the Company  continued its efforts to complete testing
and trial of  certain  engine  configurations,  to  further  the  prospects  for
successful   negotiation  of  potential   sub-license   agreements  with  engine
manufacturers and refitters. These efforts, however, were hampered by a shortage
of cash, and management at this time cannot with any degree of certainty predict
when meaningful revenues might be achieved.

Operating  expenses  incurred  during  the last  quarter  amounted  to  $183,739
compared  to  $373,707  for the same  period in 1997.  The  largest  single cost
element was research &  development  expense which  totaled  $92,740  during the
first three months in 1998.  Significant  savings  were  achieved in general and
administrative  expenses  which  decreased  to  $89,393  for the  quarter,  from
$292,285 in the first  quarter  1997.  These cost  decreases  were the result of
staff reductions and streamlining of operations,  partly due to the ongoing cash
shortage.

After recognizing $3,506 net interest expense,  the Company's  operations show a
net loss of $187,245 or $0.03 per share for the  quarter  ended March 31,  1998,
compared to a net loss of 377,301 or $0.06 per share for the same quarter in the
preceding year.

Total  losses since  inception  in August 1988 through  March 31, 1998 amount to
$24,996,323 .


Liquidity and Capital Resources

At March 31,  1998,  CIL had a net worth of $538,478  compared to a net worth of
$547,976 at the beginning of the year.  Working  capital  showed a deficiency of
$(1,044,470) at March 31, 1998, compared to a negative  $(1,036,578) at December
31, 1997.  The cash outflow  primarily as a result of operating  losses could be
compensated  for by funds  received from the private sale of 7,500 shares of the
Company's  Series A preferred  equity which yielded  $129,000 in cash. Thus, the
financial condition of the Company in essence remained unchanged from the status
at the beginning of the fiscal year.

In order to further improve the Company's  financial situation and provide funds
to meet  current  obligations  and  finance  the  ongoing  efforts to market the
Company's  products,  management  plans to raise  additional  capital  through a
combination of private placements and debt issues.



                                        8




<PAGE>





PART  II  -  OTHER INFORMATION


Item 1        LEGAL PROCEEDINGS

The response to this item can be found in the  Company's  annual  report on Form
10-KSB,  Item  3,  for  the  year  ended  December  31,  1997,  which  is  being
incorporated herein by reference to such report.


Item 2        CHANGES IN SECURITIES

During the first quarter of 1998, the Company issued the following  unregistered
securities:

      7,500  shares of Series A  Preferred  Stock for an  aggregate  $129,000 in
cash, to Gregory Coates, the son of the Company's President and Chief Executive
Officer, George J. Coaqtes. The Company issued the aforesaid shares pursuant to
Section 4(2) of the Securities  Act. In addition,  the Company issued 500 shares
of its Series A Preferred Stock to a vendor for services rendered.


Item 3        DEFAULTS ON SENIOR SECURITIES    -  None
              

Item 4        SUBMISSION OF MATTERS TO A VOTE OF
              SECURITIES' HOLDERS      -  None


Item 5        OTHER INFORMATION     -  None


Item 6        EXHIBITS AND REPORTS ON FORM 8-K

              (1) Form 8-K, filed with the Securities and Exchange Commission
               via EDGAR on March 31, 1998, re item 4, Changes in Registrant's
               Certifying Accountant attached as an exhibit hereto.
              




                                        9




<PAGE>






                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.



                                        COATES INTERNATIONAL, LTD.




Date: June 30 , 1998                   By: _s/George J. Coates________________
                                             George J. Coates
                                             Chief Executive and Chief
                                             Financial Officer







                                       10


<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


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


                                    FORM 8-K

                                 CURRENT REPORT



                     PURSUANT TO SECTION 13 OR 15(d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934


Date of Report (Date of earliest event reported):  March 27, 1998

                           Coates International, Inc.
                Exact name of Registrant as specified in charter)

 Delaware              33-94884               22-2925432
(State or other       (Commission            (IRS employer
jurisdiction of       file number)           identification
incorporation                                       no.)


  Highway 34 & Ridge Road, Wall, New Jersey                  07719
(Address of principal executive office)                      Zip Code

Registration telephone number, including area code: (732) 449-7717


Former name or former address, if changed since last report)




                                       11



<PAGE>



         Item 4.           Changes in Registrant's Certifying Accountant.

                  (a)
                  304(a)(1)(i):   Moore  Stephens,   P.C.,  Registrant's  former
         independent  accountant  previously engaged as the principal accountant
         to audit the Registrant's financial statements,  was dismissed on March
         27, 1998.

                  (a)(1)(ii): Moore Stephens, P.C. issued a qualified opinion in
         its audit report of  Registrant's  financial  statements for the fiscal
         years ended December 31, 1996 and December 31, 1995,  dated January 24,
         1997, wherein Moore Stephens,  P.C.expressed  uncertainty as to whether
         Registrant would be able to continue its operations and businesses as a
         going concern.

                  (a)(1)(iii):  The Registrant's Board of Directors  recommended
         and approved the  dismissal of Moore  Stephens,  P.C. and the hiring of
         Rosenberg Rich Baker Berman & Company Certified Public Accountants, 380
         Foothill Road,  Bridgewater,  New Jersey as the Registrant's  principal
         independent accountant.

                  (a)(1)(iv)(A),(B)  and  (C):  Registrant  is  unaware  of  any
         disagreements between Registrant and Moore Stephens, P.C. on any matter
         of accounting principles or practices, financial statement disclosures,
         or auditing scopes or procedures during Registrant's fiscal years ended
         December  31,  1996  and  December  31,  1995,  reported  upon by Moore
         Stephens, P.C.

                  (a)(1)(v)(A),(B) and (C):  Not applicable.

                  (a)(1)(v)(D)(3):    Registrant   has   provided   its   former
         accountant,  Moore  Stephens,  P.C., with a copy of the disclosures set
         forth in this  Current  Report  filed  on Form  8-K,  requesting  it to
         furnish the  Registrant  with a letter  addressed to the Securities and
         Exchange  Commission (the "Commission")  stating whether it agrees with
         the  statements  contained  herein and, if not,  setting  forth in said
         letter the respects in which it does not agree.  Registrant  undertakes
         to file any letter  received  from Moore  Stephens,  P.C.  in  response
         hereto  as an  exhibit  to this  Current  Report  filed  on Form 8-K by
         amendment on the earlier date of (a) 10 days from the date this Current
         Report on Form 8-K is filed  with the  Commission,  or,  (b) within two
         business days of Registrant's receipt of such letter.






                                        12

<PAGE>


         Item 7.           Financial Statements and Exhibits.

                            (a),(b): Not applicable.

                           (c):  Exhibits  (1):  The  Letter to Moore  Stephens,
         P.C.,  dated March 31, 1998,  re change in  certifying  accountants  is
         filed herewith in accordance with Item 601 (16) of Regulation S-K.

                                   SIGNATURES


                  Pursuant to the requirements of the Securities Exchange Act of
         1934,  as  amended,  the  Registrant  has duly caused this report to be
         signed on its behalf by the undersigned hereunto duly authorized.


         March 31, 1998                     Coates International, Ltd.



                                            By: s/George J. Coates
                                                George J. Coates, President































                                       13


coates.8k



<PAGE>