<PAGE>

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

                                   -----------

                                  FORM 10-KSB/A

(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, 2000
                                   --------------------------------------------
                                       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.)

             11150 W. Olympic Blvd. Suite 1050 Los Angeles Ca. 90064
   --------------------------------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                 (310) 914-9599
-------------------------------------------------------------------------------
                           (Issuer's Telephone Number)
-------------------------------------------------------------------------------
          Securities to be registered under Section 12(b) of the Act:

    Title of Each Class to be so               Name of Each Exchange on Which
             Registered                        Each Class is to be Registered
                None                                      None
--------------------------------              --------------------------------

           Securities to be registered under Section 12(g) of the Act:
                          Common Stock, $.001 par value

-------------------------------------------------------------------------------
                                (Title of Class)

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

         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 ($2.125 per share) as of May
2, 2000 was $17,240,137.

                    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. 22,950,000 common shares as
of June 30, 2000

         Transitional Small Business Disclosure Format (check one):

Yes   X   No ________
    -----

The registrant hereby files this Annual Report on Form 10-KSB/A to amend Items
1, 6 and 7 of its Annual Report on Form 10-KSB for the year ended June 30, 2000
to include restated financial statements. No other items in the registrant's
Annual Report on Form 10-KSB for the year ended June 30, 2000 are amended.

<PAGE>

                                     PART I

Item 1.           Description of Business

         Forward-Looking Statements

         This document 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. Actual events or results may
differ materially.

         Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. 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.

         Readers are also urged to carefully review and consider the various
disclosures made by us which attempt to advise interested parties of the factors
which affect our business, including without limitation the disclosures made
under the caption "Management's Discussion and Analysis of Financial Condition
or Plan of Operation" and under the caption "Risk Factors" included herein.

         General

         Advanced Engine Technologies, Inc. ("we", "us" or the "Company") was
incorporated and commenced operations on September 23, 1996. We were formed to
develop and commercialize the OX2 internal combustion engine, a
state-of-the-art, uniquely designed 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.

         In 1996, we entered into an exclusive sub-licensing agreement with OX2
Engine (Distribution) Ltd. ("OX2"), pursuant to which we acquired the right to
manufacture, distribute and market the OX2 engine in the North American Free
Trade Agreement countries (presently the United States, Canada and Mexico). OX2
licensed the technology from OX2 Intellectual Property, Inc., a foreign
corporation that was assigned the technology from the original patent holders.
The sub-license was for the longer of (1) life of the patent or (2) twenty
years. In May 1999, we acquired the worldwide patent rights for the OX2 engine
from OX2 in exchange for $1.5 million. We will take responsibility for patent
maintenance and for future research and development on the engine.

         We have spent $1,041,376 for the fiscal year ended June 30, 2000 and
$525, 000 for the fiscal year ended June 30, 1999, on research and development
for the OX2 engine. On July 15, 1998, we entered into a joint venture agreement

                                       -1-

<PAGE>

with Carroll Shelby, our president, to further develop the OX2 engine for use in
a standard application for motor vehicles and promote the OX2 engine to the
automotive industry.

         Our Product

         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. 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.

         The OX2 engine prototype is designed to be fuel efficient, lightweight,
low-emission, multi-fueled, and smaller and more inexpensive than conventional
internal combustion engines. We also believe that it will not have the complex
manufacture/production requirements of conventional internal combustion engines.

         The OX2 engine prototype is designed to have only six major components,
of which only three move. We believe this design will result in low set-up and
production costs and simplicity of design that will promote a high level of
quality assurance.

         The major parts of the engine prototype are: (1) housing, (2) cylinder
block, (3) top piston plate, (4) lower piston plate, (5) cam track, and (6)
drive shaft. The moving parts are: (1) cylinder block, (2) top piston plate, and
(3) lower piston plate.

         We expect the OX2 engine, once completed, will have several advantages
over a four stroke conventional engine. Some of these advantages are expected to
include:

         .  The OX2 engine prototype has only six major components,
            which should result in lower set-up and production and
            manufacturing costs than a typical conventional engine.

         .  We believe the OX2 engine prototype to have greater
            effective engine capacity than a typical conventional
            engine.

         .  The OX2 engine prototype does not use a conventional
            crankshaft, which we believe will result in a leverage
            advantage over a typical conventional engine.

         .  The OX2 engine prototype design should enable the timing
            to be adjusted, which will produce a more effective burn
            on the combustible fuel being used.

         .  The OX2 engine prototype's piston speed should remain
            constant throughout the entire power stroke, thus allowing
            exhaust gases to be more efficiently expelled than a typical
            conventional engine.

         In the short term, our plans are to complete the research and
development of the OX2 engine in order to prepare it for production and
marketing. We currently have an agreement with Steven Manthey, the inventor of
the OX2 engine, which provides that Mr. Manthey will continue to develop and

                                       -2-

<PAGE>

maintain the OX2 engine prototype. We have an agreement with the University of
California, Riverside ("UCR"), which provides that they 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.

         Marketing

         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. 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. We believe the multi-purpose nature of the OX2 engine should make it
compatible to several different market applications.

         Upon completion of the OX2 engine, we expect, initially, to market it
to specialist engine manufacturers who produce stationary engines. We expect
that sub-licenses allowing the manufacture of OX2 engines, will be granted by us
only to a limited number of engine manufacturers, to achieve a manageable and
controlled market introduction.

         Sources of Income

         We expect to generate income in two ways: (1) we expect to receive a
licensing fee from approved manufacturers in return for the right to produce and
sell the OX2 engine; license fees will be determined by territory size and
market potential; and (2) we expect to receive a royalty payment for each engine
produced and sold. We expect royalty payments will be determined by engine
capacity and application.

         Patents

         We have been granted a U.S. patent for an Axial Piston Rotary Engine
(U.S. Patent No. 5,813,372). We have filed a patent application for an Axial
Piston Rotary Engine in Australia (No. PCT/AU95/00815). In addition, we have
patent applications pending in countries throughout the world.

         Employees

         We have one employee, our president. We are currently evaluating the
need to hire additional employees to assist in the daily operations and market
placement of our product. We also engage consultants who receive fees for their
consulting services.

         Other Agreements

         In June 1999, we agreed to grant 1,000,000 shares of the Company's
common stock ("Shares") to the University of California Riverside Foundation.
The stock is to be issued in five annual installments of 200,000 Shares each.
Two installments have been granted, one in July, 1999 and the other in July,
2000, for a total of 400,000 Shares. The Shares were donated to provide an

                                       -3-

<PAGE>

endowment for research funds for the College of Engineering-Center for
Environmental Research and Technology. This donation is independent of the
relationship between Advanced Engine Technologies Inc., and the University of
California, Riverside for research and development of the OX2 engine.

         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.

 .    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.

 .    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.

 .    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.

 .    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

                                       -4-

<PAGE>

     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.

 .    Our business depends on the protection of our intellectual property and may
     suffer if we are unable to adequately  protect our  intellectual  property.
     The  success of our  business  depends on our ability to patent our engine.
     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.

 .    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.

 .    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.

 .    We have a history of losses. We have a history of operating losses, and an
     accumulated deficit, as of June 30, 2000, of $4,254,906. Our ability to
     generate revenues and profits is subject to the risks and uncertainties
     encountered by development stage companies.

 .    Our future revenues and profitability are unpredictable. We are 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.

                                       -5-

<PAGE>

 .    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.

 .    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.

 .    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 June 30, 2000,
     approximately 65% 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.

                                       -6-

<PAGE>

                                     Part II

Item 6.       Management's Discussion and Analysis or Plan of Operation

         We plan to continue the development of prototypes and marketing during
the 2001 fiscal year. The planned activities include: (1) demonstrations to
prospective original equipment manufacturers of products using internal
combustion engines; (2) work with our joint venture partners and shareholders to
continue the development, in the shorter term, of an engine for stationary
generator applications and, in the longer term, of an engine for automobile
and/or aircraft applications; and (3) the development of additional joint
venture partners to market the engine. While prototypes of the OX2 engine exist,
there can be no assurance that we will be successful in our marketing efforts,
the development of our joint ventures or in the ultimate development of the
engine for commercial 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 $1,026,990 as of June 30, 2000. Our cost estimates do not
include provisions for any contingencies or unexpected expenses that may arise

                                       -7-

<PAGE>

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 $4,254,906. Our
net loss for the 2000 Fiscal Year is $2,800,657.

         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.

                                       -8-

<PAGE>

Item 7. Financial Statements

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





                                    CONTENTS

                                                                       Page

INDEPENDENT AUDITORS' REPORT                                            10
FINANCIAL STATEMENTS

               Balance Sheet                                            11
               Statements of Operations                                 12
               Statements of Stockholders' Equity                       13
               Statements of Cash Flows                                 14
               Notes to Financial Statements                            15

                                       -9-

<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, 2000, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended June 30, 2000 and 1999, and for the period from September 23, 1996
(inception) through June 30, 2000. 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 include 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, 2000 and the results of its operations and its cash flows for the
years ended June 30, 2000 and 1999, and for the period from September 23, 1996,
(inception) to June 30, 2000, in conformity with accounting principles generally
accepted in the United States of America.

The financial statements have been revised for the matter discussed in Note 7.


/s/ Neff & Ricci, LLP
-----------------------
Albuquerque, New Mexico
September 20, 2000, except for Note 7, as to
which the date is October 12, 2001

                                      -10-

<PAGE>

ADVANCED ENGINE TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
June 30, 2000

ASSETS

Current Assets

    Cash and cash equivalents                                   $  1,026,990
    Prepaid expenses                                                  22,768
    Due from related party                                            26,000
                                                                ------------
           Total current assets                                    1,075,758
                                                                ------------
Fixed Assets

    Automobile                                                        10,000
    Furniture                                                         12,242
    Computer equipment                                                44,156
    Manufacturing equipment and tooling                               67,922
    Less accumulated depreciation                                    (46,636)
                                                                ------------
           Total fixed assets                                         87,684
                                                                ------------
Other Assets

    Patent rights, net of accumulated
        amortization of $177,353                                   1,344,365
    Patent, copyrights and designs, net of
        accumulated amortization of $13,854                           29,896
                                                                ------------
           Total other assets                                      1,374,261
                                                                ------------
           Total assets                                         $  2,537,703
                                                                ============
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

    Accounts payable                                            $    115,359
    Accrued payroll                                                    5,000
                                                                ------------
           Total current liabilities                                 120,359
                                                                ------------
Commitments and Contingencies

Stockholders' Equity

    Common stock-50,000,000 shares authorized,
        22,950,000 issued and outstanding; $.001 par value            22,950
    Additional paid-in capital                                     6,571,300
    Committed Common Stock under grant                             3,720,000
    Deferred Cost under grant agreement                           (3,642,000
    Deficit accumulated during the development stage              (4,254,906)
                                                                ------------
           Total stockholders' equity                              2,417,344
                                                                ------------
Total liabilities and stockholders' equity                      $  2,537,703
                                                                ============
See Notes to Financial Statements.

                                      -11-

<PAGE>

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

                                                                      9/23/96
                                                                    (Inception)
                                                                      Through
                                          2000           1999         6/30/00

Operating expenses                   $     599,985       400,161     1,498,430
Research and development expenses        1,341,376       525,000     1,866,376
Stock grant expense                        930,000        78,000     1,008,000
                                     -----------------------------------------
Loss from operations                    (2,871,361)   (1,003,161)   (4,372,806)
Interest income                             70,704        22,780       117,900
                                     -----------------------------------------
Net loss                             $  (2,800,657)     (980,381)   (4,254,906)
                                     =========================================
Basic net loss per share             $        (.12)         (.04)         (.20)
                                     =========================================
Weighted average number of common
    shares outstanding                  22,837,431    21,947,500    21,222,526
                                     =========================================

See Notes to Financial Statements.

                                      -12-

<PAGE>

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

<TABLE>
<CAPTION>
                                                                     Committed                 (Deficit)
                                                                      Common      Deferred    Accumulated
                             Common Stock           Additional         Stock        Costs      During the
                         ----------------------      Paid-in        Under Grant  Under Grant  Development
                          Shares       Amount        Capital          Agreement   Agreement      Stage       Total
                         ---------   ----------    ------------     -----------  -----------  -----------  ----------
<S>                     <C>          <C>           <C>              <C>          <C>          <C>          <c>
Balance, September
 23, 1996 (Inception)           -   $          _   $        -     $          -  $         -   $        -   $        -
Common stock
 issued to parent
 corporation for
 license rights        20,000,000         20,000        (18,000)                                                2,000
Common stock
 issued for cash          499,200            499        498,701                                               499,200
Common stock
 issued for services      600,000            600          5,400                                                 6,000
Net loss                                                                                        (164,233)    (164,233)
                      -----------   ------------   ------------   ------------  -----------   -----------  ----------

Balance, June 30,
 1997                  21,099,200         21,099        486,101              -            -     (164,233)     342,967
Common stock
 issued 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
Common stock
 committed under
 grant agreement                                                     4,650,000   (4,650,000)
Common stock
 issued for cash          325,000            325        568,425                                               568,750



Common stock
 issued for services      400,000   $        400   $  1,999,600   $             $             $            $2,000,000
Research and
 development
 expense
 recognized under
 grant agreement                                                                     78,000                    78,000
Net loss                                                                                        (980,381)    (980,381)
                      -----------   ------------   ------------   ------------  -----------   ----------   ----------

Balance, June 30,
 1999                  22,325,000         22,325      3,554,425      4,650,000   (4,572,000)  (1,454,249)   2,200,501
Common stock
 issued under grant
 agreement                200,000            200        929,800       (930,000)                                     -
Common stock
 issued for cash          400,000            400      1,999,600                                            2,000,000
Common stock
 issued for services       25,000             25         87,475                                                87,500
Research and
 development
 expense
 recognized under
 grant agreement                                                                    930,000                   930,000
Net Loss                                                                                      (2,800,657)  (2,800,657)
                      -----------   ------------   ------------   ------------  -----------  -----------   ----------
Balance, June 30,
 2000                  22,950,000   $     22,950   $  6,571,300   $  3,720,000  $(3,642,000) $(4,254,906)  $2,417,344
                      ===========   ============   ============   ============  ===========  ===========   ==========
</TABLE>

See Notes to Financial Statements.

                                      -13-

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                 9/23/96
                                                                               (Inception)
                                                                                 Through

                                                  2000             1999          6/30/00
<S>                                            <C>             <C>             <C>
Reconciliation of net losses to net
   cash provided by operations:

        Net loss                               $(2,800,657)   $  (980,381)    $(4,254,906)
        Depreciation and amortization              188,207         47,834         237,843
        Stock grant expense                        930,000         78,000       1,008,000
        Issuance of common stock for
           assets and services                      87,500        568,750         664,250
Changes in current assets and liabilities:
        Prepaid expenses                           (14,552)        (8,216)        (22,768)
        Due from related party                     (26,000)             -         (26,000)
        Accounts payable                           112,479        (28,402)        115,360
        Accrued payroll                              5,000              -           5,000
                                               ------------------------------------------
           Net cash flows used by
               operating activities             (1,518,023)      (322,415)     (2,273,221)
                                               ------------------------------------------

Cash flows from investing activities:

        Fixed asset purchases                      (16,782)       (95,757)       (134,321)
        Intangible asset purchases                       -     (1,565,468)     (1,565,468)
                                               ------------------------------------------
           Net cash flows used by
               investing activities                (16,782)    (1,661,225)     (1,699,789)
                                               ------------------------------------------

Cash flows from financing activities:

        Issuance of common stock                 2,000,000      2,000,000       5,000,000
        Loan proceeds                                    -              -          50,000
        Loan payments                                    -              -         (50,000)
                                               ------------------------------------------
           Net cash flows provided by
               financing activities              2,000,000      2,000,000       5,000,000
                                               ------------------------------------------

Net increase in cash                               465,195         16,360       1,026,990

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

Cash at end of period                          $ 1,026,990    $   561,795     $ 1,026,990
                                               ==========================================
</TABLE>

See Notes to Financial Statements.

                                      -14-

<PAGE>

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

June 30, 2000

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 June 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.

                                      -15-

<PAGE>

NOTE 2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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 $174,500 from September 23, 1996 (inception) to
June 30, 1999, including $84,249 for the year ended June 30, 2000, 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 common stock equivalents as their effect would be antidilutive. The
numerator for the computation is the net loss and the denominator is the
weighted average shares of common stock outstanding.

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

                                      -16-

<PAGE>

NOTE 3.  RELATED PARTY TRANSACTIONS

The Company paid consulting fees to its former President, who is also a
shareholder and former director, in the amount of $290,303 from September 23,
1996 (inception) to June 30, 2000 including $82,505 for the year ended June 30,
1999, and $79,100 for the year ended June 30, 2000.

The Company paid administrative fees and reimbursed expenses to a company that
is owned by one of its shareholders in the amount of $101,570 from September 23,
1996 (inception) to June 30, 2000 including $31,293 for the year ended June 30,
1999, and $51,560 for the year ended June 30, 2000.

The Company has paid research and development costs and rent to a company owned
by its current President in the amount of $124,437 from September 23, 1996
(inception) to June 30, 2000, including $124,437 for the year ended June 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 legal fees and reimbursed expenses, including rent, to a
company that is owned by its Secretary/Treasurer in the amount of $187,985 from
September 23, 1996, (inception) to June 30, 2000, including $187,985 for the
year ended June 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 June 30, 2000,
including $71,956 for the year ended June 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.

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

                                      -17-

<PAGE>
NOTE 3.  RELATED PARTY TRANSACTIONS (CONTINUED)

directors. As of June 30, 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 secretary/treasurer.
The receivable at June 30, 2000 is $26,000.

NOTE 4.  INCOME TAXES

At June 30, 2000 the Company had deferred tax assets amounting to approximately
$1,633,000. 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 $1,125,000 and $359,000 for the year ended June 30,
2000 and 1999, respectively. The net change is due primarily to the increase in
net operating loss carryforwards.

At June 30, 2000, the Company had net operating loss carryforwards of
approximately $3,783,000 available to offset future state and federal taxable
income. These carryforwards will expire in 2017 to 2020 for federal tax purposes
and at various times for state tax purposes.

NOTE 5.  COMMON STOCK

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

On August 6, 1998, the Company entered into a joint venture agreement with
Carroll Shelby under which the Company was to issue 300,000 shares of restricted
common stock in exchange for services related to the future production of a
street vehicle that utilizes the OX2 combustion engine. These shares were issued

                                      -18-

<PAGE>

NOTE 5.  COMMON STOCK (CONTINUED)

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 and became President.

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 restricted common
stock to the University of California Riverside Foundation in five annual
installments of 200,000 shares each. The donated stock is to provide an
endowment for research funds for the College of Engineering Center for
collaborative research on the development of advanced engine technologies. For
financial statement presentation purposes, the stock under the grant agreement
is treated as committed stock until its issuance. The first and second
installments were issued in July 1999 and 2000, respectively.

Expense on the grant is being recognized ratably over a five-year period based
upon an estimated fair value at the date of the grant of $4.65 per share. This
estimate of its fair value is based upon the tracking price of the stock on the
grant date of $7.75 per share, less a 40% discount because the stock was
restricted, Company's stock had a very low trading volume at the time of the
grant agreement, and the Company was still in a development stage. During the
period from September 23, 1996 (inception) to June 30, 2000, the Company
recognized total expense on the stock grant of $1,008,000, including $930,000
for the year ended June 30, 2000 and $78,000 for the year ended June 30, 1999.

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 research and
development expense.

NOTE 6.  SUBSEQUENT EVENTS

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.

Also in August 2000, the Company adopted a stock option plan and reserved 5
million shares for the plan.


NOTE 7.  RESTATEMENT OF THE JUNE 30, 2000 FINANCIAL STATEMENTS

The financial statements for the year ended June 30, 2000 have been restated
from the originally filed financial statements to reflect greater expense
recognition in those years in connection with the June 1999 stock grant
agreement with the University of Riverside Foundation. (See Note 5 for a
description of the agreement and the accounting related to the agreement.)
Specifically, upon re-evaluation of the agreement, current management has
concluded that the fair value of the committed common stock on the date of the
agreement was $4,650,000, and not $1,500,000 as originally valued. This increase
in the fair value of the committed common stock on the date of the grant
agreement impacts the expense recognition on the stock grant agreement because
the expense which is recognized over a five-year period is based upon the fair
value of the committed common stock on the date of the stock grant agreement. As
a result of the foregoing, the financial statements for the year ended June 30,
2000 have been restated to reflect an additional expense recognized on the stock
grant agreement of $630,000. Also, the originally filed June 30, 2000 financial
statements classified the expense on the stock grant as operating expense;
whereas, the restated financial statements present the expense as "stock grant
expense." Additionally, there have been certain presentation changes in the
statement of shareholders' equity to reflect committed common stock and deferred
costs related to the stock grant agreement.

                                      -19-

<PAGE>

                                   SIGNATURES

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


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

By:                     /s/ Carroll Shelby
      -----------------------------------------------------------
                Carroll Shelby, President and Director

                        October 15, 2001
      -----------------------------------------------------------

By:                   /s/ Alexandria Phillips
      -----------------------------------------------------------
               Alexandria Phillips, Treasurer and Director

Date:                   October 15, 2001
      -----------------------------------------------------------


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/ Richard C. Ronzi
      -----------------------------------------------------------
                    Richard C. Ronzi, Director

Date:                   October 15, 2001
      -----------------------------------------------------------


By:                     /s/ Noel Holmes
      -----------------------------------------------------------
                      Noel Holmes, Director

Date:                   October 15, 2001
      -----------------------------------------------------------