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 30, 2000
                                                    ------------------


---      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO __________

                         Commission file number 0-25177
                                                -------

                       Advanced Engine Technologies, Inc.
           ------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

                  Colorado                                 84-1358194
        ---------------------------------               -------------------
         (State or other jurisdiction of                 (IRS Employer
         Incorporation or organization)                 Identification No.)

          11150 W. Olympic Blvd. Suite 1020 Los Angeles, Ca.    90064
          -----------------------------------------------------------------
           (Address of principal executive offices)           (Zip Code)

                                 (310)-914-1849
                           --------------------------
                (Issuer's telephone number, including area code)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X   No
                                                             ---     ---
State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date.  September  30, 2000 -  33,150,000
shares of common stock.

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


<PAGE>

Part I.    Financial Information

Item 1.    Financial Statements

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

                                                                FINANCIAL REPORT
                                                              SEPTEMBER 30, 2000

                                                                               2
<PAGE>


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









                                    CONTENTS

                                                                    Page

ACCOUNTANTS' REPORT                                                   4

FINANCIAL STATEMENTS

         Balance Sheet                                                5

         Statements of Operations                                     6

         Statements of Stockholders' Equity                           7

         Statements of Cash Flows                                     9

         Notes to Financial Statements                               10



                                                                               3
<PAGE>



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




                         Independent Accountants' Report



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


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

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

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



/s/ Neff & Ricci LLP
-----------------------
Albuquerque, New Mexico
November 6, 2000



                                                                               4
<PAGE>

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

ASSETS
Current Assets
    Cash and cash equivalents                                     $ 10,860,615
    Prepaid expenses                                                     9,706
    Due from related party                                              26,000
                                                                  ------------
           Total current assets                                     10,896,321
                                                                  ------------
Fixed Assets
    Automobile                                                          10,000
    Furniture                                                           12,242
    Computer equipment                                                  44,156
    Manufacturing equipment and tooling                                 67,922
    Less accumulated depreciation                                      (53,994)
                                                                  ------------
           Total fixed assets                                           80,326
                                                                  ------------
Other Assets
    Patent rights, net of accumulated
        amortization of $215,396                                     1,306,323
    Patent, copyrights and designs, net of
        accumulated amortization of $16,042                             27,708
                                                                  ------------
           Total other assets                                        1,334,031
                                                                  ------------
           Total assets                                           $ 12,310,678
                                                                  ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
    Accounts payable                                              $     79,181
                                                                  ------------
Commitments And Contingencies

Stockholders' Equity
    Common stock-50,000,000 shares authorized,
    33,150,000 issued and outstanding; $.001 par value            $     33,150
    Additional paid-in capital                                      16,231,100
    Deficit accumulated during the development stage                (4,032,753)
                                                                  ------------
           Total stockholders' equity                               12,231,497
                                                                  ------------

Total liabilities and stockholders' equity                        $ 12,310,678
                                                                  ============
See Notes to Financial Statements.


                                                                               5
<PAGE>

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



                                                                      9/23/96
                                                                    (Inception)
                                                                      Through
                                         2000           1999          9/30/00

Operating expenses                   $    150,314       496,126      1,948,744

Research and development expenses         349,433             -      2,215,809
                                     -----------------------------------------

Loss from operations                     (499,747)     (496,126)   (4,164,553)

Interest income                            13,900         4,216       131,800
                                     -----------------------------------------

Net loss                             $   (485,847)     (491,910)   (4,032,753)
                                     =========================================

Basic net loss per share             $       (.02)         (.02)         (.18)
                                     ========================================

Weighted average number of common
    shares outstanding                 27,960,000    22,625,000    21,884,800
                                     ========================================


See Notes to Financial Statements.




                                                                               6
<PAGE>


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

<TABLE>
<CAPTION>

                                                                                 (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                  20,000,000     $   20,000       (18,000)             -          2,000
Issuance of common stock
    for services                       600,000            600         5,400              -          6,000
Issuance of common stock
    for cash                           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                           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                       325,000            325       568,425              -        568,750
Issuance of common stock
    for cash                           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.


                                                                               7
<PAGE>


ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
Quarters Ended September 30, 2000 and 1999 and the
Period From September 23, 1996 (Inception)
Through September 30, 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                          200,000           200       299,800              -        300,000
Issuance of stock
    for cash                              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                               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

Net loss                                                                            (870,552)      (870,552)
                                      ---------------------------------------------------------------------

Balance June 30, 2000                  22,950,000        22,950     5,941,300     (3,546,906)     2,417,344

Issuance of stock
    for services                          200,000           200       299,800              -        300,000

Issuance of stock for cash             10,000,000        10,000     9,990,000              -     10,000,000

Net loss                                        -             -             -       (485,847)      (485,847)
                                      ---------------------------------------------------------------------

Balance September 30, 2000             33,150,000    $   33,150    16,231,100     (4,032,753)    12,231,497
                                      =====================================================================

</TABLE>

See Notes to Financial Statements.


                                                                               8
<PAGE>


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

<TABLE>
<CAPTION>

                                                                               9/23/96
                                                                             (Inception)
                                                                               Through
                                                   2000            1999        9/30/00

<S>                                            <C>               <C>         <C>
Reconciliation of net losses to net
  cash provided by operations:
     Net loss                                  $   (485,847)     (491,910)   (4,032,753)
     Depreciation and amortization                   47,590        49,688       285,433
     Issuance of common stock for
        assets or services                          300,000       300,000     1,264,250
Changes in current assets and liabilities:
     Prepaid expenses                                13,060         4,928        (9,708)
     Accounts payable                               (36,178)       (2,881)       79,182
     Accrued payroll                                 (5,000)            -             -
     Due from related party                               -             -       (26,000)
                                               ----------------------------------------
        Net cash flows used by
            operating activities                   (166,375)     (140,175)   (2,439,596)
                                               ----------------------------------------

Cash flows from investing activities:
     Fixed asset purchases                                -        (5,767)     (134,321)
     Intangible asset purchases                           -       (96,593)   (1,565,468)
                                               ----------------------------------------
        Net cash flows used by
            investing activities                          -      (102,360)   (1,699,789)
                                               ----------------------------------------

Cash flows from financing activities:
     Issuance of common stock                    10,000,000     2,000,000    15,000,000
     Loan proceeds                                        -             -        50,000
     Loan payments                                        -             -       (50,000)
                                               ----------------------------------------
        Net cash flows provided by
            financing activities                 10,000,000     2,000,000    15,000,000
                                               ----------------------------------------

Net increase in cash                              9,833,625     1,757,465    10,860,615

Cash at beginning of period                       1,026,990       561,795             -
                                               ----------------------------------------

Cash at end of period                          $ 10,860,615     2,319,260    10,860,615
                                               ========================================

See Notes to Financial Statements.
</TABLE>


                                                                               9
<PAGE>


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



NOTE 1.  NATURE OF BUSINESS

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

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

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

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

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



                                       10
<PAGE>


NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
         (CONTINUED)

Cash and Cash Equivalents.  Cash and cash equivalents  include all cash balances
and highly liquid debt instruments with an original  maturity of three months or
less. The Company's cash is deposited in financial  institutions  and is insured
only  up  to  $100,000  by  the  Federal  Deposit  Insurance  Corporation.  Cash
equivalents  consist of  commercial  paper and other  securities,  along with an
irrevocable letter of credit facility in the amount of $10 million.

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

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

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

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

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

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



                                       11
<PAGE>


NOTE 2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
          (CONTINUED)

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


NOTE 3.   RELATED PARTY TRANSACTIONS

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

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

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

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

The Company  has paid for  services to a company  that is a  shareholder  in the
amount of $71,956 from September 23, 1996, (inception) to September 30, 2000.

In May 2000, the Company paid engine development costs to an individual who is a
shareholder of OX2 in the amount of $300,000.



                                       12
<PAGE>



NOTE 3.   RELATED PARTY TRANSACTIONS (CONTINUED)

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

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

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


NOTE 4. INCOME TAXES

At  September  30,  2000 the  Company  had  deferred  tax  assets  amounting  to
approximately  $1,550,000.  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  $200,000  and  $212,000  for  the  quarters  ending
September  30, 2000 and 1999,  respectively.  The net change is due primarily to
the increase in net operating loss carryforwards.

At September  30, 2000,  the Company had net  operating  loss  carryforwards  of
approximately  $3,980,000  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.



                                       13
<PAGE>



NOTE 5. COMMON STOCK

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

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

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

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

In June 1999, the Company agreed to issue  1,000,000  shares of 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 and  second
installments  were  issued in July of 1999 and  2000.  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.



                                       14
<PAGE>


NOTE 5. COMMON STOCK (CONTINUED)

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

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



                                       15
<PAGE>


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

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

         You should read the following  discussion  and analysis in  conjunction
with the Financial  Statements and related Notes thereto contained  elsewhere in
this Report. The information in this Report is not a complete description of our
business or the risks associated with an investment in our common stock. We urge
you to carefully review and consider the various  disclosures made by us in this
Report and in our other reports filed with the SEC,  including our Annual Report
on  Securities  and Exchange  Commission  ("SEC") Form 10-KSB for the year ended
June 30, 2000.

         The section  entitled  "Risk Factors" set forth in this Form 10-QSB and
similar  discussions in our Annual Report on Form 10-KSB for the year ended June
30,  2000 and in our other  SEC  filings,  discuss  some of the  important  risk
factors  that may  affect our  business,  results of  operations  and  financial
condition.  You should carefully  consider those risks, in addition to the other
information  in this  Report  and in our  other  filings  with the  SEC,  before
deciding to invest in our company or to maintain or increase your investment.

         This  Report  contains  forward-looking  statements.  These  statements
relate to future events or our future financial performance.  In some cases, you
can identify  forward-looking  statements by terminology  such as "may," "will,"
"should,"  "except," "plan,"  "anticipate,"  "believe,"  "estimate,"  "predict,"
"potential"  or  "continue,"  the  negative  of such  terms or other  comparable
terminology.  These  statements are only  predictions.  These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and  assumptions  that are difficult to predict.  Therefore,  our actual results
could   differ   materially   and   adversely   from  those   expressed  in  any
forward-looking  statements as a result of various factors. Moreover, neither we
nor any other person assumes responsibility for the accuracy and completeness of
the  forward-looking  statements.  We are  under  no duty to  update  any of the
forward-looking  statements  after  the  date of this  report  to  conform  such
statements to actual results or to changes in our expectations.

Overview
--------

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

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


                                       16
<PAGE>

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

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

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

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

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

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

         Our net loss since inception (September 23, 1996) is $4,032,753.

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


                                       17
<PAGE>

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

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

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

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

o    Our cash reserves may not be adequate to cover our costs of operations.  To
     date, we have covered our operating losses by privately placing securities.
     We expect to fund our general operations and marketing  activities for 2001
     with our  current  cash  reserves,  which  were  obtained  from the sale of
     securities.  However,  our cost estimates do not include provisions for any
     contingencies, unexpected expenses or increases in costs that may arise.

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



                                       18
<PAGE>

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

o    If we are found to infringe on the intellectual  property rights of others,
     we may  not be able to  continue  the  development  and  production  of our
     engine,  or we  may  have  to  enter  into  costly  license  or  settlement
     agreements.  Third  parties may allege  infringement  by us with respect to
     past,  current  or  future  intellectual  property  rights.  Any  claim  of
     infringement,  regardless  of merit,  could be costly,  time  consuming and
     could  require  us to  develop  non-infringing  technology  or  enter  into
     royalty,  licensing or settlement agreements.  These agreements could be on
     terms  unfavorable or unacceptable to us and could  significantly  harm the
     development of our product, and ultimately, our business. In the future, we
     may also have to enforce our patent and other intellectual  property rights
     through  litigation.  Any such enforcement could also result in substantial
     costs and could materially affect our financial condition and our business.

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

o    We have a history of losses. We have a history of operating losses,  and an
     accumulated  deficit, as of September 30, 2000, of $4,032,753.  Our ability
     to generate  revenues and profits is subject to the risks and uncertainties
     encountered by development stage companies.

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


                                       19
<PAGE>

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

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

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

Part II. Other Information

Item 1.  Legal Proceedings

         None

Item 2.  Changes in Securities

(c)

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

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

Item 3.  Default upon Senior Securities

         None

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

         None


                                       20
<PAGE>

Item 5.  Other Information

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

Item 6.  Exhibits and Reports on Form 8-K

         a)  Exhibits 10.6: 10 Million Share Subscription Agreement

         b)  Reports on Form 8-K: None





                                       21
<PAGE>


                                   SIGNATURES

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

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

By:                                 /s/ Carroll Shelby
          ---------------------------------------------------------------------
                                Carroll Shelby, President
Date:                               November 10, 2000
          ---------------------------------------------------------------------




By:                                  /s/ Neil Cummings
          ---------------------------------------------------------------------
                              Neil Cummings, Treasurer/Secretary
Date:                                  November 10, 2000
          ---------------------------------------------------------------------





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