U. S. SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                                   FORM 10-QSB


               QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934


               For the quarterly period ended: September 30, 1999


                           Commission file No.0-24511


                        ADVANCED OPTICS ELECTRONICS, INC.
           (Name of small business issuer as specified in its charter)

       Nevada                                                   88-0365136
(State of incorporation)                       (IRS Employer Identification No.)

           8301 Washington NE, Suite 4, Albuquerque, New Mexico 87113
           (Address of principal executive offices including zip code)

Issuer's telephone number:                                        (505) 797-7878

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X No____

The number of issuer's  shares of Common Stock  outstanding  as of September 30,
1999 was 42,541,431

Transitional Small Business Disclosure Format (check one): Yes ____ No  X


<PAGE>


ADVANCED OPTICS ELECTRONICS, INC.
BALANCE SHEET (Unaudited)
September 30, 1999

ASSETS

CURRENT ASSETS
    Cash and cash equivalents                                       $   241,989
    Certificate of deposit                                              105,251
    Marketable equity securities                                         67,571
    Costs and estimated earnings
        in excess of billings on
        uncompleted contract                                            511,575
    Raw materials inventory                                              41,324
    Related party receivables                                            67,494
                                                                    -----------

           Total current assets                                       1,035,204
                                                                    -----------

FIXED ASSETS, at cost
    Furniture and fixtures                                               26,856
    Computers                                                            34,096
    Technical equipment                                                 143,047
    Automobile                                                           43,313
    Equipment under capital lease                                       101,359
    Leasehold improvements                                               16,775
    Less accumulated depreciation                                      (102,691)
                                                                    -----------

           Total fixed assets                                           262,755
                                                                    -----------

OTHER ASSETS
    Note receivable from officer                                         30,523
    Investment in Bio Moda, Inc.                                        242,112
    Investment in Wizard Technologies, Inc.                             110,000
    Goodwill, net of accumulated amortization
        of $365                                                           4,635
    Patents, net of accumulated amortization
        of $40,045                                                      202,294
    Note origination costs, net of accumulated
        amortization of $3,332                                           16,668
    Other assets                                                         30,000
                                                                    -----------

           Total other assets                                           636,232
                                                                    -----------
           Total assets                                             $ 1,934,191
                                                                    ===========


See accompanying notes to condensed consolidated financial statements.


<PAGE>


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Notes payable                                                   $     7,726
    Accrued liabilities                                                  13,967
    Current portion of long-term debt
        and capital lease obligation                                     39,321
                                                                    -----------
           Total current liabilities                                     61,014
                                                                    -----------
Long-term portion of long-term debt
    and capital lease obligation                                        465,509
                                                                    -----------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
    Common stock, authorized 75,000,000 shares,
        $.001 par value, 42,667,140 shares issued
        and outstanding                                                  42,667
    Additional paid-in capital                                        3,507,717
    Deficit accumulated during the development stage                 (2,135,413)
    Treasury stock at cost, 72,400 shares                                (7,303)
                                                                    -----------

           Total shareholders' equity                                 1,407,668
                                                                    -----------







           Total liabilities and shareholders' equity               $ 1,934,191
                                                                    ===========

                                                                               3

<PAGE>


ADVANCED OPTICS ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (Unaudited)
Quarters Ended September 30, 1999 and 1998


                                                          1999             1998

REVENUES
    Contract revenue                              $    125,000             --
                                                  -----------------------------

COSTS AND EXPENSES
    General and administrative                         309,082          103,355
    Contract costs                                     119,451           59,560
    Research and development                            50,611           12,262
                                                  -----------------------------

           Total expenses                              479,144          175,177
                                                  -----------------------------

    Operating loss                                    (354,144)        (175,177)
                                                  -----------------------------

OTHER INCOME AND (EXPENSES)
    Interest income                                      3,959             --
    Unrealized gain (loss) on marketable
        equity securities                                7,505             --
    Loss on Bio Moda, Inc.                              (9,781)          (7,622)
    Interest expense                                   (39,735)          (2,297)
                                                  -----------------------------

           Total other expenses                        (38,052)          (9,919)
                                                  -----------------------------

           Net loss                                   (392,196)        (185,096)
                                                  -----------------------------

Net loss per share                                $      (.009)           (.013)
                                                  =============================

Weighted average shares outstanding                 41,851,287       14,064,135
                                                  =============================

See accompanying notes to condensed consolidated financial statements.

                                                                               4

<PAGE>


STATEMENTS OF OPERATIONS (CONTINUED)
Nine Months Ended September 30, 1999 and 1998,
and the Period from May 22, 1996 (Inception)
Through September 30, 1999
<TABLE>
<CAPTION>

                                                                                                        5/22/96
                                                                                                     (Inception)
                                                                                                        Through
                                                               1999                  1998               9/30/99
<S>                                                    <C>                         <C>                  <C>
REVENUES
    Contract revenue                                   $    261,375                72,000               511,575
                                                       --------------------------------------------------------

COSTS AND EXPENSES
    General and administrative                              721,624               236,046             1,341,759
    Contract costs                                          283,570               147,394               556,710
    Research and development                                137,051                28,880               326,169
                                                       --------------------------------------------------------

           Total expenses                                 1,142,245               412,320             2,224,638
                                                       --------------------------------------------------------

    Operating loss                                         (880,870)             (340,320)           (1,713,063)
                                                       --------------------------------------------------------

OTHER INCOME AND (EXPENSES)
    Interest income                                          11,028                  --                  11,879
    Unrealized gain (loss) on marketable
        equity securities                                   (15,424)                 --                 (22,299)
    Loss on Bio Moda, Inc.                                  (48,309)              (16,910)             (116,733)
    Interest expense                                       (225,115)               (3,022)             (232,177)
                                                       --------------------------------------------------------

           Total other expenses                            (277,820)              (19,932)             (359,330)
                                                       --------------------------------------------------------

           Net loss before cumulative effect
               of change in accounting principle         (1,158,690)             (360,252)           (2,072,393)

CUMULATIVE EFFECT OF CHANGE
    IN ACCOUNTING PRINCIPLE                                 (63,020)                 --                 (63,020)
                                                       --------------------------------------------------------

           Net loss                                    $ (1,221,710)             (360,252)           (2,135,413)
                                                       ========================================================

Net loss per share before cumulative effect
    of change in accounting principle                  $      (.036)                (.029)                (.169)

Cumulative effect of change in
    accounting principle                                      (.002)                 --                   (.005)
                                                       --------------------------------------------------------

Net loss per share                                     $      (.038)                (.029)                (.174)
                                                       ========================================================

Weighted average shares outstanding                      32,149,015            12,272,337            13,647,698
                                                       ========================================================
</TABLE>


See accompanying notes to condensed consolidated financial statements.

                                                                               5

<PAGE>


ADVANCED OPTICS ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN  STOCKHOLDERS'  EQUITY  (Unaudited)
For the Period from May 22, 1996 (Inception) Through
September 30, 1999
<TABLE>
<CAPTION>

                                                                          Common Stock
                                                                                                 Par
                                                                     Shares                     Value

<S>                                                               <C>                     <C>
Balance, May 22, 1996                                                   --                $      --
    Stock issued to incorporators for cash                           500,000                      500
    Stock issued for the net assets of PLZ Tech, Inc.              4,500,000                    4,500
        Net loss                                                        --                       --
                                                                  -----------------------------------

Balance, December 31, 1996                                         5,000,000                    5,000
    Stock issued in public offering                                2,281,212                    2,281
        Net loss                                                        --                       --
                                                                  -----------------------------------

Balance, December 31, 1997                                         7,281,212                    7,281
    Stock issued for cash                                         10,979,275                   10,979
    Stock issued for services                                      2,751,000                    2,751
    Stock issued in exchange for note receivable                     315,000                      315
    Purchase and retirement of treasury stock                       (472,200)                    (472)
        Net loss                                                        --                       --
                                                                  -----------------------------------

Balance, December 31, 1998                                        20,854,287                   20,854
    Stock issued for cash                                          3,259,180                    3,259
    Stock issued for services                                      6,026,681                    6,027
    Purchase and retirement of treasury stock                       (489,251)                    (489)
        Net loss                                                        --                       --

Balance, March 31, 1999                                           29,650,897                   29,651
    Stock issued for cash                                          1,437,050                    1,437
    Stock issued for services                                      3,947,488                    3,947
        Net loss                                                        --                       --
                                                                  -----------------------------------

Balance, June 30, 1999, as previously reported                    35,035,435                   35,035
    Restatement for debentures and warrants                             --                       --
                                                                  -----------------------------------

Balance, June 30, 1999, restated                                  35,035,435                   35,035
    Stock issued for cash                                          1,675,705                    1,676
    Stock issued for services                                      5,556,000                    5,556
    Stock issued for equity investment                               400,000                      400
    Purchase of treasury stock                                          --                       --
        Net loss                                                        --                       --
                                                                  -----------------------------------

Balance, September 30, 1999                                       42,667,140              $    42,667
                                                                  ===================================
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                                                               6

<PAGE>


<TABLE>
<CAPTION>


                                                                                         Equity
                                                                                        (Deficit)
                         Treasury Stock                                                 Accumulated
                         --------------                           Additional             During the                  Total
                                          Par                       Paid-In              Development              Shareholders'
                   Shares                Value                      Capital                Stage                     Equity
            <S>                              <C>                  <C>                    <C>                      <C>
            $          --                      --                      --                      --                      --
                       --                      --                    24,500                    --                    25,000
                       --                      --                   281,096                    --                   285,596
                       --                      --                      --                   (76,902)                (76,902)
            ---------------------------------------------------------------------------------------------------------------

                       --                      --                   305,596                 (76,902)                233,694
                       --                      --                   362,720                    --                   365,001
                       --                      --                      --                   (84,690)                (84,690)
            ---------------------------------------------------------------------------------------------------------------

                       --                      --                   668,316                (161,592)                514,005
                       --                      --                 1,281,728                    --                 1,292,707
                       --                      --                   293,719                    --                   296,470
                       --                      --                    28,685                    --                    29,000
                       --                      --                   (39,913)                   --                   (40,385)
                       --                      --                      --                  (752,111)               (752,111)
            ---------------------------------------------------------------------------------------------------------------

                       --                      --                 2,232,535                (913,703)              1,339,686
                       --                      --                   151,361                    --                   154,620
                       --                      --                    21,660                    --                    27,687
                       --                      --                   (10,643)                   --                   (11,132)
                       --                      --                      --                  (273,303)               (273,303)
            ---------------------------------------------------------------------------------------------------------------

                       --                      --                 2,394,913              (1,187,006)              1,237,558
                       --                      --                   111,547                    --                   112,984
                       --                      --                   187,137                    --                   191,084
                       --                      --                      --                  (379,817)               (379,817)
            ---------------------------------------------------------------------------------------------------------------

                       --                      --                 2,693,597              (1,566,823)              1,161,809
                       --                      --                   296,186                (176,394)                119,792
            ---------------------------------------------------------------------------------------------------------------

                       --                      --                 2,989,783              (1,743,217)              1,281,601
                       --                      --                   238,359                    --                   240,035
                       --                      --                   169,975                    --                   175,531
                       --                      --                   109,600                    --                   110,000
                    (72,400)                 (7,303)                   --                      --                    (7,303)
                       --                      --                      --                  (392,196)               (392,196)
            ---------------------------------------------------------------------------------------------------------------

            $       (72,400)                 (7,303)              3,507,717              (2,135,413)              1,407,668
            ===============================================================================================================
</TABLE>

                                                                               7

<PAGE>


ADVANCED OPTICS ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (Unaudited)
Quarters Ended September 30, 1999 and 1998

<TABLE>
<CAPTION>

                                                                              1999                   1998

<S>                                                                      <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                             $(392,196)              (185,096)
    Adjustments to reconcile net loss to net cash
        applied to operating activities:
           Amortization and depreciation expense                            53,762                 10,301
           Unrealized (gain) loss on marketable securities                  (7,505)                  --
           Loss on Bio Moda, Inc.                                            9,781                  7,622
           Issuance of common stock for services                           175,531                   --
           Contract receivable                                            (125,000)                  --
           Other receivables                                               (13,509)                (3,500)
           Accrued liabilities and accounts payable                        (19,557)                10,131
                                                                         --------------------------------
               Net cash applied to operating
                  activities                                              (318,693)              (160,542)
                                                                         --------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of equipment                                                  (25,769)               (43,448)
    Purchase of marketable securities                                       (8,836)                  --
    Purchase of certificate of deposit                                        (451)               (50,000)
                                                                         --------------------------------
               Net cash applied to investing
                  activities                                               (35,056)               (93,448)
                                                                         --------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Additions to notes payable                                               4,383                   --
    Payments on notes payable and capital
        lease obligation                                                    (2,041)               (37,733)
    Issuance of common stock                                               240,035                292,155
    Purchase of treasury stock                                              (7,303)               (21,833)
                                                                         --------------------------------
               Net cash provided by financing
                  activities                                               235,074                232,589
                                                                         --------------------------------

Net increase (decrease) in cash                                           (118,675)               (21,401)

Cash, beginning of period                                                  360,664                372,595
                                                                         --------------------------------

Cash, end of period                                                      $ 241,989                351,194
                                                                         ================================

Interest paid                                                            $   2,736                  2,297
                                                                         ================================

</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                                                               8

<PAGE>


ADVANCED OPTICS ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (CONTINUED)
Nine Months Ended September 30, 1999 and 1998,
and the Period from May 22, 1996 (Inception) Through
September 30, 1999
<TABLE>
<CAPTION>
                                                                                                           5/22/96
                                                                                                         (Inception)
                                                                                                           Through
                                                                          1999              1998           9/30/99
<S>                                                                <C>                  <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net loss                                                       $(1,221,710)         (360,252)       (2,135,413)
    Adjustments to reconcile net loss to net cash
        provided by operating activities:
           Amortization and depreciation expense                       109,870            32,862           216,641
           Write off of organization costs                              63,020              --              63,020
           Unrealized loss on marketable securities                     15,424              --              22,299
           Loss on Bio Moda, Inc.                                       48,309            16,910           116,733
           Issuance of common stock for services                       565,488              --             861,958
           Issuance of notes payable for services                       50,000              --              50,000
           Contract receivable                                        (261,375)          (72,000)         (511,575)
           Other receivables                                           (21,970)            4,679           (79,367)
           Inventory                                                   (41,324)             --             (41,324)
           Accrued liabilities and accounts payable                    (21,446)           10,647            13,967
                                                                   -----------------------------------------------
               Net cash applied to operating
                  activities                                          (715,714)         (367,154)       (1,423,061)
                                                                   -----------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of equipment                                              (86,431)          (78,200)         (264,947)
    Investment in Bio Moda, Inc.                                          --            (300,000)         (358,845)
    Purchase of marketable securities                                  (19,836)          (35,191)          (89,870)
    Purchase of certificate of deposit                                 (55,251)          (50,000)         (105,251)
    Purchase of other assets                                           (10,000)             --             (96,777)
                                                                   -----------------------------------------------
               Net cash applied to investing
                  activities                                          (171,518)         (463,391)         (915,690)
                                                                   -----------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Additions to notes payable                                         447,383              --             542,109
    Payments on notes payable and capital
        lease obligation                                               (11,978)          (49,404)         (102,896)
    Issuance of common stock                                           507,639         1,197,107         2,190,347
    Purchase of treasury stock                                         (18,435)          (40,385)          (48,820)
                                                                   -----------------------------------------------
               Net cash provided by financing
                  activities                                           924,609         1,107,318         2,580,740
                                                                   -----------------------------------------------
Net increase (decrease) in cash                                         37,377           276,773           241,989
Cash, beginning of period                                              204,612            74,421              --
                                                                   -----------------------------------------------
Cash, end of period                                                $   241,989           351,194           241,989
                                                                   ===============================================
Interest paid                                                      $    11,722             3,022            18,784
                                                                   ===============================================

</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                                                               9

<PAGE>


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business.  Advanced Optics  Electronics,  Inc. (the Company) is a
developmental   stage  technology  company  with  its  principal  focus  on  the
development and production of large-scale  flat panel  displays.  The Company is
currently  continuing  its  research  and  development  of  this  product.  Upon
substantial  completion of the research and  development of the large flat panel
display,  the Company plans to make the transition  from a  developmental  stage
company to selling and producing  this product.  The market for the  large-scale
flat panel will include,  but not be limited to,  cockpit  displays,  flat panel
computer monitors, and advertising billboards. Advanced Optics Electronics, Inc.
plans to focus on producing and selling the large-scale  flat panel displays for
outdoor advertising billboards,  which is currently the only industry segment it
operates in.

The  Company  has  obtained  a  contract  to  produce  two  outdoor  advertising
billboards using its flat panel display technology. This is the first commercial
application of the Company's technology.  The success of the Company will depend
on its ability to  commercialize  its technology and complete this contract.  In
addition,  the Company will be required to obtain additional capital in order to
fund the completion of the contract.

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 and  certificates of deposit are deposited in financial
institutions  and  are  insured  only  up to  $100,000  by the  Federal  Deposit
Insurance Corporation.

Marketable  Equity  Securities.  The Company  classifies  all of its  marketable
equity securities as trading securities.  Trading securities are carried at fair
value with the unrealized gains and losses reported in the income statement.  As
of September 30, 1999,  gross unrealized gains were $24,983 and gross unrealized
losses were $47,281. Realized gains and losses were not material.

Inventory.  Inventory  consists of raw  materials and is carried at the lower of
cost (specific identification) or market.

Equity  Investment.  The investment in Bio Moda, Inc. is accounted for using the
equity method. Under this method, income and losses reported by the investee are
recorded  by the  Company  in its  proportionate  interest  at the time they are
recognized by the investee.  The original cost of the Bio Moda, Inc.  investment
exceeded the  Company's  proportionate  interest in Bio Moda's book value.  This
difference is being amortized over a 15 year period.

Depreciation. Depreciation of property, plant and equipment is provided over the
estimated useful lives of the respective assets ranging from 3 to 10 years using
straight line and declining balance methods.

                                                                              10

<PAGE>


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

Other Assets.  Organization  costs were amortized on a straight-line  basis over
the period to be benefited of five years up until December 31, 1998. Patents are
amortized on a straight-line  basis over the remaining  estimated useful life of
15 years.  Goodwill is amortized  over the period to be benefited,  or 40 years,
whichever is less.  Debt  origination  costs are amortized  over the life of the
related notes payable.  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.

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

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.

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.

Effect of New  Accounting  Pronouncements.  Statement of Position 98-5 Reporting
the Costs of Start-up  Activities  requires that organization costs be expensed.
The Company applied this new accounting pronouncement effective January 1, 1999.
The  impact of this  change in  accounting  principle  was to reduce  assets and
increase the deficit  accumulated  during the development stage by $63,020 as of
December  31, 1998 and is presented as the  cumulative  effect of an  accounting
change on the statement of operations. There are no related income tax amounts.

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.  The
principal  areas  requiring  estimation  are  revenue  recognition  based on the
percentage of completion method, loss reserves and the valuation of common stock
issued for services.

                                                                              11

<PAGE>


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        (CONTINUED)

Revenue and Cost Recognition.  The Company recognized revenue on its contract in
process using the percentage-of-completion  method of accounting, which is based
on the proportion of the contract cost incurred to the estimated  total contract
cost. Costs incurred and estimated  earnings in excess of billings represent the
revenue recognized that has not yet been billed.

Contract  costs include all direct  material and labor costs and those  indirect
costs  related  to  contract  performance,  such as  indirect  labor,  supplies,
overhead, and equipment depreciation.

The contract to produce two outdoor advertising  billboards totals $1.7 million,
with  $885,000  allocated  to  the  first  unit.  An  estimated  total  loss  of
approximately  $45,000 in the first unit has been recognized as of September 30,
1999.  The  Company's  estimated  cost to complete as of  September  30, 1999 is
approximately  $375,000  which it  expects to fund with  cash,  billings  on the
contract and additional capital.

In accordance with the contract, the Company will bill the customer when certain
milestones have been met. There were no billings as of September 30, 1999.

Adjustments to the original estimates of total contract revenue,  total contract
cost,  and extent of  progress  toward  completion  are often  required  as work
progresses under the contract and as experience is gained, even though the scope
of the work required under the contract may not change. The nature of accounting
for  contracts  is  such  that   refinements  of  the  estimating   process  for
continuously  changing  conditions and new developments are a characteristic  of
the process.  Accordingly,  provisions  for losses on contracts  are made in the
period in which they become evident under the percentage-of-completion method.

Reclassifications.  Certain  amounts  in 1998  financial  statements  have  been
reclassified to conform with 1999 presentation.

NOTE 2. RELATED PARTY RECEIVABLES

Related party receivables at September 30, 1999, consist of the following:

    Due from officer                                             $        52,494
    Note receivable from former shareholder bearing
        interest at 8% and due in June, 2000                              15,000
                                                                 ---------------

                                                                 $        67,494
                                                                 ===============

The note  receivable  from  former  shareholder  was issued  for  $10,000 in the
Company's common stock and $5,000 in cash.

                                                                              12

<PAGE>


NOTE 3. EQUITY INVESTMENTS

During 1998 the Company  increased  its  investment  in Bio Moda,  Inc. to 21.93
percent. Bio Moda, Inc. is a development stage company involved primarily in the
development  of  technology  for  the  early  detection  of  lung  cancer.  As a
development  stage company,  Bio Moda,  Inc. has not had any revenues and, as of
September 30, 1999, was in the process of conducting clinical trials.

There is currently no active  market for the common stock of Bio Moda,  Inc. The
ultimate value of the Company's  investment in Bio Moda, Inc. will depend on its
ability  to  complete  its  research  and  either   commercialize  or  sell  its
proprietary technology.

A summary of the financial  data  relative to Bio Moda,  Inc. as of December 31,
1998 is as follows:

<TABLE>
<CAPTION>

<S>                                                                                            <C>
    Assets:
        Current assets                                                                         $  56,223
        Other assets                                                                              17,000
                                                                                               ---------
                                                                                               $  73,223
                                                                                               =========

    Liabilities and equity
        Current liabilities                                                                    $  32,148
        Notes payable to stockholders                                                             84,884
        Common stock                                                                             372,273
        Deficit accumulated during the development stage                                        (416,082)
                                                                                               ---------
                                                                                               $  73,223
                                                                                               =========

The  investment in Bio Moda,  Inc. is accounted for using the equity  method.  A
summary of the investment as of September 30, 1999 is as follows:

    Original cost, all of which exceeded book value                                            $ 358,845
    Share of net loss                                                                            (81,880)
    Amortization of excess of cost
        over book value                                                                          (34,853)
                                                                                               ---------

    Net investment                                                                             $ 242,112
                                                                                               =========

</TABLE>

In September  1999,  the Company  issued  400,000  shares of its common stock in
exchange for a 25 percent ownership in Wizard Technologies, Inc. The transaction
was valued at the estimated fair value of $110,000.  The Company has not applied
the  equity  method  to this  investment  as  financial  statements  for  Wizard
Technologies, Inc. are not available. Wizard Technologies, Inc. is a development
stage company with a fiber optics switch design.

                                                                              13

<PAGE>


NOTE 4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION

Capital Lease  Obligation.  In July,  1998,  the Company  entered into a capital
lease  agreement for equipment  valued at $100,499 (net book value of $71,185 at
September 30, 1999).  The Company made a down payment of $20,170.  The remaining
amount  was  financed  on a lease  with 36 monthly  payments  of $2,810.  Future
minimum lease payments are as follows for the years ending June 30:

        2000                                                $        33,720
        2001                                                         33,720
                                                            ---------------
                                                                     67,440

        Less amounts representing interest                          (11,051)
                                                            ---------------

                                                            $        56,389
                                                            ===============

Long-Term Debt. In October 1998, the Company obtained a note payable from a bank
as  part  of  the  purchase  of an  automobile.  The  note  is  due  in  monthly
installments  of principal and interest  (fixed rate of 8 percent) of $817 until
October 2002. The note is secured by the automobile and the balance  outstanding
at September 30, 1999 was $27,359.

In April  1999,  the  Company  obtained a note  payable  from a bank to purchase
equipment.  The note is due in 36 monthly installments of principal and interest
(bank index rate plus 1.5 percent  which was 9.75 percent at September 30, 1999)
of $409.  The note is  secured  by  equipment  and the  balance  outstanding  at
September 30, 1999 was $11,759.

Convertible  Notes.  On June 3, 1999, the Company issued $500,000 in convertible
notes which bear  interest at an annual rate of 8 percent and mature  (principal
and  interest)  on May 31,  2001.  Effective  August  1,  1999,  the  notes  are
convertible  into shares of common stock at a 25 percent discount to the closing
bid price of a share of common  stock at the time of  conversion  The notes were
issued in exchange for $430,000 in cash $50,000 in legal services and $20,000 in
commissions. The commissions have been capitalized as debt origination costs and
are being amortized over the life of the notes. The notes are unsecured.

The  intrinsic  value of the  conversion  feature of the  principal  and accrued
interest  was  estimated  to be  $171,186.  This  should  have been  included as
interest  expense in the  quarter  ended June 30,  1999,  and is included in the
restatement in the accompanying  Statements of Changes in Stockholders'  Equity.
The  convertible  notes also  include  detachable  warrants  for the purchase of
12,500,000  shares of common stock at the lower of 75 percent of the closing bid
price of a share of common  stock at the time of exercise or  September 1, 1999.
The warrants  expire on June 3, 2002.  Management  estimates that  approximately
half the warrants will be exercised prior to expiration.


                                                                              14

<PAGE>


NOTE 4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION
        (CONTINUED)

Management  estimated  the fair market  value of these  warrants at $125,000 and
recorded  this amount as an  increase  in paid-in  capital and a discount to the
convertible  notes  payable.  The discount is being  amortized over the two year
life of the notes.  The discount of $125,000 is included in the  restatement  of
paid-in capital along with the related  discount  amortization of $5,208 at June
30, 1999.

The effect of the restatements  described above was to increase the net loss for
the quarter ended June 30, 1999, by $176,394 to $556,211.

A  significant  contingency  regained  by the  convertible  notes  and  warrants
agreements is the registration of the underlying  shares with the Securities and
Exchange  Commission.  The  company  is to use its best  efforts  to affect  the
registration of these shares and is in the process of preparing the registration
statement.

Principal payments for long-term debt and convertible notes for the years ending
September 30 are as follows:

                2000                              $         11,927
                2001                                       526,527
                2002                                        11,812
                2003                                         2,410
                                                  ----------------

                                                  $        552,676
                                                  ================


NOTE 5. EQUITY TRANSACTIONS

The Company was initially capitalized through the issuance of 500,000 shares for
$25,000 in cash.  In November  1996,  the  Company  issued  4,500,000  shares in
exchange  for the  outstanding  shares of PLZ Tech,  Inc.  The  transaction  was
accounted for as a purchase and net assets of $285,596,  consisting primarily of
patents and equipment  were  recorded.  In previous  financial  statements,  the
Company  did not present  unclaimed  shares  resulting  from the merger with PLZ
Tech, Inc. as outstanding  shares.  In the accompanying 1997 and prior financial
statements the number of shares  outstanding  has been restated to include these
shares.

During 1997 the Company  issued  2,281,212  shares of stock in a public  offing,
primarily for cash.

During  1998,  the  Company  repurchased  472,200  of its  outstanding  stock in
exchange  for  $10,000  in  notes  receivable  and  $30,385  in cash in  various
transactions. This stock was subsequently retired.

                                                                              15

<PAGE>


NOTE 5. EQUITY TRANSACTIONS (CONTINUED)

The  Company  also  issued  9,274,811  shares of common  stock in  exchange  for
$1,292,707 in cash, net of sales commissions and other direct costs.  Certain of
these sales included price maintenance  agreements  resulting in the issuance of
an additional 1,704,464 shares of stock in 1998.

In 1998 the Company  issued  2,751,000  shares of common  stock in exchange  for
services from contractors,  officers and others. These shares were valued at the
estimated  fair market  value for  similar  issuances  of stock and  amounted to
$296,470. The Company also issued 315,000 shares to an officer in exchange for a
note  receivable of $29,000.  The notes bears  interest at the rate of 7 percent
with interest due semiannually and the principal due July, 2001.

During the quarter ended March 31, 1999, the Company  repurchased 489,251 shares
of its  outstanding  stock for $11,132 in cash.  These shares were retired.  The
Company also sold  3,259,180  shares for  $154,620 in cash and issued  6,026,681
shares for services which were valued at $27,687.

During the quarter  ended June 30, 1999,  the Company sold  1,437,050  shares of
common  stock for $112,984 in cash and issued  3,947,488  shares in exchange for
services from officers and directors.

During the quarter ended  September 30, 1999, the Company sold 1,675,705  shares
of common  stock for  $240,035  and  issued  5,956,000  shares in  exchange  for
services from  officers,  directors  and others valued at $175,531.  The Company
also repurchased 72,400 shares for $7,303.


NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS

The  following  are the  carrying  amounts  and  methods  used by the Company in
estimating its fair value of financial instruments.

     Cash and  Certificates  of Deposit.  The carrying  amounts  reported in the
     balance sheet approximate fair value.

     Marketable Equity Securities.  The fair value reported in the balance sheet
     was based on current market prices.

     Notes Receivable.  Management  estimates the fair value of notes receivable
     approximates the carrying value due to their short terms.

                                                                              16

<PAGE>


NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
        (CONTINUED)

     Notes  Payable.  Management  estimates  the fair  value  of  notes  payable
     approximates the carrying value due to their short terms.

     Capital Lease and Long-Term  Debt.  Management  estimates the fair value of
     capital lease obligations and notes payable approximates the carrying value
     due to their short terms and the fact that they were entered into recently.

The carrying amounts and fair values of the Company's financial  instruments are
as follows at September 30, 1999:

                                                                       Estimated
                                                          Carrying         Fair
                                                            Amount        Value

Cash and cash equivalents                                 $241,989       241,989
Certificate of deposit                                     105,251       105,251
Marketable equity securities (with an
    original cost of $89,869)                               67,571        67,571
Notes receivable                                            30,523        30,523
Notes payable                                                7,726         7,726
Long-term debt and capital lease obligation                504,830       609,065


NOTE 7. INCOME TAXES

At  September  30,  1999,  the  Company had  deferred  tax assets  amounting  to
approximately  $760,000.  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  $170,000 in the quarter ending September 30, 1999 and
$480,000 for the nine months ending  September  30, 1999.  The net change is due
primarily to the increase in net operating loss carryforwards.

At September  30, 1999,  the Company had net  operating  loss  carryforwards  of
approximately  $1,900,000  available to offset future state and federal  taxable
income. These carryforwards will expire in 2016 to 2018 for federal tax purposes
and 2001 to 2003 for state tax purposes.

                                                                              17

<PAGE>


NOTE 8. COMMITMENTS AND CONTINGENCIES

The Company has a  non-cancelable  operating  lease agreement for its office and
production space. The agreement is through June 2000 with an option to renew for
one additional year.

Rent expense during the quarters  ending  September 30, 1999 and 1998 was $8,150
and  $3,900,  respectively.  For the nine  months  then ended it was $18,025 and
$6,000, respectively.

Future minimum lease payments for the years ending June 30, are as follows:

                2000                                            $         32,400

A summary of the  common  stock  option  and  warrant  activity  for  employees,
directors and officers is as follows:

<TABLE>
<CAPTION>

                                              Warrants        Weighted
                                                And            Average
                                              Options         Option Price       Exercisable

<S>                                           <C>                  <C>               <C>
Balance, December 31, 1997 and 1998           $   153,954          .58               153,954
                                                                                 ===========
Granted                                         6,600,000          .14
Expired                                          (153,954)         .58
                                              -----------

Balance, September 30, 1999                   $ 6,600,000          .14             5,500,000
                                              ===========                        ===========

</TABLE>

The  options in 1999  range in  exercise  price from .09 to .15 and expire  from
January 2003 to June 2004, with a weighted  average  expiration date of November
2003.  The options vest over a one year period and the warrants are  exercisable
immediately.







                                                                              18

<PAGE>


                       ADVANCED OPTICS ELECTRONICS, INC.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                  FINANCIAL CONDITION AND RESULTS OF OPERATION

Advanced  Optics  Electronics,  Inc.  (ADOT-NASDAQ  BB)  (the  "Company")  is  a
development  stage  technology  company based in  Albuquerque,  New Mexico.  The
Company is primarily  engaged in the  development,  production  and sales of its
novel and innovative electronic flat panel displays.  The result of research and
development  activities  will be the  manufacturing  of  large-scale  flat panel
displays  utilizing  its  patented  technology.  These  large-scale  flat  panel
displays will be marketed and sold to the outdoor advertising billboard market.

Forward - Looking Statements

This Quarterly  Report contains  forward-looking  statements about the business,
financial  condition and prospects of the Company that reflect  assumptions made
by management and management's beliefs based on information  currently available
to it. The Company can give no assurance that the expectations indicated by such
forward-looking  statements will be realized. If any of management's assumptions
should prove incorrect, or if any of the risks and uncertainties underlying such
expectations  should  materialize,  the  Company's  actual  results  may  differ
materially from those indicated by the forward-looking statements.

The key factors  that are not within the  Company's  control and that may have a
direct  bearing  on  operating  results  include,  but are not  limited  to, the
acceptance by customers of the  Company's  products,  the  Company's  ability to
develop  new  products  cost-effectively,  the  ability of the  Company to raise
capital in the future, the development by competitors of products using improved
or alternative  technology,  the retention of key employees and general economic
conditions.

There may be other risks and circumstances that management is unable to predict.
When  used in this  Quarterly  Report,  words  such as,  "believes,"  "expects,"
"intends,"  "plans,"  "anticipates"  "estimates"  and  similar  expressions  are
intended to identify forward-looking  statements,  although there may be certain
forward-looking   statements   not   accompanied   by  such   expressions.   All
forward-looking statements are intended to be covered by the safe harbor created
by Section 21E of the Securities Exchange Act of 1934.

Liquidity and Capital Resources

The Company  relies upon the purchase of its  securities by investors to provide
capital.  Capital  is  required  for the  development  of  prototype  units  and
manufacturing  operations.   Operating  revenues  from  initial  contracts  also
contribute to operating  liquidity.  The Company's  holding of stock in BioModa,
Inc will eventually provide additional liquidity.


                                                                              19

<PAGE>


BioModa  is  a  biomedical   development   company  primarily  involved  in  the
development of technology for the early detection of lung cancer.  The Company's
ownership of BioModa,  as of September 30, 1999, was 21.93%. No immediate family
members of officers  or  directors  of Advanced  Optics  Electronics,  Inc.  are
securities holders of BioModa.

During the quarter, the Company acquired a minority ownership interest in Wizard
Technologies,  Inc. (WTI). WTI is a high-tech  development  company dedicated to
the  development  and  production  of  switches  for fiber  optic  systems.  The
Company's  ownership interest with options totals 25%. Management expects WTI to
contribute to the Company through  incorporating  WTI's innovative products into
its core display products and as an investment.

During the nine  months  ended  September  30, 1999  $218,670  was spent for the
purchase of equipment and product  development costs. Funds for operation needs,
product  development  and capital  expenditures  were  provided from the sale of
securities and cash reserves.  Product development  expenditures are expected to
be approximately $250,000 in fiscal 1999.

Management believes that sales of securities, cash reserves and contract revenue
will provide  adequate  liquidity and capital  resources to meet the anticipated
development  stage  requirements  through the end of the first quarter.  At that
time it is  anticipated  that  sales  of flat  panel  displays  will  begin  and
contribute  to  operating  revenues.  It is  anticipated  that these  sales will
provide the  additional  capital  resources to fund the  proportionately  higher
working capital  requirements of production and sales  initiatives.  The Company
currently has no other significant commitments for capital expenditures in 1999.

Results of Continuing Operations

Comparison of the Nine-Month Periods Ended September 30, 1999 and 1998

Revenues  increased  to $261,375 in the first nine months of 1999 as compared to
$72,000 in the first nine months of 1998.

Research,  development  and technical  costs  increased to $137,051 in the first
nine months of 1999 from  $28,880 in the first  months of 1998.  The increase in
these costs is due primarily to increased  research and development  efforts and
resources.

General and administrative  costs increased to $721,624 in the first nine months
of 1999 from  $236,046  in the first  nine  months of 1998 due to  increases  in
salaries related to additional personnel and increases in professional fees.

Depreciation increased to $102,691 in the first nine months of 1999 from $15,627
in the first nine  months of 1998 due  primarily  to  depreciation  expense  for
equipment  purchased  and  acquired  under  capital  leases and other  technical
equipment.


                                                                              20

<PAGE>


                           PART II. OTHER INFORMATION

Item 1. Legal proceedings

The  Company  is not a party to any legal  proceeding,  the  adverse  outcome of
which,  in  management's  opinion,  would have a material  adverse effect on the
Company's operating results.

Item 2. Changes in securities

During the third  quarter of fiscal year 1999 there was a 7,631,705  increase in
shares of common stock.

Item 3. Defaults upon senior securities - Not applicable

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

There were no matters  submitted  to a vote of the  Company's  security  holders
during the third quarter of fiscal year 1999.

Item 5. Other Information - Not applicable

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits
27.1 Financial Data Schedule

(b) Reports on Form 8-K
No reports on Form 8-K were filed by the company during the  three-month  period
ending September 30, 1999


                                                                              21

<PAGE>


                                   SIGNATURES


In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report  on Form  10QSB to be  signed  on its  behalf  by the  undersigned,
thereunto duly authorized.


                                            Dated: November 11, 1999

                                            ADVANCED OPTICS ELECTRONICS, INC.


                                            BY:/s/Leslie S. Robins
                                               -------------------
                                            Leslie S. Robins
                                            Executive Vice President
                                            (Principal Executive Officer)


                                            BY:/s/John J. Cousins
                                               ------------------
                                            John J. Cousins
                                            Vice President of Finance