##### 



SECURITIES AND EXCHANGE COMMISSION    FORM 10-KSB  (Mark one) [x] Annual report under section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2003   [  ] Transition report under section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition Period from            to             . Commission file number: 000-32217  O2Diesel Corporation   Washington
    
    91-2023525(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 100 Commerce Drive Suite 301
Newark, Delaware
    
    19713(Address of principal executive offices)
    
    (Zip Code)
 Issuers telephone number: (302) 266-6000 Securities registered under Section 12(b) of the Act: None Securities registered under Section 12(g) of the Act:
Common Stock, $0.0001 par value   Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 [  ]                  Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [x] Issuers revenues for its most recent fiscal year: $12,204




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The aggregate market value of the voting stock held by non-affiliates of the
registrant on April 21, 2004, computed by the average bid and asked price as of
April 21, 2004, at which the stock was sold, was $89,260,000, assuming solely
for purposes of this calculation that all directors and executive officers of
the issuer are affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes. On April 21, 2004, the registrant had 29,049,772 shares of Common Stock,
$0.0001
par value per share, issued and outstanding. TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: Yes [  ] No [X]




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EXPLANATORY NOTE: This Amendment No. 1 to the Form 10-KSB for the fiscal year ended December 31,
2003 for O2Diesel Corporation (the Company) reflects the addition of the
information required by Part III of Form 10-KSB, which was omitted in reliance
on General Instruction E(3) thereto. We have made no further changes to the
previously filed Form 10-KSB. Except as otherwise specifically noted, all
information in this Form 10-KSB/A is as of December 31, 2003 and does not
reflect any subsequent information or events. INDEX TO
AMENDMENT NUMBER 1 TO ANNUAL REPORT ON FORM 10-KSB
FOR THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 2003 PART IIIItem 9.
    
    Directors, Executive Officers Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
    
    
    3Item 10.
    
    Executive Compensation
    
    
    4Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
    
    
    6Item 12.
    
    Certain Relationships and Related Transactions
    
    
    7Item 14.
    
    Principal Accountant Fees and Services
    
    
    8SIGNATURES
    
    
    
    
    9




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NOTE REGARDING FORWARD LOOKING STATEMENTS This annual report on Form 10-KSB contains forward-looking statements
concerning O2Diesel Corporation (O2Diesel, the Company or the Registrant)
and its future operations, plans and other matters. Any statements that involve
discussions with respect to predictions, expectations, beliefs, plans,
projections, objectives, assumptions or future events or performance (often,
but not always, using phrases such as expects, or does not expect, is
expected, anticipates or does not anticipate, plans, estimates or
intends, or stating that certain actions, events or results may, could,
might, or will be taken or occur or be achieved) are not statements of
historical fact and may be forward looking statements which include
statements relating to, among other things, the ability of O2Diesel to
effectively integrate the business of AAE Technologies International Plc into
its operations and successfully compete in the fuel additive and fuel
distribution business. O2Diesel cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. Such
forward-looking statements are based on the beliefs of O2Diesels management as
well as on assumptions made by and information currently available to O2Diesel
at the time such statements were made. Forward-looking statements are subject
to a variety of risks and uncertainties which could cause actual events or
results to differ from those reflected in the forward-looking statements,
including, without limitation, the failure to obtain adequate financing on a
timely basis and other risks and uncertainties. Actual results could differ
materially from those projected in the forward-looking statements, as a result
of either the matters set forth or incorporated in this report generally or
certain economic and business factors, some of which may be beyond the control
of O2Diesel. These factors include adverse economic conditions, entry of new
and stronger competitors, inadequate capital, unexpected costs, failure to gain
product approval in the United States or foreign countries for the
commercialization and distribution of its products and failure to capitalize
upon access to new markets. O2Diesel disclaims any obligation subsequently to
revise any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events. 2




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Item 9. Directors and Executive Officers of the Registrant The following table sets forth the names, ages and positions of the Companys
executive officers and directors as of April 21, 2004: Name
    
    Age
    
    PositionAlan R. Rae
    
    
    45
    
    
    President, Chief Executive Officer and DirectorDavid L. Koontz
    
    
    61
    
    
    Chief Financial Officer, & Secretary and DirectorAnthony Dean-Smith
    
    
    71
    
    
    ChairmanKarim Jubanputra
    
    
    40
    
    
    DirectorHendrik Rethwilm
    
    
    39
    
    
    DirectorRichard J. Roger
    
    
    44
    
    
    Director
 Alan R. Raehas been President, Chief Executive Officer and a Director of the
Company since July 15, 2003.
Mr. Rae joined the AAE Technologies group of companies in 1997, and has served
as a Director and an executive of several companies within the group.  In August 1999, he became a Director and
President of AAE Technologies, Inc. (now O2Diesel Inc.),
and in October 2000 became a Director and Chief Operating Officer
of AAE Technologies International PLC and continues to hold
these positions in both companies. Mr. Rae was a Director and the Chief
Executive Office Officer of AAE Holdings plc (UK) from October 1998 until
September 2001. He was the Chief Executive Officer and a Director of AAE
Technologies Ltd. from October 1997 until September 2001. David L. Koontzhas been Chief Financial Officer and Secretary of the Company
since July 15, 2003. He joined the Company in September 2002, serving first
as the Chief Financial Officer and Secretary of O2Diesel Inc. Prior to joining
the Company, Mr. Koontz had worked primarily as an independent business
consultant, mostly with businesses located in Asia, for the period 2000 to
September 2002. During 1999, Mr. Koontz acted as a consultant and chief
financial officer for Hard Corps Sports, an apparel company in Boulder,
Colorado. Anthony Dean-Smithhas been a Director of the Company since July 15, 2003, but
has served as a Director and Executive of the AAE Technologies group of
companies since October 1999. Mr. Dean Smith is a Director
and Chief Operating
Officer of AAE Technologies International Plc, and a Director of O2Diesel Inc.,
AAE Technologies Holdings Plc and AAE Technologies Limited. Mr. Anthony
Dean-Smith also owns companies in the United Kingdom that are active in the
development and management of real estate properties. Karim Jubanputrahas been a Director since July 15, 2003. Mr. Jubanputra is an
entrepreneur and owns companies that do business mostly in the Middle East and
Europe. Mr. Jubanputra has experience in the areas of corporate finance and
international business development, and also works as a self-employed
consultant. For the past 5 years he has provided
consulting services to private companies in the areas of corporate finance and
business development in the Asian and Middle East markets, including Indonesia,
Qatar, Saudi Arabia, India and China. Hendrik Rethwilmhas been a Director since July 15, 2003. From 1993-1999, he
worked with PricewaterhouseCoopers in its corporate finance department focusing
on financial and organizational restructuring of medium-to-large sized
companies. Subsequently, from 2000-2001, Mr. Rethwilm worked with a subsidiary
of Ericsson as a financial executive, the Swedish mobile phone producer,
advising on mobile eCommerce. During his tenure with Ericsson, Mr. Rethwilm
also developed a venture capital arm within Ericsson Consulting to invest in
companies developing applications for the mobile eCommerce sector. Currently,
Mr. Rethwilm is self-employed and provides consulting services to various
companies in the areas of corporate finance and business development. He
previously served on the board of Directors of Rapidtron Inc., a company that
trades on the OTCBB under the symbol RPDT, but resigned effective December
31, 2003. 3




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Richard Rogerbecame a Director on April 18, 2004. He is currently the
President and Chief Operating Officer of Performance Transportation Services,
Inc., which is the second largest transporter of new cars in the United
States. Prior to holding this position, Mr. Roger was a Director, President
and Chief Operating Officer of U. S. Fleet Services, Inc, from May 2002 to June
2003. U.S. Fleet Services was one of the
largest mobile fleet refueling companies in the U.S. Prior to that, Mr. Roger
was a senior vice-president with Ryder Transportation Services, Inc., the
largest full service truck company in the U.S. that specializes in renting and
leasing all types of trucks for use in all transportation sectors. Audit Committee Financial Expert The Board has not formed a separate audit committee. Pursuant to Section
3(a)(58)(B) of the Exchange Act, the entire Board of Directors acts as an audit
committee for the purpose of overseeing the Companys accounting and financial
reporting processes and the audits of the Companys financial statements. The
Board of Directors has determined that the Company does not have an audit
committee financial expert, as defined in U.S. Securities and Exchange
Commission (SEC) rules, serving on its Board. However, the Board believes
that its members are able to read and understand financial statements of the
Company, are familiar with the Company and its business, and are capable of
fulfilling the duties and responsibilities of an audit committee. The Company
is considering expanding the size of its Board of Directors and is attempting
to identify and retain an audit committee financial expert to serve on its
Board. Code of Ethics The Company has not adopted a Code of Ethics, as defined by SEC rules that
applies to the Companys Chief Executive Officer and Chief Financial Officer,
and Secretary (its principal executive officer and principal accounting and
financial officer). The Company has not adopted such a Code of Ethics because
of the small size and limited resources of the Company, and because
managements attention has been focused on matters pertaining to raising
capital, the operation of the business and other matters resulting from the
July 15, 2003 acquisition transaction. Management and the Board are
considering adopting a Code of Ethics and the Board may adopt such a code at a
later date if it and management believe that the development and adoption of a
Code of Ethics would be beneficial to the Company and its shareholders. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934 (the 1934 Act)
requires the Companys executive officers, directors and persons who
beneficially own more than 10% of a registered class of the Companys equity
securities to file with the SEC initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the
Company. Such executive officers, directors and greater than 10% beneficial
owners are required by SEC regulation to furnish the Company with copies of all
Section 16(a) reports filed by such reporting persons. Based solely on the Companys review of copies of such reports furnished
to the Company and written representations that no other reports were required
during the year ended December 31, 2003, the Company believes that all Section
16(a) filing requirements applicable to the Companys executive officers,
directors, and greater than 10% beneficial owners were complied with. 
 Item 10. Executive Compensation Compensation of Executive Officers The following summary compensation table sets forth the aggregate
compensation paid or accrued by us to the Chief Executive Officer and to
executive officers whose annual compensation exceeded $100,000 for the year
ended December 31 2003 (collectively, the named executive officers) for
services during the fiscal years ended December 31, 2003, 2002 and 2001. 4




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Annual Compensation
    
    Long Term CompensationName and Principal
    
    
    
    
    
    Securities
    
    All OtherPosition
    
    Year
    
    Salary ($)
    
    Underlying Options
    
    CompensationAnthony Dean-Smith
    
    2003
    
    136,964
    
    (c)Chief Executive
    
    2002
    
    0 (c)
    
    2,500,000 (c)Officer
    
    2001
    
    38,032 (c)(AAE Technologies
International Plc)Alan Rae
    
    2003
    
    250,000
    
    
    
    66,320 (a) (b)President and Chief
    
    2002
    
    172,806
    
    
    
    2,767 (b)Executive Officer
    
    2001
    
    161,755
    
    2,500,000 (d)David Koontz
    
    2003
    
    177,500
    
    
    
    13,356 (b)Chief Financial
Officer
    
    2002
    
    27,500
    
    
    
    1,154 (b)and Secretary
    
    2001
    
    0
  (a)
    
    Mr. Rae received a one-time payment of $50,000 to defray relocation
costs for his move from the United Kingdom to the U.S. in 2002. The
amount was finalized and payment was made to Mr. Rae in 2003. The
excess of this amount represents health and dental premiums paid on
behalf of Mr. Rae and is more fully explained in footnote (b).(b)
    
    The Company pays monthly health and dental premiums for Mr. Rae and
monthly health premiums for Mr. Koontz.(c)
    
    In 2001, Mr. Anthony Dean-Smith was given shares in AAE Technologies
International Plc in lieu of salary for payment of his services as an
officer. In 2002, Mr. Anthony Dean-Smith was given 2.5 million options
on AAE Technologies International Plc common stock at an exercise price
of GBP .04 per share as an incentive for Mr. Anthony Dean Smith to
remain with the Company. In addition, in 2003, the Board agreed to
reduce the exercise price on the 2.5 million previously granted options
held by Mr. Anthony Dean-Smith from GBP .04 to GBP.026.(d)
    
    In connection with the July 15, 2003 transaction between DVI and AAE
Technologies International Plc, Mrs. Victoria Rae exercised options to
acquire 2.5 million shares of AAE Technologies International Plc. at a
total cost of $224,000. Mrs. Rae had previously received these options
from Mr. Rae by way of a gift of his interest in these options to her in
2001. Mr. Rae had acquired these options in connection with a share
rights offering in 2001. Under the terms of the options held by Mrs.
Rae, the options were to expire, if not exercised prior to the July 15,
2003 change of control transaction. The following summary option table sets for the options exercised in the last
fiscal year. Name
    
    Shares Acquired on
    
    Value
    
    Number of
    
    Value ofExercise (#)
    
    Realized
    
    Securities
    
    Unexercised Money($)
    
    Underlying
    
    Options/SARsUnexercised
    
    In the Money atOptions/SARS
    
    FY End ($)at FY End (#)
    
    Exercisable/Exercisable/
    
    UnexercisableUnexercisableAnthony Dean-Smith
    
    
    2,500,000
    (a)
    
    
    711,906
    
    
    
    0/0
    
    
    
    0/0
  (a)
    
    In connection with the July 15, 2003 transaction between DVI and AAE
Technologies International Plc, Mr. Dean-Smith exercised options to
acquire 2.5 million shares of AAE Technologies International Plc. Under
the terms of the options held by Mr. Dean-Smith, the options were to
expire, if not exercised prior to the July 15, 2003 change of control
transaction. The named executive officers did not receive any options during the year
ended December 31, 2003 and did not own any options as of December 31, 2003. 5




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Compensation of Directors The Chairman of the Board receives $150,000 per year and other non-executive
directors receive $30,000 per year for their services as a director. In
addition, Mr. Rethwilm and Mr. Jubanputra also provide financial and business
advisory services to the Company, and each is paid $30,000 per year for these
services. All directors are reimbursed for ordinary and necessary business
expenses incurred in connection with their service as directors. As part of
the Companys consulting agreements with Mr. Rethwilm and Mr. Jubanputra, each
are entitled to receive 750,000 stock options at an exercise price of $1.50,
which shall be granted pursuant to the Companys equity compensation plan. Employment Contracts and Termination of Employment and Change-in-Control
Arrangements In July 2003, the Company entered into an Employment Agreement with Alan
R. Rae, to serve as our President and Chief Executive Officer. Pursuant to the
Agreement, Mr. Rae is entitled to an annual base salary of $254,000 per year
and is eligible to receive an annual bonus, at the discretion of the Board, of
100% of his base salary. He is also entitled to reimbursement for health and
dental insurance premiums and a car allowance of $1,000 per month. Pursuant to
the agreement, the Company shall grant Mr. Rae 1,500,000 stock options at an
exercise price of $1.50 per share, which will be granted pursuant to the
Companys equity compensation plan, once it is approved by the Companys
shareholders. The agreement continues in effect until terminated by either Mr.
Rae or the Company by written notice or upon the death or disability (as
defined in the agreement) of Mr. Rae. If the Agreement is terminated by
disability, Mr. Rae is entitled to receive his salary until he begins to
receive disability benefits, to receive a prorated portion of any bonus he
would otherwise have been entitled to and to be paid for any accrued but unused
vacation. If the agreement is terminated by the Company without cause (as
defined in the agreement), Mr. Rae is entitled to receive his base salary and
reimbursement for health and dental insurance premiums for a period of 15
months, to be paid for any unused vacation time, and to be reimbursed for
expenses in connection with his and his familys repatriation to the United
Kingdom. In addition, Mr. Rae would be entitled to a prorated portion of any
bonus to which he otherwise would have been entitled based on performance
through the calendar quarter in which the termination occurred, and any
unvested options will vest immediately. Upon a change of control, as defined in the agreement, all of Mr. Raes
outstanding options will vest immediately. The agreement also provides that
any inventions (as defined in the agreement) discovered by Mr. Rae in the
course of his service to the Company shall be the property of the Company, and
contains confidentiality, non-disparagement and non-competition provisions. The Company has also entered into an Employment Agreement with David L.
Koontz in July 2003, to serve as our Chief Financial Officer. The terms of Mr.
Koontz Employment Agreement are substantially similar to the terms of Mr.
Raes Employment Agreement, as described above, except that Mr. Koontz is
entitled to an annual base salary of $200,000 per year and 600,000 stock
options. 
 Item 11. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters The following table sets forth certain information as of April 21, 2004,
regarding the beneficial ownership of the Companys Common Stock by (i) those
persons known to the Company to be the beneficial owners of more than 5% of the
outstanding shares of Common Stock, (ii) each of the named executive officers,
(iii) each director of the Company, and (iv) all current directors and
executive officers as a group. Beneficial ownership is determined in accordance with SEC rules computing
the number of shares of Common Stock beneficially owned by a person and the
percentage ownership of that person. Except as indicated in the footnotes to this table, each stockholder named
in the table below has sole voting and investment power for the shares shown as
beneficially owned by them. Percentage of ownership is based on 29,049,772
shares of Common Stock outstanding on April 21, 2004. None of the Companys
Directors, Officers or 5% shareholders own options currently exercisable within
60 days after April 21, 2004. 6




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Directors, Officers and
    
    Shares Directly and5% Shareholders
    
    Beneficially Owned
    
    PercentAnthony Dean Smith
100 Commerce Drive Suite 301
Newark, Delaware 19713
    
    
    4,337,451
    (a)
    
    
    14.93
    %Alan Rae
100 Commerce Drive Suite 301
Newark, Delaware 19713
    
    
    1,519,022
    (b)
    
    
    5.23
    %David Koontz
100 Commerce Drive Suite 301
Newark, Delaware 19713
    
    
    90,512
    
    
    
    0.31
    %Rick Roger
100 Commerce Drive Suite 301
Newark, Delaware 19713
    
    None
    
    NoneHendrik Rethwilm
100 Commerce Drive Suite 301
Newark, Delaware 19713
    
    None
    
    NoneKarim Jubanputra
100 Commerce Drive Suite 301
Newark, Delaware 19713
    
    None
    
    NoneAll directors and officers as a group.
    
    
    5,946,985
    
    
    
    20.47
    %
  (a)
    
    Mr. Anthony Dean-Smith owns directly 2,809,524 shares of the
Companys common stock. Mrs. Dean-Smith (spouse) directly owns 342,323
shares and Mr. Dean-Smiths two adult sons each own 592,802 shares. Mr.
Dean-Smith disclaims beneficial ownership of the shares held by his
spouse and two adult sons.(b)
    
    A trust of which Mr. Rae is the beneficiary holds 819,787 shares, and
Mrs. Victoria Rae, (spouse), owns 699,235 shares of the Companys common
stock. Mr. Rae disclaims beneficial ownership of the shares held by the
trust to the extent that they are not attributable to his proportionate
interest in the trust. Mr. Rae also disclaims beneficial ownership of
the shares held by Victoria Rae. Securities Authorized for Issuance Under Equity Compensation Plans The Company did not have any equity compensation plans in place during the
year ended December 31, 2003. The Board has since adopted an equity
compensation plan that will be presented to the shareholders for approval at
the Companys 2004 annual meeting of shareholders. 
 Item 12. Certain Relationships and Related Transactions None. 
 7




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Item 14. Principal Accountant Fees and Services We retained our current auditors, Ernst & Young, on February 4, 2004. We
did not pay any fees to Ernst & Young during the year ended December 31, 2003.
However, we expect to pay fees of approximately $130,000 to Ernst
& Young during 2004 in connection with the audit of the Companys consolidated financial
statements for the year ended December 31, 2003. We did not accrue any
audit-related, tax fees or other fees to Ernst & Young for the
year-ended 2003, as Ernst & Young performed no such services. Prior to retaining Ernst & Young, Cremin McCarthy & Company served as the
Companys auditors. During our fiscal years ended December 31, 2003 and 2002,
Cremin McCarthy & Company provided services to us in the following categories
and amounts: Description
    
    2003
    
    2002Audit Fees
    
    $
    3,246
    
    
    $
    34,152Audit-Related Fees
    
    $
    12,140
    
    
    $
    0Tax Fees
    
    $
    0
    
    
    $
    1,132All Other Fees
    
    $
    95,475
    
    
    $
    0
 In the above table, in accordance with SEC definitions and rules, audit
fees are fees we paid to Cremin McCarthy & Company for professional services
for the audit of our consolidated financial statements. Audit related fees
are fees billed by Cremin McCarthy & Company for assurance and related
services that are reasonably related to the performance of the audit or review
of our financial statements, including the preparation of a GAAP footnote
comparing UK/Irish GAAP to US GAAP. Tax fees are fees primarily for tax
compliance in connection with filing Irish income tax returns. All other
fees are fees billed by Cremin McCarthy & Company to us for any services not
included in the first three categories, including the rendering of a competent
person opinion in connection with the July 15, 2003 transaction and for
services in preparing a long-form and short form report to be used as part of
the Companys attempt to obtain a listing on the Alternative Investment Market
of the London Stock Exchange. 8




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SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. O2Diesel CorporationBy:
    
    /s/ Alan RaeAlan Rae
President, Chief Executive Officer and DirectorDate:
    
    April 29, 2004
 9