**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:  **March                31, 2007**                                               |
|                     |                                                                                                                                 |
| [                 ] | Transition                Report pursuant to 13 or 15(d) of the Securities Exchange Act of                1934                       |
|                     |                                                                                                                                 |
|                     | For                the transition period _________                 to __________                                           |
|                     |                                                                                                                                 |
|                     | Commission                File Number: **000-49698**                                                                            |

**Axial      Vector Engine Corporation**

| **Nevada**                                                                    | **20-3362479**                                   |
|-------------------------------------------------------------------------------|--------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) | (IRS                Employer Identification No.) |

| **One                World Trade Center****121                S.W. Salmon Street, Portland, Oregon 97204** |
|------------------------------------------------------------------------------------------------------------|
| (Address                of principal executive offices)                                                    |

| **503-471-1348**                                                                                                 |
|------------------------------------------------------------------------------------------------------------------|
| (Issuer’s                telephone number)                                                                 |
|  ____________________________________________________                                                       |
| (Former                name, former address and former fiscal year, if changed since last                report) |

**[X]      Yes [   ] No**

**[        ] Yes [X] No**

**36,303,096      common shares as of January 23, 2007.**

**Yes      [   ] No [X]**

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***Table          of Contents***

|                                                       | **TABLE                OF CONTENTS**                                                      |   Page |
|------------------------------------------------------------|-------------------------------------------------------------------------------------------|------------------|
| **PART                I - FINANCIAL INFORMATION**     |
| Item                1.                                     | Financial                Statements                                                       |  3     |
| Item                2.                                     | Plan                of Operation                                                          |  4     |
| Item                3.                                     | Controls                and Procedures                                                    | 21          |
|  **PART                II - OTHER INFORMATION**  |
| Item                1.                                     | Legal                Proceedings                                                          | 23          |
| Item                2.                                     | Unregistered                Sales of Equity Securities and Use of                Proceeds | 23          |
| Item                3.                                     | Defaults                Upon Senior Securities                                            | 23          |
| Item                4.                                     | Submission                of Matters to a Vote of Security                Holders         | 24          |
| Item                5.                                     | Other                Information                                                          | 24          |
| Item                6.                                     | Exhibits                                                                                  |  25         |

----

***Table          of Contents***

**PART      I - FINANCIAL INFORMATION**

**Item      1.** **     Financial      Statements**

| Our                unaudited consolidated financial statements included in this Form                10-QSB                are as follows: |
|-------------------------------------------------------------------------------------------------------------------------------------------|
|  F-1                                                                                                                                 |  Consolidated                Balance Sheets as of March 31, 2007 (Unaudited) and March 31, 2006                (Restated); |
|  F-2                                                                                                                                 |  Consolidated                Statements of Operations for the three and nine months ended March                31,                2007 and                2006 (Restated) with Cumulative Totals Since Inception (Unaudited); |
|  F-3                                                                                                                                 |  Consolidated                Statement of Changes in Stockholders’ Equity for the nine                months ended                March 31, 2007; |
|  F-4                                                                                                                                 |  Consolidated                Statements of Cash Flows for the three and nine months ended March                31,                2007 and                2006 (Restated) with Cumulative Totals Since Inception (Unaudited);                and |
|  F-5                                                                                                                                 |  Notes                to Consolidated Financial                Statements. |

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***Table          of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY **

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**CONSOLIDATED      BALANCE SHEETS **

**March      31, 2007 AND 2006 (Restated)**

**(Unaudited)      **

|                                                                                        |   |                  **March                31****,                2007** |        |                  **March                31****,                2006 (Restated)****Note                2** |   |
|---------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|-------------|----------------------------------------------------------------------------------------------------------------|--------|
| **ASSETS**                                                                                  |   |                                                                  |        |                                                                                                      |   |
| Current                Assets:                                                              |   |                                                                       |        |                                                                                                           |   |   |   |
| Cash                and cash equivalents                                                    |   | $                                                                          | 1,319       |                                                                                                           | $      | 5,880 |   |
| Deposit                                                                                     |   |                                                                       | 22,670      |                                                                                                           |   | 22,670 |   |
| Due                from employee                                                            |   |                                                                       | 1,000       |                                                                                                           |   | - |   |
| Prepaid                expenses                                                             |   |                                                                       | 15,000      |                                                                                                           |   | - |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| Total                Current Assets                                                         |   |                                                                       | 39,989      |                                                                                                           |   | 28,550 |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| Property                and equipment, net (Note 5)                                         |   |                                                                       | 142,143     |                                                                                                           |   | 38,861 |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
|                  Due                from shareholder                                   |   |                                                                       | 10,000      |                                                                                                           |   | - |   |
|                                                                                        |   |                                                                       |             |                                                                                                           |   |  |   |
| Intangible                assets- patents, net                                              |   |                                                                       | 243,838     |                                                                                                           |   | 243,324 |   |
|                                                                                        |   |                                                                       |             |                                                                                                           |   |  |   |
| **TOTAL                ASSETS**                                                             |   | $                                                                          | 435,970     |                                                                                                           | $      | 310,734 |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |  |   |
| **LIABILITIES                AND STOCKHOLDERS' DEFICIT**                                    |   |                                                                       |        |                                                                                                           |   |   |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| **LIABILITIES**                                                                             |   |                                                                       |        |                                                                                                           |   |   |   |
| Current                Liabilities:                                                         |   |                                                                       |        |                                                                                                           |   |   |   |
| Accounts                payable and accrued expenses                                        |   | $                                                                          | 1,029,849   |                                                                                                           | $      | 624,466 |   |
| Payroll                tax liabilities                                                      |   |                                                                       | 99,192      |                                                                                                           |   | - |   |
| Current                portion of note payable (Note 6)                                     |   |                                                                       | 1,253,795   |                                                                                                           |   | 1,245,000 |   |
| Contingent                share-based payment (Note 7)                                      |   |                                                                       | -           |                                                                                                           |   | - |   |
| Liability                for stock to be issued (Note 8)                                    |   |                                                                       | 190,327     |                                                                                                           |   | 946,262 |   |
| Share-based                fee liability- warrants (Note 9)                                 |   |                                                                       | 2,084,884   |                                                                                                           |   | 6,351,895 |   |
| Share-based                fee liability- options (Note 10)                                 |   |                                                                       | 2,856,220   |                                                                                                           |   | 3,234,668 |   |
| Share-based                compensation liability- options (Note 11)                        |   |                                                                       | 5,615,400   |                                                                                                           |   | 8,428,460 |   |
| Accrued                interest - shareholder loan (Note 13)                                |   |                                                                       | 101,200     |                                                                                                           |   | 69,565 |   |
| Due                to related company (Note 12)                                             |   |                                                                       | 301,339     |                                                                                                           |   | 301,339 |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| Total                Current Liabilities                                                    |   |                                                                       | 13,532,206  |                                                                                                           |   | 21,201,655 |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| Note                Payable (Note 14)                                                       |   |                                                                       | 41,468      |                                                                                                           |   | - |   |
| Due                to shareholder (Note 13)                                                 |   |                                                                       | 956,577     |                                                                                                           |   | 835,694 |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| **Total                Liabilities**                                                        |   |                                                                       | 14,530,251  |                                                                                                           |   | 22,037,349 |   |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| **STOCKHOLDERS'                DEFICIT**                                                    |   |                                                                       |        |                                                                                                           |   |   |   |
| Preferred                stock, $.001 par value; 100,000,000 shares authorized              |   |                                                                       |        |                                                                                                           |   |   |   |
| no                shares issued and outstanding                                             |   |                                                                       | -           |                                                                                                           |   | - |   |
| Common                stock, $.001 par value; 100,000,000 shares authorized                 |   |                                                                       |        |                                                                                                           |   |   |   |
| 36,785,136 and                34,554,771 shares issued and outstanding (Note 15)  |   |                                                                       | 36,733      |                                                                                                           |   | 34,605 |   |
| Additional                paid-in capital                                                   |   |                                                                       | 23,886,704  |                                                                                                           |   | 20,940,517 |   |
| Prepaid                share-based fees (Note 16)                                           |   |                                                                       | (1,832,154  | )                                                                                                              |   | (2,781,743 | ) |
| Prepaid                share-based compensation (Note 16)                                   |   |                                                                       | (27,125     | )                                                                                                              |   | (678,125 | ) |
| Beneficial                reduction of share-based liability (Note 17)                      |   |                                                                       | 13,528,016  |                                                                                                           |   | 4,898,109 |   |
| Deficit                accumulated during the development stage                             |   |                                                                       | (49,686,455 | )                                                                                                              |   | (44,139,978 | ) |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| **Total                Stockholders' Deficit**                                              |   |                                                                       | (14,094,281 | )                                                                                                              |   | (21,726,614 | ) |
|                                                                                        |   |                                                                       |        |                                                                                                           |   |   |   |
| **TOTAL                LIABILITIES AND STOCKHOLDERS' DEFICIT**                              |   | $                                                                          | 435,970     |                                                                                                           | $      | 310,734 |   |

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**CONSOLIDATED      STATEMENTS OF OPERATIONS **

**FOR      THE THREE AND NINE MONTHS ENDED MARCH 31, 2007 AND 2006 (Restated)**

**(WITH      CUMULATIVE TOTALS SINCE INCEPTION)**

**(Unaudited)      **

|                                                                   | For                the Three Months Ended March 31, 2007 |      | For                the Nine Months Ended March 31, 2007 |   | For                the Three Months Ended March 31, 2006 | For                the Nine Months Ended March 31, 2006 |   |                  Cumulative                Totals December                30, 2002 through March                31,                2007** ** |
|------------------------------------------------------------------------|----------------------------------------------------------|-----------|---------------------------------------------------------|--------|----------------------------------------------------------|---------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                   |                                                     |      |                                                    |   |                                                |                                                    |   |                                                                                                                                              |                    |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **SALES**                                                         | $                                                        | -         |                                                    | $      | -                                                        |                                                    | $      | -                                                                                                                                                      | $ | - |   | $ | - |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **COST                OF SALES**                                       |                                                     | -         |                                                    |   | -                                                        |                                                    |   | -                                                                                                                                                      |   | - |   |   | - |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **GROSS                PROFIT**                                        |                                                     | -         |                                                    |   | -                                                        |                                                    |   | -                                                                                                                                                      |   | - |   |   | - |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **OPERATING                EXPENSES**                                  |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| Accounting                and auditing                                 |                                                     | 8,050     |                                                    |   | 230,686                                                  |                                                    |   | 2,993                                                                                                                                                  |   | 21,370 |   |   | 328,591 |
| Administration                                                         |                                                     | 656       |                                                    |   | 3,340                                                    |                                                    |   | 9,770                                                                                                                                                  |   | 12,755 |   |   | 153,857 |
| Advertising,                promotion, consulting and travel (Note 18) |                                                     | 192,099   |                                                    |   | 996,991                                                  |                                                    |   | 601,952                                                                                                                                                |   | 2,453,759 |   |   | 7,942,535 |
| Beneficial                share-based fee (Note 19)                    |                                                     | 139,272   |                                                    |   | 417,816                                                  |                                                    |   | 139,272                                                                                                                                                |   | 417,816 |   |   | 2,427,304 |
| Board                compensation (Note 20)                            |                                                     |      |                                                    |   | 58,590                                                   |                                                    |   | 206,460                                                                                                                                                |   | 348,750 |   |   | 1,330,830 |
| Depreciation                (Note 5)                                   |                                                     | 4,616     |                                                    |   | 10,713                                                   |                                                    |   | 2,133                                                                                                                                                  |   | 3,685 |   |   | 57,327 |
| Financing                cost - standby equity agreement (Note 2 )     |                                                     | -         |                                                    |   | -                                                        |                                                    |   | -                                                                                                                                                      |   | - |   |   | 7,320,000 |
| Legal                fees (Note 21)                                    |                                                     | 126,380   |                                                    |   | 715,779                                                  |                                                    |   | 824.234                                                                                                                                                |   | 1.606.339 |   |   | 6,138,510 |
| Insurance                                                              |                                                     | 11,145    |                                                    |   | 47,370                                                   |                                                    |   | 19,360                                                                                                                                                 |   | 31,362 |   |   | 94,235 |
| Interest                                                               |                                                     | 17,299    |                                                    |   | 33,225                                                   |                                                    |   | 1,116,206                                                                                                                                              |   | 1,893,829 |   |   | 167,391 |
| Office                expense                                          |                                                     | 33,340    |                                                    |   | 103,089                                                  |                                                    |   | 45,600                                                                                                                                                 |   | 104,176 |   |   | 313,098 |
| Officers’                compensation (Note 22)                  |                                                     | 215,250   |                                                    |   | 833,250                                                  |                                                    |   | 1,713,168                                                                                                                                              |   | 3,150,524 |   |   | 11,418,613 |
| Payroll                taxes                                           |                                                     | 3,319     |                                                    |   | 39,565                                                   |                                                    |   | 29,794                                                                                                                                                 |   | 48,023 |   |   | 84,608 |
| Rent                                                                   |                                                     | 5,956     |                                                    |   | 17,910                                                   |                                                    |   | 7,714                                                                                                                                                  |   | 15,179 |   |   | 98,655 |
| Research                and development (Note 23)                      |                                                     | -         |                                                    |   | 238,395                                                  |                                                    |   | 788,577                                                                                                                                                |   | 2,028,428 |   |   | 5,187,964 |
| Salaries                and wages-administration                       |                                                     | 19,835    |                                                    |   | 101,058                                                  |                                                    |   | 70,526                                                                                                                                                 |   | 135,093 |   |   | 531,645 |
| Salaries                and wages-engineering                          |                                                     | 25,000    |                                                    |   | 75,000                                                   |                                                    |   | 65,900                                                                                                                                                 |   | 91,712 |   |   | 191,712 |
| Impairment                of intangible asset                          |                                                     | -         |                                                    |   | -                                                        |                                                    |   | -                                                                                                                                                      |   | - |   |   | 3,701,347 |
| **Total                Operating Expenses**                            |                                                     | 802,217   |                                                    |   | 3,922,777                                                |                                                    |   | 5,643,659                                                                                                                                              |   | 12,362,800 |   |   | 47,488,222 |
| **NET                LOSS BEFORE OTHER INCOME (EXPENSE)**              |                                                     | (802,217) |                                                    |   | (3,922,777)                                              |                                                    |   | (5,643,659)                                                                                                                                            |   | (12,362,800) |   |   | (47,488,222) |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **OTHER                INCOME (EXPENSE)**                              |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| Bank                interest                                           |                                                     | (76)      |                                                    |   | (76)                                                     |                                                    |   | -                                                                                                                                                      |   | 70 |   |   | (5) |
| Write                off of worthless inventory                        |                                                     | -         |                                                    |   | -                                                        |                                                    |   | -                                                                                                                                                      |   | - |   |   | (266,519) |
| Refunds                                                                |                                                     | 4,000     |                                                    |   | (20,903)                                                 |                                                    |   | -                                                                                                                                                      |   | 2,587 |   |   | (18,316) |
| Lawsuit                settlements                                     |                                                     | -         |                                                    |   | -                                                        |                                                    |   | (1,805,429)                                                                                                                                            |   | (1,805,429) |   |   | (1,805,429) |
| Impairment                of property and equipment                    |                                                     | -         |                                                    |   | -                                                        |                                                    |   | -                                                                                                                                                      |   | - |   |   | (107,964) |
| **Total                Other Income (Expense)**                        |                                                     | 3,924     |                                                    |   | (20,979)                                                 |                                                    |   | (1,805,429)                                                                                                                                            |   | (1.802,772) |   |   | (2,198,233 |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **NET                LOSS BEFORE PROVISION FOR INCOME TAXES**          |                                                     | (798,293) |                                                    |   | (3,943,756)                                              |                                                    |   | (7,449,088)                                                                                                                                            |   | (14,165,572) |   |   | (49,686,455) |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| Provision                for income taxes (Note 24)                    |                                                     | -         |                                                    |   | -                                                        |                                                    |   | -                                                                                                                                                      |   | - |   |   | - |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **NET                LOSS APPLICABLE TO COMMON SHARES**                | $                                                        | (798,293) |                                                    | $      | (3,943,756)                                              |                                                    | $      | (7,449,088)                                                                                                                                            | $ | (14,165,572) |   | $ | (49,686,455) |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **NET                LOSS PER SHARE -BASIC (Note 4)**                  | $                                                        | (.04)     |                                                    | $      | (.04)                                                    |                                                    | $      | (.08)                                                                                                                                                  | $ | (.28) |   |   |   |
|                                                                   |                                                     |      |                                                    |   |                                                     |                                                    |   |                                                                                                                                                   |   |   |   |   |   |
| **NET                LOSS PER FULLY DILUTED SHARES (Note 4 )**         | $                                                        | (.04)     |                                                    | $      | (.04)                                                    |                                                    | $      | (.08)                                                                                                                                                  | $ | (.28) |   |   |   |

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**CONSOLIDATED      STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY **

**FOR      THE THREE AND NINE MONTHS ENDED MARCH 31, 2007 (Restated) **

**(Unaudited)**

| **Description**                                                       |                  **Prepaid                Shares &****Beneficial****Reduction****Common** |       |                  **Additional****Paid-In                Capital** |          |                  **Deficit****Accumulated****During                the****Development****Stage** |         |                  **Total                Stockholders’ Equity** |
|-----------------------------------------------------------------------|----------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|---------------|-------------------------------------------------------------------------------------------------------|--------------|---------------------------------------------------------------------------|
|                                                                  |                                                                                          |       |                                                              |          |                                                                                             |         |                                                                 |   |                    |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Balance,                June 30, 2006-restated (Note 2)               | $                                                                                                  | 9,428,959  |                                                                   |  $  | 35,004                                                                                                |         |  $                                                              | 20,988,208 |   |  $  | (45,747,259)     |  $  | (15,295,088) |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Issuance                of shares for services                        |                                                                                               |       |                                                                   |          | 73                                                                                                    |         |                                                                      | 566,814 |   |   |   |   |   | 566,887 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Reduction                in prepaid shares                            |                                                                                               | 400,148    |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   | 400,148 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Beneficial                reduction in option value outstanding       |                                                                                               | 1,039,334  |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   | 1,039,334 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Issuance                of stock for cash                             |                                                                                               | -          |                                                                   |          | 1,017                                                                                                 |         |                                                                      | 1,674,883 |   |   |   |   |   | 1,675,900 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Net                loss for the three months ended September 30, 2006 |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   | (1,801,086) |   |   | (1,801,086) |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Balance,                September 30, 2006                            |  $                                                                                       | 10,868,441 |                                                                   | $             | 36,094                                                                                                |    | $                                                                         | 23,229,905 |   | $ | (47,548,345) |   | $ | (13,413,905) |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Issuance                of stock for cash                             |                                                                                               | -          |                                                                   |          | 179                                                                                                   |         |                                                                      | 192,322 |   |   |   |   |   | 192,500 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Issuance                of stock for services                         |                                                                                               |       |                                                                   |          | 50                                                                                                    |         |                                                                      | 99,950 |   |   |   |   |   | 100,000 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Reduction                in prepaid shares                            |                                                                                               | 400,148    |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   | 400,148 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Net                loss for the three months ended December 31, 2006  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   | (1,339,817) |   |   | (1,339,817) |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Balance,                December 31, 2006                             |  $                                                                                       | 11,268,589 |                                                                   | $             | 36,323                                                                                                |    | $                                                                         | 23,522,177 |   | $ | (48,888,162) |   | $ | (14,061,074) |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Issuance                of stock for cash                             |                                                                                               |       |                                                                   |          | 145                                                                                                   |         |                                                                      | 144,855 |   |   |   |   |   | 145,000 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Issuance                of stock for services                         |                                                                                               |       |                                                                   |          | 265                                                                                                   |         |                                                                      | 219,672 |   |   |   |   |   | 219,938 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Reduction                in prepaid shares                            |                                                                                               | 400,148    |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   | 400,148 |
|                                                                  |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   |   |   |   |   |
| Net                loss for the three months ended March 31, 2007     |                                                                                               |       |                                                                   |          |                                                                                                  |         |                                                                      |   |   |   | (798,293) |   |   | (798,293) |
| Balance                March 31, 2007                                 | $                                                                                                  | 11,668,737 |                                                                   | $             | 36,733                                                                                                |         | $                                                                         | 23,886,704 |   | $ | (49,686,455) |   | $ | (14,094,281) |

----

***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**CONSOLIDATED      STATEMENTS OF CASH FLOW **

**FOR      THE THREE AND NINE MONTHS ENDED MARCH 31, 2007 AND 2006 (Restated)**

**(WITH      CUMULATIVE TOTALS SINCE INCEPTION) **

**(Unaudited)**

|                                                                        | **Three                Months Ended March 31, 2007**  |               |  **Nine                Months Ended March 31, 2007**  |                  **Three                Months Ended March 31, 2006****(Restated)** |                        |  **Nine                Months Ended March 31, 2006****(Restated)****See                Note 2** |        |                  **Cumulative                Totals****December                30, 2002 through**                 **March                31****,                2007** |
|-----------------------------------------------------------------------------|------------------------------------------------------------|--------------------|-----------------------------------------------------------------|------------------------------------------------------------------------------------------|-----------------------------|------------------------------------------------------------------------------------------------------|-------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                        |                                                  |               |                                                       |                                                                                |                        |                                                                                            |        |                                                                                                                                                                        |
| **CASH                FLOWS FROM OPERATING ACTIVITIES**                     |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| Net                (loss)                                                   | $                                                          | (798,293)          |                                                            | $                                                                                        | (3,939,196)                 | $                                                                                                    | (2,846,655) |                                                                                                                                                                             | $ | (                6,280,798) |   | $ | (49,686,455) |
| Adjustments                to reconcile net loss to net cash                |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| used                in operating activities:                                |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| Common                stock issued for services                             |                                                       | 620,086            |                                                            |                                                                                     | 1,323,194                   |                                                                                                 | 135,850     |                                                                                                                                                                             |   | 665,450 |   |   | 10,273,413 |
| Options                issued for services                                  |                                                       | -                  |                                                            |                                                                                     | 119,500                     |                                                                                                 |        |                                                                                                                                                                             |   | 22,750 |   |   | 4,350,300 |
| Options                issued as compensation                               |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   | 7,847,510 |
| Warrants                issued for services                                 |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 | 150,000     |                                                                                                                                                                             |   | 150,000 |   |   | 6,024,218 |
| Depreciation                and amortization                                |                                                       | 4,616              |                                                            |                                                                                     | 10,712                      |                                                                                                 | 2,133       |                                                                                                                                                                             |   | 5,767 |   |   | 57,326 |
| Shares                issued for lawsuit settlements                        |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 | -           |                                                                                                                                                                             |   | - |   |   | 1,805,428 |
| Impairment                of property and equipment                         |                                                       | 0                - |                                                            |                                                                                     | 0                -          |                                                                                                 | -           |                                                                                                                                                                             |   | - |   |   | 107,964 |
| Impairment                of goodwill and intangibles                       |                                                       | 0-                 |                                                            |                                                                                     | 0-                          |                                                                                                 | 888,109     |                                                                                                                                                                             |   | 888,109 |   |   | 3,701,347 |
| Write-off                of inventory                                       |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 | -           |                                                                                                                                                                             |   | - |   |   | 266,519 |
| **Changes                in assets and liabilities**                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| (Increase)                in prepaid expenses and other current assets      |                                                       | -                  |                                                            |                                                                                     | 24,000                      |                                                                                                 | 171,339     |                                                                                                                                                                             |   | (250,379) |   |   | (48,670) |
| Increase                in accounts payable and accrued expenses            |                                                       | 151,092            |                                                            |                                                                                     | 1,248,024                   |                                                                                                 | 431,845     |                                                                                                                                                                             |   | 1,009,840 |   |   | 1,232,361 |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| Total                adjustments                                            |                                                       | 775,794            |                                                            |                                                                                     | 2,725,430                   |                                                                                                 | 1,779,276   |                                                                                                                                                                             |   | 2,491,537 |   |   | 35,617,716 |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **Net                cash (used in) operating activities**                  |                                                       | (22,499)           |                                                            |                                                                                     | (1,213,766                ) |                                                                                                 | (1,067,379) |                                                                                                                                                                             |   | (                3,789,261) |   |   | (14,068,739) |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES**                     |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| Bank                interest                                                |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 | -           |                                                                                                                                                                             |   | - |   |   | 71 |
| Acquisition                of intangible assets                             |                                                       | -                  |                                                            |                                                                                     | (515)                       |                                                                                                 | -           |                                                                                                                                                                             |   | (179,574) |   |   | (243,849) |
| Acquisitions                of fixed assets                                 |                                                       | -                  |                                                            |                                                                                     | (119,001)                   |                                                                                                 | (3,065)     |                                                                                                                                                                             |   | (22,637) |   |   | (164,833) |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **Net                cash (used in) investing activities**                  |                                                       | -                  |                                                            |                                                                                     | (119,516)                   |                                                                                                 | (3,065)     |                                                                                                                                                                             |   | (202,211) |   |   | (408,601                ) |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**                     |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| Proceeds                from the sale of stock                              |                                                       | 145,000            |                                                            |                                                                                     | 2,013,400                   |                                                                                                 | 365,993     |                                                                                                                                                                             |   | 365,993 |   |   | 6,501,170 |
| Proceeds                from standby equity distribution agreement          |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 | 250,000     |                                                                                                                                                                             |   | 3,600,000 |   |   | 4,000,000 |
| Liability                for stock to be issued                             |                                                       | (150,000)          |                                                            |                                                                                     | (557,252)                   |                                                                                                 | -           |                                                                                                                                                                             |   | (400,000) |   |   | 190,326 |
| Conversion                of shareholder debt to equity                     |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 | -           |                                                                                                                                                                             |   | - |   |   | 975,000 |
| Proceeds                from note payable                                   |                                                       | (6,134)            |                                                            |                                                                                     | 50,266                      |                                                                                                 | 250,000     |                                                                                                                                                                             |   | 250,000 |   |   | 1,295,266 |
| Advances                from shareholders                                   |                                                       | 41,000             |                                                            |                                                                                     | 227,712                     |                                                                                                 | 250,000     |                                                                                                                                                                             |   | 250,000 |   |   | 3,014,826 |
| Payments                on shareholder loan                                 |                                                       | (33,237)           |                                                            |                                                                                     | (452,772)                   |                                                                                                 | (153,527)   |                                                                                                                                                                             |   | (186,092) |   |   | (2,044,249) |
| Advances                (payments to) related company-net                   |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 | -           |                                                                                                                                                                             |   | (10,000) |   |   | 301,339 |
| Exercise                of stock options                                    |                                                       | -                  |                                                            |                                                                                     | -                           |                                                                                                 | 64,311      |                                                                                                                                                                             |   | 114,390 |   |   | 244,981 |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **Net                cash provided by financing activities**                |                                                       | (3,371)            |                                                            |                                                                                     | 1,281,354                   |                                                                                                 | 1,026,777   |                                                                                                                                                                             |   | 3,984,291 |   |   | 14,478,659 |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **NET                INCREASE (DECREASE) IN**                          |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS**                                |                                                       | (25,870)           |                                                            |                                                                                     | (51,928)                    |                                                                                                 | (43,667)    |                                                                                                                                                                             |   | (7,181) |   |   | 1,319 |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS -**                              |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **Beginning                period**                                         |                                                       | 27,189             |                                                            |                                                                                     | 53,247                      |                                                                                                 | 43,846      |                                                                                                                                                                             |   | 7,360 |   |   | - |
|                                                                        |                                                       |               |                                                            |                                                                                     |                        |                                                                                                 |        |                                                                                                                                                                             |   |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS -****End                Period** | $                                                          | 1,319              |                                                            | $                                                                                        | 1,319                       | $                                                                                                    | 179         |                                                                                                                                                                             | $ | 179 |   | $ | 1,319 |

----

***Table          of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      1                **
**GOING      CONCERN UNCERTAINTY **

*The      Company is currently in the development stage, and there is no guarantee whether      the Company will be able to generate enough revenue and/or raise capital to      support current operations and generate anticipated sales.*

**NOTE      2                **
**BASIS      OF PRESENTATION AND RESTATEMENT **

The consolidated      financial statements include the accounts of the Company and its wholly      owned subsidiary Dyna-Cam, Aero Marine Engine Corp. All significant      inter-company accounts and transactions are eliminated. 

----

***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      2                  **
**BASIS      OF PRESENTATION AND RESTATEMENT (CONTINUED) **

**Income      Statement for the three months ended March 31, 2006:**

|                                       |   | As                Originally Reported |       | As                Adjusted |   | Effect                 of Change |   |
|--------------------------------------------|--------|---------------------------------------|------------|----------------------------|--------|---------------------------------------|--------|
| Sales                                      |   | $                                     | -          |                       | $      | -                                     |   | $ | - |   |
| Cost                of goods sold          |   |                                  | -          |                       |   | -                                     |   |   | - |   |
| Compensation                               |   |                                  | 150,129    |                       |   | 1,919,628                             |   |   | 1,769,499 |   |
| Professional                and consulting |   |                                  | 806,647    |                       |   | 824,234                               |   |   | 17,587 |   |
| Advertising                and promotions  |   |                                  | -          |                       |   | 601,952                               |   |   | 601,952 |   |
| Rent                                       |   |                                  | 7,347      |                       |   | 7,714                                 |   |   | 367 |   |
| Research                and development    |   |                                  | 813,577    |                       |   | 854,477                               |   |   | 40,900 |   |
| General                and administrative  |   |                                  | 1,050,956  |                       |   | 317,315                               |   |   | (733,641 | ) |
| Depreciation                               |   |                                  | 2,133      |                       |   | 2,133                                 |   |   | - |   |
| Total                Expenses              |   |                                  | 2,830,789  |                       |   | 4,527,453                             |   |   | 1,696,664 |   |
| Lawsuit                settlement          |   |                                  | -          |                       |   | (1,805,429                            | )      |   | (1,805,429 | ) |
| Interest                income             |   |                                  | -          |                       |   | -                                     |   |   | - |   |
| Interest                expense            |   |                                  | (15,866    | )                          |   | (1,116,206                            | )      |   | (1,100,340 | ) |
| Net                income (loss)           |   | $                                     | (2,846,655 | )                          | $      | (7,449,088                            | )      | $ | (4,602,433 | ) |
| Per                Share Basic             |   |                                  | (.08       | )                          |   | .07                                   |   |   | .12 |   |
| Per                Share Fully Diluted     |   |                                  | (.08       | )                          |   | .07                                   |   |   | .12 |   |

----

***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      2                       **
**BASIS      OF PRESENTATION AND RESTATEMENT (CONTINUED) **

**Balance      Sheet **

**March      31, 2006**

|                                                         |   |  As                OriginallyReported |        |  AsAdjusted             |   |  Effect                ofChange |   |
|--------------------------------------------------------------|--------|--------------------------------------------|-------------|------------------------------|--------|--------------------------------------|--------|
|                                                         |   |                                  |        |                    |   |                            |   |
| **Assets**                                                   |   |                                  |        |                    |   |                            |   |
| Cash                                                         |   | $                                          | 179         |                         | $      | 5,880                                |   | $ | 5,701 |   |
| Deposit                                                      |   |                                       | 22,670      |                         |   | 22,670                               |   |   | - |   |
| Prepaid                expenses                              |   |                                       | 272,710     |                         |   | -                                    |   |   | (272,710 | ) |
| Total                current assets                          |   |                                       | 295,559     |                         |   | 28,550                               |   |   | (267,009 | ) |
| Property                and equipment-net                    |   |                                       | 38,011      |                         |   | 38,861                               |   |   | 850 |   |
| Deferred                financing costs                      |   |                                       | 1,725,000   |                         |   | -                                    |   |   | (1,725,000 | ) |
| Intangible                assets-net                         |   |                                       | 243,324     |                         |   | 243,324                              |   |   | - |   |
| Total                Assets                                  |   | $                                          | 2,301,894   |                         | $      | 310,734                              |   | $ | (1,991,160 | ) |
| **Liabilities                and Stockholders' Deficit**     |   |                                       |             |                         |   |                                      |   |   |  |   |
| Accounts                payable                              |   | $                                          | 1,141,259   |                         | $      | 624,466                              |   | $ | (516,793 | ) |
| Current                portion of note payable               |   |                                       | 3,245,000   |                         |   | 1,245,000                            |   |   | (2,000,000 | ) |
| Liability                for stock to be issued              |   |                                       | -           |                         |   | 946,262                              |   |   | 946,262 |   |
| Share-based                fee liabilities                   |   |                                       | -           |                         |   | 18,015,023                           |   |   | 18,015,023 |   |
| Accrued                interest - shareholder                |   |                                       | -           |                         |   | 69,565                               |   |   | 69,565 |   |
| Due                to related company                        |   |                                       | 301,339     |                         |   | 301,339                              |   |   | - |   |
| Total                current liabilities                     |   |                                       | 4,687,589   |                         |   | 21,201,655                           |   |   | 16,514,057 |   |
| Note                payable                                  |   |                                       | -           |                         |   | -                                    |   |   | - |   |
| Due                to shareholder                            |   |                                       | 294,794     |                         |   | 835,694                              |   |   | 540,900 |   |
| Total                Liabilities                             |   |                                       | 4,982,392   |                         |   | 22,037,349                           |   |   | 17,054,957 |   |
| Stockholders’                Deficit                   |   |                                       |             |                         |   |                                 |   |   |   |   |
| Prepaid                share-based fee                       |   |                                       | -           |                         |   | (2,781,743                           | )      |   | (2,781,743 | ) |
| Prepaid                share-based compensation.             |   |                                       | -           |                         |   | (678,125                             | )      |   | (678,125 | ) |
| Common                stock                                  |   |                                       | 34,554      |                         |   | 34,605                               |   |   | 51 |   |
| Additional                paid-in capital                    |   |                                       | 20,410,846  |                         |   | 20,940,517                           |   |   | 529,671 |   |
| Beneficial                Reduction of Share Based Liability |   |                                       | -           |                         |   | 4,898,109                            |   |   | 4,898,109 |   |
| Accumulated                deficit                           |   |                                       | (23,125,898 | )                            |   | (44,139,978                          | )      |   | (21,014,080 | ) |
| Total                Stockholders' Deficit                   |   |                                       | (2,680,498  | )                            |   | (21,726,614                          | )      |   | (19,046,116 | ) |
| Total                Liabilities and Stockholders'           |   |                                       |             |                         |   |                                      |   |   |  |   |
| Deficit                                                      |   | $                                          | 2,301,894   |                         | $      | 310,734                              |   | $ | (1,991,160 | ) |

----

***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      2                **
**BASIS      OF PRESENTATION AND RESTATEMENT (CONTINUED) **

| Accumulated                deficit June 30, 2006 original |   | $ | (38,874,824 | )      |
|-----------------------------------------------------------|--------|---|-------------|--------|
| Cumulated                effect of Alliance warrants      |   | $ | (7,320,000  | )      |
| Incorrect                accounts payable accrual         |   | $ | 447,565     |   |
| Accumulated                deficit June 30, 2006 restated |   | $ | (45,747,259 | )      |

**NOTE      3                **
**ORGANIZATION      **

----

***Table          of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      3                **
**ORGANIZATION      (CONTINUED) **

**NOTE      4                 **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES **

**Use      of Estimates **

----

***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      4                **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) **

**Cash      and Cash Equivalents **

**Concentration      of Credit Risk **

**Property      and Equipment **

----

***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      4                 **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) **

**Reclassifications      **

**Income      Taxes **

**Advertising,      Promotion, Consulting, and Travel Expenses **

**Research      and Development **

Research      and development costs are expensed as incurred.

**Intangible      Assets **

----

***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      4                **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) **

**Start-up      Costs **

*“*
*Reporting      on the costs of Start-up Activities”*

**Share-Based      Compensation **

*Accounting      for Share-Based Compensation” *

**(Loss)      Per Share of Common Stock **

he      following is a reconciliation of the computation for basic and diluted EPS:      

----

***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      4                  **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) **

|                                          |   | **Three                Months Ended****March                31****,****2007** |       | **Three                Months Ended****March                31****,                2006****(Restated)** |   |
|-----------------------------------------------|--------|-------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------|--------|
|                                          |   |                                                                          |       |                                                                                                    |   |
| Net (loss)                               |   | $                                                                             | (797,772   | )                                                                                                       | $      | (7,449,088 | ) |
|                                          |   |                                                                          |       |                                                                                                    |   |   |   |
| Weighted-average                common shares |   |                                                                          |       |                                                                                                    |   |   |   |
| outstanding                (Basic)            |   |                                                                          | 36,094,046 |                                                                                                    |   | 34,657,010 |   |
|                                          |   |                                                                          |       |                                                                                                    |   |   |   |
| Weighted-average                common stock  |   |                                                                          |       |                                                                                                    |   |   |   |
| equivalents:                                  |   |                                                                          |       |                                                                                                    |   |   |   |
| Stock                warrants                 |   |                                                                          | 2,500,000  |                                                                                                    |   | 2,075,000 |   |
| Stock                options                  |   |                                                                          | 3,638,000  |                                                                                                    |   | 3,239,939 |   |
|                                          |   |                                                                          |       |                                                                                                    |   |   |   |
| Weighted-average                common shares |   |                                                                          |       |                                                                                                    |   |   |   |
| outstanding                (Fully Diluted)    |   |                                                                          | 42,232,046 |                                                                                                    |   | 39,971,949 |   |

**Fair      Value of Financial Instruments **

----

***Table            of Contents***

 **AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      4                **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES **
**(CONTINUED)      **

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      4                **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

       

**NOTE      5                ****PROPERTY      AND EQUIPMENT**

|                                          |   | 2007   |    | 2006   |   |
|-----------------------------------------------|--------|--------|---------|--------|--------|
| Computer                                      |   | $      | 41,837  |   | $      | 26,571 |   |
| Equipment                and machinery        |   |   | 13,274  |   |   | 13,274 |   |
| Leasehold                Improvements         |   |   | 5,533   |   |   |   |   |
| Office                equipment               |   |   | 102,068 |   |   | 6,637 |   |
|                                          |   |   | 162,712 |   |   | 46,482 |   |
|                                          |   |   |    |   |   |  |   |
| Less:                accumulated depreciation |   |   | (20,569 | )      |   | (7,621 | ) |
|                                          |   |   |    |   |   |  |   |
|                                          |   | $      | 142,143 |   | $      | 38,861 |   |

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***Table          of Contents***

**AXIAL        VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY        AERO MARINE ENGINE, INC.) **

**(A        DEVELOPMENT STAGE COMPANY) **

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH        31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      5                **
**PROPERTY      AND EQUIPMENT (CONTINUED) **

**NOTE      6                **
**CURRENT      PORTION OF NOTES PAYABLE **

$250,000      Note payable to Twilight Bay, LLC commencing January 2006 for working      capital needs. The note was due in one year and carries a stated interest      rate of two percent. This note is currently in default.

**NOTE      7                **
**CONTINGENT      SHARE-BASED PAYMENT **
       

In      addition to the Note Payable above, the Transporter Inc., purchase in August      2004, consisted of the issuance by the Company of 1,000,000      shares to the former shareholders of Transporter, Inc. These shares are      guaranteed to have a value of $2.00 per share for a period of 2 years. The      market share value is below $2.00 per share. There is no value placed for this      contingent liability as of the reporting dates December 31, 2006 and 2005,      but is disclosed for reporting purposes only. 

**NOTE      8**
**LIABILITY      FOR STOCK TO BE ISSUED**       

|                          |   | Shares                to be issued |    | Market                Value |   |
|-------------------------------|--------|------------------------------------|---------|-----------------------------|--------|
| March                31, 2006 |   |                               | 710,362 |                        | $      | 695,362 |   |
| March                31, 2007 |   |                               | 340,327 |                        | $      | 393,326 |   |

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      9                 **
**SHARED-BASED      FEE LIABILITY- WARRANTS **

| Warrant                # |   | Unexercised#                Shares |      | Exercise                Price |   | Until     |   | Value                at March 31, 2007 |    | Value                at March 31, 2006 |   |
|--------------------------|--------|------------------------------------|-----------|-------------------------------|--------|-----------|--------|----------------------------------------|---------|----------------------------------------|--------|
| 11                       |   |                               | 3,000,000 |                          |   | 0.20      |   |                                   | 5/2007  |                                   | $      | 600,000 |   | $ | 6,220,000 |   |
| 16-19                    |   |                               | 50,000    |                          |   | 1.75-2.50 |   |                                   | 3/2010  |                                   | $      | 117,250 |   | $ | 284,250 |   |
| 12-14                    |   |                               | 35,001    |                          |   | 3.00-5.00 |   |                                   | 10/2007 |                                   | $      | 40,134 |   | $ | - |   |
| 15                       |   |                               | 250,000   |                          |   | 4.00      |   |                                   | 11/2007 |                                   | $      | 327,500 |   | $ | - |   |
| Total                    |   |                               |           |                          |   |           |   |                                   |         |                                   | $      | 1,084,884 |   | $ | 6,504,250 |   |

**NOTE      10              **
**SHARED-BASED      FEE LIABILITY- OPTIONS **

| Option |   |   |   |   |   | Unexercised                #                Shares March                31, |   | Value                March                31, |      | Unexercised                #                Shares March                31, |   | Value                March                31, |   |
|--------|--------|--------|--------|--------|--------|-----------------------------------------------------------------------------|--------|-----------------------------------------------|-----------|-----------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
| #      |   | Price  |   | Until  |   | 2007                                                                        |   | 2007                                          |      | 2006                                                                        |   | 2006                                          |   |
| 6      |   |   | 1.52   |   |   | 4/2010                                                                      |   |                                          | 762,000   |                                                                        | $      | 1,760,220                                     |   |   | 2,604,820 |   | $ | 3,559,128 |   |
| 8      |   |   | 3.00   |   |   | 5/2011                                                                      |   |                                          | 10,000    |                                                                        |   | 23,000                                        |   |   | - |   |   | - |   |
| 12     |   |   | 2.63   |   |   | 4/2011                                                                      |   |                                          | 50,000    |                                                                        |   | 117,000                                       |   |   | - |   |   | - |   |
| 14     |   |   | 2.00   |   |   | 7/2011                                                                      |   |                                          | 50,000    |                                                                        |   | 119,500                                       |   |   |   |   |   |   |   |
| 13     |   |   | 2.03   |   |   | 6/2011                                                                      |   |                                          | 350,000   |                                                                        |   | 836,500                                       |   |   | - |   |   | - |   |
| Total  |   |   |        |   |   |                                                                             |   |                                          | 1,222,000 |                                                                        |   | 2,856,220                                     |   |   | 2,604,820 |   | $ | 3,559,128 |   |

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      11              **
**SHARED-BASED      COMPENSATION LIABILITY- OPTIONS **

| Title     |   | Option# |   | Unexercised                #Shares |   | Price     |   | Until  |      | Value                at March 31, 2007 |   | Value                at March 31, 2006 |   |
|-----------|--------|---------|--------|------------------------------------|--------|-----------|--------|--------|-----------|----------------------------------------|--------|----------------------------------------|--------|
| Board     |   |    | 1-3    |                               |   | 279,000   |   |   | .50       |                                   |   | 12/09                                  |   | $ | 675,180 |   | $ | 1,065,780 |   |
| Sec/Treas |   |    | 4      |                               |   | 1,000,000 |   |   | 1.52      |                                   |   | 4/10                                   |   | $ | 2,310,000 |   | $ | 3,820,000 |   |
| CEO       |   |    | 5      |                               |   | 1,000,000 |   |   | 1.52      |                                   |   | 4/10                                   |   | $ | 2,310,000 |   | $ | 3,820,000 |   |
| Admin     |   |    | 7,8-11 |                               |   | 140,000   |   |   | 2.15-2.63 |                                   |   | 8/10                                   |   | $ | 320,220 |   | $ | 57,000 |   |
| Total     |   |    |        |                               |   |           |   |   |           |                                   |   |                                        |   | $ | 5,615,400 |   | $ | 8,762,780 |   |

**NOTE      12              ****DUE      TO RELATED COMPANY**

**NOTE      13               **
**DUE      TO SHAREHOLDERS **

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      13              **
**DUE      TO SHAREHOLDERS (CONTINUED) **

**NOTE      14             **
**NOTE      PAYABLE**

**NOTE      15              **
**COMMON      STOCK **

**NOTE      16              **
**PREPAID      SHARE-BASED FEES AND COMPENSATION **
**       **

**NOTE      17              **
**BENEFICIAL      REDUCTION OF SHARE-BASED LIABILITIES **

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      18               ****ADVERTISING,      PROMOTION, CONSULTING AND TRAVEL**** **

|                                    |   | March                31,2007 |    | March                31,2006 |   |
|-----------------------------------------|--------|------------------------------|---------|------------------------------|--------|
| Cash                and accrued expense |   | $                            | 24,035  |                         | $      | 157,439 |   |
| Common                shares            |   |                         | 168,064 |                         |   | 444,513 |   |
| Options                                 |   |                         | -       |                         |   | - |   |
| Warrants                                |   |                         | -       |                         |   |  |   |
| Total                                   |   | $                            | 192,099 |                         | $      | 601,952 |   |

**NOTE      19             **
**BENEFICIAL      SHARE-BASED FEE EXPENSE **

**NOTE      20             ****BOARD      COMPENSATION**

accordance      with SFAS 123r this share-based compensation is retroactively expensed in the      year issued and valued with an econometric model. Options to purchase 279,000      shares were valued at $3.31 per share at the date of issue. 

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      21              **
**LEGAL      FEES **
**       **

|                                    |   | March                31, 2007 |    | March                31, 2006 |   |
|-----------------------------------------|--------|-------------------------------|---------|-------------------------------|--------|
| Cash                and accrued expense |   | $                             | 126,380 |                          | $      | 824,234 |   |
| Common                shares            |   |                          | -       |                          |   | - |   |
| Options                                 |   |                          | -       |                          |   | - |   |
| Total                                   |   | $                             | 126,380 |                          | $      | 824,234 |   |

**NOTE      22              ****OFFICERS’      COMPENSATION**** **

|                                               |   | March                31, 2007 |    | March                31, 2006 |   |
|----------------------------------------------------|--------|-------------------------------|---------|-------------------------------|--------|
| CEO,                Ray Brouzes                    |   |                          |         |                          |   |  |   |
| Salary                                             |   | $                             | 37,500  |                          | $      | 25,418 |   |
| Common                shares                       |   |                          | 162,750 |                          |   | 162,750 |   |
| Options                                            |   |                          | -       |                          |   | 760,000 |   |
| Total                                              |   | $                             | 200,250 |                          | $      | 948,168 |   |
| Secretary/Treasurer,                Samuel Higgins |   |                          |         |                          |   |  |   |
| Salary                                             |   | $                             | 15,000  |                          | $      | 5,000 |   |
| Options                                            |   |                          | -       |                          |   | 760,000 |   |
| Total                                              |   | $                             | 15,000  |                          | $      | 765,000 |   |
| CFO,                Benjamin Langford              |   |                          |    |                          |   |  |   |
| Salary                                             |   | $                             | -       |                          | $      | - |   |
| Total                                              |   | $                             | -       |                          | $      | - |   |
| Total                Officers’ Compensation  |   | $                             | 215,250 |                          | $      | 1,713,168 |   |

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      23              **
**RESEARCH      AND DEVELOPMENT **

**NOTE      24              **
**PROVISION      FOR INCOME TAXES **

|                                     |   | 2007   |        |
|------------------------------------------|--------|--------|-------------|
| Deferred                tax assets       |   | $      | 16,893,395  |   |
| Less:                valuation allowance |   |   | (16,893,395 | ) |
|                                     |   |   |        |   |
| Net                deferred assets       |   | $      | -0-         |   |

** **

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      25              **
**COMMITMENTS      AND CONTINGENCIES **

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***Table            of Contents***

**AXIAL      VECTOR ENGINE CORPORATION AND SUBSIDIARY**

**(FORMERLY      AERO MARINE ENGINE, INC.) **

**(A      DEVELOPMENT STAGE COMPANY) **

**NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS **

**MARCH      31, 2007 AND 2006 **

**(Unaudited)**

**NOTE      25              **
**SUBSEQUENT      EVENTS **

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***Table          of Contents***

**Item      2.      Plan of      Operation**

**Forward-Looking      Statements**

**Recent      Developments in Our Business**

----

***Table          of Contents***

***Developments      in Our Agreement with Adaptive***

***Advent      of the Axial Vector Workhorse 7.2***

***Developments      in Our Electric Motors***

----

***Table          of Contents***

*Initial      Applications*

*Energy      and Operating Cost Savings (Sources for Statistics in Exhibit      99.1)*

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***Table          of Contents***

*Introduction      into the Marketplace*

*Industrial      Electric Motors (Sources for Statistics in Exhibit 99.1)*

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***Table          of Contents***

*Refrigeration      (Sources for Statistics in Exhibit 99.1)*

*Air      Conditioning (Sources for Statistics in Exhibit 99.1)*

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***Table          of Contents***

***Developments      in Initial Testing***

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***Table          of Contents***

| 1.   | Subsystem                testing |
|----------------|----------------------------------|
| 2.   | Engine                Testing at an independent third party firm “A” specialized in engines |
|----------------|---------------------------------------------------------------------------------------------------------|
| 3.   | Generator                Testing at an independent third party firm “B” specializing in generators |
|----------------|----------------------------------------------------------------------------------------------------------------|
| 4.   | Generator                Set (GENSET) Testing |
|----------------|-----------------------------------------------|
| 5.   | Reliability                and Homologation Testing |
|----------------|-----------------------------------------------------|

**1.**
**Subsystem      testing**

| a.   | Injection                system testing |
|----------------|-----------------------------------------|

| b.   | Piston-roller                / Cam interface |
|----------------|----------------------------------------------|

| c.   | Generator                coil resistance tests |
|----------------|------------------------------------------------|

| d.   | Generator                magnetic disk tests |
|----------------|----------------------------------------------|

**Engine      Testing**

| a.   | Overall                Engine Operation (such as HP and torque over RPM                range) |
|----------------|-----------------------------------------------------------------------------------------------|

| b.   | Fuel                System Evaluation |
|----------------|---------------------------------------|

| c.   | Air                System Evaluation |
|----------------|--------------------------------------|

| d.   | Cylinder                Blowby Measurements |
|----------------|---------------------------------------------|

| e.   | Oil                Consumption |
|----------------|--------------------------------|

| f.   | Heat                Rejection |
|----------------|-------------------------------|

| g.   | Friction                Measurement |
|----------------|-------------------------------------|

| h.   | Calibration                Mapping |
|----------------|------------------------------------|

| i.   | Exhaust                Emissions |
|----------------|----------------------------------|

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***Table          of Contents***

**Generator      Testing**

| a.   | No                  load test |
|----------------|-------------------------------|
| b.   | Load                  test |
|----------------|----------------------------|
| c.   | Speed                  - Load test |
|----------------|------------------------------------|
| d.   | Controls                  testing |
|----------------|-----------------------------------|
| e.   | Additional                  tests to examine critical performance parameters and some critical                  mechanical parameters for the magnets, axial clearance, coils and                  gauss                  generated. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| f.   | Detailed                  GENSET testing will further include: |
|----------------|----------------------------------------------------------------|

**GENSET          Testing **

| a.   | Overall                GENSET operation |
|----------------|-----------------------------------------|

| b.   | System                calibration |
|----------------|-----------------------------------|

| c.   | Efficiency |
|----------------|------------|

| d.   | Noise                emissions |
|----------------|--------------------------------|

| e.   | During                the early marriage period, the Control Systems must be verified for                perfect functioning, especially the rectifier, DC bus and inverter                - the                heart of the system |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| f.   | The                load sharing synchronization and the transfer panel that the client                operators must monitor and control - this is where interface with                the                client occurs. |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**GENSET      Reliability **

| a.   | Durability                tests - 3 GENSETS proposed to be tested for 4,000 hours; durability                design                is 40,000 hours between major                overhauls |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b.   | Beta                tests - 4 proposed Beta sites |
|----------------|---------------------------------------------------|

| c.   | Homologation                tests |
|----------------|-----------------------------------|

| d.   | Need                a UL Certification on the Inverter - a document of some 100 pages.                (UL                2200 is for the “Stationary Engine Generator Assemblies” and not just for                the inverter. Preponderance of safety concerns are however with the                inverter system.) |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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***Table          of Contents***

***Re-Emergence      of the Gasoline Powered Sinusoidal Cam Driven Mechanical      Engine***

----

***Table          of Contents***

***Developments      in Beta Testing***

***Developments      in Licenses***

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***Table          of Contents***

***Developments      in Distribution Agreements***

**Summary      of Product Research and Development Expenditures**

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***Table          of Contents***

**Purchase      and Sale of Plant or Significant Equipment**

**Changes      in Number of Employees**

**Results      of Operations for the three and nine months ended **
**March      31, 2007**
**and      2006**

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***Table          of Contents***

| 1.   | advertising                and promotion expenses in the amount of                $192,099; |
|----------------|---------------------------------------------------------------------------------------------|

| 2.   | compensating                our officers in the form of salaries, common shares, and options                with                associated payroll taxes in the amount of                $215,250; |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | legal                fees in the form of cash, accrued expenses and options valued at                $126,380; |
|----------------|----------------------------------------------------------------------------------------------------------------|

| 4.   | accounting                and auditing expenses in the amount of                $8,050; |
|----------------|-----------------------------------------------------------------------------------------|

| 5.   | beneficial                share-based fee expenses for stock awards to vendors that are over                and                above the stated fair value of services provided valued at $139,272;                and |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | research                and developments costs of $44,835 as noted above. |
|----------------|---------------------------------------------------------------------------|

| 1.   | beneficial                share-based fee expenses for stock awards to venders that are over                and                above the stated fair value of services provided in the amount of                $139,272; |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2.   | compensating                our officers in the form of salaries, common shares, and options                with                associated payroll taxes in the amount of                $1,713,168; |
|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | advertising                and promotion expenses in the amount of                $73,588; |
|----------------|--------------------------------------------------------------------------------------------|

| 4.   | financing                our Standby Equity Agreement in the amount of                $0; |
|----------------|-------------------------------------------------------------------------------------------|

| 5.   | research                and development costs of $925,003 as noted                above; |
|----------------|------------------------------------------------------------------------------------------|

| 6.   | legal                fees in the form of cash, accrued expenses and options valued at                $824,234;                and |
|----------------|-----------------------------------------------------------------------------------------------------------------------------------|

| 7.   | compensating                our board of directors with options valued at $206,460. |
|----------------|-------------------------------------------------------------------------------------|

|   | 1. | beneficial                share-based fee expenses for stock awards to venders that are over                and                above the stated fair value of services provided in the amount of                $417,816; |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 2. | compensating                our officers in the form of salaries, common shares, and options                with                associated payroll taxes in the amount of                $3,150,524; |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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***Table          of Contents***

**Liquidity      and Capital Resources**

----

***Table          of Contents***

***Cash      Flows from Operating Activities***

***Cash      Flows from Investing Activities***

***Cash      Flows from Financing Activities***

**Off      Balance Sheet Arrangements **

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***Table          of Contents***

**Going      Concern**

**Critical      Accounting Policies**

*Accounting      for Share-Based Compensation” *

*"Share-based      Payments"  *

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***Table          of Contents***

**Recently      Issued Accounting Pronouncements**

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***Table          of Contents***

**Item      3.     Controls and Procedures**

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***Table          of Contents***

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***Table          of Contents***

**PART      II - OTHER INFORMATION**

**Item      1.     Legal      Proceedings**

**Item      2.     Unregistered Sales of Equity      Securities and Use of Proceeds**

**Item      3.     Defaults upon Senior      Securities**

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***Table          of Contents***

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

**Item      5.     OtherInformation**

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***Table          of Contents***

**Item      6.      Exhibits**

| **Exhibit****Number** | **Description                of Exhibit**                                                                                                                                                                                                                |
|-----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                  | Certification                of Chief Executive Officer pursuant to 18                U.S.C. Section 1350, as adopted pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002                                                           |
| 31.2                  | Certification                of Chief Financial Officer pursuant to 18                U.S.C. Section 1350, as adopted pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002                                                           |
| 32.1                  | Certification                of Chief Executive Officer and Chief                Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted                pursuant                to Section 906 of the Sarbanes-Oxley Act of                2002 |

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***Table          of Contents***

**SIGNATURES**

|   | **Axial                Vector Engine Corporation**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| Date:  | May                22, 2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   By:       /s/                Samuel J.                Higgins                                                                    Samuel                J. HigginsTitle:**    Chief                Executive Officer and Director**  |

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***Table          of Contents***