UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

     FOR  THE  QUARTERLY  PERIOD  ENDED  JUNE  30,  2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to . . . . . . . . . .to. . . . . . . . . . . . .

                        Commission File Number: 000-32217

                              O2DIESEL CORPORATION
                 (Name of small business issuer in its charter)

              WASHINGTON                              91-2023525
           (State or Other                          (IRS Employer
    Jurisdiction of Incorporation)               Identification No.)

                              200 EXECUTIVE DRIVE
                             NEWARK, DELAWARE 19702
                    (Address of Principal Executive Offices)

                                 (302) 266-6000
                          (Issuer's telephone number)
                                 Not Applicable

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

On August 11, 2003, the registrant had 25,451,313 shares of Common Stock,
$0.0001 par value per share, issued and outstanding

     Transitional Small Business Disclosure Format (check one)  Yes [ ]  No [X]


<PAGE>
<TABLE>
<CAPTION>
                              02DIESEL CORPORATION
                      FOR THE QUARTER ENDED JUNE 30, 2003

                              INDEX TO FORM 10-QSB


                                                              PAGE
                                                             -----
<S>                                                          <C>

PART I   FINANCIAL INFORMATION
Item 1.  Financial Statements                                F-1

Item 2.  Plan of Operation                                     1

Item 3.  Controls and Procedures                               7

PART II

Item 1.  Legal Proceedings                                     8

Item 2.  Changes in Securities                                 8

Item 3.  Defaults Upon Senior Securities                       9

Item 4.  Submissions of Matters to Vote of Security Holders    9

Item 5.  Other Information                                     9

Item 6.  Exhibits and Reports on Form 8-K                     11

Signatures                                                    13
</TABLE>


<PAGE>
                    NOTE REGARDING FORWARD LOOKING STATEMENTS

     This quarterly report contains forward-looking statements concerning
O2Diesel Corporation ("O2Diesel" or the "Registrant") and its future operations,
plans and other matters.  Any statements that involve discussions with respect
to predictions, expectations, belief, plans, projections, objectives,
assumptions or future events or performance (often, but not always, using
phrases such as "expects", or "does not expect", "is expected", "anticipates" or
"does not anticipate", "plans", "estimates" or "intends", or stating that
certain actions, events or results "may", could", "might", or "will" be taken or
occur or be achieved) are not statements of historical fact and may be "forward
looking statements" which include statements relating to, among other things,
the ability of O2Diesel to effectively integrate the business of AAE
Technologies International plc into its operations and to effectively compete in
the fuel additive business.

     O2Diesel cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.  Such
forward-looking statements are based on the beliefs of O2Diesel's management as
well as on assumptions made by and information currently available to 02Diesel
at the time such statements were made.  Forward-looking statements are subject
to a variety of risks and uncertainties which could cause actual events or
results to differ from those reflected in the forward-looking statements,
including, without limitation, the failure to obtain adequate financing on a
timely basis and other risks and uncertainties.  Actual results could differ
materially from those projected in the forward-looking statements, as a result
of  either the matters set forth or incorporated in this report generally or
certain economic and business factors, some of which may be beyond the control
of O2Diesel.  These factors include adverse economic conditions, entry of new
and stronger competitors, inadequate capital, unexpected costs, failure to gain
product approval in the United States or foreign countries for the
commercialization and distribution of its products and failure to capitalize
upon access to new markets.

     O2Diesel disclaims any obligation subsequently to revise any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

                                EXPLANATORY NOTES

     On July 15, 2003, O2Diesel declared the recommended offer ("Recommended
Offer") by O2Diesel to acquire AAE Technologies International plc, an Irish
corporation ("AAE"), unconditional in all respects.  The Offer was made in
accordance with Irish law and pursuant to an exemption from the U.S. tender
offer rules provided by Rule 14d-1(c) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Rule 802 thereunder.

     Under the terms of the Recommended Offer, the Registrant agreed to issue
18,000,000 shares of common stock to the shareholders of AAE in exchange for all
of the issued and outstanding equity capital of AAE.  The Recommended Offer
transactions were reported in O2Diesel's current report on Form 8-K filed on
July 30, 2003, which is incorporated by reference in this quarterly report.

     O2Diesel issued a stock dividend of seven-tenths of one share for every one
share issued and outstanding to shareholders of record at 8:00 a.m. (Eastern
time) on April 9, 2003 (the "Record Date").  As of the Record Date, the Company
had 8,600,000 shares of common stock issued and outstanding.  Fractional shares
resulting from the stock dividend were rounded up to the next whole


<PAGE>
share. After giving effect to the stock dividend, the Company had 14,620,000
shares of common stock issued and outstanding. The information contained in this
quarterly report on Form 10-QSB gives retroactive effect to the stock dividend.




<PAGE>

                         PART I.  FINANCIAL INFORMATION
ITEM 1.







               Financial  Statements


               O2DIESEL CORPORATION
               (formerly, Dynamic Ventures, Inc.)
               (A Development Stage Company)


               Three and Six months ended June 30, 2003 and 2002
               (Unaudited)


<PAGE>
<TABLE>
<CAPTION>
O2 Diesel Corporation (formerly Dynamic Ventures Inc.)
(A Development Stage Company)
Balance Sheets
(expressed in U.S. dollars)


                                                                       June 30,   December 31,
                                                                         2003         2002
                                                                         $
                                                                     (unaudited)   (audited)
<S>                                                                   <C>         <C>


Assets

Current Assets

  Cash                                                                   30,658         63,946
-----------------------------------------------------------------------------------------------

Total Current Assets                                                     30,658         63,946

Deferred Business Acquisition Costs (Note 4)                            181,666              -
-----------------------------------------------------------------------------------------------

Total Assets                                                            212,324         63,946
===============================================================================================


Liabilities and Stockholders' Deficit

Current Liabilities

  Accounts payable                                                      189,946              -
  Accrued liabilities (Note 7(b))                                        36,100         28,201
  Note payable (Note 5)                                                 100,000        100,000
-----------------------------------------------------------------------------------------------

Total Liabilities                                                       326,046        128,201
-----------------------------------------------------------------------------------------------

Contingent Liability (Note 1)
Commitments (Notes 3 and 8)
Subsequent Events (Note 9)

Stockholders' Deficit

Common Stock: 100,000,000 common shares authorized with a par
value of $0.0001; 14,620,000 shares issued and outstanding (Note
6)                                                                        1,462          1,462

Additional Paid-in Capital (Note 6)                                      84,538         84,538

Donated Capital (Note 7(c))                                              21,000         18,000
-----------------------------------------------------------------------------------------------

                                                                        107,000        104,000
-----------------------------------------------------------------------------------------------

Preferred Stock, 20,000,000 preferred shares authorized with a par
value of $0.0001; none issued                                                 -              -
-----------------------------------------------------------------------------------------------
Deficit Accumulated During the Development Stage                       (220,722)      (168,255)
-----------------------------------------------------------------------------------------------
Total Stockholders' Deficit                                            (113,722)       (64,255)
-----------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit                             212,324         63,946
===============================================================================================
</TABLE>


                                      F-2
    (The accompanying notes are an integral part of the financial statements)

<PAGE>
<TABLE>
<CAPTION>
O2 Diesel Corporation (formerly Dynamic Ventures Inc.)
(A Development Stage Company)
Statements of Operations
(expressed in U.S. dollars)
(unaudited)

                                                Accumulated from
                                                 April 10, 2000        Three Months Ended           Six Months Ended
                                              (Date of Inception)           June 30,                    June 30,
                                                to June 30, 2003       2003          2002          2003          2002
                                                       $                $             $             $             $
<S>                                            <C>                 <C>           <C>           <C>           <C>

Revenue                                                        -             -             -             -             -
-------------------------------------------------------------------------------------------------------------------------

Expenses

  Asset written-off                                       24,750             -             -             -             -
  Consulting (Note 7 (c) and (d))                         67,318        11,000             -        19,000             -
  Foreign exchange loss (gain)                               638          (226)         (138)         (475)         (136)
  Interest and bank charges (Note 7(b))                   30,386         3,070         2,942         6,157         5,921
  Market research                                          1,500             -             -             -             -
  Office, rent and telephone                              17,662         9,291           664         9,743         1,483
  Professional fees and organizational costs              22,800         6,736         4,956        11,800         8,769
  Transfer agent and filing fees                           6,289         5,030           255         6,289         1,155
  Web site maintenance fee                                 1,000             -           500             -           500
  Less:  Interest income                                  (2,367)          (10)            -           (47)            -
-------------------------------------------------------------------------------------------------------------------------

Total Expenses                                           210,472        34,891         9,179        52,467        17,692
-------------------------------------------------------------------------------------------------------------------------

Net Loss for the Period                                 (210,472)      (34,891)       (9,179)      (52,467)      (17,692)
=========================================================================================================================

Basic Net Loss Per Share                                                     -             -             -             -
=========================================================================================================================

Weighted Average Shares Outstanding
(Note 6)                                                            14,620,000    14,620,000    14,620,000    14,620,000
=========================================================================================================================
</TABLE>

(Diluted loss per share has not been presented as the result is anti-dilutive)


                                      F-3
    (The accompanying notes are an integral part of the financial statements)

<PAGE>
<TABLE>
<CAPTION>
O2 Diesel Corporation (formerly Dynamic Ventures Inc.)
(A Development Stage Company)
Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)

                                                                 For the
                                                            Six Months Ended
                                                                June  30,
                                                             2003       2002
                                                              $          $
<S>                                                        <C>        <C>

Cash Flows to Operating Activities

  Net loss for the period                                   (52,467)  (17,692)

  Adjustment to reconcile net loss to cash

    Donated consulting                                        3,000         -

  Change in operating assets and liabilities

    Increase in accounts payable and accrued liabilities     16,179     7,646
------------------------------------------------------------------------------
Net Cash Used by Operating Activities                       (33,288)  (10,046)
------------------------------------------------------------------------------
Cash Flows from Financing Activities                              -         -
------------------------------------------------------------------------------
Cash Flows to Investing Activities                                -         -
------------------------------------------------------------------------------
Decrease in Cash                                            (33,288)  (10,046)
Cash - Beginning of Period                                   63,946    80,802
------------------------------------------------------------------------------
Cash - End of Period                                         30,658    70,756
==============================================================================

Non-Cash Financing Activities

  A total of $181,666 of deferred acquisition costs were
  accrued as at June 30, 2003                               181,666         -
==============================================================================

Supplemental Disclosures

  Interest paid                                                   -         -
  Income tax paid                                                 -         -
</TABLE>


                                      F-4
    (The accompanying notes are an integral part of the financial statements)

<PAGE>
<TABLE>
<CAPTION>
O2 Diesel Corporation (formerly) Dynamic Ventures Inc.
(A Development Stage Company)
Statement of Stockholders' Deficit
From April 10, 2000 (Date of Inception) to June 30, 2003
(expressed in U.S. dollars)

                                                                                                          Deficit
                                                                                                        Accumulated
                                                                          Additional                     During the
                                                         Common Stock      Paid-in   Donated            Development
                                                     Shares    Par Value   Capital   Capital    Total      Stage
                                                       #           $          $         $         $          $
<S>                                                <C>         <C>         <C>       <C>       <C>       <C>

Balance - April 10, 2000 (Date of Inception)                -           -         -         -         -          -

  Stock issued for license at a fair market
    value of $0.0058824 per share (Note 6)          5,950,000         595    34,405         -    35,000          -

  Stock issued for organizational expenses
    and offering costs at a fair market value of
    $0.0058824 per share (Note 6)                   1,870,000         187    10,813         -    11,000          -

  Dividend deemed paid (Note 7)                             -           -         -         -         -    (10,250)

  Net loss for the period                                   -           -         -         -         -    (50,707)
-------------------------------------------------------------------------------------------------------------------

Balance - December 31, 2000 (audited)               7,820,000         782    45,218         -    46,000    (60,957)

  Stock issued at $0.0058824 per share for
    cash (Note 6)                                   6,800,000         680    39,320         -    40,000          -

  Net loss for the year                                     -           -         -         -         -    (58,167)
-------------------------------------------------------------------------------------------------------------------

Balance - December 31, 2001 (audited)              14,620,000       1,462    84,538         -    86,000   (119,124)

  Donated consulting                                        -           -         -    18,000    18,000          -

  Net loss for the year                                     -           -         -         -         -    (49,131)
-------------------------------------------------------------------------------------------------------------------

Balance - December 31, 2002 (audited)              14,620,000       1,462    84,538    18,000   104,000   (168,255)

  Donated consulting                                        -           -         -     3,000     3,000          -

  Net loss for the period                                   -           -         -         -         -    (52,467)
-------------------------------------------------------------------------------------------------------------------

Balance - June 30, 2003 (unaudited)                14,620,000       1,462    84,538    21,000   107,000   (220,722)
===================================================================================================================
</TABLE>

On  April  10,  2003,  the  Company  paid  a  stock  dividend on each issued and
outstanding  share of common stock. For each share owned, a stockholder received
0.7  additional shares. The increase in common stock issued and outstanding from
the  resulting 1.7 for 1 forward stock split has been charged against additional
paid-in  capital.  This  change  in  capital  structure  has  been  recorded
retroactively  in  these  financial  statements.


                                      F-5
    (The accompanying notes are an integral part of the financial statements)

<PAGE>
O2 Diesel Corporation (formerly Dynamic Ventures Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
(unaudited)


1.      Nature of Operations and Business Acquisition

     O2 Diesel Corporation (formerly Dynamic Ventures Inc.) herein (the
     "Company") was incorporated in the State of Washington, U.S.A. on April 10,
     2000. The Company's previous business was to market and distribute
     vitamins, minerals, nutritional supplements, and other health and fitness
     products in the States of Nevada and Utah.

     The Company's SB-2 Registration Statement filed with the U.S. Securities
     and Exchange Commission was declared effective on January 5, 2001. The
     Company completed an offering and issued 6,800,000 post-split common shares
     for cash proceeds of $40,000.

     On July 15, 2003, the Company declared the Recommended Offer to acquire all
     of the issued and outstanding share capital of AAE Technologies
     International PLC ("AAE") in exchange for 18,000,000 shares of its common
     stock unconditional in all respects. This transaction will effect a reverse
     merger of the Company and a new business direction. For accounting purposes
     this transaction will be accounted for as a capital transaction accompanied
     by a recapitalization of AAE rather than a purchase business combination.
     AAE is a fuel additive development and marketing company incorporated in
     Ireland with offices in the United Kingdom and the United States.
     Immediately prior to closing the business acquisition, the President of the
     Company contributed 7,720,000 shares of common stock of the Company, which
     he owned to the Company for cancellation.

     The Company has a working capital deficit of $295,388 as at June 30, 2003.
     Subsequent to June 30, 2003 the Company received proceeds of $4,945,000
     under a private placement of common shares at $1.50 per share (the "Private
     Placement") and the terms of a Loan Agreement dated July 10, 2003. The
     Company accepted subscriptions under the Private Placement for 630,000
     shares of common stock at $1.50 per share for total proceeds of $945,000
     and issued a convertible note in the principal amount of $4,000,000 (the
     "Convertible Note") under the terms of the Loan Agreement. Under the terms
     of the Loan Agreement and the Convertible Note, the Company has agreed to
     pay the proceeds of any subscription under the Private Placement received
     until August 10, 2003 (extended to September 30, 2003) to the holder of the
     Convertible Note as payment toward the principal. Subsequent to July 10,
     2003, the Company accepted additional subscriptions for 781,667 shares of
     common stock under the Private Placement for proceeds of $1,172,500, which
     were applied to reduce the principal balance of the Convertible Note to
     $2,827,450. On September 30, 2003, the remaining principal balance of the
     Convertible Note (if any) will convert automatically into shares of common
     stock of the Company at $1.50 per share. The Convertible Note bears no
     interest.

     The Company was in the early development stage until its new business
     direction. The ability of the Company to emerge from the development stage
     with respect to its new planned principal business activity is dependent
     upon its ability to generate significant revenue from its new business
     direction. There is no guarantee that the Company will be able to sell any
     of its products at a profit. There may be doubt regarding the Company's
     ability to continue as a going concern.


2.      Summary of Significant Accounting Policies

     (a)  Year  end

               The Company's fiscal year end is December 31.

     (b)  Cash  and  Cash  Equivalents

          The Company considers all highly liquid instruments with a maturity of
          three months or less at the time of issuance to be cash equivalents.




                                      F-1
    (The accompanying notes are an integral part of the financial statements)

<PAGE>
O2 Diesel Corporation (formerly Dynamic Ventures Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
(unaudited)

2.      Summary of Significant Accounting Policies (continued)

     (c)  Long-lived Assets

               In accordance with SFAS No. 144, "Accounting for the Impairment
               or Disposal of Long Lived Assets", the carrying value of
               intangible assets and other long-lived assets is reviewed on a
               regular basis for the existence of facts or circumstances that
               may suggest impairment. The Company recognizes an impairment when
               the sum of the expected undiscounted future cash flows is less
               than the carrying amount of the asset. Impairment losses, if any,
               are measured as the excess of the carrying amount of the asset
               over its estimated fair value.

     (d)  Foreign Exchange

               Current monetary assets and liabilities of the Company, which are
               denominated in foreign currencies, are translated at the exchange
               rate in effect at the balance sheet dates. Revenues and expenses
               are translated at rates of exchange prevailing on the transaction
               dates. Exchange gains or losses on the realization of current
               monetary assets and the settlement of current monetary
               liabilities are recognized currently to operations.

     (e)  Revenue Recognition

          The  Company will receive from the Grantor of the license, commissions
          of  one-half of all the profit on all sales made through the Grantor's
          Web  Site. The commission revenue will be recognized in the period the
          sales have occurred. The Company will report the commission revenue on
          a  net  basis as the Company is acting as an Agent for the Grantor and
          does not assume any risks or rewards of the ownership of the products.
          This  policy  is  prospective  in  nature,  as the Company has not yet
          generated  any  revenue.

     (f)  Comprehensive Income

          SFAS  No. 130, "Reporting Comprehensive Income," establishes standards
          for the reporting and display of comprehensive loss and its components
          in  the  financial statements. As at June 30, 2003, the Company has no
          items  that  represent  comprehensive  loss  and,  therefore,  has not
          included  a schedule of comprehensive loss in the financial statements

     (g)  Basic and Diluted Net Income (Loss) per Share

          The  Company  computes  net income (loss) per share in accordance with
          SFAS  No.  128,  "Earnings  per  Share"  (SFAS 128). SFAS 128 requires
          presentation of both basic and diluted earnings per share (EPS) on the
          face  of  the  income statement. Basic EPS is computed by dividing net
          income  (loss)  available  to  common  shareholders (numerator) by the
          weighted  average  number  of  common shares outstanding (denominator)
          during  the period. Diluted EPS gives effect to all dilutive potential
          common  shares  outstanding during the period including stock options,
          using  the  treasury  stock  method,  and convertible preferred stock,
          using  the  if-converted method. In computing Diluted EPS, the average
          stock price for the period is used in determining the number of shares
          assumed  to  be  purchased  from  the  exercise  of  stock  options or
          warrants. Diluted EPS excludes all dilutive potential common shares if
          their  effect  is  anti  dilutive.

     (h)  Use of Estimates

          The  preparation  of  financial  statements  in  conformity  with U.S.
          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 periods. Actual results could differ
          from  those  estimates.


                                      F-2
    (The accompanying notes are an integral part of the financial statements)

<PAGE>
O2 Diesel Corporation (formerly Dynamic Ventures Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
(unaudited)


2.     Summary of Significant Accounting Policies (continued)

(i)     Financial Instruments

               The carrying value of cash, accounts payable, accrued liabilities
               and note payable approximate fair value due to the relatively
               short maturity of these instruments.

     (j)  Recent Accounting Pronouncements

          In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
          Financial Instruments with Characteristics of both Liabilities and
          Equity". SFAS No. 150 establishes standards for how an issuer
          classifies and measures certain financial instruments with
          characteristics of both liabilities and equity. It requires that an
          issuer classify a financial instrument that is within its scope as a
          liability (or an asset in some circumstances). The requirements of
          SFAS No. 150 apply to issuers' classification and measurement of
          freestanding financial instruments, including those that comprise more
          than one option or forward contract. SFAS No. 150 does not apply to
          features that are embedded in a financial instrument that is not a
          derivative in its entirety. SFAS No. 150 is effective for financial
          instruments entered into or modified after May 31, 2003, and otherwise
          is effective at the beginning of the first interim period beginning
          after June 15, 2003, except for mandatory redeemable financial
          instruments of non-public entities. It is to be implemented by
          reporting the cumulative effect of a change in an accounting principle
          for financial instruments created before the issuance date of SFAS No.
          150 and still existing at the beginning of the interim period of
          adoption. Restatement is not permitted. The adoption of this standard
          is not expected to have a material effect on the Company's results of
          operations or financial position.

          In December 2002, the FASB issued SFAS No. 148, "Accounting for
          Stock-Based Compensation - Transition and Disclosure," which amends
          SFAS No. 123 to provide alternative methods of transition for a
          voluntary change to the fair value based method of accounting for
          stock-based employee compensation. In addition, SFAS No. 148 expands
          the disclosure requirements of SFAS No. 123 to require more prominent
          disclosures in both annual and interim financial statements about the
          method of accounting for stock-based employee compensation and the
          effect of the method used on reported results. The transition
          provisions of SFAS No. 148 are effective for fiscal years ended after
          December 15, 2002. The disclosure provisions of SFAS No. 148 are
          effective for financial statements for interim periods beginning after
          December 15, 2002. The adoption of this standard currently has no
          effect on the Company's results of operations and financial position
          as the Company has no stock-based employee compensation. The Company
          will adopt the disclosure requirements of SFAS No. 148 if stock-based
          compensation is awarded to employees.

          In June 2002, FASB issued SFAS No. 146, "Accounting for Costs
          Associated with Exit or Disposal Activities". The provisions of this
          Statement are effective for exit or disposal activities that are
          initiated after December 31, 2002, with early application encouraged.
          This Statement addresses financial accounting and reporting for costs
          associated with exit or disposal activities and nullifies Emerging
          Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
          Certain Employee Termination Benefits and Other Costs to Exit an
          Activity (including Certain Costs Incurred in a Restructuring)". This
          Statement requires that a liability for a cost associated with an exit
          or disposal activity be recognized when the liability is incurred. The
          Company adopted SFAS No. 146 on January 1, 2003. The adoption of this
          standard did not have a material effect on the Company's financial
          position and results of operations.

          FASB has also issued SFAS No. 145, 147 and 149 but these
          pronouncements will not have any effect on the operations of the
          Company therefore a description of each and their respective impact on
          the Company's operations have not been disclosed.



    (The accompanying notes are an integral part of the financial statements)


                                      F-3
<PAGE>
O2 Diesel Corporation (formerly Dynamic Ventures Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
(unaudited)


2.     Summary of Significant Accounting Policies (continued)

     (k)  Interim Financial Statements

          These interim unaudited financial statements have been prepared on the
          same basis as the annual financial statements and in the opinion of
          management, reflect all adjustments, which include only normal
          recurring adjustments, necessary to present fairly the Company's
          financial position, results of operations and cash flows for the
          periods shown. The results of operations for such periods are not
          necessarily indicative of the results expected for a full year or for
          any future period.


3.     License

     The Company's only asset was a license to market vitamins, minerals,
     nutritional supplements and other health and fitness products through the
     grantor's web site. The license was acquired on April 10, 2000 for a term
     of three years. The Company paid an annual fee of $500 for maintenance of
     the grantor's web site commencing on the anniversary date of April 10th of
     each year. See Note 7 for consideration paid for the license. The license
     was written-off to operations in fiscal 2000 due to the lack of historical
     cash flow and lack of a market to resell the license and will not be
     renewed.


4.     Deferred  Business  Acquisition  Costs

     The Company accrued legal and consulting fees totalling $181,666 in
     conjunction with the acquisition described in Note 9(a).


5.     Note  Payable

The Company received $100,000 from a company controlled by the President of the
Company pursuant to a note payable secured by all corporate property, bearing
interest at 12% and due on demand. The note payable plus accrued interest of
$29,000 was repaid on July 18, 2003.


6.     Common  Shares

     On April 10, 2003, the Company paid a stock dividend on each issued and
     outstanding share of common stock. For each share owned, a stockholder
     received 0.7 additional shares. The increase in common stock issued and
     outstanding from the resulting 1.7 for 1 forward stock split has been
     charged against additional paid-in capital. This change in capital
     structure has been recorded retroactively in these financial statements.


7.     Related  Party  Transactions/Balances

(a)     The license referred to in Note 3 was assigned to the Company in fiscal
     2000 by the sole director and President of the Company for consideration of
     5,950,000 post-split common shares having a fair market value of $35,000.
     The Company estimated the cost of the license to its President at $24,750.
     The excess of fair market value over predecessor cost, being $10,250, was
     treated as a dividend. The Grantor of the license was not related to the
     Company.

(b)     The Company has accrued $29,000 of interest owing on a note payable to a
     company controlled by the President of the Company (See Note 5). A total of
     $6,000 was charged to operations during the six months ended June 30, 2003
     (2002 -$6,000).


    (The accompanying notes are an integral part of the financial statements)


                                      F-4
<PAGE>
O2 Diesel Corporation (formerly Dynamic Ventures Inc.)
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
(unaudited)


7.     Related  Party  Transactions/Balances  (continued)

(c)     The President of the Company has donated consulting services valued at
     $3,000 for the six months ended June 30, 2003 (2002 - $Nil). This amount
     has been charged to operations and classified as "donated capital" in
     stockholders' deficit.

(d)     For the six months ended June 30, 2003, the Company paid $16,000 (2002 -
     $Nil) in consulting fees to a company controlled by the President of the
     Company. See Note 8.


8.     Commitment

     The Company entered into a consulting services agreement with a company
     controlled by the President of the Company for $4,000 per month expiring on
     February 28, 2004. Pursuant to the terms of the acquisition described in
     Note 9(a), the agreement now expires on September 15, 2003.


9.     Subsequent  Events

     (a)     Subsequent to June 30, 2003 the Company received proceeds of
     $4,945,000 under a private placement of common shares at $1.50 per share
     (the "Private Placement") and the terms of a Loan Agreement dated July 10,
     2003. The Company accepted subscriptions under the Private Placement for
     630,000 shares of common stock at $1.50 per share for total proceeds of
     $945,000 and issued a convertible note in the principal amount of
     $4,000,000 (the "Convertible Note") under the terms of the Loan Agreement.
     Under the terms of the Loan Agreement and the Convertible Note, the Company
     has agreed to pay the proceeds of any subscription under the Private
     Placement received until August 10, 2003 (extended to September 30, 2003)
     to the holder of the Convertible Note as payment toward the principal.
     Subsequent to July 10, 2003, the Company accepted additional subscriptions
     for 781,667 shares of common stock under the Private Placement for proceeds
     of $1,172,500, which were applied to reduce the principal balance of the
     Convertible Note to $2,827,450. On September 30, 2003, the remaining
     principal balance of the Convertible Note (if any) will convert
     automatically into shares of common stock of the Company at $1.50 per
     share. The Convertible Note bears no interest.

     (b)     On July 15, 2003, the Company declared the Recommended Offer to
     acquire all of the issued and outstanding share capital of AAE in exchange
     for 18,000,000 shares of its common stock unconditional in all respects.
     This transaction will effect a reverse merger of the Company. AAE is a fuel
     additive development and marketing company incorporated in Ireland with
     offices in the United Kingdom and the United States.

     (c)     Immediately prior to closing the acquisition described in Note
     9(b), the President of the Company contributed 7,720,000 shares of common
     stock of the Company, which he owned to the Company for cancellation.

     (d)     On July 18, 2003 the Company repaid the $100,000 note payable to
     the company controlled by the President of the Company plus $29,000 of
     accrued interest.


                                      F-5
<PAGE>
ITEM 2.      PLAN OF OPERATION

OVERVIEW

     The financial statements of O2Diesel are prepared in accordance with United
States Generally Accepted Accounting Principles. The following management
discussion and analysis is qualified in its entirety by, and should be read in
conjunction with, the financial statements and notes thereto, included elsewhere
in this quarterly report.

     O2Diesel was incorporated under the name Dynamic Ventures, Inc. in the
State of Washington on April 10, 2000, and is in its early stage of development.
On May 30, 2003, the Registrant filed Articles of Amendment with the office of
the Secretary of State of the State of Washington to change its corporate name
to "O2Diesel Corporation" effective June 10, 2003. O2Diesel commenced a
Recommended Offer to acquire all of the issued and outstanding ordinary shares
of AAE under the terms of a Recommended Offer Document, dated June 16, 2003. On
or about June 18, 2003, O2Diesel mailed the Recommended Offer Document to the
shareholders of AAE and submitted the Recommended Offer Document to the
Securities and Exchange Commission on Form CB.

     On July 11, 2003, O2Diesel declared the Recommended Offer unconditional in
respect to acceptances, and on July 15, 2003, 02Diesel declared the Recommended
Offer unconditional in all respects. Under the terms of the Recommended Offer,
O2Diesel agreed to issue 18,000,000 common shares of its capital for 100% of the
shares of AAE. As of July 11, 2003, shareholders holding approximately 87% of
AAE's issued and outstanding ordinary shares had accepted the Recommended Offer.
The Recommended Offer remained open until July 31, 2003 to accept additional
shares tendered by shareholders of AAE. The remaining shares of AAE are
anticipated to be acquired by O2Diesel under a compulsory acquisition
transaction under Irish law.

     Prior to the Recommended Offer, O2Diesel's only activities have been
directed at acquiring the rights under a license to distribute
Vitamineralherb.com products, developing and evaluating a business plan related
to the Vitamineralherb.com products and examining business opportunities for the
purposes of diversifying its business. During the quarter ended June 30, 2003,
substantially all of O2Diesel's activities were related to negotiating,
financing and completing the Recommended Offer. O2Diesel intends to pursue the
business of AAE and expects to sell or abandon its rights related to the
Vitamineralherb.com products.

     As a result of the Recommended Offer, control of the combined companies
passed to the former shareholders of AAE and AAE became a wholly-owned
subsidiary of O2Diesel. For accounting purposes, the Recommended Offer is
expected to be accounted for as a capital transaction accompanied by a
recapitalization of AAE, rather than a business combination. The financial
results of AAE as of June 30, 2003 were not available as of the date of this
report and, consequently, are not provided in this quarterly report.


                                        1
<PAGE>
RESULTS OF OPERATION

     Revenues:  O2Diesel  has  no  reported  revenues  from  operations since it
inception.

     Expenses: During the three and six month periods ended June 30, 2003,
O2Diesel had total expenses of $34,891 and $52,467, respectively. Material
expenses included (i) consulting expenses of $11,000 during the three months
ended June 30, 2003 (nil for the same period in 2002) and $19,000 during the six
months ended June 30, 2003 (nil for the same period in 2002); (ii) interest and
bank changes of $3,070 during the three months ended June 30, 2003 ($2,942 for
the same period in 2002) and $6,157 during the six months ended June 30, 2003
($5,921 for the same period in 2002); (iii) office and rent expenses of $9,291
during the three months ended June 30, 2003 ($664 for the same period in 2002)
and $9,743 during the six months ended June 30, 2003 ($1,483 for the same period
in 2002); (iv) professional fees of $6,736 during the three months ended June
30, 2003 ($4,956 for the same period in 2002) and $11,800 during the six months
ended June 30, 2003 ($8,769 for the same period in 2002); and (v) transfer agent
fees of $5,030 during the three months ended June 30, 2003 ($225 for the same
period in 2002) and $6,289 during the six months ended June 30, 2003 ($1,155 for
the same period in 2002). The increase in consulting fees resulted from fees
paid to a wholly-owned company of an officer of O2Diesel for consulting services
provided in evaluating strategic opportunities and assessing the viability of
acquiring AAE in the first half of 2003. O2Diesel's President donated his
consulting services to O2Diesel in 2002. During 2002, O2Diesel was not required
to pay rent to maintain an office, resulting in an increase in office rent and
expenses in 2003. Transfer agent fees increased as a result or the stock
dividend declared by O2Diesel effective on April 9, 2003.

     Net Loss. O2Diesel had a net loss of $34,891 for the three months ended
June 30, 2003 ($9,179 for the same period in 2002) and $52,467 for the six
months ended June 30, 2003 ($17,692 for the same period in 2002).

     As a result of the Recommended Offer, O2Diesel believes that its historic
spending levels will not be indicative of future spending levels because it is
entering a period in which it will undertake to implement the business plan of
AAE. O2Diesel anticipates that it will increase spending on intellectual
property, marketing, staffing and other general operating and administrative
expenses in future periods. For these reasons, O2Diesel believes its expenses,
losses, and deficit accumulated during the development stage will increase
significantly during the last half of 2003, as the financial results of AAE and
O2Diesel are consolidated.

LIQUIDITY AND CAPITAL RESOURCES

     As of June 30, 2003, O2Diesel had current assets consisting of cash and
cash equivalents of $30,658, and current liabilities of $326,046. O2Diesel had a
working capital deficit of $295,388 at June 30, 2003. During the first quarter
ended June 30, 2003, O2Diesel used cash of


                                        2
<PAGE>
     $33,288 for operating activities and accounts payable and accrued
     liabilities increased by $16,179.

     The Company currently has no revenues from operations, and the Company does
not anticipate that it will generate any significant revenues until it can
successfully implement the business plan of AAE. The Company currently has no
external sources of liquidity or commitments for additional financing.

     Historically, the Company has raised capital through equity financings and
advances made by executive officers of the Company.

     Subsequent to June 30, 2003 and in connection with the Recommended Offer,
O2Diesel received aggregate proceeds of approximately $4,945,000 under the
private placement of common shares at $1.50 per share (the "Private Placement")
and the terms of a Loan Agreement dated effective as of July 10, 2003. O2Diesel
accepted subscriptions under the Private Placement for 630,000 shares of common
stock at $1.50 per share for total proceeds of $945,000 and issued a convertible
note in the principal amount of $4,000,000 (the "Convertible Note") under the
terms of the Loan Agreement. Under the terms of the Loan Agreement and the
Convertible Note, O2Diesel has agreed to pay the proceeds of any subscription
under the Private Placement received until August 10, 2003 (extended to
September 30, 2003) to the holder of the Convertible Note as payment toward the
principal. Subsequent to July 10, 2003, O2Diesel accepted additional
subscriptions for 781,667 shares of common stock under the Private Placement for
proceeds of $1,172,500.50, which were applied to the reduce the principal
balance of the Convertible Note to $2,827,449.50. On September 30, 2003, the
remaining principal balance of the Convertible Note (if any) will convert
automatically into shares of common stock of O2Diesel at $1.50 per share. The
Convertible Note bears no interest.

     Under the terms of the Recommended Offer, the proceeds of the Private
Placement are required to be used as follows:

     (a)  $2,200,000 to be advanced to AAE for general working capital purposes;

     (b)  $1,000,000 to be used to repay an outstanding obligation of AAE under
          a bridge loan arranged by O2Diesel (the "Bridge Loan");

     (c)  up to $300,000 to be used to pay O2Diesel's legal and other costs and
          expenses in connection with the Recommended Offer; and

     (d)  $1,500,000 to be released to AAE as follows:

          i.   $750,000 to be released three months from closing of the
               Recommended Offer; and


                                        3
<PAGE>
          ii.  $750,000 to be released six months from closing of the
               Recommended Offer.

     O2Diesel advanced $2,200,000 of the proceeds of the Private Placement to
AAE, and $1,000,000 of the proceeds were used to repay the obligations under the
Bridge Loan. O2Diesel also repaid a loan made by O2Diesel's former President and
director in the principal amount of $100,000 together with accrued interest in
the amount of $29,000.

     With the proceeds from the Private Placement, O2Diesel anticipates that it
will have sufficient working capital to fund its operations through January 31,
2003. In connection with the Recommended Offer, O2Diesel also committed to use
its best efforts to complete a non-brokered private placement equity offering to
raise an additional $3,500,000 by offering and selling shares of common stock at
a price of not less than $1.50 per share (the "Follow-on Private Placement") to
fund the acquisition of a fuel distribution business. As of the date of this
report, O2Diesel has not commenced the Follow-on Private Placement.

     O2Diesel could be required to raise additional financing to fund the AAE
business plan. If required, O2Diesel anticipates that it will raise such
financing through public offerings or private placements of its equity
securities, debt securities or both. There can be no assurance that any
additional funds will be available on terms acceptable to O2Diesel, if at all.

PLAN OF OPERATION

     During the period from April 10, 2000 (inception) through June 30, 2003,
the Company has not engaged in any significant operations other than
organizational activities, the acquisition of the rights to market
Vitamineralherb, the examination of potential business opportunities to
diversify its business and the negotiation and commencement of the Recommended
Offer to acquire AAE. No revenues were received by the Company during this
period. On July 15, 2003, the Recommended Offer was declared unconditional in
all respects and the Company completed the initial acquisition of AAE Shares.
The Recommended Offer resulted in a change of control of O2Diesel. Anthony
Dean-Smith, Alan Rae, David Koontz, Karim Jobanputra and Hendrik Rethwilm were
appointed as directors of O2Diesel; Alan Rae was appointed as President and
Chief Executive Officer of O2Diesel and David Koontz was appointed as Chief
Financial Officer and Secretary of O2Diesel. Eric Boehnke resigned as a director
and the President, Treasurer and Secretary of O2Diesel effective July 15, 2003.

     For the next twelve months, the Company anticipates it will continue to
incur losses as a result of expenses associated with implementing the business
plan of AAE and carrying on the business activities of AAE, which include
research and development and marketing and commercialization of its primary
product, O(2)Diesel(TM).


                                        4
<PAGE>
AAE'S FUEL ADDITIVE BUSINESS

     AAE is a fuel additive development and marketing company incorporated in
Ireland with offices in the United Kingdom and the United States. Starting in
1997, AAE has developed a line of proprietary additive products designed to
improve the performance of ethanol and other oxygenated fuels used in various
petroleum-based liquid transportation fuels. AAE is completing product
development and regulatory compliance for its technologies through its
wholly-owned regional subsidiaries and strategic partnerships. AAE's primary
product under development is O(2)Diesel(TM).

     O(2)Diesel(TM) - AAE, together with its exclusive North American marketing
partner Octel Starreon, LLC, is commercializing its fuel additive through sales
of O(2)Diesel(TM) (AAE's branded ethanol-diesel blend) in the United States and
Canadian markets. Octel Starreon, LLC is a fuel additive manufacturer and
marketer in the United States, and is a joint venture between U.K. based Octel
Corporation and Starreon Corporation, both of which are leading companies in the
fuel industry. O(2)Diesel(TM) is formulated using AAE's and Octel Starreon's
proprietary additive technology (Octel Octimax 4900 Series) and is a stable
ethanol-diesel fuel blend with enhanced water and temperature tolerance.
O(2)Diesel(TM) contains a blend of ethanol, diesel fuel and proprietary
additive. Tests conducted using O(2)Diesel(TM) have shown that it can
significantly reduce emissions of visible smoke, oxides of nitrogen, carbon
monoxide and particulate matter in a range of engine applications.
O(2)Diesel(TM) is commercially available in North America.

     Commercialization and Marketing - AAE is focusing its initial
commercialization and marketing activities in the United States, Canada and
Brazil. AAE's 5-year plan, assuming adequate financing is available, is to
establish itself simultaneously in North America and Brazil and then to expand -
through a network of strategic alliances - to key markets in Europe, Central &
South America and Asia targeting:

     -    Urban truck fleets

     -    Agriculture & construction equipment

     -    Mobile or stationary power generators

     -    Railroads

     -    Government fleets: (state, provincial and federal)

     North America
     -------------

     North America is the largest and most diverse motor fuel market in the
     world, with total annual consumption of transportation fuels in the range
     of 170 billion gallons of gasoline and diesel fuel. Diesel fuel is used in
     a wide array of urban and highway trucks, railroads,


                                        5
<PAGE>
     marine vessels, and agricultural, construction, and military vehicles. U.S.
     diesel sales is approximately 50 billion gallons per year and growing.

     According to a recent U.S. Department of Energy (DOE) estimate, diesel fuel
     is used to transport 94% of all domestic freight and provides power for the
     vast majority of heavy-duty vehicles and other equipment operating
     throughout the country. AAE's target is to achieve 4.4% diesel market
     penetration in the U.S. by 2006, or about 5% of current U.S. fuel ethanol
     production.

     AAE has targeted the three largest diesel fuel markets in the United States
     with diminished air quality, high diesel fuel consumption, and large urban
     areas: California, Texas, and the Northeast.


     Supported by incentives available for fuel ethanol, AAE estimates that it
     will be able to price its product at a competitive premium of $0.02 and
     0.05 per gallon.

     Latin America
     -------------

     BRAZIL: AAE's commercial rollout in Brazil is expected to be accelerated
     through its partnerships with Brazil's largest sugar producers and related
     industry partners, many of which AAE has been working with since 1998. AAE
     anticipates that the first phase of commercialization will be implemented
     by the end of 2003.

     MEXICO: Mexico City's extremely polluted plateau prompted federal air
     quality officials to approach several fuel technology companies, including
     AAE, to propose solutions. As a result, successful engine emission testing
     of O2Diesel(TM) was completed, leading to an expanded demonstration program
     which is expected to commence in 2004.

     Asia
     ----

     PEOPLE'S REPUBLIC OF CHINA: China remains a net importer of diesel fuel.
     Introducing fuel ethanol is expected to reduce the country's dependence on
     petroleum imports and expand fuel ethanol production as exhibited by
     China's plans to build one of the world's largest fuel ethanol plant in
     Guangxi province.

     INDIA: India has a general shortage of domestically produced diesel fuel
     coupled with an abundance of locally produced ethanol feedstock, sugarcane.

     THAILAND: Thailand has an active biofuels industry, which has led to the
     acceptance of fuel ethanol both in gasoline and diesel.


                                        6
<PAGE>
     European Union
     --------------

     There is minimal fuel ethanol production in the European Union (EU),
     although several countries have introduced renewable fuel incentives. These
     incentives have motivated the sugar industry to consider fuel ethanol
     production. At present, 70% of all transport motor fuel sold in EU is
     imported.

     Research and Development - AAE and Cognis have an agreement for the joint
development of co-solvency additive products as well as joint ownership of
patents for such products. AAE has world-wide rights to market and sell these
additive products. O2Diesel anticipates that Cognis will continue research and
development efforts on these of co-solvency additive products during the next
twelve months.

     Acquisition of Plant, Property and Equipment - In connection with the
Recommended Offer, O2Diesel committed to use its best efforts to complete a
non-brokered private placement equity offering to raise an additional $3,500,000
in the Follow-on Private Placement to fund the acquisition of a fuel
distribution business. As of the date of this report, O2Diesel is negotiating a
letter of intent to acquire a fuel distribution business.

     Employees - Prior to the Recommended Offer, O2Diesel had no employees.
Under the terms of the Recommended Offer, O2Diesel agreed to enter into
employment agreements with Alan Rae as O2Diesel's President and Chief Executive
Officer and David Koontz as O2Diesel's Chief Financial Officer. The terms of the
proposed employment agreements are described in O2Diesel's current report on
Form 8-K filed with the Securities and Exchange Commission on July 30, 2003. As
of July 15, 2003, AAE had 6 employees, including 1 engaged in technical
services, 2 engaged in sales and marketing, 1 engaged in business development
and 2 executive officers. During the next twelve months, O2Diesel anticipates
that AAE will hire an additional 12 employees, including 1 technical services
employee, 2 sales and marketing employees, 1 business development employee, 2
management employees and 7 administrative employees.

     O2Diesel anticipates that it will continue to operate at a loss for the
foreseeable future, depending upon the performance of the business.

ITEM 3.      CONTROLS AND PROCEDURES.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. O2Diesel's Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of
02Diesel's disclosure controls and procedures (as such term is defined in Rules
13a-15 and 15d-15 under the Exchange Act) as of the end of the period covered by
this quarterly report (the "Evaluation Date"). Based on such evaluation, such
officers have concluded that, as of the Evaluation Date, O2Diesel's disclosure
controls and procedures are effective in alerting them on a timely basis to
material information


                                        7
<PAGE>
relating to O2Diesel required to be included in its reports filed or submitted
under the Exchange Act.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING. During the most recent
fiscal quarter, there have not been any significant changes in our internal
controls over financial reporting or in other factors that have materially
affected, or are reasonably likely to materially affect, our internal controls
over financial reporting.

                           PART II.  OTHER INFORMATION

ITEM 1.      LEGAL PROCEEDINGS.

None.

ITEM 2.      CHANGES IN SECURITIES.

     O2Diesel did not sell any securities during the quarter ended June 30,
2003. Additional information regarding the Company's issuance of unregistered
securities during the past three fiscal years is contained in the Company's
annual reports on Form 10-KSB for the year ended December 31, 2002 under "Item
5. Market for Common Equity and Related Shareholder Matters - Recent Sale of
Unregistered Securities" filed with the United States Securities and Exchange
Commission. The information contained under Item 5. "Market for Common Equity
and Related Shareholder Matters - Recent Sale of Unregistered Securities" of the
Company's annual report on Form 10-KSB for the year ended December 31, 2002 is
hereby incorporated by reference to this report.

     SUBSEQUENT CHANGES IN SECURITIES

     Subsequent to June 30, 2003 and in connection with the Recommended Offer,
O2Diesel accepted subscriptions from non-U.S. Persons outside the United States
under the Private Placement for 630,000 shares of common stock at $1.50 per
share for total proceeds of $945,000 and issued the Convertible Note in the
principal amount of $4,000,000 under the terms of the Loan Agreement to one
non-U.S. Person outside the United States. The shares of common stock issued in
the Private Placement and the Convertible Note were issued in reliance upon the
exception from the registration requirements available under Regulation S as
promulgated under the Securities Act. No commissions or fees were paid in
connection with the offerings. Under the terms of the Loan Agreement and the
Convertible Note, O2Diesel has agreed to pay the proceeds of any subscription
under the Private Placement received until August 10, 2003 (extended to
September 30, 2003) to the holder of the Convertible Note as payment toward the
principal. Subsequent to July 10, 2003, O2Diesel accepted additional
subscriptions for 781,667 shares of common stock under the Private Placement for
proceeds of $1,172,500.50, which were applied to the reduce the principal
balance of the Convertible Note to $2,827,449.50. On


                                        8
<PAGE>
September 30, 2003, the remaining principal balance of the Convertible Note (if
any) will convert automatically into shares of common stock of O2Diesel at $1.50
per share. The Convertible Note bears no interest.

     O2Diesel and Eric Boehnke, O2Diesel's sole director and officer, entered
into a Contribution and Cancellation Agreement under which Mr. Boehnke
contributed 7,720,000 shares of Company common stock to O2Diesel for
cancellation concurrent with the closing of the Recommended Offer on July 15,
2003.

     On July 15, 2003, O2Diesel declared the Recommended Offer unconditional in
all respects. The Offer was made in accordance with Irish law and pursuant to an
exemption from the registration requirements of the Securities Act provided by
Rule 802 thereunder. AAE was a foreign private issuer at the commencement of the
Recommended Offer and no more than 10% of its issued and outstanding share
capital was held by persons resident in the United States. Under the terms of
the Recommended Offer, the Registrant will issue 18,000,000 shares of common
stock to the shareholders of AAE in exchange for all of the issued and
outstanding equity capital of AAE. As at July 31, 2003, O2Diesel issued a total
of 16,475,797 shares of common stock to AAE shareholders that had accepted the
Recommended Offer in reliance upon the exemption from the registration
requirements of the Securities Act provided by Rule 802 thereunder. The
Recommended Offer transactions were reported in O2Diesel's current report on
Form 8-K filed on July 30, 2003.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES.

Not  applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

     O2Diesel completed transactions in connection with the Recommended Offer
which were reported in O2Diesel's current report on Form 8-K filed on July 30,
2003.

     In addition to the transactions and terms described above, the Recommended
Offer had the following material terms:

     The shares of O2Diesel common stock issuable under the Recommended Offer
     are subject to the following restrictions:

     (a)  all shares issued by O2Diesel in connection with the Recommended Offer
          are subject to a 1 year contractual hold period;


                                        9
<PAGE>
     (b)  all AAE shareholders are required to place 10% of the shares issued by
          O2Diesel in the Recommended Offer into escrow for 12 months as
          security for the indemnification obligations of AAE (the "Indemnity
          Escrow"); and

     (c)  Certain major AAE shareholders (Anthony Dean-Smith and Quarryside
          Ltd., a trust in which Alan Rae is a beneficiary, collectively, the
          "Major Shareholders")) were required to place all of their shares
          issued by O2Diesel in the Recommended Offer into escrow for 18 months
          as security for their respective indemnification obligations to
          O2Diesel.

     O2Diesel entered into a Support Agreement, dated June 17, 2003, with AAE
and certain key shareholders of AAE (Alan Rae, Anthony Dean-Smith, David Koontz,
Quarryside Ltd., Pauline Dean-Smith and Victoria Rae, collectively, the "Key
Shareholders"), under which AAE and the Key Shareholders made certain
representations and warranties to O2Diesel and agreed to indemnify O2Diesel
against certain claims. Under the Support Agreement, AAE agreed to take certain
actions to support the Recommended Offer, to operate its business in the
ordinary course until completion of the Recommended Offer and not to solicit
other transactions. Each of the Key Shareholders agreed, subject to certain
conditions being satisfied, that they would accept the Recommended Offer with
respect to all of their AAE shares

     On June 30, 2003, the board of directors took action by written consent,
effective on the later of the closing of the Recommended Offer or the expiration
of the 10 day waiting period under Rule 14f-1 of the Exchange Act, to expand the
board of directors to consist of 6 directors and to appoint five persons to fill
the newly created vacancies on the board of directors: Anthony Dean Smith, Alan
Rae and David Kootnz were designated by the Key Shareholders and Karim
Jobanputra and Hendrik Rethwilm were designated by O2Diesel's board of
directors.

     On July 11, 2003, O2Diesel entered into an Option and Escrow Agreement with
a shareholder of O2Diesel, under which the shareholder granted O2Diesel an
option to purchase 1,000,000 shares of Company common stock at an exercise price
$0.20 per share. The option is exercisable only if AAE entered into an agreement
to acquire a fuel distribution business within six months and AAE fails to
complete the acquisition within eight months solely because the Follow-On
Private Placement is not completed by O2Diesel.


                                       10
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

     (a)  Exhibits

EXHIBIT INDEX

EXHIBIT NO.   DESCRIPTION
<C>           <S>

      3.1(1)    Articles of Incorporation

      3.2(3)    Articles of Amendment to Change Corporation Name to O2Diesel Corporation

      3.3(1)    Bylaws  (Previously filed as Exhibit 3.2)

      4.1(1)    Specimen Stock Certificate

      4.2(1)    Stock Subscription Agreement

      4.3(2)    $100,000 Promissory Note (Previously filed as Exhibit 4.4)

     10.1(1)    License Agreement

     10.2(1)    Assignment of License

     10.3(4)    Support Agreement (previously filed as Exhibit 1)

     10.4(4)    Indemnity Escrow Agreement (previously filed as Exhibit 2)

     10.5(4)    Option and Escrow Agreement (previously filed as Exhibit 3)

     10.6(4)    Contribution and Cancellation Agreement (previously filed as Exhibit 4)

     10.7(4)    Waiver Agreement (previously filed as Exhibit 5)

     10.8(4)    Loan Agreement (previously filed as Exhibit 6 )

     10.9(4)    Form of Convertible Note (previously filed as Exhibit 7)
                Form of Employment Agreement between O2Diesel and Alan Rae (previously filed as

    10.10(4)    Exhibit 8)
                Form of Employment Agreement between O2Diesel and David Kootnz (previously

    10.11(4)    filed as Exhibit 9)

 10.12(4)(5)    Cooperation agreement between Cognis and AAE (previously filed as Exhibit 10)

      10.13     Form of Agreement to Amendment Loan Agreement and Convertible Debenture


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       31.1     Sarbanes Oxley Act of 2002 Rule 302 Certifications

       32.1     Sarbanes Oxley Act of 2002 Rule 906 Certifications
</TABLE>

     (1)  Previously filed as exhibit to the Company's registration statement on
          Form SB-2 on June 30, 2000, as amended September 19, 2000, November 3,
          2000 and December 22, 2000.
     (2)  Previously filed as an exhibit to the registrant's annual report on
          Form 10-KSB on March 29, 2002.
     (3)  Previously filed as an exhibit to the registrant's current report on
          Form 8-K on June 9, 2003.
     (4)  Previously filed as an exhibit to the registrant's current report on
          Form 8-K on July 30, 2003.
     (5)  O2Diesel has applied for confidential treatment with respect to
          certain portions of this Agreement, which have been omitted, pursuant
          to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.


          (b)  Reports on Form 8-K.

     The Company filed the following current reports during the quarter ended
June 30, 2003:

     -    Current report on Form 8-K filed on April 11, 2003 related to stock
          dividend.

     -    Current report on Form 8-K filed on June 9, 2003 related to change of
          corporation name to O2Diesel Corporation.

     Subsequent to June 30, 2003, O2Diesel filed the following current reports
on Form 8-K:

     -    Current report on Form 8-K filed on July 14, 2003 related to the
          declaration of Recommended Offer unconditional with respect to
          acceptances.

     -    Current report on Form 8-K filed on July 16, 2003 related to the
          declaration of Recommended Offer unconditional in all respects.

     -    Current report on Form 8-K filed on July 16, 2003 related to the
          initial closing of Recommended Offer.


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<PAGE>
                                   SIGNATURES

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


                                             O2DIESEL CORPORATION
                                             (Registrant)


Date:   August 14, 2003                      By:  /s/ Alan Rae
                                             ------------------------------
                                             Alan Rae
                                             Chief Executive Officer
                                             (Principal Executive Officer)

Date:   August 14, 2003                      By:  /s/ David Koontz
                                             ------------------------------
                                             David Koontz
                                             Chief Financial Officer
                                             (Principal Financial Officer)


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