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
      1934For
      the quarterly period ended:March
      31, 2005[
      ]
    Transition
      Report pursuant to 13 or 15(d) of the Securities Exchange Act of
      1934For
      the transition period ___________ to__________Commission
      File Number:000-49698





Aero
Marine Engine, Inc.


(Exact
name of small business issuer as specified in its charter)





Nevada
    98-0353007(State
      or other jurisdiction of incorporation or organization)
    (IRS
      Employer Identification No.)





One
      World Trade Center, 121 S.W. Salmon Street, Suite 1100, 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)





Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days [X] Yes [
] No





State the
number of shares outstanding of each of the issuer’s classes of common stock, as
of the latest practicable date: 28,862,942 common shares as of March 15,
2005





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








***Table of Contents***











**TABLE OF CONTENTS**
    **Page****PART
      I - FINANCIAL INFORMATION**
      ****Item
      1:
    Financial Statements
    3Item
      2:
    Plan of Operation
    4Item
      3:
    Controls and Procedures
    8**PART
      II - OTHER INFORMATION**
      ****Item
      1:
    Legal Proceedings
    9Item
      2:
    Unregistered Sales of Equity Securities and Use of
      Proceeds
    9Item
      3:
    Defaults Upon Senior Securities
    9Item
      4:
    Submission of Matters to a Vote of Security
      Holders
    9Item
      5:
    Other Information
    9Item
      6:
    Exhibits
    10











2
 ***Table of Contents***





**PART
1 - FINANCIAL INFORMATION**





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





Our
unaudited condensed consolidated financial statements included in this Form
10-QSB are as follows:





(a)
    Balance
      Sheet as of March 31, 2005.


(b)
    Statements
      of Operations for the nine and three month periods ended March 31, 2005
      and 2004 (unaudited with cumulative totals since Inception);


(c)
    Statements
      of Cash Flow for the nine months ended March 31, 2005 and 2004 (unaudited
      with cumulative totals since inception);


(d)
    Notes
      to Condensed Consolidated Financial
Statements.





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and Item 310 (b) of
Regulation S-B, and, therefore, do not include all information and footnotes
necessary for a complete presentation of financial position, results of
operations, cash flows, and stockholders' equity in conformity with generally
accepted accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a normal
recurring nature. Operating results for the nine months ended March 31, 2005 are
not necessarily indicative of the results that can be expected for the year
ending June 30, 2005.








3
 ***Table of Contents***




AERO MARINE ENGINE, INC.


(A DEVELOPMENT STAGE COMPANY)


CONDENSED CONSOLIDATED BALANCE SHEET


MARCH 31, 2005 (UNAUDITED)





******ASSETS**Cash
      and cash equivalents
    
    $
    33,394Prepaid
      expenses and other current assets
    
    
    22,670Total
      Current Assets
    
    
    56,064Property
      and equipment, net of depreciation
    
    
    20,581Intangible
      assets, net of impairment and amortization
    
    
    3,050,000**TOTAL
      ASSETS**
    
    $
    3,126,645**LIABILITIES
      AND STOCKHOLDERS' EQUITY (DEFICIT)****LIABILITIES**Current
      Liabilities:Accounts
      payable and accrued expenses
    
    $
    62,347Current
      portion of note payable
    
    
    995,000Due
      to shareholders
    
    
    801,717Due
      to related company
    
    
    311,339Total
      Current Liabilities
    
    
    2,170,403Note
      payable - net of current portion
    
    
    2,000,000**Total
      Liabilities**
    
    
    4,170,403**STOCKHOLDERS'
      EQUITY (DEFICIT)**Preferred
      stock, $.001 Par Value; 100,000,000 shares authorizedno
      shares issued and outstandingCommon
      stock, $.001 Par Value; 100,000,000 shares authorized28,399,166
      shares issued and outstanding
    
    
    28,399Additional
      paid-in capital
    
    
    5,526,908Deficit
      accumulated during the development stage
    
    
    (6,599,065
    )**Total
      Stockholders' Equity (Deficit)**
    
    
    (1,043,758
    )**TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**
    
    $
    3,126,645












F -
1
 ***Table of Contents***


AERO MARINE ENGINE, INC.
 (A DEVELOPMENT STAGE COMPANY)
 CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
 FOR THE NINE AND THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
 (WITH CUMULATIVE TOTALS SINCE INCEPTION)
 
 **NINE
      MONTHS ENDED**
    
    **THREE
      MONTHS ENDED**
    
    **CUMULATIVE
      TOTALS****MARCH
      31**
    
    **MARCH
      31**
    
    **DECEMBER
      30, 2002 through****2005**
    
    **2004**
    
    **2005**
    
    **2004**
    
    **MARCH
      31, 2005****OPERATING
      REVENUES**Sales
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -**COST
      OF SALES**
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -**GROSS
      PROFIT**
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -**OPERATING
      EXPENSES**Compensation
      expense
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    432,969Professional
      and consulting fees
    
    
    259,064
    
    
    3,487,745
    
    
    85,014
    
    
    3,364,860
    
    
    3,923,540Advertising
      and promotions
    
    
    16,584
    
    
    -
    
    
    16,584
    
    
    -
    
    
    61,475Rent
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    42,783General
      and administrative expenses
    
    
    72,734
    
    
    520,623
    
    
    32,222
    
    
    251,405
    
    
    187,727Depreciation
      and amortization
    
    
    885
    
    
    38,840
    
    
    598
    
    
    13,952
    
    
    39,725**Total
      Operating Expenses**
    
    
    349,267
    
    
    4,047,208
    
    
    134,418
    
    
    3,630,217
    
    
    4,688,219**NET
      LOSS BEFORE OTHER (EXPENSES)****AND
      PROVISION FOR INCOME TAXES**
    
    
    (349,267
    )
    
    (4,047,208
    )
    
    (134,418
    )
    
    (3,630,217
    )
    
    (4,688,219
    )**OTHE
      (EXPENSES)**Interest
      expense
    
    
    (5,387
    )
    
    (10,940
    )
    
    (2,036
    )
    
    (5,440
    )
    
    (22,517
    )Impairment
      of property and equipment
    
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    (107,964
    )Impairment
      of goodwill and intangibles
    
    
    (812,500
    )
    
    -
    
    
    -
    
    
    -
    
    
    (1,513,847
    )Impairment
      of inventory
    
    
    
    
    
    -
    
    
    -
    
    
    -
    
    
    (266,519
    )**Total
      Other Expenses**
    
    
    (817,887
    )
    
    (10,940
    )
    
    (2,036
    )
    
    (5,440
    )
    
    (1,910,847
    )**NET
      LOSS BEFORE PROVISION****FOR
      INCOME TAXES**
    
    
    (1,167,154
    )
    
    (4,058,148
    )
    
    (136,454
    )
    
    (3,635,657
    )
    
    (6,599,066
    )Provision
      for income taxes
    
    
    -
    
    
    -
    
    
    -
    
    
    -
    
    
    -**NET
      LOSS**
    
    
    (1,167,154
    )
    
    (4,058,148
    )
    
    (136,454
    )
    
    (3,635,657
    )
    
    (6,599,066
    )**WEIGHTED
      AVERAGE COMMON SHARES****OUTSTANDING**
    
    
    22,496,919
    
    
    51,285,831
    
    
    28,394,722
    
    
    53,896,021**NET
      LOSS PER COMMON SHARE OUTSTANDING**
    
    $
    (0.0519
    )
    $
    (0.0791
    )
    $
    (0.0048
    )
    $
    (0.0675
    )






F -
2
 ***Table of Contents***


AERO MARINE ENGINE, INC.
 (A DEVELOPMENT STAGE COMPANY)
 CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOW
 FOR THE NINE MONTHS ENDED MARCH 31, 2005
AND 2004 (UNAUDITED)
 (WITH CUMULATIVE TOTALS SINCE INCEPTION)
 
 **Cumulative
      Totals****December
      30, 2002 through****2005**
    
    **2004**
    
    **March
      31, 2005****CASH
      FLOWS FROM OPERATING ACTIVITIES**Net
      loss
    
    $
    (1,167,154
    )
    $
    (4,058,148
    )
    $
    (6,599,066
    )Adjustments
      to reconcile net loss to net cashused
      in operating activitiesPrior
      period adjustment
    
    
    
    
    
    
    
    
    (137,283
    )Common
      stock issued for services
    
    
    109,000
    
    
    3,350,000
    
    
    3,459,000Depreciation
      and amortization
    
    
    885
    
    
    38,840
    
    
    39,725Impairment
      of property and equipment
    
    
    -
    
    
    -
    
    
    107,964Impairment
      of goodwill and intangibles
    
    
    812,500
    
    
    -
    
    
    1,513,847Impairment
      of inventory
    
    
    -
    
    
    -
    
    
    266,519**Changes
      in assets and liabilities**(Increase)
      Decrease in inventory
    
    
    -
    
    
    70
    
    
    (266,519
    )(Increase)
      Decrease in prepaid expenses andother
      current assets
    
    
    -
    
    
    (10,088
    )
    
    599(Increase)
      Decrease in deposits and other assets
    
    
    -
    
    
    (5,150
    )
    
    -Increase
      in accounts payable and accrued expenses
    
    
    5,387
    
    
    23,817
    
    
    522,455Total
      adjustments
    
    
    927,772
    
    
    3,397,489
    
    
    5,506,307**Net
      cash (used in) operating activities**
    
    
    (239,382
    )
    
    (660,659
    )
    
    (1,092,759
    )**CASH
      FLOWS FROM INVESTING ACTIVITIES**Acquisition
      of business
    
    
    -
    
    
    -
    
    
    (1,018,814
    )Acquisitions
      of fixed assets
    
    
    (3,021,465
    )
    
    (26,767
    )
    
    (3,048,232
    )**Net
      cash (used in) investing activities**
    
    
    (3,021,465
    )
    
    (26,767
    )
    
    (4,067,046
    )**CASH
      FLOWS FROM FINANCING ACTIVITES**Proceeds
      from note payable, net
    
    
    2,995,000
    
    
    -
    
    
    4,079,843Advances
      from shareholders, net
    
    
    301,941
    
    
    406,584
    
    
    801,717Proceeds
      from issuance of common stock
    
    
    300
    
    
    -
    
    
    300Advances
      from (Payments to) related company
    
    
    (3,000
    )
    
    218,966
    
    
    311,339**Net
      cash provided by financing activities**
    
    
    3,294,241
    
    
    625,550
    
    
    5,193,199**NET
      INCREASE (DECREASE) IN****CASH
      AND CASH EQUIVALENTS**
    
    
    33,394
    
    
    (61,876
    )
    
    33,394**CASH
      AND CASH EQUIVALENTS -****BEGINNING
      OF YEAR**
    
    
    -
    
    
    61,909
    
    
    -**CASH
      AND CASH EQUIVALENTS - END OF YEAR**
    
    $
    33,394
    
    $
    33
    
    $
    33,394**SUPPLEMENTAL
      CASH FLOW INFORMATION**Cash
      paid during the year for interest
    
    $
    -
    
    $
    -
    
    $
    190**SUPPLEMENTAL
      DISCLOSURE OF NONCASH INFORMATION**Common
      stock issued for services
    
    $
    109,000
    
    $
    -
    
    $
    3,459,000Impairment
      of property and equipment
    
    $
    -
    
    $
    -
    
    $
    107,964Impairment
      of goodwill and intangibles
    
    $
    812,500
    
    $
    -
    
    $
    1,513,847Impairment
      of inventory
    
    $
    -
    
    $
    -
    
    $
    266,519Conversion
      of payables to equity
    
    $
    -
    
    $
    -
    
    $
    170,285






F -
3
 ***Table of Contents***


**AERO
MARINE ENGINE, INC.**
**(A
DEVELOPMENT STAGE ENTERPRISE)**
**NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
**MARCH
31, 2005 AND 2004**
****
1.
ORGANIZATION AND BASIS OF PRESENTATION

The
accompanying unaudited interim condensed consolidated financial statements have
been prepared without audit pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted, pursuant to such rules and
regulations. These unaudited financial statements should be read in
conjunction with the audited financial statements and notes thereto of the
Company included in the Company's Annual Report on Form 10-KSB for the year
ended June 30, 2004. In the opinion of Management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of financial position, results of operations and cash flows for the
interim periods presented have been included. Operating results for the interim
periods are not necessarily indicative of the results that may be expected for
the respective full year.

Princeton
Ventures, Inc. (the "Company") was incorporated in the State of Nevada on May
10, 2001. The Company had not commenced operations. On May 30, 2003, the Company
exchanged 37,944,922 shares of its common stock for all of the issued and
outstanding shares of Aero Marine Engine Corp. ("Aero"). Aero was formed on
December 30, 2002. Aero had no operations and was formed to acquire the assets
of Dyna-Cam Engine Corporation. The Company changed its name from Princeton
Ventures, Inc. to Aero Marine Engine, Inc.

At the
time that the transaction was agreed to, the Company had 20,337,860 common
shares issued and outstanding. In contemplation of the transaction with Aero,
the Company's two primary shareholders cancelled 9,337,860 shares of the
Company's common stock held by them, leaving 11,000,000 shares issued and
outstanding. As a result of the acquisition of Aero, there were 48,944,922
common shares outstanding, and the former Aero stockholders held approximately
78% of the Company's voting stock. For financial accounting purposes, the
acquisition was a reverse acquisition of the Company by Aero, under the purchase
method of accounting, and was treated as a recapitalization with Aero as the
acquirer. Accordingly, the historical financial statements have been restated
after giving effect to the May 30, 2003, acquisition of the Company. The
financial statements have been prepared to give retroactive effect to December
30, 2002, the date of inception of Aero, of the reverse acquisition completed on
May 30, 2003, and represent the operations of Aero. Consistent with reverse
acquisition accounting: (i) all of Aero's assets, liabilities, and accumulated
deficit, are reflected at their combined historical cost (as the accounting
acquirer) and (ii) the preexisting outstanding shares of the Company (the
accounting acquiree) are reflected at their net asset value as if issued on May
30, 2003.



F -
4
***Table of Contents***

1.
ORGANIZATION AND BASIS OF PRESENTATION (CONTINUED)

Additionally,
on June 30, 2003, the Company acquired the operating assets of Dyna-Cam Engine
Corp. ("Dyna-Cam"). Dyna-Cam was a development stage enterprise developing a
unique, axial cam-drive, free piston, internal combustion engine. Dyna-Cam
intended to produce and sell the engine primarily for aircraft and marine
applications. Dyna-Cam had not generated significant revenues at the time of the
Company's acquisition.

The
accompanying financial statements represent the consolidated financial position
and results of operations of the Company and include the accounts and results of
operations of the Company and Aero, its wholly owned subsidiary. The purchase of
the operating assets of Dyna-Cam occurred on June 30, 2003. The consolidated
entity is considered a development stage enterprise as of March 31, 2005.

The
accompanying condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the normal
course of business. The Company faces many operating and industry challenges.
The Company intends to do business in a highly competitive industry. Future
operating losses for the Company are anticipated and the proposed plan of
operations, even if successful, may not result in cash flow sufficient to
finance the initiation and continued expansion of its business. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. Realization of assets is dependent upon continued operations of the
Company, which in turn is dependent upon management's plans to meet its
financing requirements, as discussed below, and the success of its future
operations. The condensed consolidated financial statements do not include any
adjustments that might result from this uncertainty.

In the
nine months ended March 31, 2005, shareholders of the Company have advanced a
net of $301,941 to assist in funding the operations.

The
Company has received financing subsequent to the reporting period, but the
Company still requires additional capital to implement its business plan. There
can be no assurance that any new capital would be available to the Company or
that adequate funds for the Company's operations, whether from the Company's
revenues, financial markets, or other arrangements will be available when needed
or on terms satisfactory to the Company. The failure of the Company to obtain
adequate additional financing will require the Company to delay, curtail or
scale back some or all of its research and development programs, sales,
marketing efforts and manufacturing operations.

F -
5
***Table of Contents***

2.   
 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash
includes all short-term highly liquid investments that are readily convertible
to known amounts of cash and have original maturities of three months or
less.

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

Property
and equipment is stated at cost less accumulated depreciation. Depreciation is
recorded on a straight-line basis over the estimated useful lives of the assets
ranging from three to seven years. The depreciation expense was $598 and $38,840
for the nine months ended March 31, 2005 and 2004. All remaining amounts had
been written off as of June 30, 2004. Depreciation for the nine months ended
March 31, 2005 is attributed to the new acquisitions made during the
period.

Income
taxes: The Company provides for income taxes based on the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, which, among other things, requires that recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date of
financial statements.

Financial
Instruments: Financial instruments consist primarily of cash and obligations
under accounts payable and accrued expenses. The carrying amounts of cash,
accounts payable and accrued expenses approximate fair value because of the
short maturity of those instruments. The Company has applied certain assumptions
in estimating these fair values. The use of different assumptions or
methodologies may have a material effect on the estimates of fair
values.

Net loss
per share is calculated using the weighted average number of shares of common
stock outstanding during the year as prescribed by the provisions of SFAS No.
128 Earnings Per Share.

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





F -
6
***Table of Contents***



2.   
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible
Assets: Intangible assets are comprised of goodwill and intellectual property.
These assets represent the value of the difference between the purchase price of
the acquired business and the fair value of the identifiable tangible net
assets. The Company adopted Statement of Financial Accounting Standard ("SFAS")
No. 142, Goodwill and Other Intangible Assets. The Company does not amortize
goodwill but rather annually evaluates the carrying value of goodwill for
impairment, in accordance with the provisions of SFAS No. 142. The finite life
of the intangibles will be amortized over 7 to 10 years. The Company realized
impairment of $812,500 during the nine months ended March 31, 2005.

Recently
Issued Accounting Pronouncements:

In July
2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated With Exit
or Disposal Activities". This Standard requires costs associated with exit or
disposal activities to be recognized when they are incurred. The requirements of
SFAS No. 146 apply prospectively after June 30, 2003, and as such, the Company
cannot reasonably estimate the impact of adopting these new rules.

In
October 2002, the FASB issued SFAS No. 147, "Acquisitions of Certain Financial
Institutions". SFAS No. 147 is effective October 1, 2002. The adoption of SFAS
No. 147 did not have a material effect on the Company's financial
statements.

In April
2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities," effective for contracts entered into or
modified after June 30, 2003. This amendment clarifies when a contract meets the
characteristics of a derivative, clarifies when a derivate contains a financing
component and amends certain other existing pronouncements. The Company believes
the adoption of SFAS No. 149 will not have a material effect on the Company's
financial statements.

In May
2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. SFAS No. 150 requires the classification as a
liability of any financial instruments with a mandatory redemption feature, an
obligation to repurchase equity shares, or a conditional obligation based on the
issuance of a variable number of its equity shares. The Company does not have
any authorized preferred shares or other financial instruments with a mandatory
redemption feature. The Company believes the adoption of SFAS No. 150 will not
have a material effect on the Company's financial statements.


F -
7
***Table of Contents***


2.SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently
Issued Accounting Pronouncements (Continued)


In
November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" (FIN 45). FIN 45 clarifies the
requirements for a guarantor's accounting for and disclosure of certain
guarantees issued and outstanding. The initial recognition and initial
measurement provisions of FIN 45 are applicable to guarantees issued or modified
after December 31, 2002. The disclosure requirements of FIN 45 are effective for
financial statements for periods ending after December 15, 2002. The adoption of
FIN 45 did not impact the Company's financial statements.

In
January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities" (FIN 46). FIN No. 46 states that companies that have exposure to the
economic risks and potential rewards from another entity's assets and activities
have a controlling financial interest in a variable interest entity and should
consolidate the entity, despite the absence of clear control through a voting
equity interest. The consolidation requirements apply to all variable interest
entities created after January 31, 2003. For variable interest entities that
existed prior to February 1, 2003, the consolidation requirements are effective
for annual or interim periods beginning after June 15, 2003. Disclosure of
significant variable interest entities is required in all financial statements
issued after January 31, 2003, regardless of when the variable interest was
created. The adoption of FIN No. 46 did not have a material impact on the
Company's financial statements.

Impairment
of long-lived assets are assessed by the Company for impairment whenever there
is an indication that the carrying amount of the asset may not be recoverable.
Recoverability of these assets is determined by comparing the forecasted
undiscounted cash flows generated by those assets to the assets' net carrying
value. The amount of impairment loss, if any, is measured as the difference
between the net book value of the assets and the estimated fair value of the
related assets. The Company revalued its long-term assets at September 30, 2004
and charged earnings $812,500.

On
December 16, 2004, the Financial Accounting Standards Board ("FASB") published
Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based
Payment ("SFAS 123R"). SFAS 123R requires that compensation cost related to
share-based payment transactions be recognized in the financial statements.
Share-based payment transactions within the scope of SFAS 123R include stock
options, restricted stock plans, performance-based awards, stock appreciation
rights, and employee share purchase plans. The provisions of SFAS 123R are
effective for small business issuers as of the first interim period that begins
after December 15, 2005. Accordingly, the Company will implement the revised
standard in the fourth quarter of fiscal year 2005. Currently, the Company
accounts for its share-based payment transactions under the provisions of APB
25, which does not necessarily require the recognition of compensation cost in
the financial statements. Management is assessing the implications of this
revised standard, which may materially impact the Company's results of
operations in the fourth quarter of fiscal year 2005 and
thereafter.


F -
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***Table of Contents***

3.STOCKHOLDERS'
EQUITY (DEFICIT)

The
Company has 100,000,000 shares of common stock authorized, par value $.001. As
of March 31, 2005, the Company has 28,399,166 shares of common stock issued and
outstanding.

The
Company issued 37,944,922 shares of its common stock in connection with the
acquisition of Aero Marine Engine Corp. Under reverse acquisition accounting,
these shares are reflected as issued on the date of inception and valued at the
book value of the net assets of as of the date of the transaction.

Aero was
incorporated in contemplation of the reverse acquisition of the Company as well
as the Dyna-Cam acquisition. A total of 38,944,922 common shares were issued in
the reverse merger transaction. However, 1,000,000 of those shares were
designated for the Dyna-Cam acquisition. (See Subsequent Event Footnote.) The
Company raised $1,218,598 as part of its initial capitalization. This capital
was raised among four individuals in contemplation of their receiving the
37,944,922 shares of the Company's common stock in connection with the
acquisition of Aero Marine Engine Corp. The value of the 1,000,000 shares issued
in connection with the Dyna-Cam purchase was determined to be $0.032 per share,
which is the price per share paid by the investors that acquired the 37,944,922
shares for cash.

In
connection with the reverse acquisition transaction with Aero, the Company's two
controlling shareholders at that time cancelled 9,337,860 shares of common stock
held by them. Upon completion of this cancellation, the Company had 11,000,000
shares of common stock remaining outstanding prior to the reverse acquisition
transaction.

On
January 22, 2004, the Company issued 5,000,000 shares of its common stock in
exchange for consulting services rendered to the company pursuant to an S-8
registration statement. These shares were valued at $3,350,000 ($.67 per share),
the fair value of the stock at the date of issuance.

On July
30, 2004 with an effective date of August 9, 2004 the Board of Directors adopted
a resolution authorizing and approving a 100 to 1 reverse stock split and the
new trading symbol of the company is AOME.

On August
24, 2004 International Equity Partners, SA purchased Transporter, Inc., a
company developing video conferencing software allowing the creation of virtual
private networks that are PC based, have no need to use servers or special
equipment, and operate on any broadband connection. The purchase price was
$3,000,000, $100,000 of which is payable within 60 days of the date of the
Exclusive Purchase Agreement with the balance payable in intervals over 24
months. In addition, the former stockholders of Transporter, Inc. are to be
issued 1,000,000 shares of the common stock of the Company.

At the
end of a two-year period the shares are guaranteed to be worth at least $2.00
per share, and, if worth less, additional shares of stock will then be issued to
make up the difference. The value of the shares is $50,000 ($.05 per
share).



F -
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***Table of Contents***

3.STOCKHOLDERS'
EQUITY (DEFICIT) (CONTINUED)

On August
24, 2004 the Company acquired through an assignment by International Equity
Partners, SA all rights, title, and interest in the aforesaid Exclusive Purchase
Agreement in exchange for 25,000,000 shares of common stock of the Registrant.
All certificates issued will bear the appropriate 2-year restrictive legend. The
value of the issuance is $812,500, which was the fair value of the stock at the
date the transaction was negotiated.

On August
25, 2004 the Company entered into a Consulting Fee Agreement with Carlyle
Financial Consulting Group, which will continue to provide consulting services
for all of the Company’s businesses and will also continue to coordinate
prospective acquisitions in European countries and the Arabian Gulf.  The
consulting fee was negotiated for 1,400,000 shares of common stock, which the
Company has registered with the Securities and Exchange Commission on Form S-8
Registration Statement under the Securities Act of 1933.

On
September 9, 2004 the Company issued 200,000 shares of common stock of the
Company in exchange for legal and professional services rendered and to be
rendered.

On
November 8, 2004 the Company issued 157,788 shares of common stock of the
Company in exchange for consulting services rendered.

On
January 3, 2005 the Company issued 100,000 shares of common stock with a par
value of $.001 for $100 cash.

The
Company, at March 31, 2005, has 100,000,000 shares of preferred stock authorized
and no shares issued and outstanding.

4.RELATED
PARTY TRANSACTIONS

Certain
shareholders of the Company have advanced funds to the Company to cover cash
flow deficiencies. During the nine months ended March 31, 2005, these
shareholders advanced a net of $301,941 to the Company. The advances have no
stated repayment terms. The advances will bear interest at the Federal Reserve
prime rate plus 1.25% and interest will be payable annually. In addition, an
affiliated entity is providing office space to the Company at no charge, and is
providing funds for payroll, moving and other general expenses. As of March 31,
2005, the Company incurred and accrued $311,339 in liabilities to this entity.
The advances and funding are based on verbal commitments with no guarantees of
future advances or funding.



F -
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***Table of Contents***



5.GOING
CONCERN UNCERTAINTY

As shown
in the accompanying financial statements, as is typical of companies going
through the development stage, the Company incurred net losses for the nine
months ended March 31, 2005 and 2004, and since inception. 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. This raises substantial doubt
about the Company’s ability to continue as a going concern.

Management
believes that the Company’s capital requirements will depend on many factors
including the success of the Company’s product development efforts.

The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.

6.COMMITTMENT

The
Company is a party to a lawsuit involving a past due claim. This amount has been
included in its accounts payable at March 31, 2005, and the Company plans on
making full payment on the outstanding liability.

On August
24 2004 the Company entered into a Joint Venture Agreement with Adaptive
Propulsion Systems, LLC (“Adaptive”), a wholly owned subsidiary of Tactronics.
Adaptive will provide 100% of the capital and labor to build military grade
engines based on the Registrant’s Dyna-Cam engine design. Adaptive will pay the
Company a 20% gross royalty on all orders of the engines sold to the United
States Government. The Company will have the rest of the world military market
and all civilian commercial applications, and the Company will pay a five (5%)
percent royalty on such orders to Adaptive.

7.PROVISION
FOR INCOME TAXES

Deferred
income taxes will be determined using the liability method for the temporary
differences between the financial reporting basis and income tax basis of the
Company’s assets and liabilities. Deferred income taxes will be measured based
on the tax rates expected to be in effect when the temporary differences are
included in the Company’s tax return. Deferred tax assets and liabilities are
recognized based on anticipated future tax consequences attributable to
differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases.


F -
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***Table of Contents***



7.PROVISION
FOR INCOME TAXES (CONTINUED)


At March
31, 2005 and 2004, deferred tax assets consist of the following:

20052004
Deferred
Tax
Assets                           
$2,177,692                          
$1,384,492
Less:
valuation
allowance(2,177,692)(1,384,492)
$      -0-$      -0-
========                          ========

At March
31, 2005 and 2004, the Company had federal net operating loss carry forwards in
the approximate amounts of $6,599,066 and $4,195,430 respectively available to
offset future taxable income through 2021. The Company established valuation
allowances equal to the full amount of the deferred tax assets due to the
uncertainty of the utilization of the operating losses in future
periods.


****








F -
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****


****


**Item 2.    Plan of
Operation**





**Forward-Looking
Statements**





Historical
results and trends should not be taken as indicative of future operations.
Management’s statements contained in this report that are not historical facts
are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Actual results may differ materially from those
included in the forward-looking statements. The Company intends such
forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995, and is including this statement for purposes of complying with
those safe-harbor provisions. Forward-looking statements, which are based on
certain assumptions and describe future plans, strategies and expectations of
the Company, are generally identifiable by use of the words “believe,”
“expect,” “intend,” “anticipate,” “estimate,” “project,” “prospects,” or similar
expressions. The Company’s ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have a
material adverse affect on the operations and future prospects of the Company on
a consolidated basis include, but are not limited to: changes in economic
conditions generally and the engine and turbine industry , legislative/
regulatory changes, availability of capital, interest rates, competition, and
generally accepted accounting principles. These risks and uncertainties should
be considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company’s financial results, is included herein and in the Company’s other
filings with the Securities and Exchange Commission.





**Discussion
of Business**





We were
incorporated in the state of Nevada on May 10, 2001.




On June
30, 2003, we acquired the operating assets of Dyna-Cam Engine Corp.
("Dyna-Cam").  Dyna-Cam was a development stage company that possessed the
intellectual property rights for a unique, axial cam-drive, free piston,
internal combustion engine.  We acquired the assets of Dyna-Cam with the
intention to further develop, produce, and sell this engine primarily for
aircraft and marine applications. As a result of insufficient capital, we never
were able to commence operations.




During
the reporting period on January 6, 2005, prior management resigned and appointed
new management. On this date, Dr. Raymond Brouzes became our chief executive
officer and was appointed as a member of our board of directors. Samuel J.
Higgins became our secretary and treasurer and was appointed as a member of our
board of directors. Benjamin Langford was also appointed to serve as members of
our board of directors.




Following
this change in management, we abandoned our plans to utilize the engine as
designed by Dyna-Cam Engine Corp. We identified an engine with technologies that
incorporate significantly enhanced performance characteristics and new design
features that make pursuing the development, manufacture, and sale of this
engine more advantageous. This engine was designed utilizing the concepts of the
original Axial Vector engine. Our efforts currently have been devoted to further
developing and testing the performance of this engine.







4
 ***Table of Contents***




**Product
Research and Development**




**Internal
Combustion Engine**




Joint
Venture Agreement with Adaptive Propulsion Systems, LLC




To assist
us with the testing of the engine and in-house trails, we entered into a joint
venture agreement (“Agreement”) with Adaptive Propulsion Systems, LLC
(“Adaptive”). Adaptive is a subsidiary of Tactronics, Inc. Under the terms of
the Agreement, Adaptive can utilize its expertise to modify the engine; however,
we will have all rights to any patentable technology that emerges. The term of
this agreement is 5 years unless revised by joint agreement of the parties.




Once the
testing process is complete and the product is available for sale, Adaptive will
provide all of the capital and labor required to build military grade engines
using our Axial Vector design. The Agreement grants Adaptive the exclusive right
to sell the Axial Vector internal combustion engine to the United States
military and all militaries of NATO countries. Adaptive will be obligated to pay
us a royalty of 20% of the gross sales. For all commercial non-military sales of
internal combustion engines we make utilizing the Axial Vector design, we will
pay Adaptive a royalty of 5% of gross sales.




During
the testing with Adaptive, significant results affecting the design and
composition of the Axial Vector engine emerged. Through this testing, we were
able to construct the engine with different alloys that reduced the weight of
our 125 horsepower Axial Vector engine from 98 lbs. to 65 lbs. Another
significant breakthrough during our testing revealed that the Axial Vector
engine was capable of maintaining its performance level while adjusting to
various fuels and a different mixture of fuels. The
design of the Axial Vector engine offers significantly reduced weight, size,
emissions and maintenance while gaining vast increases in horsepower, torque and
fuel economy.




Further
testing on our Axial Vector design still remains. We anticipate that we will
commence endurance trials before the end of our fiscal year end on June 30,
2005. Field testing of the engine to ATVs and other specialty vehicles is
expected to commence before the end of our fiscal year end on June 30, 2005. Our
management anticipates that we will complete the development and testing of our
Axial Vector engine design in military grade engines before the end of the
current fiscal year and at that time the product will be available for testing
by outside parties.




In the
event that the Axial Vector engine proves suitable for military and commercial
use, we plan over the next tweleve months to license our Axial Vector engine for
a wide variety of applications presently performed by the conventional internal
combustion engine. Specifically, we intend to license the manufacturing rights
to our technology for specific applications in defined geographical
areas.




**Power
Generators**




Power
Generation Agreement




We intend
to build upon the progress made testing an internal combustion engine utilizing
the Axial Vector design and incorporate this design into the development and
manufacture of power generators for military, commercial, and residential uses.
We entered into an agreement with Adaptive to assist us in the design,
development, and manufacture power generators for a family of seven generators ranging
from 7.5 kilowatt to 1 megawatt contingent upon our ability to secure financing. We will pay Adaptive $3,171,000
to complete the development of our proposed power generator product line.




Under the
terms of this agreement, Adaptive can utilize its expertise to modify the power
generator; however, we will have all rights to any patentable technology that
emerges. Adaptive will be obligated to pay us a royalty of 20% of the gross
sales to the military. For all commercial non-military sales of








5
 ***Table of Contents***








power
generator made utilizing the Axial Vector design, we will pay Adaptive a royalty
of 5% of gross sales. The term of this agreement is 30 years unless revised by
joint agreement of the parties.




Subsequent
to the reporting period on April 25, 2005, we completed a Financing Agreement in
the amount of $4,000,000 with Alliance Capital Management. Under the terms of
this agreement, we will receive $400,000 dollars each month for ten months
commencing in May of 2005. We received the first payment and it was converted
into common stock of the company at a rate of $2.00 per share for a total of
200,000 shares of common stock. The amount of shares issued in the remaining
nine issuances of common stock shall be determined based on 75% of the previous
ten day trading average of the company during each of the nine successive
months. This Financing Agreement satisfies the contingency set forth in our
agreement with Adaptive.




We intend
to commence the development process for these power generators before the end of
our fiscal year end on June 30, 2005. Under the terms of this agreement,
Adaptive is obligated to develop our initial power generator product line within
the next 300 days.




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




All of
our research, testing, and development are handling by outside parties. If we
are successful in developing products for military and commercial use, we intend
to license the manufacturing rights. As a result, we do not anticipate any
purchase or sale of plant and significant equipment over the next twelve
months.





**Employees**





We have
no employees other than our officers Dr. Raymond Brouzes and Samuel J. Higgins.
All of our research, development, and product testing is currently being
conducted by Adaptive. We intend to license the manufacturing rights to our
technology for specific applications. As a result, we do not anticipate any
significant changes in our number of employees over the next twelve
months.





**Results
of Operations for Period Ending March 31, 2005**





We did
not earn any revenues for the three or nine months ended March 31, 2005 or 2004.
We do not anticipate earning revenues until such time that the Axial Vector
engine is developed and available for military and commercial use.





We
incurred operating expenses in the amount of $134,418 for the three months ended
March 31, 2005, compared to operating expenses of $3,630,217 for the three
months ended March 31, 2004. We incurred operating expenses in the amount of
$349,267 for the nine months ended March 31, 2005, compared to operating
expenses of $4,047,208 for the nine months ended March 31, 2004. Our operating
expenses for the three months ended March 31, 2005 were primarily attributable
to professional and consulting fees. The significant decrease in our expenses is
primarily attributable to lower expenditures for professional and consulting
fees. We recorded $3,354,145 in consulting fees for the three month period ended
March 31, 2004. During the three month period ended March 31, 2004, we issued
5,000,000 shares of our common stock for consulting services rendered and these
shares were valued at market.





We have
incurred a net loss of $136,454 for the three month period ended March 31, 2005,
compared to $3,635,657 for the three month period ended March 31, 2004. We
incurred a net loss of $1,167,154 for the nine month period ended March 31,
2005, compared to $4,058,148 for the nine month period ended March 31, 2004. Our
losses for the three and nine months ended March 31, 2005 and 2004 are entirely
attributable to operating expenses and the impairment of goodwill for the nine
months ended March 31, 2005.





6
 ***Table of Contents***





**Liquidity
and Capital Resources**





As of
March 31, 2005, we had current assets in the amount of $56,064 and current
liabilities in the amount of $2,170,403. We had a working capital deficit of
$2,114,339 on March 31, 2005. As a result, we had insufficient capital to
implement our business plan.





We have
not attained profitable operations and are dependent upon obtaining financing to
continue operations. We can provide no assurance that we will receive adequate
financing. For these reasons, our auditors have stated in their report that they
have substantial doubt about our ability to continue as a going concern.





The
completion of our business plan over the next twelve months is contingent upon
us obtaining $10,000,000 in additional financing. Subsequent to the reporting
period, we completed a private equity offering to one investor and received
proceeds of $900,000. Subsequent to the reporting period on April 25, 2005, we
completed a Financing Agreement in the amount of $4,000,000 with Alliance
Capital Management. Under the terms of this agreement, we will receive $400,000
dollars each month for ten months commencing in May of 2005. On May 18, 2005, we
received $600,000 from International Equity Partners S.A. payable on demand
together with interest of 5% per annum. An officer and director of our company,
Samuel J. Higgins, is also the managing director of International Equity
Partners S.A.





Our
management is seeking to acquire $6,000,000 in additional financing. At the
present time, we have entered discussions with potential investors and do not
have any agreements finalized at the present time. We can provide no assurance
that we will receive the additional financing we are seeking.





**Going
Concern**





Our
independent auditors have stated in their Auditor’s Report included in our
annual report on Form 10-KSB that we have incurred operating losses, accumulated
deficit, and negative cash flow from operations. From our inception to March 31,
2005, we incurred cumulative losses of approximately $6,599,066.





We are
currently in the development stage, and there is no guarantee whether we will be
able to generate enough revenue and/or raise capital to support current
operations and generate anticipated sales. This raises substantial doubt about
our ability to continue as a going concern.





Management
believes that the capital requirements will depend on many factors including the
success of our product development efforts.





The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.





**Off
Balance Sheet Arrangements**





As of
March 31, 2005, there were no off balance sheet arrangements.








7
 ***Table of Contents***





**Item 3.Controls and Procedures**





We
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of March 31, 2005. This evaluation was carried out
under the supervision and with the participation of our Chief Executive Officer
and Chief Financial Officer, Dr. Raymond Brouzes. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective. There have been no significant
changes in our internal controls or in other factors, which could significantly
affect internal controls subsequent to the date we carried out our
evaluation.





Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Exchange Act are
accumulated and communicated to management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.





Limitations
on the Effectiveness of Internal Controls





Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. An internal control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the internal control. The design of
any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Over time, control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedures may deteriorate.





8
 ***Table of Contents***




**PART
II - Other Information**





**Item 1. Legal
Proceedings**





Our
former attorney, David M Loev, brought an action against us in Law Number 3,
Harris County, Texas, Cause No. 819,756 for unpaid attorney’s fees. On November
15, 2004, a formal judgment was entered against us. We have plans on making full
payment on the outstanding judgment.




In
October 2004, we filed a complaint against Patricia Wilks and Dennis Palmer in
the United States District Court, Central District of California.  Our
complaint states causes of action for declaratory judgment regarding
intellectual property rights, common law misrepresentation, intentional
interference with contractual relations and unfair competition, seeking relief
declaratory and injunctive relief, damages, costs and attorneys’ fees.  The
defendants have generally denied our substantive allegations and have
counterclaimed for fraud and breach of contract, seeking compensatory, special
and punitive damages.  We have generally denied these allegations. 
The issues in dispute include the enforceability of, and the rights and
obligations of the parties pursuant to, written agreements that resulted in the
transfer of certain assets and intellectual property to us, including the
Dyna-Cam engine.  Defendants have sought to avoid the operation of those
agreements by alleging both that they were fraudulently induced into executing
the agreements and that we have breached the terms thereof.  The case is in
discovery.  We intend to aggressively pursue our claims and defend the
Defendants’ counterclaims.




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





Subsequent
to the reporting period, we issued and sold unregistered equity securities and
these sales were disclosed in a Current Report on Form 8-K filed on May 2, 2005.





The
information set forth below discloses all issuances of our equity securities
without registration under the Securities Act of 1933 during the reporting
period that have not been previously disclosed in a Current Report on Form 8-K.





On
January 3, 2005, we issued 100,000 shares of common stock, par value $0.001. The
total amount we received from this offering was $100. No commissions were
paid.





**Item 3.    Defaults upon Senior
Securities**





None





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





No
matters have been submitted to our security holders for a vote, through the
solicitation of proxies or otherwise, during the first quarter of the fiscal
year ending March 31, 2005.





**Item 5.  Other
Information**





None







9
 ***Table of Contents***





**Item 6.    Exhibits**





**Exhibit
      Number**
    **Description
      of Exhibit****10.1**
    Joint Venture Agreement with Adaptive Propulsion Systems,
      LLC**10.2**
    Contract for Production of Generator Systems with
      Adaptive Propulsion Systems, LLC**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 pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002











10
 ***Table of Contents***








**SIGNATURES**





In
accordance with the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.





**AERO
      MARINE ENGINE, INC.**Date:
    May
      23, 2005By:/s/  Raymond
      Brouzes
      Dr.
      Raymond Brouzes
      Title:**Chief
      Executive Officer and Chief Financial Officer**














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