SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended June 30, 1997
                         Commission file number 0-23044

                      AMERICAN MOBILE SATELLITE CORPORATION
             (Exact name of registrant as specified in its charter)

                     DELAWARE                         93-0976127
                  (State or other                  (I.R.S. Employer
                  jurisdiction of                  Identification No.)
                  incorporation or
                    organization)

             10802 Parkridge Boulevard
                      Reston, VA                      20191-5416
               (Address of principal                  (Zip Code)
                 executive offices)

                                 (703) 758-6000
                         (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  report(s)),  and (2) has been subject to
such filing requirements for the past 90 days. Yes X No

Number of shares of Common Stock outstanding at July 31, 1997: 25,144,434







                          PART I--FINANCIAL INFORMATION

                          Item 1. Financial Statements

             AMERICAN MOBILE SATELLITE CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF LOSS
                         -------------------------------
                      (in thousands, except per share data)
                                   (Unaudited)






                                                              Three Months Ended              Six Months Ended
                                                                   June 30,                       June 30,
                                                             1997             1996           1997          1996
                                                             ----             ----           ----          ----
REVENUES
                                                                                                
           Services                                          $4,979           $1,798        $9,132         $3,591
           Sales of equipment                                 5,774            4,951        10,306          7,527
                                                             ------            -----       -------          -----

           Total Revenue                                     10,753            6,749         19,438        11,118
COSTS AND EXPENSES
           Cost of service and operations                     8,201            8,839         17,074        15,642
           Cost of equipment sold                             7,140           14,446         12,582        16,889
           Sales and advertising                              3,059            6,302          6,280        12,320
           General and administrative                         2,937            4,430          7,805         9,393
           Depreciation and amortization                     11,083           11,730         21,020        22,874
                                                             -------          ------        -------        ------

           Operating Loss                                   (21,667)         (38,998)       (45,323)      (66,000)

INTEREST AND OTHER INCOME                                        86              196          1,031           305
INTEREST EXPENSE                                             (5,281)          (4,707)        (9,651)       (7,691)
MINORITY INTEREST                                                20               --             20           --
                                                            ---------       ---------       --------      --------

NET LOSS                                                   ($26,842)        ($43,509)      ($53,923)     ($73,386)
                                                           =========        =========      =========     =========

NET LOSS PER COMMON SHARE                                     ($1.07)         ($1.74)        ($2.15)
                                                              =======         =======        =======

WEIGHTED-AVERAGE COMMON SHARES
OUTSTANDING
           DURING THE PERIOD (000'S)                          25,120          25,012         25,115        25,003
                                                              ======          ======         ======        ======

See notes to consolidated financial statements.


                                        1





                          PART I--FINANCIAL INFORMATION

                    Item 1. Financial Statements (continued)

             AMERICAN MOBILE SATELLITE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           ---------------------------
                                 (in thousands)
                                   (Unaudited)




                                                                                    June 30,               December 31,
                                                                                       1997                       1996
                                                                                       ----                       ----
ASSETS
Current Assets:
                                                                                                        
       Cash and cash equivalents                                                      $2,806                     $2,182
       Inventory                                                                      45,460                     38,034
       Prepaid in-orbit insurance                                                      1,693                      5,080
       Accounts receivable-trade                                                       8,745                      6,603
       Other current assets                                                            8,682                     14,247
                                                                                      ------                     ------
       Total current assets                                                           67,386                     66,146

PROPERTY AND EQUIPMENT - NET                                                         250,983                    267,863

DEFERRED CHARGES AND OTHER ASSETS - NET                                               33,009                     16,164
                                                                                   ---------                  ---------
       Total assets                                                                 $351,378                   $350,173
                                                                                   =========                   ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
       Accounts payable and accrued expenses                                          32,809                    $42,625
       Obligations under capital leases due within one year                            3,806                      3,931
       Current portion of long-term debt                                               5,933                     11,113
                                                                                      ------                     ------
       Total current liabilities                                                      42,548                     57,669
Long-term Liabilities:
       Obligations under Bank Facility                                               180,000                    127,000
       Debt of subsidiary                                                             14,978                       ----
       Capital lease obligations                                                         756                      2,557
       Fair value of assets acquired in excess
         of purchase price                                                             3,072                      3,395
       Other long-term liabilities                                                       794                        852
                                                                                   ---------                  ---------
       Total long-term liabilities                                                   199,600                    133,804
                                                                                    --------                    -------
       Total liabilities                                                             242,148                    191,473

Minority Interest                                                                      1,480                        ---
Stockholders' Equity:
       Preferred stock, par value $0.01; no shares issued                                 --                        ---
       Common stock, voting, par value $0.01                                             251                        251
       Additional paid-in capital                                                    451,598                    451,259
       Common stock purchase warrants                                                 36,337                     23,848
       Unamortized guarantee warrants                                                (26,955)                   (17,100)
       Retained loss                                                                (353,481)                  (299,558)
                                                                                    ---------                  ---------
       Total stockholders' equity                                                    107,750                    158,700
                                                                                     -------                    -------
       Total liabilities and stockholders' equity                                   $351,378                   $350,173
                                                                                    ========                   ========
See notes to consolidated financial statements.




                                        2





                          PART I--FINANCIAL INFORMATION

                    Item 1. Financial Statements (continued)

             AMERICAN MOBILE SATELLITE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)





                                                                                    Six Months Ended
                                                                                         June 30,
                                                                                 1997               1996
CASH FLOWS FROM OPERATING ACTIVITIES:
                                                                                            
Net Loss                                                                       ($53,923)          ($73,386)
Adjustments to reconcile net loss to net cash used in operating activities:

         Amortization of debt discount and issuance costs                         4,297              2,253
         Depreciation and amortization                                           21,020             22,874
         Deferred and other items, net                                              285                707
         Changes in assets and liabilities:
           Prepaid in-orbit insurance                                             3,387              3,215
           Trade accounts receivable                                             (2,142)            (5,257)
           Other current assets                                                   5,565                648
           Inventory                                                             (7,426)           (15,448)
           Accounts payable and accrued expenses                                 (8,558)            20,050
                                                                                 -------            ------

         Net cash used in operating  activities                                 (37,495)           (44,344)

CASH FLOWS FROM INVESTING ACTIVITIES:
         Investment in AMRC                                                     (17,978)                --
         Additions to property and equipment                                     (5,804)            (7,090)
                                                                                 -------            -------
         Net cash used in investing activities                                  (23,782)            (7,090)

CASH FLOWS FROM FINANCING ACTIVITIES:
         Proceeds from issuance of Common Stock                                     141                904
         Proceeds from issuance of Common Stock of AMRC                           1,500                 --
         Principal payments under capital leases                                 (1,882)            (1,372)
         Proceeds from short-term borrowings                                         --             70,000
         Proceeds from debt                                                          --              1,700
         Debt issued by subsidiary                                               14,978                 --
         Payments on long-term debt                                              (5,225)           (12,269)
         Debt issuance costs                                                       (611)              (455)
         Proceeds from long-term debt                                            53,000                 --
                                                                                 -------           --------
         Net cash provided by financing activities                               61,901             58,508
                                                                                 -------            ------

         Net (decrease) increase  in cash and cash equivalents                      624              7,074

         CASH AND CASH EQUIVALENTS, beginning of period                            2,182             8,865
                                                                                  ------             -----
         CASH AND CASH EQUIVALENTS, end of period                                 $2,806           $15,939
                                                                                  ======           =======

See notes to consolidated financial statements.






                                        3





                          PART I--FINANCIAL INFORMATION

                    Item 1. Financial Statements (continued)

             AMERICAN MOBILE SATELLITE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------

                                  June 30, 1997
                                   (Unaudited)


1.  Organization and Business

American Mobile Satellite  Corporation was incorporated on May 3, 1988, by eight
of the initial applicants for the mobile satellite services license, following a
determination by the Federal  Communications  Commission ("FCC") that the public
interest  would best be served by granting  the license to a  consortium  of all
willing,  qualified applicants. The FCC has authorized American Mobile Satellite
Corporation to construct, launch, and operate a mobile satellite services system
(the "SKYCELL System") to provide a full range of mobile voice and data services
via satellite to land, air and sea-based  customers in a service area consisting
of the continental United States,  Alaska,  Hawaii, Puerto Rico, the U.S. Virgin
Islands, U.S. coastal waters,  international waters and airspace and any foreign
territory where the local government has authorized the provision of service. In
March  1991,  American  Mobile  Satellite  Corporation  transferred  the  mobile
satellite  services license ("MSS license") to a wholly owned  subsidiary,  AMSC
Subsidiary  Corporation  ("AMSC  Subsidiary").  On April 7,  1995,  the  Company
successfully  launched  its first  satellite  ("AMSC-1"),  from Cape  Canaveral,
Florida.

American Mobile Satellite  Corporation together with its subsidiaries ("AMSC" or
the  "Company") is devoting its efforts to expanding a developing  business.  As
further discussed in Management's Discussion and Analysis of Financial Condition
and Results of Operations,  this effort involves substantial risk. Specifically,
future  operating  results will be subject to significant  business,  liquidity,
economic,    regulatory,    technical,   and   competitive   uncertainties   and
contingencies.  The  integration  of the  components of the SKYCELL  System is a
complex  undertaking.  Delays in the  integration  of the  SKYCELL  System  have
already  occurred,  and there can be no assurance  that further  delays will not
occur.  Depending on their extent and timing,  these factors  individually or in
the aggregate could have an adverse effect on the Company's  financial condition
and future operating results.

On April 2, 1997,  American Mobile Radio Corporation  ("AMRC"),  a subsidiary of
AMSC, was a winning bidder for an FCC license to provide satellite-based Digital
Audio Radio Service  ("DARS")  throughout the United States (see  "Liquidity and
Financing").  As  previously  reported,  AMSC  entered  into an  agreement  with
WorldSpace,   Inc.   ("WorldSpace"),   by  which   WorldSpace   acquired  a  20%
participation  in AMRC. In connection with the DARS auction,  AMRC also arranged
for  financing  of the FCC license fees as well as for initial  working  capital
needs. The terms of the financing,  which also included the issuance of options,
would, if the options were exercised, have a dilutive impact on AMSC's ownership
interest in AMRC. The  operations and financing of AMRC are maintained  separate
and apart from the operations and financing of AMSC.

American Mobile Satellite Corporation has five other subsidiaries,  two of which
are  inactive  and  three  whose  limited  activities  do not  require  material
resources at this time.


2.  Basis of Presentation

The  consolidated  balance  sheet  as of June  30,  1997,  and the  consolidated
statements of loss and cash flows for the three months and six months ended June
30,  1997 and 1996,  have been  prepared by the Company  without  audit.  In the
opinion  of  management,   all  adjustments   (consisting  of  normal  recurring
adjustments)  necessary to present  fairly the  financial  position,  results of
operations and cash flows at June 30, 1997,  and for all periods  presented have
been  made.  The  balance  sheet at  December  31,  1996 has been taken from the
audited financial statements.

The unaudited  consolidated  condensed financial statements included herein have
been  prepared  pursuant  to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain  information  and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. While the Company believes
that the  disclosures  made are adequate to make the  information  presented not
misleading,   these  consolidated   financial   statements  should  be  read  in
conjunction  with  the  consolidated  financial  statements  and  related  notes
included in the Company's 1996 Annual Report on Form 10-K ("1996 10-K").



                                        4






The Company paid  approximately  $1.6 million and $3.0 million in the  six-month
periods  ended June 30,  1997 and 1996,  respectively,  to related  parties  for
capital  assets,  service-related  obligations,  and  payments  under  financing
agreements.  Payments from related parties for  communication  services totalled
$1.2 million in the six-month period ended June 30, 1997, as compared to none in
the  six-month  period ended June 30, 1996.  Total net  indebtedness  to related
parties as of June 30, 1997 approximated $2.9 million.

Loss per  common  share is based on the  weighted-average  number  of  shares of
Common  Stock  outstanding  during the period.  Stock  options and common  stock
purchase warrants are not reflected since their effect would be antidilutive.

In  March  1997,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  per
Share." This  Statement,  applicable to reporting  periods ending after December
15, 1997,  governs the  calculation of Earnings per Share ("EPS"),  and requires
that EPS  calculations  be  presented  as Basic  Earnings  per Share and Diluted
Earnings per Share.  The impact of adopting the  Statement is not expected to be
material to the financial statements.

In June 1997,  the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income"
governing the reporting and display of comprehensive  income and its components,
and SFAS No.  131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  requiring that public  businesses report financial and descriptive
information  about  its  reportable  operating  segments.  Both  Statements  are
applicable to reporting periods beginning after December 15, 1997. The impact of
adopting  the  Statements  is not  expected  to be  material  to  the  financial
statements.

3.  Liquidity and Financing

Adequate  liquidity  and capital  are  critical to the ability of the Company to
continue  as a  going  concern  and  to  fund  subscriber  acquisition  programs
necessary  to reach cash  positive  and  profitable  operations.  As  previously
reported, the Company has established a debt facility with Morgan Guaranty Trust
Company and Toronto  Dominion Bank (the "Bank  Financing")  consisting of a Term
Loan  Facility  and a Working  Capital  Facility.  The Bank  Financing  is fully
guaranteed by certain AMSC shareholders. As previously reported, the Company, on
March 27,  1997,  reached an agreement  with the  Guarantors  to  eliminate  all
covenant tests in exchange for additional  warrants and a re-pricing of warrants
previously  issued  (together,  the  "Guarantee  Warrants").   Previously,   the
Guarantee Warrants had been valued at $19.0 million. The Guarantee Warrants were
re-valued at $21.9 million,  effective  March 27, 1997. As of July 31, 1997, the
Company  had drawn  down  $144.0  million  of the Term Loan  Facility  at annual
interest  rates ranging from 5.9375% to 6.25%,  and $42.0 million of the Working
Capital Facility at annual interest rates ranging from 5.9375% to 6.25%.

As a result of slower than anticipated sales of inventory, the Company will need
additional financing ("Additional Financing") in 1997 beyond the Bank Financing.
The Company is currently  pursuing such  Additional  Financing  through  various
financing  arrangements and believes that such Additional  Financing will likely
be available;  however, there can be no assurance that Additional Financing will
be available or that the terms thereof will be favorable to the Company.  If the
Bank Financing or Additional  Financing is not  sufficient,  the Company may not
have adequate  capital to fund its future  operations.  The Company expects that
operating  revenues  will be  insufficient  to cover  operating  expenses  until
sometime in 1998 or beyond.

On March 12, 1997, the Company received waivers of certain  financial  covenants
contained in the ground segment obligations  ("Ground Segment  Obligations") for
the remaining  anticipated period of the Ground Segment Obligations.  The Ground
Segment Obligations were satisfied in full on May 15, 1997.

As previously  mentioned (see  "Organization and Business"),  AMRC was a winning
bidder for an FCC license to provide DARS throughout the United States. AMRC has
arranged  funding of the FCC license fees as well as the initial working capital
needs for this  business  through the issuance of debt,  not  guaranteed  by the
Company,  and  equity  in AMRC.  Such  debt is  currently  in the form of a note
outstanding  at an annual  interest  rate of 10.9%  (LIBOR  plus 5%).  It is not
expected that the  development  of this business will have a material  impact on
the Company's financial position, results of operations, or cash flows.


                                        5




4.  Legal and Regulatory Matters

Like other mobile  service  providers in the  telecommunications  industry,  the
Company is subject to substantial domestic, foreign and international regulation
including  the need for  regulatory  approvals  to operate the  SKYCELL  System,
mobile data terminals and mobile  telephones.  The  successful  operation of the
SKYCELL  System is  dependent  on a number of factors,  including  the amount of
L-band  spectrum  made  available  to the Company  pursuant to an  international
coordination process. The United States is currently engaged in an international
process of  coordinating  the Company's  access to the spectrum that the FCC has
assigned to the Company.  While the Company believes that  substantial  progress
has been made in the  coordination  process and expects  that the United  States
government will be successful in securing the necessary spectrum, the process is
not yet  complete.  The  inability  of the United  States  government  to secure
sufficient  spectrum  could have an adverse  effect on the  Company's  financial
position, results of operations, and its cash flows.

The Company has the necessary regulatory  approvals,  some of which are pursuant
to special temporary authority, to continue full commercial revenue service. The
Company has filed  applications with the FCC and expects to file applications in
the future with respect to the operation of its SKYCELL System and certain types
of mobile data  terminals  and mobile  telephones.  Certain of its  applications
pertaining to future service have been opposed.  While the Company,  for various
reasons,  believes  that it will  receive the  necessary  approvals  on a timely
basis,  there can be no assurance  that the requests will be granted on a timely
basis or that they will be granted on conditions  favorable to the Company.  Any
significant changes to the applications  resulting from the FCC's review process
or any significant  delay in their approval could adversely affect the Company's
financial position, results of operations, and its cash flows.

The Company's  license  requires that it comply with a  construction  and launch
schedule specified by the FCC for each of the three authorized  satellites.  The
second  and third  satellites,  while not  necessary  to achieve  the  Company's
current  business plan, are not in compliance with the schedule for commencement
of  construction.  The  Company  has  asked the FCC to grant  extensions  of the
deadlines  for the  second  and third  satellites.  Certain  of these  extension
requests  have  been  opposed  by third  parties.  The FCC has not  acted on the
Company's  requests.  The FCC has the authority to revoke the authorizations for
the second and third satellites and in connection with any such revocation could
exercise its authority to rescind the Company's  license.  The Company  believes
that the exercise of such authority to rescind the license is unlikely.

In 1992,  a former  director  of AMSC filed an  Amended  Complaint  against  the
Company alleging  violations of the Communications Act of 1934, as amended,  and
of the Sherman Act and breach of contract.  The suit seeks  damages for not less
than $100  million  trebled  under the  antitrust  laws plus  punitive  damages,
interest, attorneys' fees and costs. In mid-1992, the Company filed its response
denying all allegations.  The Company's motion for summary  judgement,  filed on
June 30,  1994,  was denied on April 18,  1996.  The matter has now been set for
trial beginning December 1997. Management believes that the complaint is without
merit,  and the  ultimate  outcome of this  matter  will not be  material to the
Company's financial position, results of operations, or its cash flows.


5.  Other Matters

The Company has received a current  recommendation  from a subcontractor  to its
satellite   manufacturer   that,   pending   further  results  from  an  ongoing
investigation,  the satellite  should be operated at modified  power  management
levels. The Company and its satellite  manufacturer are investigating the basis,
if any, for this  recommendation.  Based on the  information  available to date,
management  believes  that,  even if  maintained,  the current power  management
recommendation  would  not have a  material  negative  effect  on the  Company's
near-term  business plan based on anticipated  traffic  patterns and anticipated
subscriber  levels. In the event that traffic patterns or subscriber levels vary
materially  from those  anticipated,  the power  management  recommendation,  if
maintained,  could have a material  impact on the Company's  long-term  business
plan.

At June 30, 1997, the Company had remaining contractual  commitments to purchase
both  mobile data  terminal  inventory  and mobile  telephone  inventory  in the
maximum amount of $18.7 million.



                                        6



                          PART I--FINANCIAL INFORMATION

                 Item 2. Management's Discussion and Analysis of
              Interim Financial Condition and Results of Operations

In addition to historical information,  this Form 10-Q Quarterly Report contains
forward-looking  statements  within the meaning of Section 27A of the Securities
Act of  1933  and  Section  21E of the  Securities  Exchange  Act of  1934.  The
forward-looking  statements  contained  herein are subject to certain  risks and
uncertainties  that could cause actual results to differ  materially  from those
reflected  in the  forward-looking  statements.  Factors that might cause such a
difference include, but are not limited to, those discussed in the "Factors that
could affect Future  Operating  Results" and "Liquidity  and Capital  Resources"
sections.   Readers  are  cautioned  not  to  place  undue   reliance  on  these
forward-looking  statements,  which reflect management's analysis only as of the
date hereof.  The Company  undertakes  no  obligation  to publicly  revise these
forward-looking  statements to reflect events or circumstances  that arise after
the date hereof.  Readers should carefully review the risk factors  described in
other  documents  the Company  files from time to time with the  Securities  and
Exchange  Commission,  including  the Form  10-K  Annual  Report  and Form  10-Q
Quarterly  Report  filed by the Company  prior to this Form 10-Q,  any Form 10-Q
filed subsequent to this Form 10-Q, and any Current Reports on Form 8-K filed by
the Company.

General

The following  discussion  and analysis  provides  information  that  management
believes is relevant to an  assessment  and  understanding  of the  consolidated
financial  condition  and results of  operations  of American  Mobile  Satellite
Corporation  (with its  subsidiaries,  "AMSC" or the "Company").  The discussion
should be read in conjunction  with the  consolidated  financial  statements and
notes thereto.

American Mobile Satellite  Corporation was incorporated in May 1988. The SKYCELL
System  includes the Company's  satellite  ("AMSC-1")  launched  successfully in
April 1995, and a fixed  communications  ground segment (the "CGS"). In December
1995, the Company initiated  commercial voice service.  During 1996, the Company
transitioned  to an operating  company,  and currently  operates North America's
first high-powered,  satellite-based,  digital mobile  communication system (the
"SKYCELL System").

On April 2, 1997,  American Mobile Radio Corporation  ("AMRC"),  a subsidiary of
American Mobile Satellite  Corporation,  was a winning bidder for an FCC license
to provide  satellite-based  Digital Audio Radio Service ("DARS") throughout the
United States (see "Liquidity and Financing").


Factors that could affect Future Operating Results

The Company's future operating  results could be adversely  affected by a number
of uncertainties and factors, including (i) the timely completion and deployment
of  future  products  and  related  services,   including  among  other  things,
availability of mobile telephones, data terminals and other equipment to be used
with the SKYCELL System  ("Subscriber  Equipment")  being  manufactured by third
parties over which the Company has limited control, (ii) the market's acceptance
of the Company's services, (iii) the ability and the commitment of the Company's
Authorized Sales Agents and other distribution channels to market and distribute
the Company's  services,  (iv) the Company's ability to modify its organization,
strategy  and  product  mix to  maximize  the market  opportunities  in light of
changes therein,  (v) competition from existing  companies that provide services
using existing  communications  technologies  and the possibility of competition
from  companies  using new technology in the future,  (vi) capacity  constraints
arising from the reconfiguration of AMSC-1 previously reported, (vii) additional
technical  anomalies that may occur within the SKYCELL  System,  including those
relating to AMSC-1, which could impact, among other things, the operation of the
SKYCELL System and the cost, scope or availability of in-orbit insurance, (viii)
the ability of the Company to fully integrate  certain  components of the mobile
data  service,   (ix)  Subscriber   Equipment  inventory   responsibilities  and
liabilities assumed by the Company and the ability of the Company to realize the
value of its  inventory in a timely  manner,  and (x) the  Company's  ability to
secure additional financing as necessary.

The Company has received a current  recommendation  from a subcontractor  to its
satellite   manufacturer   that,   pending   further  results  from  an  ongoing
investigation,  the satellite  should be operated at modified  power  management
levels. The Company and its satellite  manufacturer are investigating the basis,
if any, for this  recommendation.  Based on the  information  available to date,
management  believes  that,  even if  maintained,  the current power  management
recommendation  would  not have a  material  negative  effect  on the  Company's
near-term  business plan based on anticipated  traffic  patterns and anticipated
subscriber  levels. In the event that traffic patterns or subscriber levels vary
materially  from those  anticipated,  the power  management  recommendation,  if
maintained,  could have a material  impact on the Company's  long-term  business
plan.  

                                        7



As of June 30, 1997,  there were in excess of 25,700  subscribers  on the
SKYCELL System.

In March 1997,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  ("SFAS") No. 128,  "Earnings  per Share." This
Statement,  applicable  to reporting  periods  ending  after  December 15, 1997,
governs the  calculation  of Earnings per Share  ("EPS"),  and requires that EPS
calculations  be presented as Basic Earnings per Share and Diluted  Earnings per
Share.  The impact of adopting  the  Statement is not expected to be material to
the financial statements.

In June 1997,  the FASB issued SFAS No. 130,  "Reporting  Comprehensive  Income"
governing the reporting and display of comprehensive  income and its components,
and SFAS No.  131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  requiring that public  businesses report financial and descriptive
information  about  its  reportable  operating  segments.  Both  Statements  are
applicable to reporting periods beginning after December 15, 1997. The impact of
adopting  the  Statements  is not  expected  to be  material  to  the  financial
statements.

Results of Operations

Operating Revenues

Service  revenues,  which  include both the Company's  voice and data  services,
approximated  $5.0 million and $9.1 million for the  three-month  and  six-month
periods ended June 30, 1997,  respectively.  Service revenue from voice services
approximated  $3.1 million for the  three-month  period ended June 30, 1997,  as
compared to $849,000 for the comparable period in 1996, and $5.7 million for the
six-month  period  ended June 30,  1997,  as  compared  to $1.8  million for the
comparable  period in 1996.  This  increase was primarily a result of (i) a 243%
increase in voice  customers as of June 30, 1997, as compared to voice customers
as of June 30, 1996,  and (ii) a 68% increase in power and band width  contracts
as of June 30,  1997,  as compared to power and band width  contracts as of June
30, 1996, offset by approximately $1.3 million received in the first five months
of 1996,  attributable  to satellite  capacity leased to TMI, under a commitment
that was completed in May 1996. Service revenue from the Company's data services
approximated  $1.9 million for the  three-month  period ended June 30, 1997, and
$3.5 million for the six-month period ended June 30, 1997,  compared to $949,000
and $1.8  million for the same period in 1996,  an increase of $1.0  million and
$1.7  million,  respectively.  The increase was primarily a result of (i) an 83%
increase  in single  mode  mobile  messaging  subscribers,  and (ii)  additional
revenue  from dual mode  subscribers  added as a result of the  acquisition,  in
November 1996, of Rockwell  International  Corporation's  ("Rockwell") dual mode
mobile messaging and global positioning and monitoring  service,  as compared to
the  revenue  received  in the first six months of 1996 for  satellite  capacity
leased by Rockwell.  Revenue from the sale of mobile data  terminals  and mobile
telephones  increased from $5.0 million for the three months ended June 30, 1996
to $5.7 million for the three months ended June 30, 1997,  and from $7.5 million
for the six-months ended June 30, 1996 to $10.3 million for the six-months ended
June 30,  1997.  This  increase is  attributable  to (i) a 13% increase in voice
equipment  sales  as a  result  of  the  Company's  introduction  of  additional
Subscriber  Equipment   configurations   throughout  1996,  and  (ii)  increased
equipment sales of the dual mode mobile messaging product, discussed above.

Costs and Expenses

The  Company's  costs and expenses  have  primarily  decreased in the  six-month
period ended June 30, 1997, as compared to the  comparable  period in 1996, as a
result of stringent  cost controls and expense  management.  Cost of service and
operations for the three-month and six-month  periods ended June 30, 1997, which
includes costs to support  subscribers  and to operate the SKYCELL  System,  was
$8.2  million  and  $17.1  million,  respectively,  $638,000  less than and $1.4
million  greater  than the  comparable  periods  in 1996.  Cost of  service  and
operations for the three-month  and six-month  periods ended June 30, 1997, as a
percentage of operating expenses, was 25% and 26%, respectively, compared to 19%
and  20% for  the  comparable  periods  in  1996.  The  dollar  decrease  in the
three-month  period ended June 30, 1997, as compared to the comparable period in
1996,  was the result of the reversal,  in May 1996,  of previously  capitalized
costs. The dollar and percentage  increase in cost of service and operations for
the  six-month  period ended June 30, 1997,  was primarily  attributable  to (i)
increased  interconnect  charges  associated  with  increased  service  usage by
customers,  and (ii) the additional  costs  associated  with supporting the dual
mode mobile  messaging  product,  discussed  above.  The cost of equipment  sold
decreased to $7.1 million from $14.4 million for the three months ended June 30,
1997 and 1996,  respectively,  and  represented  22% and 32% of total  operating
expenses for the three months  ended June 30, 1997 and 1996,  respectively.  The
cost of equipment sold decreased to $12.6 million from $16.9 million for the six
months ended June 30, 1997 and 1996,  respectively,  and represented 19% and 22%
of total operating  expenses for the same periods.  The decrease in both dollars
and as a  percentage  of operating  expenses of the cost of  equipment  sold was



                                        8




primarily  attributable  to  certain  charges  in the  second  quarter  of 1996,
totalling $8.1 million,  for the reconfiguration of inventory and the write down
of certain assets,  including inventory,  to net realizable value, offset by (i)
the Company's  introduction of additional  Subscriber  Equipment  configurations
throughout 1996 and the resulting sale of mobile telephones,  and (ii) increased
equipment  sales of the dual mode mobile  messaging  product,  discussed  above.
Sales and  advertising  expenses  were $3.0  million  and $6.2  million  for the
three-month and six-month  periods ended June 30, 1997,  respectively,  compared
with $6.3  million  and $12.3  million for the same  periods in 1996.  Sales and
advertising  expenses for both the three-month and six-month  periods ended June
30, 1997,  were 10% as a percentage of operating  expenses,  compared to 14% and
16% for the  comparable  periods  in 1996.  Both  the  dollar  decrease  and the
percentage   decrease  of  sales  and   advertising   expenses  were   primarily
attributable to (i) reduced personnel and advertising costs as the Company moved
from consumer markets to targeted business-to-business sales, and (ii) increased
costs in the first quarter of 1996 for the  development  of collateral  material
needed to  support  the sales  effort,  and (iii)  costs  incurred  in the first
quarter  of 1996  associated  with the formal  launch of  service.  General  and
administrative expenses for the three-month and six-month periods ended June 30,
1997, were $2.9 million and $7.8 million,  respectively,  $1.5 million less than
both of the comparable periods in 1996. General and administrative  expenses for
the  three-month  and six-month  periods  ended June 30, 1997,  were 9% and 12%,
respectively, as a percentage of operating expenses, compared to 38% and 36% for
the same periods in 1996. Both the dollar and percentage decrease in general and
administrative  expenses for the first six months of 1997  compared to 1996 were
primarily  attributable  to  reductions  made  in  staffing  as  a  result  of a
management  restructuring  in  the  third  quarter  of  1996.  Depreciation  and
amortization expense was $11.1 million and $21.0 million for the three-month and
six-month periods ended June 30, 1997, respectively, compared with $11.7 million
and $22.9 million for the same periods in 1996.  Depreciation  and  amortization
for the three-month  and six-month  periods ended June 30, 1997, was 34% and 33%
respectively,  as a percentage of operating expenses,  compared with 25% and 30%
for the comparable  periods in 1996.  The dollar  decrease in  depreciation  and
amortization  expense was attributable to the reduction of the carrying value of
the satellite as a result of the resolution, in August 1996, of claims under the
Company's  satellite  insurance  contracts  and  policies  and  the  receipt  of
approximately $66.0 million, offset by a $1.0 million one-time charge associated
with  increased  amortization  in  accordance  with SFAS No.  86, in the  second
quarter of 1997, of certain costs  associated with software  development for the
mobile data  product.  The  increase as a percentage  of  operating  expenses in
depreciation and  amortization  expense was attributable to the reduction in all
other operating expenses.

Interest and Other Income

Interest  income was $86,000 and  $156,000 for the three and  six-month  periods
ended June 30, 1997, respectively, compared to $196,000 and $305,000 in the same
periods in 1996. The decrease was a result of lower average cash balances in the
first six months of 1997 as  compared  to the same  period in 1996.  The Company
incurred  $5.3  million and $9.7  million of interest  expense for the three and
six-month  periods ended June 30, 1997,  respectively,  compared to $4.7 million
and  $7.7  million  of  interest  expense  for the  comparable  periods  of 1996
reflecting (i) increased debt balances during the six months of 1997 as compared
to 1996, and (ii) the  amortization  of debt discount and debt issuance costs in
the six months of 1997 of approximately $4.3 million compared to $2.3 million in
the first six months of 1996. Additionally, in the first six months of 1997, the
Company  received other income in the amount of $875,000  representing  proceeds
from the licensing of certain technology associated with the SKYCELL System.

Capital Expenditures

Net capital  additions,  including  additions  financed through vendor financing
arrangements,  for the first six months of 1997 were $4.4  million  compared  to
$7.5 million for the same period in 1996. The decrease was largely  attributable
to the reduction in the acquisition of assets  necessary to complete the SKYCELL
System.

Liquidity and Capital Resources

Adequate  liquidity  and capital  are  critical to the ability of the Company to
continue  as a  going  concern  and  to  fund  subscriber  acquisition  programs
necessary  to reach cash  positive  and  profitable  operations.  As  previously
reported, the Company has established a debt facility with Morgan Guaranty Trust
Company and Toronto  Dominion Bank (the "Bank  Financing")  consisting of a Term
Loan  Facility  and a Working  Capital  Facility.  The Bank  Financing  is fully
guaranteed  by certain  AMSC  shareholders  (the  "Guarantors").  As  previously
reported,  the  Company,  on March  27,  1997,  reached  an  agreement  with the
Guarantors to eliminate all covenant tests, in exchange for additional  warrants
and a  re-pricing  of  warrants  previously  issued  (together,  the  "Guarantee
Warrants"). Previously, the Guarantee Warrants had been valued at $19.0 million.
The Guarantee  Warrants were  re-valued at $21.9  million,  effective  March 27,
1997. As of July 31, 1997, the Company had drawn down $144.0 million of the Term
Loan Facility at annual interest rates ranging from 5.9375% to 6.25%,  and $44.0
million of the Working  Capital  Facility at annual  interest rates ranging from
5.9375% to 6.25%.


                                       9






As a result of slower than anticipated sales of inventory, the Company will need
additional financing ("Additional Financing") in 1997 beyond the Bank Financing.
The Company is currently  pursuing such  Additional  Financing  through  various
financing  arrangements and believes that such Additional  Financing will likely
be available;  however, there can be no assurance that Additional Financing will
be available or that the terms thereof will be favorable to the Company.  If the
Bank Financing or Additional  Financing is not  sufficient,  the Company may not
have adequate  capital to fund its future  operations.  The Company expects that
operating  revenues  will be  insufficient  to cover  operating  expenses  until
sometime in 1998 or beyond.

On March 12, 1997, the Company received waivers of certain  financial  covenants
contained in the ground segment obligations  ("Ground Segment  Obligations") for
the remaining  anticipated period of the Ground Segment Obligations.  The Ground
Segment Obligations were satisfied in full on May 15, 1997.

As previously  mentioned (see  "Organization and Business"),  AMRC was a winning
bidder for an FCC license to provide DARS throughout the United States. AMRC has
arranged  funding of the FCC license fees as well as the initial working capital
needs for this  business  through the issuance of debt,  not  guaranteed  by the
Company,  and  equity  in AMRC.  Such  debt is  currently  in the form of a note
outstanding  at an annual  interest  rate of 10.9%  (LIBOR  plus 5%).  It is not
expected that the  development  of this business will have a material  impact on
the Company's financial position, results of operations, or cash flows.

At June 30, 1997, the Company had remaining contractual  commitments to purchase
both  mobile data  terminal  inventory  and mobile  telephone  inventory  in the
maximum amount of $18.7 million.

For the first six months of 1997,  the  Company  used  $37.5  million of cash in
operating  activities and $23.8 million of cash in investing  activities and has
generated  $61.9  million  of  cash  from  financing  activities.  Cash  used in
operating activities was $37.5 million for the first six months of 1997 compared
to $44.3  million for the same period in 1996, a decrease of $6.8  million.  The
decrease in cash used in operating activities was primarily  attributable to (i)
decreased  operating  losses,  and (ii) the  reduction of payments for inventory
commitments,  partially  offset by increased  payments for accounts  payable and
accrued  expenses.  Cash used in investing  activities was $23.8 million for the
first six months of 1997  compared to $7.1  million for the same period in 1996,
an increase of $16.7  million.  The increase was primarily  attributable  to the
initial funding towards the acquisition of the DARS license, partially offset by
the  reduction,  in the first six months of 1997 as compared  to the  comparable
period in 1996, in the  acquisition of capital  assets  required to complete the
SKYCELL System. Cash provided by financing  activities was $61.9 million for the
first six months of 1997  compared to $58.5 million for the same period in 1996,
an increase of $3.4 million.  The increase was largely attributable to financing
received  to fund the  required  payments  towards the  acquisition  of the DARS
license, offset by the reduction in the amount of proceeds received in the first
six months of 1997, as compared to the comparable  period in 1996,  from various
bank financing  arrangements.  As of June 30, 1997, the Company had $2.8 million
of cash and cash equivalents and working capital of $24.8 million.




                                       10






                          PART II -- OTHER INFORMATION

          Item 4. Submission of Matters to a Vote of Security Holders

(a)   At the annual  meeting of the  stockholders  of AMSC held on May 21, 1997,
      the matters described under (b) and (c) below were voted upon.

(b)   The following nominees,  constituting all of the Company's directors, were
      elected to the Company's board of directors:



                             Votes For   Votes Against       Abstain
Steven D. Dorfman            22,715,454       0              612,476
Ho Siaw Hong                 22,716,669       0              611,261
David A. Juliano             22,636,654       0              691,276
Billy J. Parrott             22,717,369       0              610,561
Gary M. Parsons              22,717,454       0              610,476
Andrew A. Quartner           22,717,454       0              610,476
Jack A. Shaw                 22,633,824       0              694,106
Roderick M. Sherwood, III    22,716,654       0              611,276
Michael T. Smith             22,715,354       0              612,576
Yap Chee Keong               22,716,754       0              611,176
Albert L. Zesiger            22,716,069       0              611,861

(c)(1)    The vote on the  ratification  of Arthur  Andersen LLP as  independent
          accountants  for the  Company  for 1997  was  23,176,753  for,  92,656
          against, 58,521 abstaining.

   (2)    The vote on the approval of an amendment to the  Company's  1989 Stock
          Option Plan to increase the number of shares  authorized  for issuance
          was 20,691,339 for, 1,303,632 against, 22,596 abstaining and 1,310,363
          not voted.

                                       11


                          PART II -- OTHER INFORMATION

                    Item 6. Exhibits and Reports on Form 8-K

          (a) Exhibits

3.1 --    Restated  Certificate of Incorporation of AMSC (as restated  effective
          May  1,  1996)  (Incorporated  by  reference  to  Exhibit  3.1  to the
          Company's  Quarterly  Report on Form 10-Q for the periods ending March
          31,1996 and June 30, 1996 (File No. 0-23044))

3.2 --    Amended and Restated Bylaws of AMSC (as amended and restated effective
          February  29, 1996)  (Incorporated  by reference to Exhibit 3.2 to the
          Company's  Annual  Report  on Form  10-K for the  fiscal  year  ending
          December 31, 1995 (File No. 0-23044))

11.1 --   Computations of Earning Per Common Share (filed herewith)


27.0 --   Financial Data Schedule (filed herewith)


                                       12




SIGNATURE

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.

                  AMERICAN MOBILE SATELLITE CORPORATION
                  (Registrant)


Date: August 7, 1997                By:/s/STEPHEN D. PECK
                                    -------------------------------------
                                    Stephen D. Peck
                                    Vice President and Chief Financial Officer
                                    (principal financial officer)


                                    By:/s/CHRISTOPHER COLAVITO
                                    -------------------------------------
                                    Christopher Colavito
                                    Controller and Vice President
                                    (principal accounting officer)


                                       13