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 SEPTEMBER 31, 1999
                      ------------------

         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.)


                    9909 Osuna Road NE, Albuquerque, NM 87111
                    -----------------------------------------
               (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.  September  30, 1999 -  22,925,000
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, 1999


<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                       4

               Statements of Cash Flows                                5

               Notes to Financial Statements                           6




<PAGE>



NEFF & RICCI LLP
----------------------------

CERTIFIED PUBLIC ACCOUNTANTS
7001 PROSPECT PLACE NE
ALBUQUERQUE, NM  87110



                               Accountants' Report



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


We have compiled the accompanying balance sheet of Advanced Engine Technologies,
Inc. (a  development  stage  company) as of  September  30, 1999 and the related
statements of operations, changes in stockholders' equity and cash flows for the
quarters  ended  September 30, 1999 and 1998,  and the period from September 23,
1996  (inception)  through  September 30, 1999, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.

A  compilation  is limited to  presenting  in the form of  financial  statements
information  that is the  representation  of management.  We have not audited or
reviewed the accompanying financial statements and, accordingly,  do not express
an opinion  or any other  form of  assurance  on them.



/s/ Neff & Ricci LLP

Albuquerque,  New Mexico
October 15, 1999



                                                                               1

<PAGE>



ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
September 30, 1999



ASSETS

CURRENT ASSETS
    Cash                                                    $  2,319,260
    Prepaid insurance                                              3,288
                                                            ------------
           Total current assets                                2,322,548
                                                            ------------

FIXED ASSETS
    Furniture                                                      7,523
    Computer equipment                                            44,156
    Manufacturing equipment and tooling                           71,626
    Less accumulated depreciation                                (26,393)
                                                            ------------
           Total fixed assets                                     96,912
                                                            ------------

OTHER ASSETS
    Patent rights, net of accumulated
        amortization of $65,638                                1,552,674
    Patent, copyrights and designs net of
        accumulated amortization of $7,292                        36,457
                                                            ------------
           Total other assets                                  1,589,131
                                                            ------------

           Total assets                                     $  4,008,591
                                                            ============

LIABILITIES AND STOCKHOLDERS' EQUITY

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
    Common stock-50,000,000 shares authorized,
    22,925,000 issued and outstanding; $.001 value          $     22,925

    Additional paid-in capital                                 5,853,825

    Deficit accumulated during the development stage          (1,868,159)
                                                            ------------
           Total stockholders' equity                          4,008,591
                                                            ------------

Total liabilities and stockholders' equity                  $  4,008,591
                                                            ============


See accompanying notes and accountants' report.


                                                                               2
<PAGE>



ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Quarters Ended September 30, 1999 and 1998 and the
Period From September 23, 1996 (Inception)
Through September 30, 1999



                                                                   September 23,
                                                                       1996
                                                                    (Inception)
                                                                      Through
                                                                   September 30,
                                           1999          1998          1999

Operating expenses                      $   496,126      108,279     1,394,571

Research and development expenses                 -            -       525,000
                                        --------------------------------------

Loss from operations                       (496,126)    (108,279)   (1,919,571)

Interest income                               4,216         4,960       51,412
                                        --------------------------------------

Net loss                                $  (491,910)    (103,319)   (1,868,159)
                                        ======================================

Basic net loss per share                $     (.022)       (.005)        (.089)
                                        ======================================

Weighted average number of common
    shares outstanding                  $22,625,000   21,600,000    20,971,962
                                        ======================================


See accompanying notes and accountants' report.


                                                                               3
<PAGE>


ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Quarters Ended September 30, 1999 and 1998 and the
Period From September 23, 1996 (Inception)
Through September 30, 1999
<TABLE>
<CAPTION>

                                                                             Equity (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

Issuance of stock
    for 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
                                   =======================================================================

</TABLE>

See accompanying notes and accountants' report.


                                                                               4
<PAGE>



ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Quarters Ended September 30, 1999 and 1998 and the
Period From September 23, 1996 (Inception)
Through September 30, 1999
<TABLE>
<CAPTION>

                                                                                     September 23,
                                                                                         1996
                                                                                      (Inception)
                                                                                        Through
                                                                                     September 30,
                                                           1999            1998          1999
<S>                                                    <C>               <C>          <C>
Reconciliation of net losses to net
  cash provided by operations:
        Net loss                                       $   (491,910)     (103,319)    (1,868,159)
        Depreciation                                         49,688           901         99,324
        Issuance of common stock for
           services and license rights                      300,000             -        876,750
Changes in current assets and liabilities:
        Prepaid insurance                                     4,928             -         (3,288)
        Accounts payable                                     (2,881)      (31,283)             -
                                                       -----------------------------------------
           Net cash flows applied to
               operating activities                        (140,175)     (133,701)      (895,373)
                                                       -----------------------------------------

Cash flows from investing activities:
        Equipment purchases                                  (5,767)         (829)      (123,306)
        Intangible purchases                                (96,593)            -     (1,662,061)
                                                       -----------------------------------------
           Net cash flows applied to
               investing activities                        (102,360)         (829)    (1,785,367)
                                                       -----------------------------------------

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                           1,757,465      (134,530)     2,319,260

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

Cash at end of period                                  $  2,319,260       410,905      2,319,260
                                                       =========================================


</TABLE>

See accompanying notes and accountants' report.


                                                                               5
<PAGE>
ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
September 30, 1999



NOTE 1. NATURE OF BUSINESS

Advanced Engine Technologies, Inc. (the Company), originally a subsidiary of OX2
Engine  (Distribution)  Ltd. (OX2), 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 combustion engine
throughout the United States, Canada and Mexico. On October 18, 1996 the Company
entered  into a contract  with OX2 which was  incorporated  in the  Republic  of
Vanuatu, whereby the Company acquired the rights to manufacture,  distribute and
market the OX2  combustion  engine.  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 certain  tests  (see Note 3). In  December  1998,  both
parties  agreed to cancel the  requirement  to issue the  additional  19,000,000
shares.  In addition,  OX2 has the right to appoint two of the  Company's  three
directors.  As of June 30,  1998,  OX2 owned  approximately  62  percent  of the
Company's outstanding shares.

During the year ended June 30, 1999, OX2 transferred  its ownership  interest to
various  successor  entities,  none  of  which  individually  has a  controlling
interest. These successor entities have common ownership and as a group may have
a controlling interest in the Company.

In May of 1999, the Company  acquired the  world-wide  patent rights for the OX2
engine  from  OX2  in  exchange  for  $1.5   million.   The  Company  will  take
responsibility for patent maintenance and future research and development.

As of June 30, 1999, the Company's operations consisted of obtaining capital and
marketing  the OX2  combustion  engine.  Management  does not expect to generate
significant sales revenue until fiscal year 2000. 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 a Colorado financial institution and is
insured only up to $100,000 by the Federal Deposit Insurance Corporation.

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.


                                                                               6
<PAGE>



NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

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 $139,109 from  September 23, 1996  (inception) to
September 30, 1999,  including  $48,858 for the quarter ended September 30, 1999
and $199 for the quarter ended September 30, 1998.

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 potential  common stock 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.



                                                                               7
<PAGE>


NOTE 3. RELATED PARTY TRANSACTIONS (CONTINUED)

The Company paid consulting fees to its President, who is also a shareholder, in
the amount of $231,093 from September 23, 1996 (inception) to September 30, 1999
including  $19,890 for the quarter ended September 30, 1999, and $19,500 for the
quarter ended September 30, 1998.

The Company paid  administrative  fees and reimbursed expenses to a company that
is owned by one of its  shareholders in the amount of $65,416 from September 23,
1996  (inception) to September 30, 1999 including  $15,406 for the quarter ended
September 30, 1999, and $6,106 for the quarter ended June 30, 1998.

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.

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 cancel
the requirement to issue the additional  19,000,000  shares. The Company is also
to pay a  royalty  of 15  percent  of the  gross  proceeds  of its  revenue.  In
addition, OX2 has the right to appoint two of the Company's three directors.  As
of June 30, 1999,  OX2 had  appointed  one  director  who is also the  Company's
President.  In May 1999,  the Company  acquired the world wide patent rights for
the OX2 engine  from OX2 in exchange  for $1.5  million.  The Company  will take
responsibility for patent maintenance and future research and development.


NOTE 4. INCOME TAXES

At  September  30,  1999 the  Company  had  deferred  tax  assets  amounting  to
approximately  $720,000.  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  $212,000 and $40,000 for the quarter ended September
30, 1999 and 1998, respectively. The net change is due primarily to the increase
in net operating loss carryforwards.


                                                                               8
<PAGE>




NOTE 4. INCOME TAXES (CONTINUED)

At  September  30, 1999 the  Company had net  operating  loss  carryforwards  of
approximately  $1,800,000  available to offset future state and federal  taxable
income.  These  carryforwards  will  expire  in 2017 and 2020  for  federal  tax
purposes and 2002 and 2005 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 the design and  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 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.



                                                                               9
<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 demonstrations to
prospective   original  equipment   manufacturers  of  products  using  internal
combustion engines, work with its joint venture partner to develop an engine for
automobile  use and  developing  additional  joint venture  partners in order to
market the engine.  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  $2,300,000,  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 since  inception  (September 23, 1996)
is $1,868,159.

                  The  Company  expects  to sign  its  first  contracts  for the
production of small engines in fiscal year 2000 and expects as a result to begin
generating  revenue.  There are currently no signed  contracts that will produce
revenue  and  there  can  be no  assurance  management  will  be  successful  in
negotiating these contracts.

                  The  Company's  parent  provides the research and  development
required to bring the product to commercial  production.  In addition, its joint
venture partner undertakes development as well. As a result, the Company expects
to carry out or fund any research and development.

                  The Company does not currently  have any employees  other than
its officers nor does it expect to add any in the next year.


Part II.      Other Information

Item 1.       Legal Proceedings
              None

Item 2.       Changes in Securities
              None


<PAGE>



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:  None

              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/ Murray Bailey
                                          -------------------------------------
Date:  September 30, 1999                 By:   Murray Bailey
                                                President
                                                (Principal Executive, Financial
                                                and Accounting Officer)