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 September 30, 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:  6,035,450  shares  of  Series  A
Preferred Stock at September 30, 1997





<PAGE>

                            COATES INTERNATIONAL LTD.

        Quarterly Report on Form 10Q for Quarter Ended September 30, 1997

                         PART I - FINANCIAL INFORMATION


Item 1.Financial Statements

       Attached.




                                        1
<PAGE>

COATES INTERNATIONAL, LTD.
[A DEVELOPMENT STAGE COMPANY]
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CONDENSED BALANCE SHEETS
------------------------------------------------------------------------------
<TABLE>


                                                                 September 30,
                                                             1 9 9 7       1 9 9 6

Assets:
Current Assets:
<S>                                                        <C>          <C>
  Cash and Cash Equivalents                                $  205,862   $     3,518
  Cash Held in Escrow                                         112,000            --
  Inventory                                                   226,841       132,792

  Total Current Assets                                        544,703       136,310

Property, Plant and Equipment - Net                         1,592,421     1,616,968

Other Assets:
  Deposits                                                         --         2,500
  Due from Stockholder                                         15,915        39,116
  Due from Affiliated Companies                                 2,211         2,116

  Total Other Assets                                           18,126        43,732

  Total Assets                                             $2,155,250   $ 1,797,010

Liabilities and Stockholders' Equity [Deficit]:
Current Liabilities:
  Redeemable Series A Preferred Stock                      $       --   $   496,970
  Mortgage Payable                                            210,000       210,000
  Accrued Legal Fees                                          633,495     1,041,153
  Accounts Payable                                             41,443        37,184
  Accrued Interest                                            106,559       109,408
  Other Accrued Expenses                                      172,260        88,616
  Due to Stockholder                                            8,000         3,000

  Total Current Liabilities                                 1,171,757     1,986,331

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,
   6,035,450 and 5,963,600 Shares Issued and Outstanding
   at September 30, 1997 and 1996, Respectively                 6,035         5,963

  Additional Paid-in Capital                               15,355,490    12,669,739

  Deficit Accumulated During the Development Stage         (14,378,032) (12,865,023)

  Total Stockholders' Equity [Deficit]                        983,493      (189,321)

  Total Liabilities and Stockholders' Equity [Deficit]     $2,155,250   $ 1,797,010
</TABLE>

See Notes to Condensed Financial Statements.



                                        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     Nine months ended      through
                                September 30,         September 30,     September 30,
                              1 9 9 7    1 9 9 6    1 9 9 7    1 9 9 6     1 9 9 7

<S>                        <C>         <C>        <C>        <C>        <C>
Revenues                   $       --  $      --  $       -- $   37,375 $   687,375

Expenses:
  Research and Development
   Costs                       68,373     38,983     204,564    199,447   7,657,470
  General and Administrative
   Expenses                   193,699    304,923     766,610    864,344   6,988,851
  Depreciation Expense          9,975     10,308      29,925     30,606     309,303

  Total Operating Expenses    272,047    354,214   1,001,099  1,094,397  14,955,624

  Loss From Operations       (272,047)  (354,214) (1,001,099)(1,057,022)(14,268,249)

Other Income [Expense]:
  Interest Income              10,747         55      10,760        615     124,364
  Interest Expense             (3,600)    (3,975)    (10,800)   (31,834)   (234,146)

  Net Other [Expense]           7,147     (3,920)        (40)   (31,219)   (109,782)

  Net Loss                 $ (264,900) $(358,134) $(1,001,139$(1,088,241$(14,378,031)

  Net Loss Per Share       $     (.04) $    (.06) $     (.17)$     (.18)

  Weighted Average Number
   of Shares                6,022,954  5,963,600   5,983,602  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]
                                                      Nine months ended           through
                                                        September 30,           September 30,
                                                   1 9 9 7       1 9 9 6         1 9 9 7

<S>                                             <C>         <C>               <C>
  Net Cash - Operating Activities               $(1,768,396)$    (823,263)    $(7,858,484)

Investing Activities:
  Payments for Property and Equipment                    --        (5,252)       (413,032)
  Payments on Loans to Stockholders                      --            --              --
  Loans to Stockholders                                  --        (3,430)     (1,208,678)

  Net Cash - Investing Activities                        --        (8,682)     (1,621,710)

Financing Activities:
  Proceeds of Additional Paid-in Capital          1,010,617            --       2,379,908
  Proceeds from Issuance of Stock in Private
   Placement                                        960,000       804,694       7,338,148
  Payment for Treasury Stock                             --            --         (30,000)
  Loans from Stockholder                                 --         3,000           8,000
  Payment to Potential Investor                     (10,000)           --         (10,000)

  Net Cash - Financing Activities                 1,960,617       807,694       9,686,056

  Net [Decrease] Increase in Cash and Cash
   Equivalents                                      192,221       (24,251)        205,862

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

  Cash and Cash Equivalents - End of Periods    $   205,862   $     3,518     $   205,862

Supplemental Disclosures of Cash Flow
Information:

  Cash paid during the periods for:
   Interest Paid                                $    10,800   $    15,037     $    56,957
   Taxes Paid                                   $        --   $        --     $        --
</TABLE>

Supplemental Schedule of Non-Cash Investing and Financing Activities:
  During the nine months ended September 30, 1997, the Company had a noncash
financing  transaction by issuing 23,825 shares of Series A Preferred Stock with
an aggregate par value of $24 and recording  additional  paid-in  capital in the
amount of $476,946  in  exchange  for  amounts  due to  potential  investors  of
$476,970.

  During the nine months ended  September  30,  1997,  the Company had a noncash
investing and financing transaction in the amount of $15,688 for the acquisition
of equipment by a stockholder treated as additional paid-in capital.

  Also  during the nine  months  ended  September  30,  1997,  the Company had a
financing  transaction in the amount of $10,000 for the repurchase of Redeemable
Series A Preferred Stock by a stockholder treated as additional paid-in capital.

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  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 and nine month periods ended September 30, 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

In July 1997, as approved by the United States  District  Court for the Southern
District  of New York  [the  "Court"],  the  Company,  in  conjunction  with its
principal  stockholder,  completed a private placement of its Series A Preferred
Stock.  As  instructed  by the Court,  the Company  satisfied its amounts due to
potential and other investors [as more fully described in Note 4 to the December
31,  1996,  financial  statements],  by  issuing  23,825  shares of its Series A
Preferred Stock. Also, as part of the private placement, the Company sold 48,000
shares of its Series A Preferred Stock for $960,000. These transactions resulted
in an  increase  to Series A Preferred  Stock par value and  additional  paid-in
capital of $72 and $1,436,898, respectively.

As also instructed by the Court, the Company placed $112,000 of the net proceeds
in escrow for the payment of interest  due to two former  stockholders  [as more
fully described in Note 4 to the December 31, 1996, financial  statements].  The
balance of the net proceeds of the private placement were used to settle accrued
legal fees and other liabilities.

The  completion  of the  private  placement  also  relieved  the  Company of its
$773,500 contingent liability to potential investors, as more fully described in
Notes  4 and 10 to  the  December  31,  1996,  financial  statements,  when  the
Company's  principal  stockholder  settled his court ordered liability with such
individuals  by the transfer of his personal  shares of the  Company's  Series A
Preferred Stock.

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,  and the private  placement
discussed in the preceding paragraph.

[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 nine months ended September 30, 1997 and 1996, $144,000
and $142,968, respectively, were paid for these services.


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

                                        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 September 30, 1997

         Virtually no revenues  were  realized  from the inception of operations
through  September  30,  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.


                                         6

<PAGE>

         CIL did not recognize any revenues  during the quarter ended  September
30, 1997 or during the corresponding quarter ended September 30, 1996. Loss from
operations  and net loss  aggregated  ($272,047) and ($264,900) in the September
30, 1997 quarter as compared to ($354,214)  and  ($358,134) in the September 30,
1996  quarter.  The  reduction in losses in the  September  30, 1997 quarter was
principally  attributable to reduced general and administrative  expenses in the
later quarter  ($193,699 vs.  $304,923)  partially offset by higher research and
development expenses in the later quarter ($68,373 vs. $38,983).

         CIL did not recognize any revenues for the nine months ended  September
30, 1997. For the nine months ended  September 30, 1996, CIL recognized  $37,375
in revenues paid by Nicholson McLaren Engines Ltd. (U.K.) in partial payment for
two high  performance  racing car engines  modified  with the Coates  System and
shipped  to  Nicholson  McLaren  by CIL.  Loss  from  operations  and  net  loss
aggregated ($1,001,099) and ($1,001,139) for the nine months ended September 30,
1997 as compared to  ($1,057,022)  and  ($1,088,241)  for the nine months  ended
September  30,  1996.  The income  realized in the earlier nine month period was
offset by higher general and  administrative  expenses in such period  ($864,344
vs. $766,610).

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, 1996
and during  the nine  months  ended  September  30,  1997  aggregated  $404,549,
$1,132,523 and $1,053,339, 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 September  30,  1997,  of  ($14,378,031)  and at  September  30, 1997,  had a
positive net worth of $983,493 and negative working capital of ($627,054).

         At September 30, 1996,  CIL had a negative net worth of ($189,321)  and
negative  working  capital of  ($1,850,021).  The  increase  in net worth and in
working  capital during the period  September 30, 1996 to September 30, 1997 was
attributable to the receipt by CIL of capital  contributions from Gregory Coates
and to the completion in July 1997 of a private placement by CIL, in conjunction
with George J. Coates, of Series A Preferred Stock,  offset by losses.  Pursuant
to the private placement, CIL sold 48,000 shares of its Series A Preferred Stock
for $960,000 and issued an additional  23,825 shares of Series A Preferred Stock
to investors who had  previously  subscribed  for and advanced  payment for such
shares.  (See Item 3 of CIL's  annual  report on Form  10-KSB 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.



                                        7

<PAGE>



         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  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


Item 1.  Legal Proceedings

         CIL  incorporates  herein by  reference  its  response to Item 3 of its
annual report on Form 10- KSB for the year ended December 31, 1996.

Item 2.  Changes in Securities and Use of Proceeds

         (c) See "Management's  Discussion - Liquidity and Capital Resources" as
to a private placement  completed by CIL in July 1997 pursuant to which CIL sold
48,000 shares of Series A Preferred  Stock for $960,000 and issued an additional
23,825  shares of  Series A  Preferred  Stock to  investors  who had  previously
subscribed  for and  advanced  payment for such  shares.  Each of the  investors
represented that he or she was an "accredited investor" as defined in Regulation
D promulgated  under  Securities  Act of 1933 and was acquiring  such shares for
investment and not with a view to distribution.  The bulk of the net proceeds of
the  private  placement  was  applied  to the  payment  of legal  fees and other
payables.



                                        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, President
                                     George J. Coates, President,
                                     Chief Executive and Chief Financial Officer

Dated: November 18, 1997

                                       10

<PAGE>