<PAGE>


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                  FORM 10QSB/A

 x   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
---  OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                               ------------------

     TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
---  OF 1934 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                  (IRS Employer
         Incorporation or organization)                 Identification No.)

          11150 W. Olympic Blvd. Suite 1050 Los Angeles, Ca.    90064
          -----------------------------------------------------------------
           (Address of principal executive offices)           (Zip Code)

                                 (310)-914-9599
                           --------------------------
                (Issuer's telephone number, including area code)

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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. September 30, 2000 - 33,000,000
shares of common stock.

Transitional Small Business Disclosure Form    Yes      No  x
                                                   ---     ---

<PAGE>


Part I.    Financial Information

Item 1.    Financial Statements

                                              ADVANCED ENGINE TECHNOLOGIES, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)
                                                                FINANCIAL REPORT
                                                              SEPTEMBER 30, 2000


                                       2

<PAGE>

                       ADVANCED ENGINE TECHNOLOGIES, INC.
                          (A DEVELOPMENT STAGE COMPANY)


                                    CONTENTS

                                                                      Page

ACCOUNTANTS' REPORT                                                     4
FINANCIAL STATEMENTS

         Balance Sheet                                                  5
         Statements of Operations                                       6
         Statements of Stockholders' Equity                             7
         Statements of Cash Flows                                       8
         Notes to Financial Statements                                  9-14




                                       3

<PAGE>

NEFF & RICCI LLP
----------------------------
CERTIFIED PUBLIC ACCOUNTANTS
7001 PROSPECT PLACE NE
ALBUQUERQUE, NM  87110


                         Independent Accountants' Report

Advanced Engine Technologies, Inc.
(A Development Stage Company)

We have reviewed the accompanying balance sheet of Advanced Engine Technologies,
Inc. (a development stage company) as of September 30, 2000, and the related
statements of operations, stockholders equity, and cash flows for the quarters
ended September 30, 2000 and 1999 and the period from September 23, 1996
(inception) through September 30, 2000, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Advanced Engine
Technologies, Inc.

A review of interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.

The financial statements have been revised for the matter discussed in Note 6.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying September 30, 2000 financial statements in order for
them to be in conformity with generally accepted accounting principles.

/s/ Neff & Ricci LLP
-----------------------
Albuquerque, New Mexico
November 6, 2000, except
for Note 6, as to which
the date is October 12, 2001


                                       4

<PAGE>

ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September 30, 2000
See Accountants' Report.

<TABLE>
<S>                                                               <C>
ASSETS
Current Assets
    Cash and cash equivalents                                     $    860,615
    Prepaid expenses                                                     9,706
    Due from related party                                              26,000
                                                                  ------------
           Total current assets                                        896,321
                                                                  ------------
Fixed Assets
    Automobile                                                          10,000
    Furniture                                                           12,242
    Computer equipment                                                  44,156
    Manufacturing equipment and tooling                                 67,922
    Less accumulated depreciation                                      (53,994)
                                                                  ------------
           Total fixed assets                                           80,326
                                                                  ------------
Other Assets
    Patent rights, net of accumulated
        amortization of $215,396                                     1,306,323
    Patent, copyrights and designs, net of
        accumulated amortization of $16,042                             27,708
                                                                  ------------
           Total other assets                                        1,334,031
                                                                  ------------
           Total assets                                           $  2,310,678
                                                                  ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Accounts payable                                              $     79,181
                                                                  ------------
Commitments And Contingencies

Stockholders' Equity
    Common stock-50,000,000 shares authorized,
    33,150,000 issued and outstanding; $.001 par value            $     33,150
    Committed common stock under grant agreement                     2,790,000
    Subscription receivable                                        (10,000,000)
    Deferred costs under grant agreement                            (3,409,500)
    Additional paid-in capital                                      17,491,100
    Deficit accumulated during the development stage                (4,673,253)
                                                                  ------------
           Total stockholders' equity                                2,231,497
                                                                  ------------
Total liabilities and stockholders' equity                        $  2,310,678
                                                                  ============
</TABLE>

See Notes to Financial Statements.


                                       5

<PAGE>

ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Quarters Ended September 30, 2000 and 1999
and the Period From September 23, 1996
(Inception) Through September 30, 2000
See Accountants' Report.

<TABLE>
<CAPTION>
                                                                      9/23/96
                                                                    (Inception)
                                                                      Through
                                         2000           1999          9/30/00
                                       ---------------------------------------
<S>                                    <C>           <C>           <C>
Operating expenses                     $  150,314    $  196,126    $ 1,648,744
Research and development expenses          49,433             -      1,915,809
Stock grant expense                       232,500       232,500      1,240,500
                                       ---------------------------------------
Loss from operations                     (432,247)     (428,626)    (4,805,053)
Interest income                            13,900         4,216        131,800
                                       ---------------------------------------
Net loss                               $ (418,347)   $ (424,410)   $(4,673,253)
                                       =======================================
Basic net loss per share               $     (.02)   $     (.02)   $      (.22)
                                       =======================================
Weighted average number of common
    shares outstanding                 27,483,333    22,525,000     21,611,795
                                       =======================================
</TABLE>

See Notes to Financial Statements.


                                       6

<PAGE>

ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
Quarters Ended September 30, 2000 and 1999
and the Period From September 23, 1996 (Inception)
Through September 30, 2000
See Accountants' Report.

<TABLE>
<CAPTION>
                                                                   Committed                 Deferred      (Deficit)
                                                                    Common                     Costs      Accumulated
                                    Common Stock       Additional    Stock                     Under       During the
                                 -------------------    Paid-in   Under Grant  Subscription    Grant      Development
                                  Shares      Amount    Capital    Agreement    Receivable   Agreement       Stage         Total
                                 --------------------------------------------------------------------------------------------------
<S>                              <C>         <C>      <C>         <C>          <C>           <C>          <C>          <C>
Balance, September 23, 1996
    (Inception)                           -  $     -  $         - $         -  $          -  $         -  $         -  $         -
Common stock issued to
    parent corporation for
    license rights               20,000,000   20,000      (18,000)          -             -            -            -        2,000
Common stock issued for cash        499,200      499      498,701           -             -            -            -      499,200
Common stock issued for
    services                        600,000      600        5,400           -             -            -            -        6,000
Net loss                                  -        -            -                                            (164,233)    (164,233)
                                 ----------  -------  -----------  ----------  ------------  -----------  -----------  -----------
Balance, June 30, 1997           21,099,200   21,099      486,101           -             -            -     (164,233)     342,967
Common stock issued for cash        500,800      501      500,299           -             -            -            -      500,800
Net loss                                  -        -            -                                            (309,635)    (309,635)
                                 ----------  -------  -----------  ----------  ------------  -----------  -----------  -----------
Balance, June 30, 1998           21,600,000   21,600      986,400           -             -            -     (473,868)     534,132
Common stock committed
    under grant agreement                 -        -            -   4,650,000             -   (4,650,000)           -            -
Common stock issued for cash        325,000      325      568,425           -             -            -            -      568,750
Common stock issued for
    services                        400,000      400    1,999,600           -             -            -            -    2,000,000
Research and development
    expense recognized under
    grant agreement                       -        -            -           -             -       78,000            -       78,000
Net loss                                  -        -            -           -             -            -     (980,381)    (980,381)
                                 ----------  -------  -----------  ----------  ------------  -----------  -----------  -----------
Balance, June 30, 1999           22,325,000   22,325    3,554,425   4,650,000             -   (4,572,000)  (1,454,249)   2,200,501
Common stock committed
    under grant agreement           200,000      200      929,800    (930,000)            -            -            -            -
Common stock issued for cash        400,000      400    1,999,600           -             -            -            -    2,000,000
Common stock issued for
    services                         25,000       25       87,475           -             -            -            -       87,500
Research and development
    expense recognized under
    grant agreement                       -        -            -           -             -      930,000            -      930,000
Net loss                                  -        -            -           -             -            -   (2,800,657)  (2,800,657)
                                 ----------  -------  -----------  ----------  ------------  -----------  -----------  -----------
Balance, June 30, 2000           22,950,000   22,950    6,571,300   3,720,000             -   (3,642,000)  (4,254,906)   2,417,344
Common stock committed
    under grant agreement           200,000      200      929,800    (930,000)            -            -            -            -
Common stock issued for cash     10,000,000   10,000    9,990,000           -   (10,000,000)           -            -            -
Research and development
    expense recognized under
    grant agreement                       -        -            -           -             -      232,500            -      232,500
Net loss                                  -        -            -           -             -            -     (418,347)    (418,347)
                                 ----------  -------  -----------  ----------  ------------  -----------  -----------  -----------
Balance, September 30, 2000      33,150,000  $33,150  $17,491,000  $2,790,000  $(10,000,000) $(3,409,500) $(4,673,253) $ 2,231,497
                                 ==========  =======  ===========  ==========  ============  ===========  ===========  ===========
</TABLE>

See Notes to Financial Statements.


                                       7

<PAGE>

ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Quarters Ended September 30, 2000 and 1999
and the Period From September 23, 1996 (Inception)
Through September 30, 2000
See Accountants' Report.
<TABLE>
<CAPTION>
                                                                             9/23/96
                                                                           (Inception)
                                                                             Through
                                                   2000          1999        9/30/00
                                               --------------------------------------
<S>                                            <C>           <C>          <C>
Reconciliation of net losses to
   net cash provided by operations:
     Net loss                                  $ (418,347)   $ (424,410)  $(4,673,253)
     Stock grant expense                          232,500       232,500     1,240,500
     Depreciation and amortization                 47,590        49,688       285,433
     Issuance of common stock for
        assets or services                              -             -       664,250
Changes in current assets and liabilities:
     Prepaid expenses                              13,060         4,928        (9,708)
     Accounts payable                             (36,178)       (2,881)       79,182
     Accrued payroll                               (5,000)            -             -
     Due from related party                             -             -       (26,000)
                                               --------------------------------------
        Net cash flows used by
            operating activities                 (166,375)     (140,175)   (2,439,596)
                                               --------------------------------------
Cash flows from investing activities:
     Fixed asset purchases                              -        (5,767)     (134,321)
     Intangible asset purchases                         -       (96,593)   (1,565,468)
                                               --------------------------------------
        Net cash flows used by
            investing activities                        -      (102,360)   (1,699,789)
                                               --------------------------------------
Cash flows from financing activities:
     Issuance of common stock                           -     2,000,000     5,000,000
     Loan proceeds                                      -             -        50,000
     Loan payments                                      -             -       (50,000)
                                               --------------------------------------
        Net cash flows provided by
            financing activities                        -     2,000,000     5,000,000
                                               --------------------------------------
Net increase in cash and equivalents             (166,375)    1,757,465       860,615
Cash and equivalents at beginning of period     1,026,990       561,795             -
                                               --------------------------------------
Cash and equivalents at end of period          $  860,615    $2,319,260   $   860,615
                                               ======================================
</TABLE>

See Notes to Financial Statements.


                                       8

<PAGE>


ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
See Accountants' Report.


NOTE 1.  NATURE OF BUSINESS

Advanced Engine Technologies, Inc. (the Company) was incorporated under the laws
of Colorado and began operations on September 23, 1996. The Company was formed
to acquire the rights to manufacture, distribute and market an OX2 Engine
(Distribution) Ltd. (OX2) combustion engine throughout the United States, Canada
and Mexico. On October 18, 1996 the Company entered into a contract with OX2, a
company incorporated in the laws of the Republic of Vanuatu, whereby the Company
acquired the rights to manufacture, distribute and market the OX2 combustion
engine. Performance under this contract required the Company to forthwith issue
20,000,000 shares of its common stock plus an additional 19,000,000 upon the
completion of certain emission tests (see Note 3). In addition, OX2 was given
the right to appoint two of the Company's directors. In December 1998, both
parties agreed to cancel the requirement to issue the additional 19,000,000
shares. As of June 30, 1998, OX2 owned approximately 62 percent of the Company's
outstanding shares.

During the year ended June 30, 1999, OX2 sold, transferred, assigned and/or
otherwise conveyed its stock to various individuals, companies, and other legal
entities, none of which individually has a controlling interest. Certain of
these legal entities have common ownership and, as a group, may have a
controlling interest in the Company.

A dispute has arisen related to the shares originally owned by OX2. As a result,
two lawsuits were filed which included the Company as a defendant. The suits
seek to have the disputed shares surrendered to the Company and the stock
records amended to reflect OX2 as the beneficial owner of these shares. In
August 2000, the Company accepted the surrender of 10,713,238 shares of its
common stock, which it subsequently deposited with the court. As a result, the
Company's legal counsel expects the Company to be dismissed from the litigation.

In May of 1999, the Company acquired the worldwide patent rights for the OX2
engine pursuant to a written agreement with OX2, OX2 (Intellectual Property) and
Advanced Engine Technology (PTY). The Company has assumed responsibility for
worldwide patent maintenance and enforcement.

As of September 30, 2000, the Company's operations consisted of marketing,
testing, and developing the OX2 combustion engine for commercial applications,
and raising any necessary capital investment. Management does not expect to
generate significant sales revenue until fiscal year 2001. Accordingly, planned
principal operations have not commenced and the Company is a development stage
enterprise.

                                       9

<PAGE>

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents. Cash and cash equivalents include all cash balances
and highly liquid debt instruments with an original maturity of three months or
less. The Company's cash is deposited in financial institutions and is insured
only up to $100,000 by the Federal Deposit Insurance Corporation. Cash
equivalents consist of commercial paper and other securities.

Fixed Assets. Fixed assets are stated at cost. Depreciation expense is
calculated using the straight-line method over the estimated useful lives of the
assets, which range from 5 to 10 years.

Other Assets. Patent rights are amortized on a straight-line basis over the
remaining estimated useful life of 10 years. The patents, copyrights and designs
are amortized on a straight-line basis over the remaining estimated useful life
of 5 years. The Company continually reviews other assets to assess
recoverability from estimated future net cash flows. To date, these reviews have
not resulted in a reduction of other assets.

Income Taxes. The Company accounts for its income taxes using the liability
method. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse. The Company has provided a
valuation allowance to offset the benefit of any net operating loss
carryforwards or deductible temporary differences.

Research and Development Costs. Research and development costs are expensed as
incurred.

Advertising Costs. The Company expenses advertising costs as incurred.
Advertising costs amounted to $1,330 and $48,858 for the quarters ending
September 30, 2000 and 1999, respectively and $175,830 from September 23, 1996
(inception) to September 30, 2000.

Loss Per Share. Loss per share is computed on the basis of the weighted average
number of common shares outstanding during the year and did not include the
effect of common stock equivalents, as their effect would be antidilutive. The
numerator for the computation is the net loss and the denominator is the
weighted average shares of common stock outstanding.



                                       10

<PAGE>

NOTE 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (CONTINUED)

Use of 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 and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NOTE 3.   RELATED PARTY TRANSACTIONS

The Company paid consulting fees to its former President, who is also a
shareholder and director, in the amount of $293,503 from September 23, 1996
(inception) to September 30, 2000 including $3,200 and $19,890 for the quarters
ended September 30, 2000 and 1999, respectively.

The Company paid administrative fees and reimbursed expenses to a company that
is owned by one of its shareholders in the amount of $111,197 from September 23,
1996 (inception) to September 30, 2000 including $9,627 and $15,406 for the
quarters ended September 30, 2000 and 1999, respectively.

The Company has paid research and development costs and rent to a company owned
by its current President in the amount of $136,685 from September 23, 1996
(inception) to September 30, 2000, including $12,248 for the quarter ended
September 30, 2000. Also, starting in May 2000, monthly salary of $5,000 is paid
to the President, who is also a shareholder and director.

The Company has paid or accrued legal fees and reimbursed expenses, including
rent, to a company that is owned by its Secretary/Treasurer in the amount of
$250,157 from September 23, 1996, (inception) to September 30, 2000, including
$62,172 for the quarter ended September 30, 2000.

The Company has paid for services to a company that is a shareholder in the
amount of $71,956 from September 23, 1996, (inception) to September 30, 2000. In
May 2000, the Company paid engine development costs to an individual who is a
shareholder of OX2 in the amount of $300,000.


                                       11

<PAGE>

NOTE 3.   RELATED PARTY TRANSACTIONS (CONTINUED)

In October 1996, the Company issued 600,000 shares of its common stock to one of
its founders in exchange for his services in organizing the Company. The
transaction was recorded at the estimated fair market value of the services
provided ($6,000), as this was more readily determinable than the fair market
value of the stock.

Also in October 1996, the Company entered into a contract with OX2 whereby the
Company acquired the rights to manufacture, distribute and market the OX2
combustion engine in the United States, Canada and Mexico for the life of the
world-wide patent. As part of this contract, the Company issued 20,000,000
shares of its common stock and was to issue an additional 19,000,000 upon the
completion of emission tests. In December 1998, both parties agreed to rescind
and terminate the requirement to issue the additional 19,000,000 shares. The
Company was also to pay a royalty of 15 percent of the gross proceeds of its
revenue. In addition, OX2 had the right to appoint two of the Company's
directors. As of March 31, 2000, OX2 had appointed one director who was also the
Company's President, until December 1999 when he resigned. In May 1999, the
Company acquired the worldwide patent and manufacturing rights to the OX2 engine
in a four party agreement between the Company, OX2, OX2 (Intellectual Property)
and Advanced Engine Technology (PTY). The Company has assumed responsibility for
patent maintenance and enforcement.

The Company has an outstanding receivable from one of its board members. The
receivable at September 30, 2000 is $26,000.

NOTE 4. INCOME TAXES

At September 30, 2000 the Company had deferred tax assets amounting to
approximately $1,828,000. The deferred tax assets consist primarily of the tax
benefit of net operating loss carryforwards and are fully offset by a valuation
allowance of the same amount.

The net change in the valuation allowance for deferred tax assets was an
increase of approximately $195,000 and $212,000 for the quarters ending
September 30, 2000 and 1999, respectively. The net change is due primarily to
the increase in net operating loss carryforwards.

At September 30, 2000, the Company had net operating loss carryforwards of
approximately $4,201,000 available to offset future state and federal taxable
income. These carryforwards will expire in 2017 to 2019 for federal tax purposes
and 2002 to 2004 for state tax purposes.


                                       12

<PAGE>

NOTE 5. COMMON STOCK

The Company offered one million shares of its common stock at the price of one
dollar per share in an offering memorandum pursuant to Rule 504 of Regulation D
of the Securities Act of 1933. The Company sold 499,200 shares as of June 30,
1997, and 500,800 during fiscal year 1998. As of June 30, 1997, the Company had
stock subscribed in the amount of $74,000 that was recorded as a receivable and
subsequently received in fiscal year 1998.

On August 6, 1998, the Company entered into a joint venture agreement with
Carroll Shelby under which the Company was to issue 300,000 shares of restricted
common stock in exchange for services related to the future production of a
street vehicle that utilizes the OX2 combustion engine. These shares were issued
in November 1998. They were valued at $525,000 and expensed as research and
development costs. In addition, the Company will issue an additional 250,000
shares upon completion of the vehicle utilizing the OX2 combustion engine.
Subsequent to this transaction, Carroll Shelby was appointed to the Board of
Directors.

In November 1998, the Company issued 25,000 shares of restricted stock to
purchase patents, copyrights, designs and prototypes to be used with the
Company's technology. This transaction was valued at $43,750 and recorded as an
intangible asset.

In April 1999, the Company issued 400,000 shares of common stock for $2,000,000
in a private placement. During the quarter ended September 30, 1999, the Company
issued an additional 400,000 shares of common stock to the same party for
$2,000,000 in a private placement.

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 and second
installments were issued in July 1999 and 2000, respectively.

Expense on 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, Company's stock had a very low tracking volume at the time of the
grant agreement, and the Company was still in a development stage. During the
period from September 23, 1996 (inception) to September 30, 2000, the Company
recognized total expense on the stock grant of $1,240,500, including $232,500
for the three months ended September 30, 2000 and 1999.

In January 2000, the Company issued 25,000 shares of common stock in exchange
for services related to the performance testing of the OX2 engine. This
transaction was valued at $87,500 and was charged to expense.


                                       13

<PAGE>

NOTE 5. COMMON STOCK (CONTINUED)

In August 2000, the Company entered into a subscription agreement with a current
shareholder to issue 10 million shares at one dollar per share in a private
placement. On September 6, 2000, the Company issued the stock under subscription
in exchange for an irrevocable line of credit in the amount of $10,000,000. The
Board of Directors may draw on this line of credit at its discretion.

Also in August 2000, the Company adopted a stock option plan and reserved 5
million shares for the plan. As of September 30, 2000, no stock options had been
granted.

NOTE 6. RESTATEMENT OF THE SEPTEMBER 30, 2000 FINANCIAL STATEMENTS

The financial statements for the three months ended September 30, 2000 have been
restated from the originally filed financial statements to reflect greater
expense recognition in those years in connection with the June 1999 stock grant
agreement with the University of Riverside Foundation. (See Note 5 for a
description of the agreement and the accounting related to the agreement.)
Specifically, upon re-evaluation of the agreement, current management has
concluded that the fair value of the committed common stock on the date of the
agreement was $4,650,000, and not $1,500,000 as originally valued. This increase
in the fair value of the committed common stock on the date of the grant
agreement impacts the expense recognition on the stock grant agreement because
the expense which is recognized over a five-year period is based upon the fair
value of the committed common stock on the date of the stock grant agreement.
Originally, the financial statements for the three months ended September 30,
2000 reflected $300,000 of research and development expense associated with this
grant. As a result of the foregoing, the financial statements for the three
months ended September 30, 2000 have been restated to reflect stock grant
expense of $232,500. Also, the originally filed September 30, 2000 financial
statements classified the expense on the stock grant as research and development
expense; whereas, the restated financial statements present the expense as
"stock grant expense". Additionally, there have been certain presentation
changes in the statement of shareholders' equity to reflect committed common
stock and deferred costs related to the stock grant agreement.

                                       14

<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 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, 2000.

         The section entitled "Risk Factors" set forth in this Form 10-QSB and
similar discussions in our Annual Report on Form 10-KSB for the year ended June
30, 2000 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. 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.

         Based on its design, we believe our OX2 engine prototype will be fuel
efficient, light weight, low-emission, multi-fueled, and smaller and less
expensive than conventional internal combustion engines. We also believe that it
will not have the complex manufacture/production requirements of conventional
internal combustion engines.


                                       15

<PAGE>

         At the present time only a prototype of the OX2 internal combustion
engine, plus additional parts which can be used for engine development or for
the building of additional prototypes, have been built. The development and
testing of the prototype is ongoing. No OX2 engines have been manufactured for
production use, and no assurance can be given that the OX2 engine will be
successfully developed or manufactured.

Plan of Operations
------------------

         We plan to continue the research and development of our OX2 engine
prototype during the 2001 fiscal year. We currently have an agreement with
Steven Manthey, the inventor of the OX2 engine, which provides that Mr. Manthey
will continue to develop and maintain the OX2 engine prototype. We have an
agreement with the University of California, Riverside ("UCR"), which provides
that it will continue to conduct research and development on the OX2 engine
prototype, in conjunction with us. The research and development at UCR is being
conducted under the guidance of Dr. Joseph Norbeck (of the CE-CERT program at
the University of California, Riverside) and Dr. Roberta Nichols, one of our
consultants. We are also conducting research and development activities in
Gardena, California

         Assuming the completion of the necessary research and development
required to complete our product, and assuming the tests of our OX2 prototype
are successful, we will attempt to introduce the OX2 engine into the market.
Such marketing activities include demonstrations to prospective original
equipment manufacturers of products using internal combustion engines and the
development of additional joint venture partners to assist in marketing the
engine.

         In the shorter term, our plans are to develop an engine for stationary
generator applications and, in the longer term, we plan to develop an engine for
automobile and/or aircraft applications.

         We expect that our cash flow requirements to fund general operations in
2001 will total approximately $750,000 including outside consulting fees and
expenditures for equipment. We expect to fund these costs with our cash
reserves, which were $860,615 as of September 30, 2000. The Company also has
available a $10,000,000 line of credit that can be drawn upon at any time at the
discretion of the Board of Directors. Our cost estimates do not include
provisions for any contingencies or unexpected expenses that may arise or any
unanticipated increases in costs. As a result, our cash reserves may not be
adequate to cover the actual costs of operations in the 2001 fiscal year, in
which event we will be required to raise additional capital. Historically, we
have obtained cash through private placements of securities.

         Our net loss since inception (September 23, 1996) is $4,673,253.

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


                                       16

<PAGE>

Risk Factors
------------

         You should carefully consider the following risks and the other
information in this Report and our other filings with the SEC 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 successfully develop the
     OX2 engine. No OX2 engines have been developed or manufactured for
     production use, and no assurance can be given that the OX2 engine will be
     successfully developed or manufactured. Testing and development on the
     engine is still in progress, and is being conducted in conjunction with
     UCR. Until further testing, research and development has been completed, we
     will not have a finished product for introduction into the market. We do
     not have an estimated completion date for the testing, research and
     development. Furthermore, the we cannot provide assurance that we will be
     successful in the ultimate development of the 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 revenues and profitability.
     Our OX2 engine  represents  an  innovation  in the  industry  for  internal
     combustion  engines.  The size 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  assurance  that we will be  successful  with our marketing
     efforts or the development of our joint ventures.

o    Our cash 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 2001
     with our current cash reserves, which were obtained from the sale of
     securities. However, our cost estimates do not include provisions for any
     contingencies, unexpected expenses or increases in costs that may arise.

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.


                                       17

<PAGE>

o    Our business depends on the protection of our intellectual property and may
     suffer if we are unable to adequately  protect our  intellectual  property.
     Currently,  we have been granted one U.S. Patent for an Axial Piston Rotary
     Engine.  We have one patent  application  pending in Australia for an Axial
     Piston Rotary Engine. We also have patent applications pending in 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
     assurance  that  our  patent  will  not  be  invalidated,  circumvented  or
     challenged,  that  the  rights  granted  under  the  patents  will  give us
     competitive advantages or that our patent applications will be granted.

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 our
     engine,  or we  may  have  to  enter  into  costly  license  or  settlement
     agreements.  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,  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 product, and ultimately, our business. In the future, we
     may also have to enforce our patent 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    Our  business  is  dependent  on  our  relationships  with  other  parties.
     Research,  development  and  testing of our engine is being  carried out in
     conjunction with UCR. Steven Manthey,  the inventor of the engine,  is also
     actively  participating  in the research and development.  In addition,  we
     have a joint venture  agreement with Carroll Shelby, to further develop and
     promote our engine. Completion of the research,  development and testing is
     essential to the success of our business. Until such testing,  research and
     development  has been  completed,  we will not have a  finished  product to
     introduce to the market.  Thus, if we are unable maintain our relationships
     with UCR, Steven Manthey and Carroll Shelby, our business will be adversely
     affected.

o    We have a history of losses. We have a history of operating losses, and an
     accumulated deficit, as of September 30, 2000, of $4,673,253. 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 assurance that management will be successful in
     negotiating such contracts.


                                       18

<PAGE>

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
     stockholders may find it difficult to sell their shares.

o    Our principal  stockholders  can exercise  significant  control over us and
     could limit the ability of our other  stockholders to influence the outcome
     of  transactions  requiring  shareholder  vote.  As of September  30, 2000,
     approximately  75.53%  of our  outstanding  common  stock  is  owned by our
     executive   officers,   directors   and   principal   stockholders.   These
     stockholders  will have the ability to exercise  influence over all matters
     requiring approval by our stockholders, including the election of directors
     and approval of significant corporate transactions.

Part II. Other Information

Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities

(c)

         On September 6, 2000, we sold 10 million shares of our common stock to
the R.E. & M. Petersen Living Trust DTD 1/17/83. The trust paid for the shares
by establishing an irrevocable line of credit for the benefit of the Company in
the amount of $10 million, which can be drawn down at any time at the Company's
discretion.

         The shares were sold in reliance on the exemptions provided by Section
4(2) of the Securities Act of 1933.

Item 3.  Default upon Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders
         None


                                       19

<PAGE>

Item 5.  Other Information

         On September 6, 2000, we sold 10 million shares of our common stock to
the R.E. & M. Petersen Living Trust DTD 1/17/83. See Item 2(c).

Item 6.  Exhibits and Reports on Form 8-K

         a)  Exhibits 10.6: 10 Million Share Subscription Agreement
         b)  Reports on Form 8-K: None


                                       20

<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this registration to be signed on its behalf by the
undersigned, thereunto duly authorized.

                       ADVANCED ENGINE TECHNOLOGIES, INC.
-------------------------------------------------------------------------------
                                  (Registrant)

By:                                 /s/ Carroll Shelby
          ---------------------------------------------------------------------
                          Carroll Shelby, President and Director

Date:                               October 15, 2001
          ---------------------------------------------------------------------


By:                             /s/ Alexandria Phillips
          ---------------------------------------------------------------------
                      Alexandria Phillips, Treasurer and Director

Date:                              October 15, 2001
          ---------------------------------------------------------------------