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: June 30, 2003


                           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 5, 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 June 30, 2003
was 1,624,832,960

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

<PAGE>



PART I:  FINANCIAL INFORMATION
ITEM 1:  Financial Statements


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

                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                             CONDENSED BALANCE SHEET
                                  June 30, 2003

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

                                     ASSETS


Current Assets
      Cash                                                          $   188,373
                                                                 ---------------
      Costs and estimated earnings in excess of billings on
      uncompleted contract                                            2,090,442
      Allowance for loss on contract                                 (1,255,000)
                                                                 ---------------
                                                                        835,442
      Other current assets                                               36,833
                                                                 ---------------

           Total current assets                                       1,060,648

Property and Equipment, at cost                                         426,683
      Less accumulated depreciation                                     338,115
                                                                 ---------------
      Property and Equipment, net                                        88,568

Other Assets
      Intangible assets, net                                              7,074
      Patents, net                                                            1
      Investment in Biomoda, Inc.                                        42,565
      Notes receivable from related parties                             201,652
                                                                 ---------------
                                                                        251,292

                                                                    $ 1,400,508
                                                                 ===============


           LIABILITIES AND STOCKHOLDERS' DEFICIT

Current Liabilities
      Accounts payable                                              $   125,973
      Accrued expenses                                                   13,114
      Accrued interest                                                  163,215
      Notes payable                                                       5,347
      Convertible debentures                                          1,138,805
                                                                 ---------------

           Total current liabilities                                  1,446,454
                                                                 ---------------

Commitments and Contingencies

Stockholders' Deficit
      Preferred stock, $0.001 par value, 10,000,000 shares
        authorized; no shares issued and outstanding                          -
      Common stock, $0.001 par value, 1,950,000,000 shares
        authorized; 1,624,832,960 shares issued and outstanding       1,624,833
      Treasury stock, at cost                                            (6,634)
      Notes receivable officer                                         (317,203)
      Additional paid in capital                                     10,239,071
      Deficit accumulated during the development stage              (11,586,013)
                                                                 ---------------

           Total stockholders' deficit                                  (45,946)
                                                                 ---------------

                                                                    $ 1,400,508
                                                                 ===============

--------------------------------------------------------------------------------
Page 2           See accompanying notes to these condensed financial statements.

<PAGE>
--------------------------------------------------------------------------------

                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                       CONDENSED STATEMENTS OF OPERATIONS
            For the Three Month Periods Ended June 30, 2003 and 2002

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

<TABLE>
<CAPTION>
                                                                2003              2002
                                                          ---------------    --------------

<S>                                                       <C>                <C>
CONTRACT REVENUES                                           $          -       $         -

OPERATING EXPENSES
  General and administrative                                    (255,587)          (95,251)
  Research and development                                       (21,462)          (22,908)
  Asset impairment                                                     -                 -
                                                          ---------------    --------------
                                                                (277,049)         (118,159)

ESTIMATED LOSS ON CONTRACT                                             -          (185,000)
                                                          ---------------    --------------

OPERATING LOSS                                                  (277,049)         (303,159)
                                                          ---------------    --------------

OTHER (EXPENSE) INCOME
  Interest income                                                  7,840             3,523
  Gain (loss) on marketable equity securities                          -                 -
  Other investment gains                                               -                 -
  Loss from investment in Biomoda, Inc.                          (20,966)           (7,103)
  Gain (loss) on disposal of assets                                    -                 -
  Interest expense                                               (20,546)          (21,338)
                                                          ---------------    --------------
                                                                 (33,672)          (24,918)
                                                          ---------------    --------------

NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE                                         (310,721)         (328,077)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE                                                              -                 -
                                                          ---------------    --------------

NET LOSS                                                    $   (310,721)      $  (328,077)
                                                          ===============    ==============

Basic and diluted net loss before cumulative effect of
change in accounting principle available to common
shareholder per common share                                           -                 -

Cumulative effect of change in accounting principle                    -                 -
                                                          ---------------    --------------

Basic and diluted net loss available to common                         -                 -
  shareholder per common share                            ===============    ==============


Basic and diluted weighted average common shares
  outstanding                                              1,222,227,575       147,536,223
                                                          ===============    ==============




</TABLE>


--------------------------------------------------------------------------------
Page 3           See accompanying notes to these condensed financial statements.
<PAGE>
--------------------------------------------------------------------------------

                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                       CONDENSED STATEMENTS OF OPERATIONS
    For the Six Month Periods Ended June 30, 2003 and 2002 and For The Period
               From May 22, 1996 (Inception) Through June 30, 2003

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                            May 22, 1996
                                                                                            (Inception)
                                                                                              Through
                                                                                              June 30,
                                                             2003             2002              2003
                                                        --------------   --------------    --------------

<S>                                                     <C>              <C>               <C>
CONTRACT REVENUES                                        $         -      $         -       $         -

OPERATING EXPENSES
  General and administrative                                 (591,506)        (460,365)       (7,403,600)
  Research and development                                    (35,011)         (46,509)       (1,367,084)
  Asset impairment                                                 -                            (227,570)
                                                        --------------   --------------    --------------
                                                             (626,517)        (506,874)       (8,998,254)

ESTIMATED LOSS ON CONTRACT                                    (50,000)        (185,000)       (1,255,000)
                                                        --------------   --------------    --------------

OPERATING LOSS                                               (676,517)        (691,874)      (10,253,254)
                                                        --------------   --------------    --------------
OTHER (EXPENSE) INCOME
  Interest income                                              11,960            8,227            83,342
  Gain (loss) on marketable equity securities                      -                -            (29,368)
  Other investment gains                                           -                -             59,784
  Loss from investment in Biomoda, Inc.                       (22,600)          (7,103)         (312,350)
  Gain (loss) on disposal of assets                                -            10,000            (4,306)
  Interest expense                                            (22,772)         (55,388)       (1,066,841)
                                                        --------------   --------------    --------------
                                                              (33,412)         (44,264)       (1,269,739)
                                                        --------------   --------------    --------------
NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
 IN ACCOUNTING PRINCIPLE                                     (709,929)        (736,138)      (11,522,993)

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

NET LOSS                                                 $   (709,929)    $   (736,138)     $(11,586,013)
                                                        ==============   ==============    ==============

Basic and diluted net loss before cumulative effect of
  change in accounting principle available to common
  shareholder per common share                                     -      $     (0.010)     $     (0.070)

Cumulative effect of change in accounting principle                -                -                 -
                                                        --------------   --------------    --------------

Basic and diluted net loss available to common
  shareholder per common share                                     -      $     (0.010)     $     (0.070)
                                                        ==============   ==============    ==============

Basic and diluted weighted average common shares
  outstanding                                           1,006,650,730      124,636,280       173,177,853
                                                        ==============   ==============    ==============


</TABLE>






--------------------------------------------------------------------------------
Page 4           See accompanying notes to these condensed financial statements.
<PAGE>
--------------------------------------------------------------------------------

                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                       CONDENSED STATEMENTS OF CASH FLOWS
    For The Six Month Periods Ended June 30, 2003 and 2002 and For the Period
               From May 22, 1996 (Inception) Through June 30, 2003

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                             May 22, 1996
                                                                                              (Inception)
                                                                                                Through
                                                                                                June 30,
                                                                2003             2002             2003
                                                           --------------   --------------   --------------

<S>                                                        <C>              <C>              <C>
Cash flows from operating activities:
     Net loss                                               $   (709,929)    $   (736,138)    $(11,586,013)
     Adjustments to reconcile net loss to net cash
       used in operating activities:
        Intrinsic value of conversion features                         -                -          610,603
        Write off of organization costs                                -                -           63,020
        Amortization of discount on convertible notes and
          preferred stock                                              -                -          295,209
        Loss on marketable securities                                  -                -           29,368
        Loss (gain) on disposal of assets                              -          (10,000)           4,306
        Loss on investment in Biomoda, Inc.                       22,600            7,103          312,350
        Issuance of common stock for services                    335,026          285,320        4,752,877
        Issuance of notes payable for services                         -                -           50,000
        Increase in excess of costs and earnings over
          billings on uncompleted contract                      (210,093)        (164,186)      (2,090,442)
        Increase in allowance for loss on contract                50,000          185,000        1,255,000
        Interest accrued on convertible debentures                     -           57,002          228,446
        Interest earned on note receivable from stockholder
          and related parties                                     (8,301)               -          (23,727)
        Depreciation and amortization                             45,016           46,244          582,976
        Bad debt expense                                               -                -           15,000
        Asset impairment                                               -                -          227,570
        Other non-cash expenses                                        -                -          132,119
        Accrued interest                                               -                -           30,667
     Changes in operating assets and liabilities:
        Increase in other current assets                               -           (8,223)         (36,833)
        Decrease in inventory                                          -                -                -
        Increase in accounts payable and accrued expenses       (193,693)          67,010          302,302
                                                           --------------   --------------   --------------

     Net cash used in operating activities                      (669,374)        (270,868)      (4,845,202)
                                                           --------------   --------------   --------------

Cash flows from investing activities:
     Purchases of property and equipment                               -                -         (389,832)
     Proceeds from sale of property and equipment                      -           10,000           23,800
     Investment in Biomoda, Inc.                                       -                -         (383,845)
     Proceeds from sale of Biomoda, Inc. stock                         -           11,250           28,930
     Advances to Biomoda, Inc.                                  (163,220)          (5,050)        (201,652)
     Sale of marketable securities                                     -                -           40,665
     Purchases of marketable securities                                -                -          (70,034)
     Decrease in certificates of deposit                               -                -                -
     Purchase of other assets                                          -                -         (245,579)
                                                           --------------   --------------   --------------

     Net cash used in investing activities                      (163,220)          16,200       (1,197,547)
                                                           --------------   --------------   --------------




</TABLE>
--------------------------------------------------------------------------------
Page 5           See accompanying notes to these condensed financial statements.
<PAGE>

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

                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                 CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
    For The Six Month Periods Ended June 30, 2003 and 2002 and For the Period
               From May 22, 1996 (Inception) Through June 30, 2003

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

<TABLE>
<S>                                                        <C>              <C>              <C>
Cash flows from financing activities:
     Principal repayments on notes payable and
       capital leases                                            (32,763)               -         (264,640)
     Proceeds from notes payable                                       -           (5,383)         622,776
     Issuance of common stock for cash                         1,020,372          180,432        5,194,244
     Increase in notes receivable stockholder                          -                -         (317,203)
     Proceeds from sale of treasury stock                              -            6,679          120,606
     Purchase of treasury stock                                        -           (7,305)        (154,710)
     Proceeds from issuance of convertible debt                        -                -        1,060,000
     Principal repayments on convertible debt                    (16,500)               -          (29,951)
                                                           --------------   --------------   --------------

     Net cash provided by financing activities                   971,109          174,423        6,231,122
                                                           --------------   --------------   --------------

Net increase in cash                                             138,515          (80,245)         188,373

Cash at beginning of period                                       49,858           90,863                -
                                                           --------------   --------------   --------------

Cash at end of period                                       $    188,373     $     10,618     $    188,373
                                                           ==============   ==============   ==============




See accompanying notes to the financial statements for additional information relating to non-cash investing and financing
activities during the three month period ended June 30, 2003.
</TABLE>



--------------------------------------------------------------------------------
Page 6           See accompanying notes to these condensed financial statements.

<PAGE>
--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

MANAGEMENTS REPRESENTATION:

The management of Advanced  Optics  Electronics,  Inc. (the  "Company")  without
audit has prepared the  condensed  financial  statements  included  herein.  The
accompanying  unaudited  condensed  financial  statements  have been prepared in
accordance with accounting principles generally accepted in the United States of
America  for  interim  financial  information.   Certain  information  and  note
disclosures  normally included in the condensed financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been omitted. In the opinion of the management of the Company,  all
adjustments   considered  necessary  for  fair  presentation  of  the  condensed
financial  statements have been included and were of a normal recurring  nature,
and the accompanying condensed financial statements present fairly the financial
position as of June 30, 2003,  and the results of operations  for the six months
and three  months ended June 30, 2003 and 2002 and cash flows for the six months
ended June 30, 2003 and 2002.

It is suggested that these condensed financial statements be read in conjunction
with the audited financial  statements and notes for the year ended December 31,
2002,  included in the  Company's  Form  10-KSB  filed with the  Securities  and
Exchange  Commission on March 31, 2003. The interim  results are not necessarily
indicative of the results for a full year.


1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF OPERATIONS

Advanced  Optics  Electronics,  Inc.  (the  "Company")  is a  development  stage
technology company with its principal focus on the development and production of
large-scale  flat panel  displays and trades on the OTC Bulletin Board under the
symbol  "ADOT.OB."  The market for the  large-scale  flat  panel  displays  will
include  advertising  billboards,  flat  panel  computer  monitors  and  cockpit
displays.  The Company plans to focus on producing  and selling the  large-scale
flat panel displays for outdoor advertising billboards.

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,  complete  this  contract and
obtain additional  contracts.  As of June 30, 2003,  completion of this contract
was behind schedule.

While management  believes the contract will ultimately be completed,  there can
be no certainty  that this will be  accomplished  because the technology has not
yet been used in a  commercial  application.  In  addition,  the  Company may be
required to obtain  additional  capital in order to fund the  completion  of the
contract.

--------------------------------------------------------------------------------
Page 7
<PAGE>
--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

ORGANIZATION AND NATURE OF OPERATIONS (continued)

Since  inception,  the Company has  primarily  been  engaged in the research and
development of its product.  Once the research and development is complete,  the
Company will begin to manufacture  and obtain new  contracts.  The Company is in
the development stage and has not generated revenues from any product sales. The
Company believes that its planned products will produce  sufficient  revenues in
the future. There are no assurances,  however,  that the Company will be able to
produce such products, or if produced,  that they will be accepted in the market
place.

DEVELOPMENT STAGE AND GOING CONCERN

The Company has been in the  development  stage since its  inception  on May 22,
1996,  and has not  generated  any  revenues  from  operations  and  there is no
assurance of any future revenues.

The Company will require substantial  additional funding for continuing research
and  development,   obtaining  acceptance  in  the  market  place  and  for  the
commercialization  of its product.  There can be no  assurance  that the Company
will be able to obtain  sufficient  additional  funds when needed,  or that such
funds, if available, will be obtainable on terms satisfactory to the Company.

Management has taken action to address these matters. They include:

  o  Retention of experienced management personnel with particular skills in
     the development and commercialization of such product.
  o  The Company is aggressively seeking new contracts.
  o  The Company has an equity method investment in a start-up company,
     which management hopes will be profitable.
  o  The Company is seeking investment capital through the public markets.

Management  plans  to  obtain  revenues  from  product  sales,  but  there is no
commitment by any persons for purchases of any of the proposed products.  In the
absence  of  significant  sales  and  profits,  the  Company  may  seek to raise
additional  funds  to  match  its  working  capital   requirements  through  the
additional sales of debt and equity  securities,  there is no assurance that the
Company will be able to obtain sufficient additional funds when needed, although
such funds,  if  available,  will be  obtainable  on terms  satisfactory  to the
Company.  The successful  outcome of future  activities  cannot be determined at
this time and there is no  assurance  that if  achieved,  the Company  will have
sufficient  funds to execute its  intended  business  plan or generate  positive
operating results.


--------------------------------------------------------------------------------
Page 8
<PAGE>
--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

DEVELOPMENT STAGE AND GOING CONCERN (continued)

As a result, the accompanying  financial  statements have been prepared assuming
the Company will continue as a going concern,  which  contemplates,  among other
things,  the realization of assets and satisfaction of liabilities in the normal
course of  business.  As of June 30,  2003,  the  Company has  negative  working
capital of  $385,806,  a deficit  accumulated  during the  development  stage of
$11,586,013, losses from operations and lack of operational history, among other
matters,  which raise substantial doubt about its ability to continue as a going
concern.

The condensed  financial  statements do not include any  adjustments  related to
recoverability  and  classification of assets carrying amounts or the amount and
classification  of liabilities that might result should the Company be unable to
continue as a going concern.

EARNINGS PER SHARE

The Company has adopted  Statement of  Financial  Accounting  Standards  No. 128
("SFAS 128"),  "Earnings Per Share." Under SFAS 128, basic earnings per share is
computed by dividing  income  available to common  stockholders  by the weighted
average  number  of  shares  assumed  to be  outstanding  during  the  period of
computation.  Diluted  earnings per share is computed  similar to basic earnings
per share  except that the  denominator  is  increased  to include the number of
additional  common  shares  that would have been  outstanding  if the  potential
common shares had been issued and if the additional  common shares were dilutive
(no shares as of June 30, 2003 and 2002). Because the Company has incurred a net
loss in the six month and three  month  periods  ended  June 30,  2003 and 2002,
basic and diluted  loss per share are the same as  additional  potential  common
shares would be anti-dilutive.

STOCK BASED COMPENSATION

At June 30, 2003, the Company has two stock-based  employee  compensation plans.
The  Company  accounts  for those plans under the  recognition  and  measurement
principles of Accounting  Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), and related Interpretations.

No  stock-based  employee  compensation  cost is reflected  in net loss,  as all
options  granted  under those  plans had an  exercise  price equal to the market
value of the underlying  common stock on the date of grant.  The following table
illustrates  the effect on net income and  earnings per share if the Company had
applied  the  fair  value  recognition  provisions  of  Statement  of  Financial
Accounting  Standards No. 123,  "Accounting  for Stock-Based  Compensation,"  as
amended to stock-based employee compensation.


--------------------------------------------------------------------------------
Page 9
<PAGE>
--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

STOCK BASED COMPENSATION (continued)

<TABLE>
<CAPTION>
                                                                   2003                2002
                                                              --------------      --------------
<S>                                                       <C>                   <C>
Net loss:
    As reported                                           $       (709,929)     $       (736,138)
    Deduct: Total stock-based employee compensation
          expense determined under fair value based
          method for all awards                                          -               (50,000)
                                                            ----------------       ---------------
    Pro forma                                             $       (709,929)     $       (786,138)
                                                            ================       ===============

Basic and diluted net loss per share:
    As reported                                           $              -      $          (0.07)
                                                            ================       ===============
    Pro forma                                             $              -      $          (0.07)
                                                            ================       ===============
</TABLE>

RECENT ACCOUNTING STANDARDS

Recent accounting pronouncements discussed in the notes to the December 31, 2002
audited financial statements,  filed previously with the Securities and Exchange
Commission  in form  10-KSB,  that were  required to be adopted  during the year
ending  December  31, 2003 did not have a  significant  impact on the  Company's
financial statements.


2. STOCKHOLDERS' EQUITY

COMMON STOCK

On June 19, 2003, the Company's Board of Directors  authorized the change in the
total number of common  shares which the Company is authorized to issue from the
current authorized of 1,500,000,000 to 1,950,000,000 common shares.

During the three month period ended June 30, 2003, the Company sold  516,430,000
shares of common stock for approximately  $550,000 in cash; all shares were sold
for less than $0.01.


--------------------------------------------------------------------------------
Page 10
<PAGE>
--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A Development Stage Company)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


2. STOCKHOLDERS' EQUITY (continued)

COMMON STOCK (continued)

During  the  three  month  period  ended  June  30,  2003,  the  Company  issued
106,000,000  shares  of  common  stock  for  services,   which  were  valued  at
approximately  $125,000 (based on the closing market price on the date of grant,
which  was  less  than  $0.01).   The  Company  recorded  such  amounts  in  the
accompanying statement of operations.

During the three  month  period  ended June 30,  2003,  in  accordance  with the
applicable  convertible note payable  agreement,  the Company issued  65,600,000
shares of common  stock at  conversion  prices of less than $0.01 in  connection
with the  conversion  of  notes  payable  of  approximately  $63,000,  including
approximately $17,000 of accrued interest.



















--------------------------------------------------------------------------------
Page 11
<PAGE>

                 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                  FINANCIAL CONDITION AND RESULTS OF OPERATION


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.


                                    OVERVIEW

Advanced Optics Electronics, Inc. is a technology company whose primary focus is
the development, production and sales of its electronic flat panel displays. The
primary  initial  product  will be  marketed  to  users of  outdoor  advertising
billboards.  We believe that our product line has the  potential to create a new
segment of the outdoor advertising industry. Our systems software and electronic
displays represent an innovative approach to advertising that takes advantage of
the  technological  convergence  of broadcast and billboard  media and the World
Wide Web.


<PAGE>


Our goal is to create a product line based on  technology  that is scalable both
in terms of size and resolution to meet a wide range of requirements  related to
site,  economics and use from our potential  customers.  We are also planning to
develop a leasing program and an Owned & Operated group.

THE MAJOR ADVANTAGES AND FEATURES OF THE DISPLAY ARE:
        o   Brightest display ever available (35,000 nits)
        o   Widest viewing angle available
        o   Smallest dot pitch available for outdoor large-scale displays (8 mm
            dot pitch)
        o   High definition picture quality
        o   Modular assembly (1 meter increments) for scaleable and shapeable
            architectures
        o   True Color (24 bit)
        o   Full motion video (up to 120 frames per second)
        o   Transportable for mobile operations
        o   Weather resistant for outdoor applications
        o   Modest power requirements
        o   Minimum 5 year continual use lifetime
        o   Real-time live video feeds
        o   Broadcast/simulcast applications
        o   Supports streaming video
        o   Uses industry standard DVI protocol for high speed data linking and
            digital video interfacing
        o   Satellite linkable

PROPRIETARY BILLBOARD SOFTWARE CAPABILITIES ARE:
        o   Manage and update display content remotely
        o   Works with all image file formats and digital video editors
        o   Secure Internet or WAN communications
        o   WEB-based status monitoring
        o   Provides time, temperature and other dynamic content inserts


The Company was organized as a Nevada  corporation  on May 22, 1996. On November
7, 1996,  the Company  acquired the  business and patents of PLZTech,  a company
involved in the  development of flat panel  displays.  Our operating  activities
have related  primarily to the initial  planning and  development of our product
and  building our  operating  infrastructure.  We have  completed,  tested,  and
measured  the   performance   of,  our   prototype  and  are  currently  in  the
manufacturing process of our production model.


<PAGE>


We expect  our  principal  source of  revenue  to be  derived  from sales of our
electronic display product.  To date we have recognized limited revenue,  but we
have  developed a functioning  prototype  and we anticipate  sales by the fourth
quarter  2003.  The  company  has set the price for its  units at  $395,000  and
$1,490,000 respectively for its 2 meter x 3 meter and its 3 meter x 8 meter flat
panel displays.

The  company  has  completed a  marketing  film that is being  distributed  on a
national  and  international  basis.  The  recipients  who receive this film are
institutional  investors  and  qualified  potential  buyers  of the  flat  panel
displays.

Our operating expenses have increased significantly since our inception. This is
due to increased  engineering and management  staff and investments in operating
infrastructure.  Since our inception we have incurred significant losses and, as
of June 30, 2003,  had a deficit  accumulated  during the  development  stage of
$11,586,013.


RESULTS OF OPERATIONS OF THE COMPANY

Due  to  our  limited  operating  history,  we  believe  that   period-to-period
comparisons of our results of operations are not fully meaningful and should not
be relied upon as an indication of future performance.

Comparison of the Three-Month Periods Ended June 30, 2003 and 2002
------------------------------------------------------------------

Revenue.  During the quarter  ended  March 31,  2001,  the  Company  changed the
--------
accounting for our contract to the completed contract method.  According to this
way of accounting for contracts,  we are booking no revenue until the completion
of the  contract.  Please  note that the  revenue  for the period  May 22,  1996
(Inception)  Through June 30, 2003 has been restated and is now $0. Billings and
collections through June 30, 2003 have totaled $89,873.

Product Development. Product development expenses consist primarily of personnel
--------------------
expenses,  consulting fees and depreciation of the equipment associated with the
development and enhancement of our flat panel displays. Research development and
technical costs decreased slightly to $21,462 in the second quarter of 2003 from
$22,908  in  the  second  quarter  of  2002.  Continued  investment  in  product
development is critical to attaining our strategic  objectives  and, as such, we
expect product development expenses to increase significantly in future periods.
We expense product development costs as they are incurred.

General and  Administrative.  General  and  administrative  expenses  consist of
----------------------------
expenses for executive and administrative  personnel,  facilities,  professional
services,  travel,  general  corporate  activities,  and  the  depreciation  and
amortization  of  office  furniture  and  leasehold  improvements.  General  and
administrative  costs  increased to $255,587 in the second  quarter of 2003 from
$95,251 in the second  quarter of 2002.  We expect  general  and  administrative
costs to increase in the future as our  business  prospects  develop and we will
require more staff.  The costs  associated  with being a publicly traded company
<PAGE>

and  future  strategic  acquisitions  will  also  be a  contributing  factor  to
increases in this expense.

Other Income  (Expense).  Other income (expense)  consists of interest and other
------------------------
income and expense.  Other income  (expense),  net increased to ($33,672) in the
second  quarter  of 2003  from  ($24,918)  in the  second  quarter  of 2002  due
primarily to the impact of our investment in Biomoda. There was a larger loss on
our Biomoda  Investment due to the increased activity at Biomoda and the related
increased expenses.

Comparison of the Six-Month Periods Ended June 30, 2003 and 2002
----------------------------------------------------------------

Product Development. Product development expenses consist primarily of personnel
--------------------
expenses,  consulting fees and depreciation of the equipment associated with the
development and enhancement of our flat panel displays. Research development and
technical  costs  decreased  to  $35,011  in the first  six  months of 2003 from
$46,509  in the  first six  months  of 2002.  Continued  investment  in  product
development is critical to attaining our strategic  objectives  and, as such, we
expect product development expenses to increase significantly in future periods.
We expense product development costs as they are incurred.

General and  Administrative.  General  and  administrative  expenses  consist of
----------------------------
expenses for executive and administrative  personnel,  facilities,  professional
services,  travel,  general  corporate  activities,  and  the  depreciation  and
amortization  of  office  furniture  and  leasehold  improvements.  General  and
administrative  costs increased to $591,506 in the first six months of 2003 from
$460,365 in the first six months of 2002. We expect  general and  administrative
costs to increase in the future as our  business  prospects  develop and we will
require more staff.  The costs  associated  with being a publicly traded company
and  future  strategic  acquisitions  will  also  be a  contributing  factor  to
increases in this expense.

Other Income  (Expense).  Other income (expense)  consists of interest and other
------------------------
income and expense.  Other income  (expense),  net decreased to ($33,412) in the
second  quarter  of 2003  from  ($44,264)  in the  second  quarter  of 2002  due
primarily to less interest expensed related to convertible debentures. There was
a larger loss on our Biomoda Investment due to the increased activity at Biomoda
and the related increased expenses.

Depreciation and  amortization  remained  relatively  constant at $45,016 in the
second quarter of 2003 and $46,244 in the second quarter of 2002.


LIQUIDITY AND CAPITAL RESOURCES

Since  inception,  we have funded our operations  primarily  through the private
placement of equity securities and the issuance of convertible debentures. As of
June 30, 2003 we have raised net proceeds of approximately $7,000,000.

<PAGE>
The cash balance at the end of the quarter of $188,373 represents  approximately
two months of projected cash operating expenses.

We have also utilized  equipment loans and capital lease  financing.  As of June
30, 2003 we have a balance of  approximately  $5,300 on the equipment loans. The
equipment loan was completely  paid off with in the first two weeks of the third
quarter.

The Company's holding in Biomoda, Inc may provide additional liquidity.  Biomoda
is a biomedical  development  company. The Company's ownership of Biomoda, as of
June 30, 2003 was approximately 15.9%.

The  Company's  relationship  to its  investment in Biomoda  changed  during the
second quarter of 2002. There is now an active  leadership role in Biomoda being
provided by John Cousins and Leslie Robins, officers of the Company. The Company
has gone to the equity method of reporting its investment in Biomoda  because of
these recent changes in the management  relationship  between the two companies.
Biomoda is  currently  in the process of raising  capital by selling  securities
under an SB2 that has been filed and declared  effective by the  Securities  and
Exchange Commission. The SB2 was declared effective July 11, 2003.

Product  development  expenditures  were $21,462 for the quarter  ended June 30,
2003. Funds for operations,  product  development and capital  expenditures were
provided from the sale of securities and cash reserves.

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 fourth quarter 2003. 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 2003.

GOING CONCERN

The Company's  independent  certified  public  accountants  have stated in their
report included in the Company's 2002 Form 10-KSB, that the Company has incurred
operating  losses in the last two years,  has a working  capital  deficit  and a
stockholders'  deficit.  These  conditions  raise  substantial  doubt  about the
Company's ability to continue as a going concern.

INFLATION

Management  believes  that  inflation  has  not  had a  material  effect  on the
Company's results of operations.
<PAGE>

CRITICAL ACCOUNTING POLICIES

In December  2001, the SEC requested  that all  registrants  list their three to
five most "critical  accounting  policies" in the MD&A. The SEC indicated that a
"critical  accounting policy" is one which is both important to the portrayal of
the Company's  financial condition and results,  and requires  management's most
difficult,  subjective  or complex  judgments,  often as a result of the need to
make  estimates  about the effect of matters that are inherently  uncertain.  We
believe that our following accounting policies fit this definition:

REVENUE RECOGNITION - In accordance with Statement of Position 81-1, "Accounting
for Performance of Construction-Type and Certain Production-Type Contracts," the
Company  accounts  for revenue and costs  related to its  long-term  contract in
process by the completed-contract method, whereas during the period from May 22,
1996 (inception) to December 31, 1999,  revenue and costs were determined by the
percentage-of-completion method. The completed-contract method of accounting was
adopted  in  2000  due to the  Company's  uncertainty  regarding  contract  cost
estimates.  The financial statements of the period from May 22, 1996 (inception)
to December 31,  1999,  were  restated to apply the  completed  contract  method
retroactively.  The effect of the accounting change had no effect on net loss or
loss per share previously  reported for 1999 or for the period from May 22, 1996
(inception) to December 31, 1999.

Under the completed  contract method of accounting,  contract revenues and costs
are recognized when the contract is completed,  with estimated losses recognized
when it becomes  evident  that  contract  costs will exceed  contract  revenues.
Contract  costs include all direct  material and labor costs and those  indirect
costs  related  to  contract  performance,  such as  indirect  labor,  supplies,
overhead, equipment depreciation and interest.

Costs in excess of amounts  billed are  classified as current assets under costs
and estimated earnings in excess of billings on uncompleted contract.

ESTIMATES - Critical  estimates made by management are, among others,  estimates
for  current  and  deferred   taxes,   recoverability   of  intangible   assets,
collectibility  of  contract  receivable,  estimation  of  costs  for  long-term
contracts,  allowance  for loss on  contracts,  recoverability  of investment in
Biomoda, Inc. and the valuation of other assets. Actual results could materially
differ from those estimates.

ITEM 3.  CONTROLS AND PROCEDURES

Within 90 days prior to this report, Management carried out an evaluation of the
effectiveness of the design and operation of the Company's  disclosure  controls
and procedures, pursuant to Exchange Act Rules 13a-15(c) and 15d-15(c). Based on
the foregoing,  the Principal  Executive Officer and Principal Financial Officer
concluded  that,  as of June 30, 2003,  the  Company's  disclosure  controls and
procedures  are  effective  to timely  alert  them to any  material  information

<PAGE>

relating to the Company  that must be included  in the  Company's  periodic  SEC
filings.  In addition,  there have been no significant  changes in the Company's
internal  controls over  financial  reporting  during the quarter ended June 30,
2003 or in other  factors that are  reasonably  likely to  significantly  affect
these  controls.   Thus,  no  corrective  actions  with  regard  to  significant
deficiencies or material  weaknesses  were  necessary.  Based on the most recent
evaluation as of June 30, 2003, the CEO and CFO have concluded that there are no
significant  deficiencies  in the design or operation  of internal  control over
financial  reporting  which  are  reasonably  likely  to  adversely  affect  the
Company's ability to record, process, summarize and report financial information
and such officers have  identified  no material  weaknesses in internal  control
over financial reporting.

Disclosure controls and procedures, no matter how well designed and implemented,
can provide  only  reasonable  assurance  of  achieving  an entity's  disclosure
objectives.   The  likelihood  of  achieving  such  objectives  is  affected  by
limitations  inherent in disclosure  controls and procedures.  These include the
fact that human judgment in decision-making can be faulty and that breakdowns in
internal  control can occur  because of human  failures such as simple errors or
mistakes or intentional circumvention of the established process.


                           PART II. OTHER INFORMATION

Item 1.  Legal proceedings

The company may on occasion be a party to litigation involving claims made by or
against the Company arising in the ordinary course of business. The officers and
directors know of no legal  proceedings  pending or  contemplated by any person,
entity or governmental  authority which would have a material  adverse effect on
the Company.

Item 2.  Changes in securities

Common Stock

As of June  30,  2003,  the  status  of the  common  stock of the  Company  was:
1,950,000,000 shares authorized and 1,624,832,960 shares issued and outstanding.

During the three month period ended June 30, 2003, the Company sold  516,430,000
shares of common stock for $552,142 in cash;  all shares were sold for less than
$0.01.

During  the  three  month  period  ended  June  30,  2003,  the  Company  issued
106,000,000  shares of common stock for services,  which were valued at $123,655
(based on the  closing  market  price on the date of grant,  which was less than
$0.01).

During the  period  ended  June 30,  2003,  in  accordance  with the  applicable
convertible  note payable  agreement,  the Company issued  65,600,000  shares of
common  stock at  conversion  prices of less than $0.01 in  connection  with the
conversion of notes payable of approximately  $63,000,  including  approximately
$17,000 of accrued interest.
<PAGE>

These transactions were exempt under Section 4(2) of the Securities Act of 1933,
as amended.  The purchasers were well known to an executive  officer of Advanced
Optics Electronics,  Inc. and each had a net worth or income level to qualify as
accredited investors, were experienced in financial and business matters, and no
general solicitation was involved in the transaction.

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 second quarter of fiscal year 2003.

Item 5.  Other Information - Not applicable

Item 6.  Exhibits and Reports on Form 8-K


(a)  Exhibits

31.1  Certification of CEO pursuant to Securities Exchange Act rules 13a-15 and
      15d-15(c) as adopted pursuant to section 302 of the Sarbanes-Oxley act of
      2002.

31.2  Certification of CFO pursuant to Securities Exchange Act rules 13a-15 and
      15d-15(c) as adopted pursuant to section 302 of the Sarbanes-Oxley act of
      2002.

32.1  Certification of Leslie S. Robins,  Chief Executive  Officer  pursuant to
      18  U.S.C.  section  1350,  as  adopted  pursuant  to  section 906 of the
      Sarbanes-Oxley act of 2002.

32.2  Certification  of John J. Cousins,  Chief  Financial  Officer  (Principal
      Accounting   Officer)  pursuant  to  18  U.S.C.  section 1350, as adopted
      pursuant to section 906 of the Sarbanes-Oxley act of 2002.



(a)  Reports on Form 8-K

No reports on Form 8-K was filed during the second quarter of 2003.


<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: AUGUST 14, 2003

                             ADVANCED OPTICS ELECTRONICS, INC.



                             BY:/s/John J. Cousins
                               -------------------
                             John J. Cousins
                             Vice President of Finance
                             (Principal Accounting Officer)



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