SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                 FORM 10-KSB/A3

            |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                   For the fiscal year ended December 31, 1997

                                       OR

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

           For the Transition period from____________to______________

                         Commission File Number 33-94884

                            COATES INTERNATIONAL LTD.
        (Exact name of small business issuer 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)

          Issuer's telephone number, including area code (732) 449-7717

                    Securities registered pursuant to Section
                               12(b) of the Act:

                                 Title of Class
                                      None

                    Securities registered pursuant to Section
                               12(g) of the Act:

                                 Title of Class
                                      None

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not be contained,  to the
best of the issuer's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-KSB or in any amendment to
this Form 10-KSB. [ ]

Issuer did not generate any revenues for the year ended December 31, 1997.

During the year ended December 31, 1997, there was no established public trading
market for the issuer's Series A Preferred  Stock.  On December 31, 1997,  there
were  6,564,424  shares of Series A  Preferred  Stock of the  Issuer  issued and
outstanding.




<PAGE>



     Nicholson  McLaren by CIL. In April and July 1996,  CIL  executed a License
Agreement and a Sales  Representative  Agreement  with  Nicholson  McLaren.  See
"Patents and Licenses."

      Since  its  inception,  the  bulk of the  development  costs  and  related
operational  costs of CIL have been funded primarily through cash generated from
the sale of stock, through capital  contributions made by Gregory Coates and the
above  described  payments from Harley  Davidson and Millwest.  As a development
stage  company,  CIL has incurred  losses from the inception of the  Predecessor
Entity in August 1988 through  December 31, 1997 of  $9,743,717  and at December
31,  1997,  had  a net  worth  of  $547,976  and  negative  working  capital  of
($1,036,578).

         The Company's auditors have included in its report, dated May 14, 1998,
and filed as an exhibit to the Form  10-KSB,  prepared  in  connection  with its
audit of the Company's financial  statements for the firscal year ended December
31, 1997, its  observations  that (1) the Company has suffered  recurring losses
during its  development  stage and has accumulated a deficit since its inception
to  December  31,  1997,  of over  $9,700,000;  (2) that the Company has minimal
liquid assets,  while reporting over $1,000,000 in current  liabilities and; (3)
that  the  Company'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 of high performance  engines.  These  observations have led
the auditors to opine that there exists  substantial  doubts about the Company's
ability to continue as a going concern.

Business Plan

      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 several high performance automotive engines
modified  with the Coates System on a limited  basis at its Wall  Township,  New
Jersey manufacturing  facility.  During the Company's fiscal year ended December
31, 1997, the Company built or retrofitted ten (10) V8 302 automobile engines, 3
of which were installed in a Bronco truck,  1996 Ford Mustang and in a 1988 Ford
Mustang, respectively. Except as set forth herein, none of the engines have 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.

                                        2


<PAGE>



that the overall  weight may be greater  than a  comparable  poppet  valve train
system and that  initial  manufacturing  costs will be greater than a comparable
poppet valve train system.  Since  Chrysler's  visit in 1993,  CIL has conducted
additional tests that counteract the majority of Chrysler's negative comments.

      Pursuant to a July 1991 prototype  manufacturing  agreement  signed by CIL
with Harley Davidson as a prelude to an anticipated  license  agreement,  Harley
Davidson engineers (according to Harley Davidson) conducted dynamometer tests of
two prototype  motorcycle  engines modified to incorporate the Coates System. In
the fall of 1991,  Harley Davidson advised CIL that relatively early in the test
process,  each prototype  engine  experienced  mechanical  durability  problems.
Subsequently,  CIL has reassembled the Harley Davidson  motorcycle  engine,  the
same engine  previously  tested by Harley Davidson,  again utilizing the Coates'
technology.  CIL is in the process of testing this reassembled motorcycle engine
which has now been  running for over two years.  Notwithstanding  the facts that
the Harley Davidson  motorcycle engine has been reassembled and has been running
for over two years,  it has not been  delivered  nor tested by Harley  Davidson.
Accordingly,  there can be no assurances given that Harley Davidson will accept,
test and/or agree to license this reassembled Harley Davidson motorcycle engine.

      Test  Results.  An automobile  engine  modified with the Coates System was
tested in  February  and August  1990 and  February  1991 at the  facilities  of
Compliance and Research  Services,  Inc.  ("CRS") an  independent  motor vehicle
testing  contract  laboratory  recognized  by the  United  States  Environmental
Protection  Agency  ("EPA"),  in tests set up to measure power and fuel economy.
The  test  results   indicated   emission   levels  of  pollutants   which  were
substantially   higher  than  maximum  emission  levels  permitted  pursuant  to
regulations adopted by the EPA. However,  the tests conducted were not emissions
tests and the engine of the vehicle being tested had been operated for more than
100,000 miles prior to testing.  Furthermore, the engine tested was not equipped
with an EGR  system or an air  pump,  two  standard  pollution  control  devices
required to be installed  in most  automobiles  operating  on U.S.  roads today.
Subsequently, CRS conducted an emission test in February 1995 on a 1985 Mercedes
engine  modified  to utilize the Coates  System as  compared  to a similar  1985
Mercedes  engine not so  modified.  The test,  conducted  on a  dynamometer  and
characterized  as a "hot start" test,  comprised  only one of the three required
Federal Testing Procedure or "FTP" tests required by the EPA to be passed before
any vehicles  containing engines can be sold to the public for commercial use in
the United States. The test results were as follows:

                                                  Pollutants Emitted
                                                 (in Grams per Mile)

                           Total                 Total CarbonOxides of
                           Hydrocarbons           Monoxide    Nitrogen

Mercedes Engine
with Coates System             .642                1.752         3.069

Mercedes Engine
without Coates System          .978                4.237         3.032

Maximum allowable
EPA emission standards          .41                3.4           1.0

                                        4


<PAGE>



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


<TABLE>
<CAPTION>

                                                                                                           Period From
                                                                                                            August 31,
                                                                                                          1988 (Date of
                                                                                                            Inception)
                                                                                                             Through
                                                                                                           December 31,
                                                                                                               1997
                                                                                                         ----------------
                                                                         Years Ended December 31,
                                                                     ---------------------------------   ----------------
                                                                          1997              1996
                                                                     ---------------   ---------------   ----------------
                                                                                                           (Unaudited)
                                                                       (Restated)                           (Restated)
                                                                     ---------------                     ----------------

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

Operating Expenses:
         Research and development costs                                      453,051            64,125          2,224,457
         Research and development costs - related party                      212,626           181,500            828,765
         General and administrative expenses                                 721,829         1,315,282          6,944,070
         Depreciation expense                                                 40,292            40,915            319,670
                                                                     ---------------   ---------------   ----------------

                  Total Operating Expenses                                 1,427,798         1,601,822         10,316,962
                                                                     ---------------   ---------------   ----------------

         Loss From Operations                                            (1,427,798)       (1,564,447)        (9,629,587)
                                                                     ---------------   ---------------   ----------------

Other Income (Expense):
         Interest income                                                      11,262             1,121            124,866
                                                                                                 =====
         Interest expense                                                   (15,650)          (36,784)          (238,996)
                                                                     ---------------   ---------------   ----------------

                  Total Other Income (Expense)                               (4,388)          (35,663)          (114,130)
                                                                     ---------------   ---------------   ----------------

         Net Loss                                                   $    (1,432,186) $     (1,600,110) $      (9,743,717)
                                                                     ===============   ===============   ================

         Net Loss Per Share                                         $         (0.24) $          (0.27)
                                                                     ===============   ===============
                                                                           6,033,669         5,963,600
         Weighted Average Number of Shares
                                                                    ===============   ===============

</TABLE>




See notes to the financial statements.



                                        3


<PAGE>



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

<TABLE>
<CAPTION>
                                                                                                                   Period From
                                                                                                                   August 31,
                                                                                                                  1988 (Date of
                                                                                                                   Inception)
                                                                                                                     Through
                                                                                                                  December 31,
                                                                                                                      1997
                                                                                                                -----------------
                                                                                 Years Ended December 31,
                                                                             ---------------------------------  -----------------
                                                                                  1997              1996
                                                                             ---------------   ---------------  -----------------
                                                                                                                   (Unaudited)
                                                                               (Restated)                          (Restated)
                                                                             ---------------                    -----------------
Cash Flows From Operating Activities
<S>                                                                         <C>              <C>               <C>               
    Net Loss                                                                $    (1,432,186) $     (1,600,110) $      (9,743,717)
                                                                             ---------------   ---------------  -----------------
    Adjustments to Reconcile Net Loss to Net Cash Used in Operating
        Activities
          Depreciation                                                                40,292            40,915            319,670
          Noncash research and development costs                                           -            31,131             31,131
    Changes in Assets and Liabilities
        (Increase) Decrease in
          Inventory                                                                  144,033         (144,033)                  -
          Due to/from affiliated companies                                             4,485           (2,312)                 57
        Increase (Decrease) in
          Accounts payable and accrued expenses                                    (542,861)           629,407            904,706
          Accrued interest payable                                                 (114,849)            18,371             62,340
                                                                             ---------------   ---------------  -----------------

        Total Adjustments                                                          (468,900)           573,479          1,317,904
                                                                             ---------------   ---------------  -----------------
    Net Cash Used in Operating Activities                                        (1,901,086)       (1,026,631)        (8,425,813)
                                                                             ---------------   ---------------  -----------------

Cash Flows from Investing Activities
    Payments for property and equipment                                                    -            (5,252)         (413,032)
    Loans to stockholders                                                                  -           (7,487)          (774,039)
                                                                             ---------------   ---------------  -----------------
    Net Cash Used in Investing Activities                                                  -          (12,739)        (1,187,071)
                                                                             ---------------   ---------------  -----------------

Cash Flows From Financing Activities
    Proceeds of additional paid-in capital                                           938,147         1,017,242          2,307,438
    Proceeds from issuance of stock                                                  960,000                 -          7,338,148
    Payment for treasury stock                                                             -                 -           (30,000)
    Loans from stockholder                                                            24,547             8,000             32,547
                                                                             ---------------   ---------------  -----------------
    Net Cash Provided by Financing Activities                                      1,922,694         1,025,242          9,648,133
                                                                             ---------------   ---------------  -----------------

    Net Increase (Decrease) in Cash                                                   21,608          (14,128)             35,249
    Cash - Beginning of Periods                                                       13,641            27,769                  -
                                                                             ---------------   ---------------  -----------------
    Cash - End of Periods                                                   $         35,249 $          13,641 $           35,249
                                                                             ===============   ===============  =================
</TABLE>

See notes to the financial statements.


                                        5


<PAGE>



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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued

Income Taxes
    In accordance with the provisions of Financial Accounting Standards No. 109,
    "Accounting  for  Income  Taxes"  ("SFAS  No.  109"),   deferred  taxes  are
    recognized for operating  losses that are available to offset future taxable
    income.  Valuation  allowances  are  established  when  necessary  to reduce
    deferred tax assets to the amount expected to realized. The Company incurred
    net operating losses for  financial-reporting  and  tax-reporting  purposes.
    Accordingly,  the benefit  from income  taxes has been offset  entirely by a
    valuation  allowance  against  the related  deferred  tax asset for the year
    ended December 31, 1997.

Use of Estimates
    The  preparation  of  financial  statements  in  conformity  with  generally
    accepted  accounting  principles  requires  management to make estimates and
    assumptions  that affect the reported  amounts of assets and liabilities and
    disclosure of contingent assets and liabilities at the date of the financial
    statements  and the reported  amounts of revenues  and  expenses  during the
    reporting period. Actual results could differ from those estimates.

Reclassification
    Certain items pertaining to the prior year have been reclassified to conform
with the current year's presentation.

Restatement of Financial Statements
    The  statements of operations and cash flows for the year ended December 31,
    1997 and for the period  from August 31,  1988 (date of  inception)  through
    December 31, 1997 have been restated to reduce previously  reported research
    and development  costs-related  party, by $10,000,000 in 1997 and $5,066,671
    in years  prior  thereto.  This  restatement  gives  effect  to a change  in
    reporting  the cost of  certain  patents  and  licenses  contributed  to the
    Company in exchange for preferred stock issued to GJC from their fair market
    value to the contributor's basis.

CONCENTRATIONS OF CREDIT AND BUSINESS RISK

    The  Company  maintains  cash  balances in several  financial  institutions.
    Accounts at each  institution are insured by the Federal  Deposit  Insurance
    Corporation up to $100,000,  of which the Company's  accounts may, at times,
    exceed the federally insured limits.

    The Company intends to market its engines modified with the Coates System to
the automotive racing market.

    Development  of the Coates System  technology  was  initiated by GJC,  CIL's
    founder,  President  and  controlling  stockholder  in the late  1970's  and
    development  efforts have been conducted  continuously since such time. From
    July  1982  through  May 1993,  seven  U.S.  patents  as well as a number of
    foreign patents were issued to GJC with respect to the Coates System.  Since
    the  inception  of CIL in  1988,  all  aspects  of the  business  have  been
    completely dependent upon the activities of GJC (who is a resident alien and
    not a U.S.  citizen and who does not have an employment  contract with CIL).
    The loss of GJC's  availability  or  services  due to death,  incapacity  or
    otherwise would have a material adverse effect on the Company's business and
    operations.

RESTRICTED CASH

    The Company placed $112,000 in an escrow account (pursuant to a court order)
    of net proceeds  raised from a 48,000 CIL Series A Preferred  Stock  private
    placement  offering in July 1997. The funds were escrowed for the payment of
    interest due to two former stockholders.


                                        8


<PAGE>


                                   Signatures

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, the Registrant has duly caused this Amendment No. 3 to
its Form 10-KSB for the year ended  December 31, 1997 to be signed on its behalf
by the undersigned, thereunto duly authorized.



Date                                   COATES INTERNATIONAL LTD.

December 14, 1998                      By s/George J. Coates
                                          -------------------
                                         George J. Coates, President


         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
Registrant and in the capacities and on the date indicated.

Signature                         Title                              Date

s/George J. Coates
George J. Coates       Director (Principal Executive           December 14, 1998
                       Principal Financial Officer, Principal
                       Accounting Officer

 s/Richard W. Evans
Richard W. Evans       Director                                December 14, 1998


s/Michael J. Suchar
Michael J. Suchar      Director                                December 14, 1998














coat10k3.97a


<PAGE>