UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                   FORM 10-QSB
                                   (Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
             1934 For the quarterly period ended December 31, 2003

       [ ] Transition report under Section 13 or 15(d) of the Exchange Act

             For the transition period from __________ to __________

                         Commission file number 0-25177

                       Advanced Engine Technologies, Inc.

        (Exact Name of Small Business Issuer as Specified in Its Charter)



                 Colorado                               84-1358194
      (State or Other Jurisdiction of                (I.R.S. Employer
       Incorporation or Organization)               Identification No.)


          11150 W. Olympic Boulevard, Suite 1050, Los Angeles, CA 90064
                    (Address of Principal Executive Offices)
                                 (310) 914-9599
                (Issuer's Telephone Number, Including Area Code)
              (Former Name, Former Address and Former Fiscal Year,
                          if Changed Since Last Report)

                     APPLICABLE ONLY TO ISSUERS INVOLVED IN
                        BANKRUPTCY PROCEEDINGS DURING THE
                              PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.

Yes __ No __

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 33,815,000 shares of common stock,
$0.001 par value per share, as of February 11, 2004.

            Transition Small Business Disclosure Format (check one):

Yes __ No _X_

<PAGE>
                                     Part I
                              FINANCIAL INFORMATION


Item 1. Financial Statements.


                                        2
<PAGE>
                       ADVANCED ENGINE TECHNOLOGIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                                    CONTENTS

                                                      Page
FINANCIAL STATEMENTS


Balance Sheets                                          4
Statements of Operations                                5
Statements of Cash Flows                              6-7
Notes to Financial Statements                         8-12



                                        3
<PAGE>
ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31, 2003 (unaudited) and June 30, 2003

<TABLE>
<CAPTION>
                                                                                 December 31,      June 30,
ASSETS                                                                               2003            2003
                                                                                 ------------    ------------
CURRENT ASSETS:                                                                  (unaudited)
<S>                                                                              <C>             <C>
           Cash and equivalents                                                  $     93,879    $     58,962
           Other current assets                                                        93,518          34,676
                                                                                 ------------    ------------
                        Total current assets                                          187,397          93,638
                                                                                 ------------    ------------
           Due from related party                                                      21,000          21,000
           Property and equipment, net                                                160,750          71,954
           Patents, net of accumulated amortization of $783,293 as of
                December 31, 2003 (unaudited) and $658,016 as of June 30, 2003        991,156       1,044,097
                                                                                 ------------    ------------
                        Total assets                                             $  1,360,303    $  1,230,689
                                                                                 ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

           Accounts payable and accrued expenses                                 $     87,425    $    111,473
                                                                                 ------------    ------------
                        Total current liabilities                                      87,425         111,473
                                                                                 ------------    ------------

STOCKHOLDERS' EQUITY
           Common stock-50,000,000 shares authorized,
           33,790,000 issued and outstanding; $.001 par value
             as of December 31, 2003 (unaudited),  33,680,000 issued
              and outstanding ; $.001 par value as of June 30, 2003                    33,790          33,680
           Additional paid-in capital                                              20,869,825      20,003,935
           Committed common stock under grant agreement                                  --           948,603
           Subscription receivable                                                 (6,653,000)     (7,465,000)
           Shares receivable under stock repurchase agreement                            --           (90,000)
           Deferred costs under grant agreement                                      (387,000)       (852,000)
           Deficit accumulated during the development stage                       (12,590,737)    (11,460,002)
                                                                                 ------------    ------------
                        Total stockholders' equity                                  1,272,878       1,119,216
                                                                                 ------------    ------------
Total liabilities and stockholders' equity                                       $  1,360,303    $  1,230,689
                                                                                 ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>
ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended December 31, 2003 and 2002 (unaudited)
and for the Period From September 23, 1996 (Inception) to December 31, 2003
(unaudited)

<TABLE>
<CAPTION>
                                                 For the                        For the
                                            Three Months Ended              Six Months Ended           September 23,
                                               December 31,                    December 31,                1996
                                            ------------------              ----------------            (Inception)
                                                                                                          Through
                                            2003           2002            2003            2002       December 31, 2003
                                        -----------    -----------     -----------     -----------       ----------
                                        (unaudited)    (unaudited)     (unaudited)     (unaudited)       (unaudited)
<S>                                    <C>             <C>             <C>             <C>             <C>
Expenses:
       Operating                       $    202,421    $    250,501    $    409,213    $    502,326    $  4,864,665
       Research and development             133,681         124,856         257,293         261,469       3,607,905
       Stock grant                          232,500         232,500         465,000         465,000       4,263,000
       Write-off of patent                     --              --              --              --            23,332
                                       ------------    ------------    ------------    ------------    ------------
Total expenses                              568,602         607,857       1,131,506       1,228,795      12,758,902
                                       ------------    ------------    ------------    ------------    ------------

Loss from operations                       (568,602)       (607,857)     (1,131,506)     (1,228,795)    (12,758,902)

Interest income                                 415             578             770             964         168,165
                                       ------------    ------------    ------------    ------------    ------------

Net loss                               $   (568,187)   $   (607,279)   $ (1,130,736)   $ (1,227,831)   $(12,590,737)
                                       ============    ============    ============    ============    ============

Basic and diluted net loss per share   $      (0.02)   $      (0.02)   $      (0.03)   $      (0.04)
                                       ============    ============    ============    ============

Weighted average number of common
  shares outstanding                     33,790,000      33,680,000      33,712,065      33,593,056
                                       ============    ============    ============    ============
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>
ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Six Months Ended December 31, 2003 and 2002 (unaudited)
and for the Period From September 23, 1996 (Inception)
to December 31, 2003 (unaudited)

<TABLE>
<CAPTION>
                                                                            For the               September 23,
                                                                       Six Months Ended               1996
                                                                         December 31,              (Inception)
                                                                       ----------------              Through
                                                                      2003           2002       December 31, 2003
                                                                   -----------    -----------   -----------------
                                                                   (unaudited)    (unaudited)     (unaudited)
<S>                                                              <C>             <C>             <C>
Cash Flow from operating activities:
              Net loss                                           $ (1,130,736)   $ (1,227,831)   $(12,590,737)
Adjustments to
  reconcile net loss to
   net cash used in operating activities
              Stock grant expense                                     465,000         465,000       4,263,000
              Depreciation and amortization                           117,058         101,314         944,484
              Issuance of common stock for
                assets and services                                     7,397          51,367         791,620
              Committed common stock for services                        --            18,604            --
              Stock options issued for services                          --              --           551,995
              Write off of patents                                       --              --            23,332
(Increase) decrease in
        Due from related party                                           --              --           (21,000)
        Prepaid expenses                                              (58,842)        (57,916)        (93,518)

Increase in
              Accounts payable and accrued expenses                   (24,048)         49,639          87,425
                                                                 ------------    ------------    ------------
               Net cash flows used in
                   operating activities                              (624,171)       (599,823)     (6,043,399)
                                                                 ------------    ------------    ------------
Cash flows from investing activities:
              Acquisition of patents                                  (46,335)        (37,839)     (1,818,194)
              Purchase of property and equipment                     (106,577)         (3,627)       (301,528)
                                                                 ------------    ------------    ------------
               Net cash flows used in
                   investing activities                              (152,912)        (41,466)     (2,119,722)
                                                                 ------------    ------------    ------------
Cash flow from financing activities:
              Proceeds from note payable                                 --              --           500,000
              Proceeds from stock subscription receivable             812,000         400,000       3,347,000
              Repayment of notes payable                                 --              --          (500,000)
              Repurchase of common stock                                 --            (5,000)        (90,000)
              Proceeds from issuance of common stock                     --              --         5,000,000
                                                                 ------------    ------------    ------------
               Net cash flows provided by
                 financing activities                                 812,000         395,000       8,257,000
                                                                 ------------    ------------    ------------

               Net increase (decrease) in cash and equivalents         34,917        (246,289)         93,879

               Cash and equivalents, at beginning of period            58,962         270,730            --
                                                                 ------------    ------------    ------------

               Cash and equivalents, at end of period            $     93,879    $     24,441    $     93,879
                                                                 ============    ============    ============
</TABLE>

                                       6
<PAGE>
Supplemental Schedule of Non-Cash Investing and Financing Activities
--------------------------------------------------------------------

During the six months ended December 31, 2003 and 2002, the Company:
o    Issued 200,000 and 200,000 (unaudited) shares, respectively, of common
     stock to the University of California Riverside Foundation which had been
     included in committed common stock under grant agreement as of June 30,
     2003 and 2002, respectively.
o    Retired 180,000 shares (unaudited) of common stock valued at $90,000
     (unaudited) from shares received under a stock redemption agreement.

During the period from September 23, 1996 (inception) through December 31, 2003
the Company:
o    Issued 1,000,000 shares (unaudited) of common stock valued at $4,650,000
     (unaudited) to the University of California Riverside Foundation in
     connection with a stock grant agreement. Of the $4,650,000 (unaudited),
     $4,263,000 (unaudited) has been expensed on the statement of operations and
     $387,000 (unaudited) is included in deferred costs under grant agreement as
     of December 31, 2003.

o    Issued 21,080,000 (unaudited) shares of common stock for services and
     assets valued at $765,620 (unaudited).

o    Committed 61,534 (unaudited) shares of common stock valued at $18,604
     (unaudited) for services.

o    Issued 2,800,000 (unaudited) stock options valued at $551,995 (unaudited)
     for services.

o    Retired 180,000 shares (unaudited) of common stock valued at $90,000
     (unaudited) from shares received under a stock redemption agreement.

o    Issued 61,534 shares of common stock valued at $18,604 (unaudited) that was
     committed as of June 30, 2003.

The accompanying notes are an integral part of these financial statements.

                                        7
<PAGE>
Advanced Engine Technologies, Inc.
Notes to Financial Statements
December 31, 2003

NOTE 1 - ORGANIZATION AND LINE OF BUSINESS

Advanced Engine Technologies, Inc. (the "Company") was incorporated in Colorado
and commenced operations on September 23, 1996. The Company was formed to
develop and commercialize the OX2 internal combustion engine, a uniquely
designed engine. On October 18, 1996 the Company entered into an exclusive
sublicense agreement with OX2 Engine (Distribution) Limited, a company
incorporated under the laws of the Republic of Vanuatu ("OX2 LTD"), pursuant to
which the Company acquired the right to manufacture, distribute and market the
OX2 engine in the North American Free Trade Agreement countries (presently the
United States, Canada and Mexico). Pursuant to the terms of the sublicense
agreement, the Company issued 20,000,000 shares of its common stock to OX2 LTD
and agreed to pay a 15% royalty on the gross proceeds generated from actual
sales of the OX2 engine. In addition, the sublicense agreement provided that the
Company would issue an additional 19,000,000 shares of common stock to OX2 LTD
upon completion of certain emissions testing. In December 1998, the parties
agreed to rescind the obligation of the Company to issue these additional
19,000,000 shares of common stock to OX2 LTD.

In May 1999, pursuant to a four-party agreement among the Company, OX2 LTD, OX2
Intellectual Property Inc. and Advanced Engine Technology PTY Ltd., the Company
acquired the worldwide patent rights for the OX2 engine for $1,500,000. This
agreement superseded and terminated the October 1996 sublicense agreement. The
Company has assumed responsibility for patent maintenance and for future
research and development on the OX2 engine.

On October 15, 2001, the Company entered into an agreement with OX2 LTD and the
inventor of the OX2 engine to provide research and development products and
services related to the OX2 engine (the "R and D Agreement"). OX2 LTD is
wholly-owned by the inventor of the OX2 engine. Research and development
activities include continued maintenance of the first and second performing test
engines as well as design and development of three additional OX2 test engines.
The agreement also calls for the design and manufacturing of new and advanced
components for the test engines. In addition, the Company has contracted with
the inventor of the OX2 engine to provide consulting services for the sum of
eighty thousand dollars ($80,000) per annum. For the three and six months ended
December 31, 2003 and 2002 and from September 23, 1996 (Inception) through
December 31, 2003, the Company paid $13,331; $33,331; $20,000; $40,000 and
$173,331, respectively, in connection with consulting services under this
agreement.

As of December 31, 2003, the Company's operations consisted of engineering,
testing, marketing and development of the OX2 combustion engine for commercial
applications and raising any necessary capital investments. Management does not
expect to generate significant sales revenue during the year ending June 30,
2004. Accordingly, planned principal operations have not commenced.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Unaudited Financial Information
---------------------------------------

The unaudited financial information furnished herein reflects all adjustments,
consisting only of normal recurring adjustments, which in the opinion of
management, are necessary to fairly state the Company's financial position, the
results of operations, and cash flows for the periods presented. The results of
operations for the three months and six months ended December 31, 2003 are not
necessarily indicative of results for the entire fiscal year ending June 30,
2004.

The information with respect to the three and six months ended December 31, 2003
and 2002 is unaudited.

                                        8
<PAGE>
Advanced Engine Technologies, Inc.
Notes to Financial Statements
December 31, 2003

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Development Stage Enterprise
----------------------------

The Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises". All losses accumulated since inception have been considered
as part of the Company's development stage activities.

Comprehensive Income
--------------------

The Company utilizes SFAS No. 130, "Reporting Comprehensive Income". This
statement establishes standards for reporting comprehensive income and its
components in a financial statement. Comprehensive income as defined includes
all changes in equity (net assets) during a period from non-owner sources.
Examples of items to be included in comprehensive income, which are excluded
from net income, include foreign currency translation adjustments and unrealized
gains and losses on available-for-sale securities. Comprehensive income is not
presented in the Company's financial statements since the Company did not have
any of the items of comprehensive income in any period presented.

Cash and Cash Equivalents
-------------------------

For purposes of the statements of cash flows, the Company considers all highly
liquid investments purchased with original maturity of three months or less to
be cash equivalents.

Property and Equipment
----------------------

Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over an estimated useful life of three to ten years.

Patent Rights
-------------

Patent rights are amortized on a straight-line basis over the remaining
estimated useful life of five to ten years. The Company continually reviews its
patent rights to assess recoverability from estimated future net cash flows. To
date, these reviews have not resulted in a reduction of these assets.

For the three and six months ended December 31, 2003 and 2002 and from the
period from September 23, 1996 (inception) through December 31, 2003, the
Company had the following patent activity, net of patent write-offs:

<TABLE>
<CAPTION>
                                                                                          Period from
                                                                                       September 23, 1996
                  For the three months ended         For the six months ended         (Inception) through
                         December 31,:                      December 31,                December 31, 2003
                  --------------------------         ------------------------         -------------------
                     2003            2002              2003            2002
<S>                <C>             <C>               <C>             <C>                  <C>
Additions          $26,652         $19,708           $46,335         $37,842              $1,774,449
                    ======          ======            ======         =======               =========
Amortization       $50,218         $43,850           $99,277         $89,553                $783,293
                    ======          ======            ======         =======               =========
</TABLE>

Impairment of Long-lived Assets
-------------------------------

The Company reviews long-lived assets for impairment whenever events or changes

                                       9
<PAGE>
Advanced Engine Technologies, Inc.
Notes to Financial Statements
December 31, 2003

in circumstances indicate that the carrying amount of an asset may not be
recoverable. If the sum of the expected future cash flows (undiscounted and
without interest charges) is less than the carrying amount of the asset, the
Company would recognize an impairment loss based on the estimated fair value of
the asset.

Concentration of Credit Risk
----------------------------
At December 31, 2003, a subscription receivable in the amount of $6,653,000
(unaudited) is due from one party.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation
------------------------

SFAS No. 123, "Accounting for Stock-based Compensation", establishes and
encourages the use of the fair value based method of accounting for stock-based
compensation arrangements under which compensation cost is determined using the
fair value of stock based compensation determined as of the date of grant and is
recognized over the periods in which the related services are rendered. The
statement also permits companies to elect to continue using the current implicit
value accounting method specified in Accounting Principles Bulletin ("APB")
Opinion No. 25, "Accounting for Stock issued to Employees", to account for
stock-based compensation issued to employees.

The Company has elected to use the intrinsic value based method and has
disclosed the pro forma effect of using the fair value based method to account
for its stock-based compensation.

Income Taxes
------------

The Company uses the asset and liability method of accounting for income taxes.
The asset and liability method accounts for deferred income taxes by applying
enacted statutory rates in effect for periods in which the difference between
the book value and the tax bases of assets and liabilities are scheduled to
reverse. The resulting deferred tax asset or liability is adjusted to reflect
changes in tax laws or rates. Because the Company has incurred losses from
operations, no benefit is realized for the tax effect of the net operating loss
carry forward and software development costs capitalized for tax purposes due to
the uncertainty of its realization.

Loss per Share
--------------

Basic loss per share is computed by dividing loss available to common
stockholders by the weighted-average number of common shares outstanding.
Diluted loss per share is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. The following potential
common shares have been excluded from the computation of diluted earnings per
share for the three and six months ended December 31, 2003 and 2002 due to being
anti-dilutive:
                                   2003               2002
                                 ----------        -----------
                                (unaudited)        (unaudited)
Stock Options                    7,675,000          7,675,000
                                 =========          =========

Because the Company has incurred net losses, basic and diluted loss per share
are the same.

Estimates
---------

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

                                       10
<PAGE>
Advanced Engine Technologies, Inc.
Notes to Financial Statements
December 31, 2003

NOTE 3--PROPERTY AND EQUIPMENT (unaudited)

Property and equipment at December 31, 2003 (unaudited) and June 30, 2003
consisted of the following:

                                     December 31,   June 30,
                                        2003          2003
                                     (unaudited)
                                     -----------   --------

Automobile                            $  10,000    $  10,000
Furniture                                 7,523        7,523
Software                                 25,568       24,906
Computer equipment                       50,488       49,576
Manufacturing equipment and tooling     207,946      102,943
                                      ---------    ---------
                                        301,525      194,948
Less: accumulated depreciation         (140,775)    (122,994)
                                      ---------    ---------

Total                                 $ 160,750    $  71,954
                                      =========    =========

Depreciation expense was $11,147 (unaudited) and $17,781 (unaudited) for the
three and six months ended December 31, 2003 compared to $5,833 (unaudited) and
$11,761 (unaudited) for the three and six months ended December 31, 2002,
respectively.

NOTE 4 - SHAREHOLDERS' EQUITY

Stock Grant Agreement
---------------------

In June 1999, the Company agreed to issue 1,000,000 shares of restricted common
stock to the University of California Riverside Foundation in five annual
installments of 200,000 shares each. The donated stock is to provide an
endowment for research funds for the College of Engineering Center for
Collaborative Research on the development of advanced engine technologies. For
financial statement presentation purposes, the stock under the grant agreement
is treated as committed stock until its issuance. The first, second, third,
fourth and fifth installments were issued in July 1999, July 2000, September
2001, September 2002 and August 2003, respectively.

Expense in the grant is being recognized ratably over a five-year period based
upon an estimated fair value at the date of the grant of $4.65 per share. This
estimate of its fair value is based upon the tracking price of the stock on the
grant date of $7.75 per share, less a 40% discount because the stock was
restricted, the Company's stock had a very low trading volume at the time of the
grant agreement, and the Company was still in the development stage. During the
period from September 23, 1996 (inception) to December 31, 2003, the Company
recognized total expense on the stock grant of $4,263,000 (unaudited), including
$232,500 and $465,000 (unaudited) for the three and six months ended December
31, 2003 and 2002, respectively.

In connection with the R & D Agreement described in Note 1, the Company had the
option to repurchase from Steven Charles Manthey, the Inventor, or his
affiliates, 240,000 shares of common stock of the Company at $2.00 per share.
The Company has allocated its $2.00 per share repurchase price as follows: $.50
per share for redemption of common shares and $1.50 per share as research and
development expense. The $.50 common share redemption price is based on the fair
market value of the common shares as of the date of the R & D Agreement. As of
September 30, 2003, the Company had repurchased 180,000 (unaudited) shares of
common stock under the R & D Agreement. The Company did not redeem any shares
for the three months and six months ended December 31, 2003. On August 12, 2003

                                       11
<PAGE>
Advanced Engine Technologies, Inc.
Notes to Financial Statements
December 31, 2003

stock certificates representing the 180,000 (unaudited) repurchased shares were
retired.

In September 2003, the company issued 90,000 shares to its directors for
services rendered and to be rendered. Of these 90,000 shares, 61,534 shares or
$18,603 were issued from committed common stock. The Company recorded
compensation expense of $4,674 (unaudited) and $7,397 (unaudited), respectively
for the six months ended December 31, 2003.

NOTE 5 - RELATED PARTY TRANSACTIONS

The Company incurred research and development costs and rent expense to
companies owned by its current President and director in the amount of $103,464
(unaudited) and $186,558 (unaudited), respectively for the three months and six
months ended December 31, 2003.

At December 31, 2003, the Company had an outstanding receivable from its
Secretary of $21,000 (unaudited) for reimbursement of remodeling costs on office
space that the Company and its Secretary share.

The Company shares office space with a legal corporation that is legal counsel
to the Company of which its Secretary is a principal. The Company incurred legal
fees, rent and other reimbursement costs of $20,246 (unaudited) and $38,322
(unaudited) for the three and six months ended December 31, 2003.

For the three and six months ended December 31, 2003 the Company paid a director
and $13,331 (unaudited) and $33,330 (unaudited), respectively, in connection
with consulting services (see Note 1).

See Note 1, for related party transactions in connection with a sublicense
agreement and a patent and license agreement.

See Note 4, for related party transactions in connection with the issuances of
common stock to directors for services rendered.

                                       12
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.

Cautionary Statement
--------------------

You should read the following discussion and analysis in conjunction with the
Financial Statements and related notes thereto contained elsewhere in this Form
10-QSB ("Report"). The information in this Report is not a complete description
of our business or the risks associated with an investment in our common stock.
We urge you to carefully review and consider the various disclosures made by us
in this Report and in our other reports filed with the SEC, including our Annual
Report on Securities and Exchange Commission ("SEC") Form 10-KSB for the year
ended June 30, 2003.

The section entitled "Risk Factors" set forth in this Report and similar
discussions in our Annual Report on Form 10-KSB for the year ended June 30, 2003
and in our other SEC filings, discuss some of the important risk factors that
may affect our business, results of operations and financial condition. You
should carefully consider those risks, in addition to the other information in
this Report and in our other filings with the SEC, before deciding to invest in
our company or to maintain or increase your investment.

This Report contains forward-looking statements. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "except," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict.

Therefore, our actual results could differ materially and adversely from those
expressed in any forward-looking statements as a result of various factors.
Moreover, neither we nor any other person assumes responsibility for the
accuracy and completeness of the forward-looking statements. We are under no
duty to update any of the forward-looking statements after the date of this
Report to conform such statements to actual results or to changes in our
expectations.

Overview
--------

Advanced Engine Technologies, Inc. ("we ", "us "or the "Company") was formed to
develop and commercialize the OX2 internal combustion engine, a uniquely
designed engine. Our focus is on the development and commercial introduction of
the OX2 engine and the subsequent licensing of the OX2 engine technology to
approved manufacturers.

We have been granted U.S. and Australian patents for an Axial Piston Rotary
Engine. In addition, we have patent registrations in countries throughout the
world which have either been granted or are pending.

Plan of Operation
-----------------

We plan to continue the research and development of our OX2 engine prototype
during the 2004 fiscal year. On October 15, 2001 we entered into an agreement
with OX2 Engine Development PTY, LTD, an Australian Company ("OX2 LTD"), and
Steven Charles Manthey, the inventor of the OX2 engine, to provide research and
development products and services related to the OX2 engine. OX2 LTD is
wholly-owned by Mr. Manthey. The agreement was amended in January 2002 and April
2002. Research and development activities under the agreement include continued
maintenance of the first and second OX2 Engine Prototypes as well as design and
development of three additional OX2 Engine Prototypes. In consideration for the
services provided by Mr. Manthey and OX2 under the agreement, we will repurchase
from Mr. Manthey, or his affiliates, 240,000 shares of Common Stock, at $2 per
share. We have allocated the $2 per share repurchase price as follows: $.50 per
share for the redemption of shares of Common Stock and $1.50 per share as
research and development expense. The $.50 common share redemption price is
based on the fair market value of the Common Stock as of the agreement date. In
addition, Mr. Manthey provides consulting services under the agreement for the
sum of $80,000 per annum. As of December 31, 2003, we have repurchased 180,000
shares of common stock for $360,000 under this agreement. No stock under this
agreement was repurchased for the three and six months ended December 31, 2003.
For the three and six months ended December 31, 2003 we paid $13,331 and
$33,331, respectively, in connection with consulting service under this
agreement.

We have an agreement with the University of California, Riverside ("UCR"), which
provides that it will continue to provide engine testing and related services to
the Company, with particular emphasis on testing related to emissions. These
services are being provided under the guidance of Dr. Joseph Norbeck (of the
CE-CERT program at UCR) and Dr. Roberta Nichols, one of our consultants. We are
also conducting research and development and testing activities in Gardena,
California.

We have spent $133,681 and $257,293, respectively, for the three and six months
ended December 31, 2003 and $124,856 and $261,469, respectively, for the three
and six months ended December 31, 2002 on research and development for the OX2
engine. For the period from September 23, 1996 (Inception) through December 31,
2003 we have spent $3,607,905 on research and development activities.

                                       13
<PAGE>
Assuming the successful completion of all necessary research and development
work, and assuming the tests of our OX2 Engine Prototypes (existing and future)
are successful, we will attempt to introduce the OX2 engine into the market.
Such marketing activities may include demonstrations to manufacturers of
products using internal combustion engines and the addition of joint venture
and/or strategic partners to assist in the marketing, development and commercial
application of the OX2 engine.

In the short term, our plans are to develop the OX2 engine for commercial
stationary generator applications, and in the longer term, we plan to develop
the engine for commercial, marine, aircraft and/or automotive applications.

We expect that our cash flow requirements to fund general operations in the
fiscal year ending June 30, 2004 will total approximately $1,500,000, including
outside consulting fees and expenditures for equipment. We expect to fund these
costs with our cash or cash equivalent reserves, which were $93,879 as of
December 31, 2003. The Company also has available a $6,653,000 stock
subscription receivable from the R.E. & M. Petersen Trust DTD 1/17/83 (the
"Petersen Trust") which may be drawn upon at the discretion of the Board of
Directors. The Petersen Trust has executed a promissory note and security
agreement for the sole purpose of paying down the stock subscription receivable
balance. The Board of Directors, at its discretion, may draw down upon the
secured promissory note at any time to further the research, development and/or
commercial application of the Company's engine(s). Our cost estimates do not
include provisions for any contingencies or unexpected expenses that may arise
or any unanticipated increases in costs.

Our net loss since inception (September 23, 1996) is $12,590,737. Our net loss
for the three and six months ended December 31, 2003 is $568,187 and $1,130,736,
respectively.

Currently, there are no signed contracts that will produce revenue, and we can
provide no assurance that management will be successful in negotiating any such
contracts.

Critical Accounting Policies

We believe that our accounting policy for long-lived assets, including patents,
is a critical accounting policy that significantly impacts our financial
statements. Our accounting policy of long-lived assets, including patents, is as
follows:

We assess the fair value and recoverability of our long-lived assets, including
patents, whenever events and circumstances indicate the carrying value of an
asset may not be recoverable from estimated future cash flows expected to result
from its use and eventual disposition. In doing so, we make assumptions and
estimates regarding future cash flows and other factors to make our
determination. The fair value of our long-lived assets and patents is dependent
upon the forecasted performance of our business, changes in the automotive
industries, and the overall economic environment. When we determine that the
carrying value of our long-lived assets may not be recoverable, we measure any
impairment based upon the excess of the carrying value that exceeds the
estimated fair value of the assets. As a result of these reviews, we have not
yet recognized any impairment losses as of December 31, 2003.

Risk Factors

o  You should carefully consider the following risks and the other information
   contained in this Report and in our other filings with the Securities and
   Exchange Commission before you decide to invest in us or to maintain or
   increase your investment. The risks and uncertainties described below are not
   the only ones facing us. Additional risks and uncertainties may also
   adversely impact and impair our business. If any of the following risks
   actually occur, our business, results of operations or financial condition
   would likely suffer. In such case, the trading price of our Common Stock
   could decline, and you may lose all or part of your investment.

o  There can be no assurance that we will be able to develop successfully the
   OX2 engine. No OX2 engines have been developed or manufactured for commercial
   production use, and no assurance can be given that the OX2 engine will be
   successfully developed or manufactured in a commercial application. Testing
   and development on the engine are still in progress. Until further testing
   and research and development have been completed, we will not have a finished
   product for introduction into the market. We do not have an estimated
   completion date for such testing and research and development. Furthermore,
   we cannot provide any assurance that we will be successful in the ultimate
   development of the OX2 engine for commercial applications.

o  A market for our OX2 engine may take longer to develop than anticipated or
   may never develop, which would adversely affect our revenues and
   profitability. Our OX2 engine represents an innovation in the industry for
   internal combustion engines. The size and nature of the internal combustion
   engine industry makes the introduction of changes to industry standards a
   complex promotional and marketing exercise. We cannot ensure that our
   targeted customers will purchase our engine. If the market for our engines
   fails to develop, or develops more slowly that anticipated, we may not be
   able to meet our expenses and may not achieve profitable results. In
   addition, we cannot provide any assurance that we will be successful with our
   marketing efforts or the development of future joint ventures or strategic
   partnerships.

                                       14
<PAGE>
o  Our cash or cash equivalents reserves may not be adequate to cover our costs
   of operations. To date, we have covered our operating losses by privately
   placing securities. We expect to fund our general operations and marketing
   activities for 2004 with our current cash and cash equivalents reserves,
   which were obtained from the sale of securities and were $93,879 as of
   December 31, 2003. We also have a $6,653,000 stock subscription receivable
   from the R.E.&M. Petersen Living Trust DTD 1/17/83 (the "Petersen Trust"),
   which may be drawn upon at the discretion of our Board of Directors. The
   Petersen Trust has executed a promissory note and security agreement for the
   sole purpose of paying down the stock subscription receivable balance.
   However, our cost estimates do not include provisions for any contingencies,
   unexpected expenses or increases in costs that may arise. If our cash and
   cash equivalent reserves are exhausted, we plan to request payments on the
   subscription receivable as funds are required for operations.

o  We may not be able to raise the capital we need. It is likely that we will
   need to raise additional capital at some point in the future. If additional
   funds are raised through the issuance of equity, our shareholders' ownership
   will be diluted. There can be no assurance that additional financing will be
   available on terms favorable to us or at all. If funds are not available or
   are not available on terms acceptable to us, we may not be able to continue
   the development of our product, respond to our competitors or continue our
   business.

o  Our business depends on the protection of our intellectual property and may
   suffer if we are unable to protect adequately our intellectual property.
   Currently, we have been granted one U.S. Patent and one Australian Patent for
   an Axial Piston Rotary Engine. We have registered these patents in many
   countries and have patent registrations pending in many other countries
   throughout the world. We believe that our ability to establish and maintain
   our position in the market depends on these patents. We cannot provide any
   assurance that our patents will not be invalidated, circumvented or
   challenged, that the rights granted under the patents will give us
   competitive advantages or that our patent registration applications will be
   granted. In the future, we may also have to enforce our patents and other
   intellectual property rights through litigation. Any such enforcement could
   also result in substantial costs and could materially affect our financial
   condition and our business.

o  If we are found to infringe on the intellectual property rights of others, we
   may not be able to continue the development and production of the OX2 engine,
   or we may have to enter into costly license or settlement agreements to be
   able to continue development and/or production. Third parties may allege
   infringement by us with respect to past, current or future intellectual
   property rights. Any claim of infringement, regardless of merit, could be
   costly and time-consuming and could require us to develop non-infringing
   technology or enter into royalty, licensing or settlement agreements. These
   agreements could be on terms unfavorable or unacceptable to us and could
   significantly harm the development of our products and, ultimately, our
   business.

o  Our business is dependent on our relationships with other parties. Research
   and development and testing of our engine is presently being carried out
   internally and in conjunction with Steven Charles Manthey, the inventor of
   the OX2 engine, and his companies. In addition, we have agreements with
   Carroll Shelby and his companies to assist in the further development,
   testing and promotion of our engine. Completion of such research, development
   and testing is essential to the success of our business. Until such research,
   development, and testing have been completed, we will not have a finished
   product to introduce to the market. Thus, if we are unable to maintain our
   relationships with Steven Charles Manthey and/or Carroll Shelby and their
   companies, our business may be adversely affected.

o  We have a history of losses. We have a history of operating losses and an
   accumulated deficit, as of December 31, 2003, of $12,590,737. Our ability to
   generate revenues and profits is subject to the risks and uncertainties
   encountered by development stage companies.

o  Our future revenues and profitability are unpredictable. We currently have no
   signed contracts that will produce revenue, and we do not have an estimate as
   to when we will be entering into such contracts. Furthermore, we cannot
   provide any assurance that management will be successful in negotiating such
   contracts.

o  Rapid technological changes could adversely affect our business. The market
   for internal combustion engines is characterized by rapidly changing
   technology, evolving industry standards and changing customer demands. Thus,
   if we are unable to adapt to rapidly changing technologies and to adapt our
   product to evolving industry standards, our business will be adversely
   affected.

o  Our Common Stock is not widely traded, which may result in illiquidity and
   increased volatility. Our Common Stock is not widely traded, and, as a
   result, the prices quoted for our stock may not reflect its fair market
   value. Because of the low volume of trading in our Common Stock, our
   shareholders may find it difficult to sell their shares.

o  Our principal shareholders can exercise significant control over us and could
   limit the ability of our other shareholders to influence the outcome of
   transactions requiring a shareholder vote. As of December 31, 2003
   approximately 90% of our outstanding Common Stock was owned by our executive
   officers, directors and principal shareholders. These shareholders will have
   the ability to exercise influence over all matters requiring approval by our
   shareholders, including the election of directors and approval of significant
   corporate transactions.
                                       15
<PAGE>
Item 3. Controls and Procedures.

Management, including the Company's principal executive officer and principal
financial officer, has evaluated, as of the end of the period covered by this
report, the effectiveness of the design and operation of the Company's
disclosure controls and procedures with respect to the information generated for
use in this report. Based upon, and as of the date of that evaluation, the
principal executive officer and principal financial officer concluded that the
disclosure controls and procedures were effective to provide reasonable
assurances that information required to be disclosed in the reports filed or
submitted under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.

In designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable, not absolute, assurance of achieving the
desired control objectives and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based upon the above evaluation, management believes that its
controls do provide such reasonable assurances.

There have been no changes in the Company's internal control over financial
reporting that occurred during the Company's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

                                       16
<PAGE>
                                     PART II
                                OTHER INFORMATION

Item 1.    Legal Proceedings.

None.

Item 2.    Changes in Securities and Use of Proceeds.

None.

Item 3.     Defaults Upon Senior Securities.

None.

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

On November 11, 2003, the annual meeting of shareholders was held. Shareholders
present in person or by proxy, representing 19,903,151 shares of common stock,
voted on the following matters:

1.  The shareholders elected the following four directors of the Company to hold
office until the next annual meeting of shareholders or until their successors
are elected and qualifies:

                            Number of Shares Cast        Number of Shares for
                                  in Favor             Which Authority Withheld
                            ---------------------      ------------------------

Noel Holmes                      19,897,321                    583,000
Steven Charles Manthey           19,897,321                    583,000
Alexandria Phillips              19,897,321                    583,000
Carroll Shelby                   19,897,321                    583,000

2.  The shareholders ratified the appointment of Singer Lewak Greenbaum &
Goldstein LLP as the Company's independent auditors for the year ended June 30,
2003, as follows:

Number of Shares                Number of Shares           Number of Shares
 Cast in Favor                    Cast Against                Abstaining
 -------------                    ------------                ----------

  19,888,761                          2,080                     12,310


Item 5.      Other Information.

None.

Item 6.     Exhibits and Reports on 8-K.

Exhibits
--------
Number  Description

  3.1   Certificate of Incorporation of the Registrant (incorporated by
        reference to Exhibit 3.1 to the Registrant's Registration Statement on
        Form 10-SB12G, filed on December 17, 1998).
  3.2   Form of Amended and Restated By-Laws of the Registrant (this is a
        compilation of the Registrant's By-Laws reflecting amendments made on
        December 7, 1999 and November 16, 2000) (incorporated by reference to
        Exhibit 3.2 to the Registrant's Report on Form 10-KSB for the fiscal
        year ended June 30, 2001).
 10.1   Cancellation of the issuance of 19,000,000 shares of the Registrant's
        Common Stock (incorporated by reference to Exhibit 10.2 to the
        Registrant's Report on Form 10-KSB for the fiscal year ended June 30,
        1999).
 10.2   Deed of Agreement Concerning the Patents, Licensing and Research and
        Development in Relation to the OX2 Engine, by and among the Registrant,
        Advanced Engine Technology Pty. Ltd. AN 063 092 759, OX2 Intellectual
        Property Inc., and OX2 Engine (Distribution) Limited, dated as of May
        12, 1999 (incorporated by reference to Exhibit 10.2 to the Registrant's
        Report on Form 10-KSB for the fiscal year ended June 30, 1999).
 10.3   Joint Venture Agreement by and between the Registrant and Carroll
        Shelby, dated as of July 15, 1998 (incorporated by reference to Exhibit
        10.1 to the Registrant's Registration Statement on Form 10-SB12G, filed
        on December 17, 1998).
 10.4   Agreement by and between the Registrant and Steven Charles Manthey,
        dated as of May 23, 2000 (incorporated by reference to Exhibit 10.4 to
        the Registrant's Report on Form 10-KSB for the fiscal year ended June
        30, 2000).
 10.5   Release Agreement by and among the Registrant, Advanced Engine
        Technology Pty. Ltd. and Steven Charles Manthey, dated as of May 23,
        2000 (incorporated by reference to Exhibit 10.5 to the Registrant's
        Report on Form 10-KSB for the fiscal year ended June 30, 2000).
 10.6   Agreement for Performance of Technology Development Services by
        Independent Contractors by and among the Registrant, Steven Charles
        Manthey and OX2 Engine Development PTY Limited, dated as of October 15,

<PAGE>
        2001 (incorporated by reference to Exhibit 10.6 to the Registrant's
        Report on Form 10-KSB for the fiscal year ended June 30, 2002).
10.7    First Amendment to Agreement for Performance of Technology Development
        Services by Independent Contractors by and among the Registrant, Steven
        Charles Manthey and OX2 Engine Development PTY Limited, dated as of
        January 24, 2002 (incorporated by reference to Exhibit 10.7 to the
        Registrant's Report on Form 10-KSB for the fiscal year ended June 30,
        2002).
10.8    Second Amendment to Agreement for Performance of Technology Development
        Services by Independent Contractors by and among the Registrant, Steven
        Charles Manthey and OX2 Engine Development PTY Limited, dated as of
        April 2002 (incorporated by reference to Exhibit 10.8 to the
        Registrant's Report on Form 10-KSB for the fiscal year ended June 30,
        2002).
10.9    Share Subscription Agreement by and between the Registrant and the R.E.
        & M. Petersen Living Trust DTD 1/17/83 (incorporated by reference to
        Exhibit 10.6 to the Registrant's Report on Form 10-QSB filed on November
        14, 2000).
10.10   Promissory Note of The Robert E. and Margaret M. Petersen Trust in favor
        of the Registrant, dated September 1, 2001 (incorporated by reference to
        Exhibit 10.10 to the Registrant's Report on Form 10-KSB for the fiscal
        year ended June 30, 2002).

                                       18
<PAGE>
10.11   Security Agreement of The Robert E. and Margaret M. Petersen Trust in
        favor of the Registrant (incorporated by reference to Exhibit 10.11 to
        the Registrant's Report on Form 10-KSB for the fiscal year ended June
        30, 2002).
10.12   Registrant's 2000 Stock Incentive Plan (incorporated by reference to
        Exhibit 4.1 to the Registrant's Report on Form 10-KSB for the fiscal
        year ended June 30, 2000).
10.13   Form of Stock Option Agreement (incorporated by reference to Exhibit
        10.13 to the Registrant's Report on Form 10-KSB for the fiscal year
        ended June 30, 2002).
10.14   First Amendment to the Registrant's 2000 Stock Incentive Plan
        (incorporated by reference to Exhibit 10.8 to the Registrant's Report on
        Form 10-KSB for the fiscal year ended June 30, 2001).
10.15   Second Amendment to the Registrant's 2000 Stock Incentive Plan
        (incorporated by reference to Exhibit 10.9 to the Registrant's Report on
        Form 10-KSB for the fiscal year ended June 30, 2001).
10.16   Memorandum of Understanding, Charitable Gift Agreement, by and among the
        Registrant, the UC Riverside Foundation and the Regents of the
        University of California, dated as of June 7, 1999 (incorporated by
        reference to Exhibit 10.10 to the Registrant's Report on Form 10-KSB for
        the fiscal year ended June 30, 2001).
31.1    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002--President.
31.2    Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
        2002--Treasurer
32.1    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
        Section 906 of the Sarbanes-Oxley Act of 2002--President.
32.2    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
        Section 906 of the Sarbanes-Oxley Act of 2002--Treasurer.


Reports of Form 8-K
-------------------

None.

                                       19
<PAGE>
                                   SIGNATURES

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

                       ADVANCED ENGINE TECHNOLOGIES, INC.
                                  (Registrant)




Date: February 17, 2004         By:           /s/ Carroll Shelby
                                     Carroll Shelby, President and Director


Date: February 17, 2004         By:          /s/ Alexandria Phillips
                                    Alexandria Phillips, Treasurer and Director




                                       20