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



                                   FORM 10QSB

 x       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
---
         SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
         PERIOD ENDED MARCH 31, 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 1020 Los Angeles, Ca. 90064
         --------------------------------------------------------
     (Address of principal executive offices)           (Zip Code)

                                 (505) 323-7341
                 ----------------------------------------------
                (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. March 31, 2000 - 22,950,000 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


<PAGE>



                       ADVANCED ENGINE TECHNOLOGIES, INC.

                          (A DEVELOPMENT STAGE COMPANY)

                                    CONTENTS

                                                                    Page

ACCOUNTANTS' REPORT                                                   1

FINANCIAL STATEMENTS

       Balance Sheet                                                  2

       Statements of Operations                                       3

       Statement of Stockholders' Equity                              5

       Statements of Cash Flows                                       7

       Notes to Financial Statements                                  9




<PAGE>




                               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 March 31,  2000,  and the  related
statements of operations, changes in stockholders equity, and cash flows for the
quarter  and nine  months  ended  March 31,  2000 and 1999 and the  period  from
September  23, 1996  (inception)  through  March 31, 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 consists  principally of inquiries of company  personnel and analytical
procedures  applied to financial data. It is substantially less in scope than an
audit 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.


Based on our review, we are not aware of any material  modifications that should
be made to the  accompanying  March 31, 2000  financial  statements in order for
them to be in conformity with generally accepted accounting principles.




/s/ Neff & Ricci LLP
-----------------------
Albuquerque, New Mexico
April 20, 2000


                                                                               1
<PAGE>



ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
March 31, 2000
See Accountants' Report.

ASSETS

Current Assets

    Cash and cash equivalents                                      $ 1,668,231
    Prepaid expenses                                                     1,000
    Due from related party                                              19,664
                                                                   -----------
           Total current assets                                      1,688,895
                                                                   -----------

Fixed Assets

    Leasehold improvements                                              12,332
    Furniture                                                            7,523
    Computer equipment                                                  44,156
    Manufacturing equipment and tooling                                 71,626
    Less accumulated depreciation                                      (40,477)
                                                                   -----------
           Total fixed assets                                           95,160
                                                                   -----------

Other Assets

    Patent rights, net of accumulated
        amortization of $146,554                                     1,471,758
    Patent, copyrights and designs, net of
        accumulated amortization of $11,667                             32,083
                                                                   -----------
           Total other assets                                        1,503,841
                                                                   -----------

           Total assets                                            $ 3,287,896
                                                                   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Commitments And Contingencies

Stockholders' Equity
    Common stock-50,000,000 shares authorized,
    22,950,000 issued and outstanding; $.001 par value             $    22,950

    Additional paid-in capital                                       5,941,300

    Deficit accumulated during the development stage                (2,676,354)
                                                                   -----------

           Total stockholders' equity                                3,287,896
                                                                   -----------

Total liabilities and stockholders' equity                         $ 3,287,896
                                                                   ===========

See Notes to Financial Statements.

                                                                               2
<PAGE>



ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 2000 and 1999 and the
Period From September 23, 1996 (Inception)
Through March 31, 2000
See Accountants' Report.
<TABLE>
<CAPTION>

                                                                                  9/23/96
                                                                                (Inception)
                                                                                  Through

                                                 2000              1999           3/31/00
<S>                                           <C>               <C>             <C>
Operating expenses                            $   872,561          312,122       1,771,006

Research and development expenses                 476,863          525,000       1,001,863
                                              --------------------------------------------

Loss from operations                           (1,349,424)        (837,122)     (2,772,869)

Interest   income                                  49,319            9,467          96,515
                                              --------------------------------------------

Net loss                                      $(1,300,105)        (827,655)     (2,676,354)
                                              ============================================


Basic net loss per share                      $     (.057)           (.038)          (.126)
                                              ============================================


Weighted average number of common
    shares outstanding                         22,829,166       21,744,444      21,250,968
                                              ============================================

</TABLE>

See Notes to Financial Statements.

                                                                               3
<PAGE>


ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (CONTINUED)
Quarter Ended
March 31, 2000 and 1999 See Accountants' Report.

                                                   2000              1999

Operating expenses                            $     139,105           102,061

Research and development expenses                   476,863                 -
                                              -------------------------------

Loss from operations                               (615,968)         (102,061)

Interest   income                                    30,628              2,064
                                              -------------------------------

Net loss                                      $    (585,340)          (99,997)
                                              ===============================


Basic net loss per share                      $       (.026)            (.005)
                                              ===============================


Weighted average number of common
    shares outstanding                           22,937,500        21,925,000
                                              ===============================


See Notes to Financial Statements.

                                                                               4
<PAGE>


ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Period From September 23, 1996 (Inception)
Through March 31, 2000
See Accountants' Report.
<TABLE>
<CAPTION>

                                                                                     (Deficit)
                                                                                    Accumulated
                                                Common Stock          Additional    During the
                                         -----------------------        Paid-in     Development
                                         Shares         Amount          Capital        Stage         Total
<S>                                      <C>              <C>         <C>          <C>             <C>
Issuance of common stock
    to parent corporation for
    license rights (Note 3)              20,000,000   $   20,000        (18,000)            -          2,000
Issuance of common stock
    for services (Note 3)                   600,000          600          5,400             -          6,000
Issuance of common stock
    for cash (Note 5)                       499,200          499        498,701             -        499,200

Net loss                                          -            -              -      (164,233)      (164,233)
                                        --------------------------------------------------------------------

Balance, June 30, 1997                   21,099,200       21,099        486,101      (164,233)       342,967

Issuance of common stock
    for cash (Note 5)                       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

Issuance of stock for assets
    and services (Note 5)                   325,000          325        568,425             -        568,750
Issuance of common stock
    for cash (Note 5)                       400,000          400      1,999,600             -      2,000,000

Net loss                                          -            -              -      (902,381)      (902,381)
                                        --------------------------------------------------------------------

Balance, June 30, 1999                   22,325,000       22,325      3,554,425    (1,376,249)     2,200,501
                                        --------------------------------------------------------------------

</TABLE>

See Notes to Financial Statements.

                                                                               5
<PAGE>


ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (CONTINUED)
Period From September 23, 1996 (Inception)
Through March 31, 2000
See Accountants' Report.
<TABLE>
<CAPTION>
                                                                                 (Deficit)
                                                                                Accumulated
                                           Common Stock         Additional      During the
                                   ------------------------       Paid-in       Development
                                    Shares        Amount          Capital          Stage         Total

<S>                                 <C>          <C>             <C>             <C>            <C>
Balance forward                     22,325,000   $   22,325      3,554,425       (1,376,249)    2,200,501

Issuance of stock for assets
    and services (Note 5)              200,000          200        299,800               -        300,000
Issuance of stock
    for cash (Note 5)                  400,000          400      1,999,600               -      2,000,000

Net loss                                     -            -              -        (491,910)      (491,910)
                                   ----------------------------------------------------------------------

Balance, September 30, 1999         22,925,000       22,925      5,853,825      (1,868,159)     4,008,591

Net loss                                     -            -              -        (222,855)      (222,855)
                                   ----------------------------------------------------------------------

Balance, December 31, 1999          22,925,000       22,925      5,853,825      (2,091,014)     3,785,736

Issuance of stock for
    services (Note 5)                   25,000           25         87,475               -         87,500

Net loss                                     -            -              -        (585,340)      (585,340)
                                   ----------------------------------------------------------------------

Balance March 31, 2000              22,950,000   $   22,950      5,941,300      (2,676,354)     3,287,896
                                   ======================================================================

</TABLE>
See Notes to Financial Statements.

                                                                               6
<PAGE>


ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Nine Months Ended March 31, 2000 and 1999
and the Period From September 23, 1996 (Inception)
Through March 31, 2000
See Accountants' Report.
<TABLE>
<CAPTION>
                                                                                      9/23/96
                                                                                    (Inception)
                                                                                      Through
                                                     2000             1999            3/31/00
<S>                                              <C>                <C>             <C>
Reconciliation of net losses to net
  cash provided by operations:
        Net loss                                 $ (1,300,105)      (827,655)       (2,676,354)
        Depreciation and amortization                 149,061          7,693           198,698
        Issuance of common stock for
           assets and services                        387,500        525,000           964,250
Changes in current assets and liabilities:
        Prepaid expenses                                7,216        (10,500)           (1,000)
        Accounts payable                               (2,881)       (31,283)                -
        Due from related party                        (19,664)                         (19,664)
                                                 ---------------------------------------------
           Net cash flows used by
               operating activities                  (778,873)      (336,745)       (1,534,070)
                                                 ---------------------------------------------
Cash flows from investing activities:
        Equipment purchases                           (18,099)       (26,951)         (135,638)
        Intangible asset purchases                    (96,592)             -        (1,662,061)
                                                 ---------------------------------------------
           Net cash flows used by
               investing activities                  (114,691)       (26,951)       (1,797,699)
                                                 ---------------------------------------------

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 (decrease) in cash                     1,106,436       (363,696)        1,668,231

Cash at beginning of period                           561,795        545,435                 -
                                                 ---------------------------------------------

Cash at end of period                            $  1,668,231        181,739         1,668,231
                                                 =============================================
</TABLE>


See Notes to Financial Statements.
                                                                              7
<PAGE>


ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
Quarter Ended March 31, 2000 and 1999
See Accountants' Report.

                                                        2000          1999

Reconciliation of net losses to net
  cash provided by operations:
        Net loss                                   $  (585,340)       (99,997)
        Depreciation and amortization                   49,687          4,625
        Issuance of common stock for
           assets and services                          87,500              -
Changes in current assets and liabilities:
    Prepaid insurance                                   (1,000)         4,500
    Due from related party                             (19,664)             -
                                                   --------------------------
           Net cash flows applied to
               operating activities                   (468,817)       (90,872)
                                                   --------------------------

Cash flows from investing activities:
        Equipment purchases                            (12,332)       (13,230)
                                                   --------------------------
Net decrease in cash                                  (481,149)      (104,102)

Cash at beginning of period                          2,149,380        285,841
                                                   --------------------------

Cash at end of period                              $ 1,668,231        181,739
                                                   ==========================


See Notes to Financial Statements.

                                                                               8
<PAGE>

ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 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
Engine  (Distribution)  Ltd., 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.

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 March 31, 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.

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.

                                                                               9
<PAGE>
ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
See Accountants' Report.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

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 $12,957 and $1,426 for the quarter ended March 31,
2000 and 1999,  respectively,  and $80,660 and $1,760 for the nine months  ended
March 31, 2000 and 1999,  respectively,  and $170,910  from  September  23, 1996
(inception) to March 31, 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.

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.

                                                                              10
<PAGE>
ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
See Accountants' Report.

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 $280,923  from  September 23, 1996
(inception)  to March 31,  2000  including  $29,945  and $22,860 for the quarter
ended  March 31,  2000 and 1999,  respectively,  and $69,720 and $64,390 for the
nine months ended March 31, 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 $251,507 from September 23,
1996 (inception) to March 31, 2000 including  $10,871 and $3,333 for the quarter
ended  March 31,  2000 and 1999,  respectively,  and $35,820 and $13,500 for the
nine months ended March 31, 2000 and 1999, respectively.

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
worldwide patent maintenance and enforcement.

The Company has an outstanding  receivable  from one of its board  members.  The
receivable at March 31, 2000 is $19,664.

                                                                              11
<PAGE>
ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
See Accountants' Report.

NOTE 4. INCOME TAXES

At March 31, 2000 the Company had deferred tax assets amounting to approximately
$1,011,000.  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 $197,000 and $30,000 for the quarters ending March 31,
2000 and 1999, respectively.  The net change is due primarily to the increase in
net operating loss carryforwards.

At  March  31,  2000,  the  Company  had net  operating  loss  carryforwards  of
approximately  $2,529,000  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.

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.

                                                                              12
<PAGE>
ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
See Accountants' Report.

NOTE 5. COMMON STOCK (CONTINUED)

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 its common stock
to the University of California Riverside Foundation.  The stock is to be issued
in five annual  installments  of 200,000 shares each. The first  installment was
issued  in July of 1999.  The  donated  stock is to  provide  an  endowment  for
research funds for the College of Engineering-Center  for Environmental Research
and Technology.

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>

Item 2.   Management's Discussion and Analysis or Plan of Operation

      The Company plans to continue the  development of prototypes and marketing
during the 2000 fiscal year.  Activities will include development and testing of
prototypes  in  coordination   with  the  College  of  Engineering   Center  for
Environmental  Research  and  Technology  at the  University  of  California  at
Riverside with  continual work with joint venture  partners to develop an engine
for stationary generators,  automobiles, marine and other commercial uses. While
prototypes of the OX2 engine  exist,  there can be no assurance the Company will
be successful with its marketing efforts,  the development of its joint ventures
or in the ultimate development of the engine for commercial applications.

      The Company's  cash flow  requirements  to fund these  activities  and the
general  operations of the Company total  approximately  $1,000,000  and include
approximately  $200,000 for  consulting  and $300,000 for equipment  among other
costs. The Company expects to fund these costs with its current cash reserves of
approximately $2,150,000, which came from private placements. The Company's cost
estimates do not include provisions for any contingencies or unexpected expenses
that may  arise or any  unanticipated  increases  in  costs.  As a  result,  the
Company's  cash  reserves  may not be  adequate  to cover  the  actual  costs of
operations in the 2000 fiscal year.

      The  Companies'  net loss from  December  31,1998 to December  31, 1999 is
$889,488.  The  Companies'  net loss since  inception  (September  23,  1996) is
$2,676,354.

      There are  currently no signed  contracts  that will  produce  revenue and
there can be no assurance  that  management  will be successful  in  negotiating
these contracts.

      The  Company's  goal is to arrange  for and/or  conduct the  research  and
development necessary to bring the product to commercial production. The Company
expects to arrange for, carry out and/or fund all necessary,  relevant  research
and development activities.

      In June 1999, the Company agreed to issue  1,000,000  shares of its common
stock to the University of California Riverside  Foundation.  The stock is to be
issued in five annual installments of 200,000 shares each. The first installment
was issued in July of 1999.  The donated  stock is to provide an  endowment  for
research funds for the College of Engineering-Center  for Environmental Research
and Technology.

      The Company does not currently have any employees  other than its officers
although employees may be added depending on the future of the enterprise.

Part II.  Other Information

Item 1.   Legal Proceedings

          None

                                                                              14
<PAGE>

Item 2.   Changes in Securities

          None

Item 3.   Default upon Senior Securities

          None

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

          None

Item 5.   Other Information

          None

Item 6.   Exhibits and Reports on Form 8-K

          a)  Exhibits:

              Exhibit 27 - Financial Data Schedule

          b)  Reports on Form 8-K: None


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.


/s/ Carroll Shelby
--------------------------
President/Director
Carroll Shelby


Date: May 1, 2000
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