U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   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 __________June 30, 1999____________________

                                       OR

       ______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.
    -----------------------------------------------------------------------
                 (Name of Small Business Issuer in Its Charter)

            Colorado                                         84-1358194
   -------------------------------                        ------------------
   (State or Other Jurisdiction of                        (I.R.S. Employer
    Incorporation or Organization                        Identification No.)

9909 Osuna Road, N.E., Albuquerque, New Mexico                87111
----------------------------------------------           --------------
  (Address of Principal Executive Offices)                  (Zip Code)

                                 (505) 323-7341
     ----------------------------------------------------------------------
                           (Issuer's Telephone Number)


Securities to be registered under Section 12(b) of the Act:


Title of Each Class                            Name of Each Exchange on Which
to be so Registered                            Each Class is to be Registered

      None                                                   None
------------------                             ------------------------------

<PAGE>


           Securities to be registered under Section 12(g) of the Act:

                          Common Stock, $.001 par value
    -----------------------------------------------------------------------
                                (Title of Class)

___X___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 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 any
amendment to this Form 10-KSB.

         State issuer's revenues for its most recent fiscal year.___$-0-______

         The aggregate market value of the common equity held by  non-affiliates
computed by reference to the price at which the common  equity was sold,  or the
average  bid and asked  price of such  common  equity  ($6.00  per  share) as of
September 7, 1999 was $44,624,256.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable  date.22,325,000 common shares as
of June 30, 1999_

         Transitional Small Business Disclosure Format (check one):
Yes________  No_________


<PAGE>



                                     PART I

Item 1. Description of Business

        General

        Advanced  Engine  Technologies,  Inc.  (the  "Company")  was  formed  to
commercialize the OX2 internal combustion engine, a  state-of-the-art,  uniquely
designed which is  environmentally  more compatible than engines used today. The
primary focus of the Company will be on the commercial  introduction  of the OX2
engine  and  subsequent  licensing  of the OX2  engine  technology  to  approved
manufacturers.

The Company had entered  into an  exclusive  license  agreement  with OX2 Engine
(Distribution) Ltd. ("OX2") to manufacture, distribute and market the OX2 engine
in the North  American  Free Trade  Agreement  countries  (presently  the United
States, Canada and Mexico). Under the sub-license agreement, the Company had the
exclusive license to manufacture,  distribute and market the OX2 engine which is
subject to the patent in NAFTA countries. The Company was to issue 39,000,000 to
OX2 (the  licensor):  20,000,000  upon  signing the  agreement  (issued)  and an
additional  19,000,000  shares upon  presentation  of  certified  emission  test
results.  In December  1998,  both parties  agreed to cancel the  requirement to
issue the additional 19,000,000 shares upon completion of certain criteria.  The
sub-license  agreement  was for the life of the  patent or a  minimum  of twenty
years,  whichever  is longer.  OX2 was the licensee of the  technology  from OX2
Intellectual  Property,  Inc.,  a foreign  corporation  which was  assigned  the
technology  from the  original  patent  holders.  In May 1999,  Advanced  Engine
Technologies, Inc. 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 R&D.

        At the present  time only a prototype  of the OX2 engine has been built.
No OX2 engines have been  manufactured  for production use, and no assurance can
be given that the OX2 will be successfully manufactured.

        On  July  15,  1998,   Carroll  Shelby,   a  director  of  the  Company,
individually  and as Trustee of the Carroll  Hall  Shelby  Trust and the Company
entered  into a joint  venture  agreement to develop the OX2 engine for use in a
standard  application  for motor  vehicles  and to promote the OX2 engine to the
automotive  industry.  The  agreement is to expire  December  31,  2001.  Shelby
received  300,000  shares of the Company for the initial joint venture  contract
and will receive an additional  250,000  shares of the Company if the OX2 Engine
is developed for use in a standard  application  for motor vehicles and promotes
the OX2 engine to the automotive industry.

        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.


                                       3
<PAGE>

        Product Overview

        The OX2 internal combustion engine is fuel efficient,  light weight, low
emission, multi fueled, smaller,  inexpensive,  higher power to weight ratio and
without complex manufacture/production requirements. Preliminary statistics have
shown the OX2 engine either meets or in most cases exceeds  requirements  in all
area of existing  internal  combustion  engines.  The OX2 engine will be applied
from zero to multi  thousand  horse-power,  for lawn mowers,  chain saws,  brush
cutters,  marine  inboard/outboards,   generators,   aircraft,   automotive  and
industrial engines.

        The fact that the OX2  engine  has only six major  components,  of which
only three move, results in low set-up and production costs with a simplicity of
design that promotes a high level of quality assurance.

        The major parts are as follows: (1) housing, (2) cylinder block, (3) top
piston plate,  (4) lower piston plate,  (5) com track,  and (6) drive shaft. The
moving parts are: (1) cylinder block, (2) top piston plate, and (3) lower piston
plate.

        The data  given  below is related to the  current  prototype  however it
should be noted that the engine is flexible enough to allow these  parameters to
change to best suit a particular application.

               Number of Combustion
               Chambers                           8
               System                             4  Stroke
               Diameter                           12.8 inches/325 mm.
               Width                              10  inches/254 mm.
               Weight                             140 lb./63.5 kilos
               Actual Cubic Capacity              66.25 c.i./ 1086 cc
               Fuel                               Any combustible gas
                                                  or liquid.

        Brief Synopsis of the OX2 Engine

        Set forth is a comparison  and  description  of the operation of the OX2
engine against a normal four stroke conventional engine (hereinafter referred to
as "4sc Engine").

        The current  prototype of the OX2 engine has two spark plugs,  two spark
plugs leads and coils. There is no crank shaft,  distributor,  sump, or oil pump
and in fact there is no need for oil  pressure  to support  bearings,  however a
small amount of oil is used for cooling.

        The combustion chambers are only slightly longer than the stroke,  (e.g.
a 75mm. stroke requires a 87 mm. combustion chamber) and pistons need only to be
thick  enough to house the rings.  There are no piston  skirts and the rings are
the only contact  point with the bore.  In other words at no time do the pistons
touch  the  bore  and  nor are  they  reliant  on it for  support.  This  system
eliminates loading on the sides of the combustion chambers.


                                       4
<PAGE>

        Not  counting  seals  and  bearings  the OX2  engine  has only six major
components,  and  should be  easier to  manufacture  than a  cylinder  head of a
conventional four cylinder engine. There are only two wearing parts, which would
wear at a rate similar to ordinary  piston rings.  Once the engine is set to its
operating setting it needs little or no servicing.

        The current OX2 engine  fires four times as often as a  4scEngine,  i.e.
For every  complete  cycle of a  4scEngine  the OX2  engine has  completed  four
cycles.  Therefore  engine capacity of the OX2 engine when compared to 4scEngine
is calculated by multiplying the actual engine capacity by four.

        Because the OX2 engine  does not use a  conventional  crankshaft  it has
been able to achieve a leverage  advantage  of 6.6 times over a 4scEngine  which
has a similar  stroke.  The method  used to achieve  this is the  subject of the
engine patent.

        Further,  the OX2  engine  design  enables  the  timing  to be  adjusted
sufficiently  to produce the most effective burn of the  combustible  fuel being
used  irrespective  of the engine  R.P.M.  This is possible  due to the extended
dwell at the top of the  compression  stroke.  Compare this to a 4scEngine where
pre ignition occurs if the timing is advanced to far,  causing  combustion prior
to the top of the  stroke.  The  result  of  which  is  resistance  against  the
crankshaft thus causing a loss of energy.

        OX2 piston speed  (which is  controlled  by the fuel burn rate)  remains
constant  throughout the entire power stroke at the leverage  advantage referred
to above. The inlet and exhaust valves do not commence to open until the exhaust
and power strokes respectively have been fully completed.  They then remain open
long enough to ensure maximum operating efficiency.  This enables more regulated
mixture  to be  induced  prior to firing and for  exhaust  gases to be  expelled
efficiently.

        Compare this to the  combustion  signature  of a 4scEngine  where piston
speed increases and decreases twice during the power stroke.  To begin with, the
majority  of the power  from the firing  occurs at the top of the  stroke  where
there is little or no  leverage.  By the  middle of the stroke  (where  there is
maximum  leverage)  the  piston  is out  accelerating  the  maximum  burn  rate,
resulting  in a loss of  torque.  Towards  the end of the  stroke  the piston is
decelerating again, the outlet port is starting to open and energy is being lost
through  the  exhaust.  Added to this at high revs  there is  considerable  back
pressure form exhaust  gasses trying to escape out of the valves,  again causing
resistance and a loss of efficiency.  A significant  advantage of the OX2 engine
design is that it has a capability  to lengthen or shorten the piston stroke and
dwell  at  top  dead  center  during  engine  operation  thus  ensuring  optimum
efficiency at all times irrespective of engine revs or load.

        A further  feature  of the OX2 engine is that it  achieves  considerable
torque  at  all  stages  through  its  operating  range.  Consequently  in  most
applications  there  would be no need for the engine to  operate at revs  higher
than 2500 rpm. In some  instances  this would  eliminate the need for a gear box
and would  certainly  reduce  engine  wear.  However,  if high  engine revs is a
prerequisite  for a  particular  application,  then the OX2 engine can be easily
adapted accordingly.


                                       5
<PAGE>

        Combustion Chamber & Porting

             Conventional Engine

        Air & fuel is taken in to the combustion chamber through the intake port
and past the intake valve which is located off to one side of the cylinder.  The
valve  being  fully open for only a  percentage  of the stroke and the port size
being  restricted by the combustion  chambers  ability to house any larger valve
while still leaving room for the exhaust valve. The valves  themselves  restrict
the efficient flow of gasses into and out of the  combustion  chamber as well as
creating  turbulence as gasses attempt to flow around them again causing further
restrictions to the smooth and efficient flow of gasses.

             OX2 Engine

        In the OX2  engine  air and fuel is taken in to the  combustion  chamber
through  one port  located in the center of the  combustion  chamber.  This port
could be the size of the  chamber  if so  desired.  It is fully  opened  for the
entire  duration of the stroke plus some additional time to allow a full chamber
of air & fuel. There is no valve  restricting the flow and the chamber is convex
in shape so as to fully change the cylinder with maximum efficiency.  Due to the
fact that this port is also the  exhaust  port a heat  transfer  takes  place on
intake thus cooling the port and seal while maximizing fuel  vaporization in the
one simple process.  Added to this is the  recirculation  of exhaust gasses into
the combustion  chamber on intake which also assists in the  vaporization of the
fuel.

             Conventional Engine Vacuum

        To control engine power and speed the flow of air and fuel is restricted
to the combustion  chamber via a carburetor or throttle body and fuel injectors.
(Less fuel and air  results in less  potential  energy  for heat  expansion  and
therefore  less power and lower engine revs).  The negative  affect of this in a
conventional  engine is high engine  vacuum,  which  produces two energy wasting
affects:  (1) it takes a great deal of energy for the piston to travel  down the
bore  under  such  vacuum;  and (ii) on  completion  of the  intake  stroke  the
combustion  chamber  still does not have full volume of air fuel  mixture and as
you can only  compress  what is in the  cylinder in the first place  compression
will not be optimum,  as a result maximum  efficiency from the potential  energy
will not be obtained.

             OX2 Engine

        The OX2 engine is  designed  to have  exhaust  gasses fed back in to the
combustion  chamber,  so as the throttle is backed off more exhaust gasses enter
the  combustion  chamber  ensuring that engine  pressure is only slightly  below
atmospheric  pressure thus eliminating the majority of the vacuum created.  This
ensures  that there is no waste of energy  fighting  vacuum and also  allows for
optimum  compression  regardless of the air fuel delivery.  This means that more
fuel is used  driving  the  piston and less  wasted  pressuring  the  combustion
chamber.  As there was little pressure  differential  the air fuel induced in to
the  cylinder  does not drop in  temperature  and when the heat of  recalculated
exhaust gasses is added to this the fuel remains in a gaseous form thus ensuring
an efficient burn.


                                       6
<PAGE>

             Marketing

        The total size of the  internal  combustion  engine  industry  makes the
introduction  of  any  significant   change  to  industry  standards  a  complex
promotional and marketing exercise.  The multi-purpose  nature of the OX2 engine
should make it compatible to all market  applications,  providing an opportunity
from a market that is demanding change.

        The initial  introduction of the OX2 engine will be to specialist engine
manufacturers who produce purpose built engines.  Sub-licenses by the Company to
manufacture  OX2  engines  will be  issued  to only a  limited  number of engine
manufacturers,  achieving a manageable and controlled market introduction.  This
will ensure that all  efforts  are  focused to the  success of  consolidating  a
targeted market share and the development of cash flow.

        It is expected  that income will be generated in two ways:  (1) approved
manufacturers will pay a licensing fee for the right to produce and sell the OX2
engine,  license fees will be determined by territory size and market potential,
and (ii) for each engine  produced and sold a royalty  payment will be received,
with royalty payments will be determined by engine capacity and application.

             Patents

        International  Patent  Application.  No PCT/AU95/00815 -- in the name of
Advanced  Engine  Technologies,  Inc. -- Axial Piston  Rotary Engine -- filed in
Australia.  A patent  filed in  Australia  is usually in effect for a minimum of
twenty years.  U.S. Patent No. 5,813,372 - Axial Piston Rotary Engine - has been
granted.

Item 2. Description of Property

        The Company does not own or lease any property. The company office space
in New Mexico is provided by a  shareholder  and is  reimbursed on a cost basis.
The office space in Gardena,  California is provided  without charge pursuant to
the joint venture with Carroll Shelby.

Item 3. Legal Proceedings

        None

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

        Not applicable


                                       7
<PAGE>


                                     Part II

Item 5. Market for common equity and related stockholder matters

        Since the first quarter of 1999,  the Company's  Common Stock has traded
in the over-the-counter  market and has been quoted on the Bulletin Board of the
NASDAQ under the symbol: AENG.

        Set  forth  below  are the range of  prices  by  quarter  since  trading
commenced.

                                              High               Low
                                              ----               ---
First Quarter 1998                            7 1/2              1 3/4

Second Quarter 1998                           29 1/4             6 1/2

Third Quarter 1998                            21                 7 1/2

Fourth Quarter 1998                           26 7/8             6 3/4

First Quarter 1999                            17 1/2             7 3/4

Second Quarter 1999                           9 5/8              4 7/8

Third Quarter 1999                            9 3/4              5 1/8

Fourth Quarter 1999                           8                  5 1/8

        As of June 30, 1999, the Company had 274 shareholders of record.

        The Company has not paid any dividends since inception. The Company does
not  anticipate  paying  any  dividends  in the  future  even if it were to have
earnings.

Item 6. 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  $800,000  and include
approximately  $200,000 for  consulting  and $100,000 for equipment  among other
costs. The Company expects to fund these costs with its current cash reserves of
approximately $2,200,000 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.


                                       8
<PAGE>

        The  Companies'  net  loss  since  inception  (September  23,  1996)  is
$1,376,249. The Companies' net loss for 1999 Fiscal Year is $902,381.

        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 research and development required to bring the product to commercial
production  is provided by the Company's  parent.  In addition,  development  is
undertaken by its joint venture partner as well. As a result, the Company expect
to carry out or fund any research and development.

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


Item 7. Financial Statements

        Independent Auditors' Report
        Financial Statement:
           Balance Sheet
           Statements of Operation
           Statements of Stockholders Equity
           Statements of Cash Flows
           Notes to Financial Statements

Item 8. Changes in and Disagreements with Accountants

        None


                                       9
<PAGE>


                                    Part III

Item 9. Directors, Executive Officers, Promoters and Control Persons

        Set forth below are the names and ages of all  directors  and  executive
officers of the Company.

Name                               Age                   Position
----                               ---                   --------
Murray J. Bailey                   49                    President and Director
George Hunt                        69                    Director
Carroll Shelby                     75                    Director

        Murray Bailey - President

        Murray  J.  Bailey  is a  New  Zealand  citizen  with  a  background  in
marketing.  From  1991  until  1994  he was  chief  executive  of  the  Economic
Development  office,  Western Bay of Plenty,  New Zealand.  Mr.  Bailey moved to
Australia in 1994 to establish a marketing and consulting  business.  Mr. Bailey
assumed  the  Presidency  of the  Company  in May 1997.  Murray  Bailey has been
appointed  a director  as a  representative  of OX2 Engine  (Distribution)  Ltd.
Pursuant to the License Agreement with the Company,  OX2 Engine has the right to
appoint  two  directors  to the board of  directors.  No other  nominee has been
proposed at this time.

        George Hunt - Director

        George Hunt has 36 years  experience in the marine  industry as an agent
and  supplier  of all related  equipment,  products  and  service.  In 1972,  he
established Sterling Marine, a Colorado company, gradually building the business
to four marine  sales and service  locations in the United  States,  having been
recognized  by  Bayliner  for  multimillion  dollar  sales   achievements.   His
relationships  with major marine  engine  manufacturers  and  suppliers  provide
valuable inroads to the industry for Advanced Engine Technologies, Inc.


        Carroll Shelby - Director

        Carroll Shelby has over 50 years of successful  experience in the engine
industries. Inducted into a number of automotive related Halls of Fame.

Founder/Director of:
                     Shelby American, Inc
                     Shelby American Licensing, Inc.
                     Shelby Technologies
                     Carroll Shelby Enterprises
                     Carroll Shelby Children's Foundation
                     International Chili Society
                     Director of Automotive Hall of Fame



                                       10
<PAGE>


Item 10.  Executive Compensation

          The  Company  paid  consulting  fees to its  President,  who is also a
shareholder,  in the amount of $211,203 from  September 23, 1996  (inception) to
June 30, 1999  including  $69,790 for the year ended June 30, 1998,  and $82,505
for the year ended June 30, 1999.  He continues  to receive  consulting  fees of
$6,650 a month.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

          The following  table sets forth  information as of June 30, 1999, with
respect to all shareholders known by the Company to be beneficial owners of more
than 5% of the outstanding  Common Stock,  all directors,  and all directors and
executive officers as a group.  Except as noted below, each shareholder has sole
voting and investment power with respect to shares owned.

                                              Number Of
Name & Address                                Common Shares
of Beneficial Owner                           Beneficially Owned     Percent*
-----------------------------------------------------------------------------

Robert/Margaret Petersen                      2,045,534               9.1%
6420 Wilshire Blvd./20th Floor
Los Angeles, CA. 90048

Carmel International Corp.                    1,428,000***            6.3%
P.O. Box N/8188 Saffery Square/Suite 205
Nassau, Bahamas

Coach Financial Inc.                          5,517,300***           24.7%
35 Barrack Rd.
Belize City, Belize

Maverick Associates Inc.                      4,089,300***           18.3%
Henville Building/Prince Charles St.
Charlestown
Nevis, West Indies

Macro Management Group, Ltd.                  1,161,820               5.2%
Windsor House 2nd Floor
Kummel Highway
Port Vila, Vanuatu

                                       11
<PAGE>


Murray J. Bailey                                198,670               0.9%
9909 Osuna Rd. NE
Albuquerque, NM 87111

Carroll Shelby                                  360,000               1.6%
10862 Vicenza Way
Los Angeles, California  90077

George Hunt                                      87,000**             0.4%
906 Holly
Sterling, Colorado 80751

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

*  Based upon 22,325,000 shares outstanding.  Does  not  include  250,000 shares
   that may be issued to Carroll Shelby on completion of the joint venture.

** These shares are owned by Cecil L. Hunt,  wife of George  Hunt who  disclaims
   beneficial ownership.

***These share are beneficially owned by OX2 Engine (Distribution) Pty. Ltd.

Item 12. Certain Relationships and Related Transactions

         In  October  1996,  the  Company  entered  into  a  contract  with  OX2
(Distributions)   Ltd.  (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 will issue
an additional  19,000,000  upon the successful  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 its  territory and 75 percent for sales
outside the territory.  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 R&D. In addition, OX2
has the right to appoint two of the Company's directors. As of June 30, 1999 OX2
owned approximately 49.3 percent of the Company's outstanding shares and OX2 had
appointed one director who is also the Company's President.

          The Company  paid  administrative  fees and  reimbursed  expenses to a
company that is owned by one of its shareholders,  Greg Howland in the amount of
$50,010 from September 23, 1996  (inception) to June 30, 1999 including  $15,700
for the year ended June 30, 1998, and $31,293 for the year ended June 30, 1999.

          On  July  15,  1998,  Carroll  Shelby,  a  director  of  the  Company,
individually  and as Trustee of the Carroll  Hall  Shelby  Trust and the Company
entered  into a joint  venture  agreement to develop the OX2 engine for use in a
standard  application  for motor  vehicles  and to promote the OX2 engine to the
automotive  industry.  The  agreement is to expire  December  31,  2001.  Shelby
received  300,000  shares of the Company for the initial joint venture  contract
and will receive an additional  250,000  shares of the Company if the OX2 Engine
is developed for use in a standard  application  for motor vehicles and promotes
the OX2 engine to the automotive industry.


                                       12
<PAGE>


Item 13.  Exhibits, List and Reports on Reports on 8-K

          (a) Exhibits

          2(a)     Certificate of Incorporation*
          10       By-Laws*

          6(a)     License Agreement with OX2 Engine*
          10       Joint Venture with Carroll Shelby*

          10.1     Cancellation of 19,000,000 Share Issuance
          10.2     Contract for World Rights and Patents

* Filed with 10-SB and incorporated here by reference

          (b) Reports on Form 8K

              None



                                       13
<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.


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



By:_______________________/s/ Murray J. Bailey_____________________
                           Murray J. Bailey, President


Date:______________________________________________________________

          In accordance with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.


By:_____________________________/s/ George Hunt____________________
                              George Hunt, Director


Date:______________________________________________________________




By:____________________________/s/ Carroll Shelby__________________
                            Carroll Shelby, Director


Date:______________________________________________________________



                                       14
<PAGE>


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

                                                                FINANCIAL REPORT

                                                                   JUNE 30, 1999



<PAGE>



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









                                                  CONTENTS

                                                                       Page

INDEPENDENT AUDITORS' REPORT                                             1

FINANCIAL STATEMENTS

        Balance Sheet                                                    2

        Statements of Operations                                         3

        Statements 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

                          Independent Auditors' Report

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

We have audited the accompanying  balance sheet of Advanced Engine Technologies,
Inc.  (a  development  stage  company)  as of June  30,  1999,  and the  related
statements of operations, stockholders' equity, and cash flows for the year then
ended and for the period from September 23, 1996,  (inception)  through June 30,
1999.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements  based on our audit.  The  financial  statements as of June 30, 1998,
were  audited by Neff & Company  LLP,  who  merged  with Ricci & Ricci LLC as of
January  1,  1999,  and  whose  report  dated  August  28,  1999,  expressed  an
unqualified opinion on those statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Advanced Engine  Technologies,
Inc. as of June 30, 1999 and the  results of its  operations  and its cash flows
for the year then ended and from  September  23,  1996  (inception)  to June 30,
1999, in conformity with generally accepted accounting principles.



/s/ Neff & Ricci LLP


Albuquerque, New Mexico
August 19, 1999


                                                                               1
<PAGE>



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


ASSETS

CURRENT ASSETS
    Cash                                                      $     561,796
    Prepaid insurance                                                 8,216
                                                              -------------
           Total current assets                                     570,012

FIXED ASSETS
    Furniture                                                         7,523
    Computer equipment                                               43,913
    Manufacturing equipment and tooling                              66,102
                                                              -------------
    Less accumulated depreciation                                   (19,351)
                                                              -------------
           Total fixed assets                                        98,187

OTHER ASSETS
    Patent rights, net of accumulated
        amortization of $25,181                                   1,496,537
    Patent, copyrights and designs net of
        accumulated amortization of $5,104                           38,646
                                                              -------------
           Total other assets                                     1,535,183
                                                              -------------
           Total assets                                       $   2,203,382
                                                              =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                          $       2,881
                                                              -------------

COMMITMENTS AND CONTINGENCIES (Note 3)

STOCKHOLDERS' EQUITY
    Common stock-50,000,000 shares authorized,
    22,325,000 issued and outstanding; $.001 value                   22,325

    Additional paid-in capital                                    3,554,425

    Deficit accumulated during the development stage             (1,376,249)
           Total stockholders' equity                             2,200,501

Total liabilities and stockholders' equity                    $   2,203,382
                                                              =============

The Notes to the Financial Statements are an integral part of this statement.



                                                                               2
<PAGE>
ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Years Ended June 30, 1999 and 1998
Period From September 23, 1996 (Inception)
Through June 30, 1999



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

Operating expenses                      $   400,161       333,601      898,445

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

Income loss from operations                (925,161)     (333,601)  (1,423,445)

Interest income                              22,780        23,966       47,196
                                        --------------------------------------

Net loss                                $  (902,381)     (309,635)  (1,376,249)
                                        ======================================

Basic net loss per share                $     (.041)        (.014)       (.066)
                                        ======================================

Weighted average number of common
    shares outstanding                   21,947,500    21,487,200   20,821,685
                                        ======================================


The Notes to the Financial Statements are an integral part of these statements.



                                                                               3
<PAGE>



ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
Years Ended June 30, 1999 and 1998
Period From September 23, 1996 (Inception)
Through June 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
                                     ===============================================================

</TABLE>

The Notes to the Financial Statements are an integral part of these statements.


                                                                               4
<PAGE>



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

                                                                                     September 23,
                                                                                         1996
                                                                                      (Inception)
                                                                                        Through
                                                                                       June 30,
                                                         1999           1998             1999
<S>                                                <C>                 <C>            <C>
Reconciliation of net losses to net
  cash provided by operations:
        Net loss                                   $   (902,381)       (309,635)      (1,376,249)
        Depreciation and amortization                    47,834           1,802           49,636
        Issuance of common stock for
           assets and services                          568,750               -          576,750
Changes in current assets and liabilities:
    Stock subscriptions receivable                            -          74,000                -
    Prepaid insurance                                    (8,216)              -           (8,216)
    Accounts payable                                    (28,402)         27,228            2,881
                                                   ---------------------------------------------

           Net cash flows applied to
               operating activities                    (322,415)       (206,605)        (755,198)
                                                   ---------------------------------------------

Cash flows from investing activities:
        Equipment purchases                             (95,757)        (21,782)        (117,539)
        Intangible purchases                         (1,565,468)              -       (1,565,468)
                                                   ---------------------------------------------

           Net cash flows applied to
               investing activities                  (1,661,225)        (21,782)      (1,683,007)

Cash flows from financing activities:
        Issuance of common stock                      2,000,000         500,800        3,000,000
        Loan proceeds                                         -               -           50,000
        Loan payments                                         -         (50,000)         (50,000)
                                                   ---------------------------------------------

           Net cash flows provided by
               financing activities                   2,000,000         450,800        3,000,000
                                                   ---------------------------------------------

Net increase in cash                                     16,360         222,413          561,795

Cash at beginning of period                             545,435         323,022                -
                                                   ---------------------------------------------

Cash at end of period                              $    561,795         545,435          561,795
                                                   =============================================

</TABLE>

The Notes to the Financial Statements are an integral part of these statements.


                                                                               5
<PAGE>



ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 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
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 R&D.

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>

ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999


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 $90,251 from  September 23, 1996  (inception) to
June 30, 1999 including  $41,808 for the year ended June 30, 1998 and $1,895 for
the year ended June 30, 1999.

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.


NOTE 3.  RELATED PARTY TRANSACTIONS

The Company paid consulting fees to its President, who is also a shareholder, in
the amount of $211,203  from  September  23, 1996  (inception)  to June 30, 1999
including  $69,790  for the year ended June 30,  1998,  and $82,505 for the year
ended June 30, 1999.



                                                                               7
<PAGE>

ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999


NOTE 3.  RELATED PARTY TRANSACTIONS (CONTINUED)

The Company paid  administrative  fees and reimbursed expenses to a company that
is owned by one of its  shareholders in the amount of $50,010 from September 23,
1996 (inception) to June 30, 1999 including  $15,700 for the year ended June 30,
1998, and $31,293 for the year ended June 30, 1999.

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  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 R&D.



NOTE 4.  INCOME TAXES

At June 30, 1999 the Company had deferred tax assets  amounting to approximately
$508,000.  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  $328,000 and $70,000 for the year ended June 30, 1999
and 1998,  respectively.  The net change is due primarily to the increase in net
operating loss carryforwards.

At  June  30,  1999  the  Company  had  net  operating  loss   carryforwards  of
approximately  $1,270,000  available to offset future state and federal  taxable
income.  These  carryforwards  will  expire  in 2017 and 2019  for  federal  tax
purposes and 2002 and 2004 for state tax purposes.




                                                                               8
<PAGE>


ADVANCED ENGINE TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999


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.  Subsequent  to June 30,  1999,  the Company  issued an
additional 400,000 shares of common stock 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>