U. S. SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                   FORM 10-QSB


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

                        SECURITIES EXCHANGE ACTS OF 1934


               For the quarterly period ended: September 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 each 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,
2003 was 2,336,982,960

    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
                               September 30, 2003
--------------------------------------------------------------------------------

                                     ASSETS

CURRENT ASSETS
   Cash                                                            $  1,323,545
   Marketable securities                                                 25,234
   Costs and estimated earnings in excess of billings on
      uncompleted contract                                            2,218,491
   Allowance for loss on contract                                    (1,333,491)
                                                                   ------------
                                                                        885,000
   Other current assets                                                  44,009
                                                                   ------------

      Total current assets                                            2,277,788

PROPERTY AND EQUIPMENT, NET                                              79,862

OTHER ASSETS
   Intangible assets, net                                                 3,605
   Investment in Biomoda, Inc.                                           46,341
   Notes receivable from related parties                                238,312
                                                                   ------------
                                                                        288,258

                                                                   $  2,645,908
                                                                   ============

                     LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES
   Accounts payable                                                $    125,650
   Accrued expenses                                                       4,896
   Accrued interest                                                     152,068
   Notes payable                                                              0
   Convertible debentures                                               979,464
                                                                   ------------

      Total current liabilities                                       1,262,078
                                                                   ============

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, 2,500,000,000
      shares authorized; 2,336,982,960 shares issued
      and outstanding                                                 2,336,983
   Treasury stock, at cost                                              (11,434)
   Notes receivable officer                                            (317,203)
   Additional paid in capital                                        11,625,016
   Other compreshenive income                                             4,587
   Deficit accumulated during the development stage                 (12,254,119)
                                                                   ------------

      Total stockholders' deficit                                     1,383,830
                                                                   ------------
                                                                   $  2,645,908
                                                                   ============
--------------------------------------------------------------------------------

 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 September 30, 2003 and 2002
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                               2003                    2002
                                                                          --------------          ------------
<S>                                                                       <C>                     <C>
CONTRACT REVENUES                                                         $         --            $       --

OPERATING EXPENSES
   General and administrative                                                   (561,789)             (180,516)
   Research and development                                                      (94,077)              (21,660)
   Asset impairment                                                                 --                    --
                                                                          --------------          ------------
                                                                                (655,866)             (202,176)

ESTIMATED LOSS ON CONTRACT                                                          --                    --
                                                                          --------------          ------------

OPERATING LOSS                                                                  (655,866)             (202,176)
                                                                          --------------          ------------
OTHER (EXPENSE) INCOME
   Interest income                                                                  --                   3,370
   Gain (loss) on marketable equity securities                                     2,041                  --
   Other investment gains                                                           --                    --
   Gain (loss) on sale of treasury stock                                          31,707                  --
   Loss from investment in Biomoda, Inc.                                           3,776                (1,158)
   Gain (loss) on disposal of assets                                                --                    --
   Interest expense                                                              (49,764)              (22,434)
                                                                          --------------          ------------
                                                                                 (12,240)              (20,222)
                                                                          --------------          ------------

NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
   IN ACCOUNTING PRINCIPLE                                                      (668,106)             (222,398)

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

NET LOSS                                                                  $     (668,106)         $   (222,398)
                                                                          ==============          ============

Basic and diluted net loss before cumulative effect of change
   in accounting principle available to common shareholder
   per common share                                                       $        (0.00)         $      (0.00)

Cumulative effect of change in accounting principle                                 --                    --
                                                                          --------------          ------------
Basic and diluted net loss available to common shareholder
per common share                                                          $        (0.00)         $      (0.00)
                                                                          --------------          ------------
Basic and diluted weighted average common shares
   outstanding                                                             2,015,908,862           229,261,072
                                                                          ==============          ============
</TABLE>

--------------------------------------------------------------------------------
3                See accompanying notes to these condensed financial statements.


<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                                        May 22, 1996
                                                                                                                        (Inception)
                                                                                                                          Through
                                                                                                                       September 30,
                                                                      2003                       2002                      2003
                                                                 --------------              ------------              ------------
<S>                                                              <C>                         <C>                      <C>
CONTRACT REVENUES                                                $         --                $       --                $       --

OPERATING EXPENSES
   General and administrative                                        (1,153,295)                 (640,881)               (7,965,389)
   Research and development                                            (129,088)                  (68,169)               (1,461,161)
   Asset impairment                                                        --                        --                    (227,570)
                                                                 --------------              ------------              ------------
                                                                     (1,282,383)                 (709,050)               (9,654,120)

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

OPERATING LOSS                                                       (1,332,383)                 (894,050)              (10,909,120)
                                                                 --------------              ------------              ------------
OTHER (EXPENSE) INCOME
   Interest income                                                       11,960                    11,597                    83,342
   Gain (loss) on marketable equity securities                            2,041                      --                     (27,327)
   Other investment gains                                                  --                        --                      59,784
   Gain (loss) on sale of treasury stock                                 31,707                      --                      31,707
   Loss from investment in Biomoda, Inc.                                (18,824)                   (8,261)                 (308,574)
   Gain (loss) on disposal of assets                                       --                      10,000                    (4,306)
   Interest expense                                                     (72,536)                  (77,822)               (1,116,605)
                                                                 --------------              ------------              ------------
                                                                        (45,652)                  (64,486)               (1,281,979)
                                                                 --------------              ------------              ------------
NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
   IN ACCOUNTING PRINCIPLE                                           (1,378,035)                 (958,536)              (12,191,099)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
   PRINCIPLE                                                               --                        --                     (63,020)
                                                                 --------------              ------------              ------------
NET LOSS                                                         $   (1,378,035)             $   (958,536)             $(12,254,119)
                                                                 ==============              ============              ============

Basic and diluted net loss before cumulative effect of change
   in accounting principle available to common shareholder
   per common share                                              $        (0.00)             $      (0.01)             $      (0.04)

Cumulative effect of change in accounting principle                        --                        --                        --
                                                                 --------------              ------------              ------------
Basic and diluted net loss available to common shareholder
   per common share                                              $        (0.00)             $      (0.01)             $      (0.04)
                                                                 ==============              ============              ============
Basic and diluted weighted average common shares
outstanding                                                       1,340,815,254               185,462,129               316,836,630
                                                                 ==============              ============              ============
</TABLE>

--------------------------------------------------------------------------------
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 Nine Month Periods Ended September 30, 2003 and 2002 and For the Period
            From May 22, 1996 (Inception) Through September 30, 2003
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                                                           May 22, 1996
                                                                                                           (Inception)
                                                                                                              Through
                                                                                                           September 30,
                                                                       2003                2002                2003
                                                                    -----------         ----------         ------------
<S>                                                                 <C>                 <C>                <C>
Cash flows from operating activities:
   Net loss                                                         $(1,378,035)        $ (958,536)        $(12,254,119)
   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                                      (2,041)              --                 27,327
      Loss (gain) on disposal of assets                                    --              (10,000)               4,306
      Loss (gain) on sale of treasury stock                             (31,707)              --                (31,707)
      Loss on investment in Biomoda, Inc.                                18,824              8,261              308,574
      Issuance of common stock for services                             743,861            396,581            5,161,712
      Issuance of notes payable for services                               --                 --                 50,000
      Increase in excess of costs and earnings over billings
       on uncompleted contract                                         (338,142)          (228,666)          (2,218,491)
      Increase in allowance for loss on contract                        128,491            185,000            1,333,491
      Interest accrued on convertible debentures                           --               82,848              228,446
      Interest earned on note receivable from stockholder and
       related parties                                                   (8,301)              --                (23,727)
      Depreciation and amortization                                      68,041             69,086              606,001
      Bad debt expense                                                     --               17,680               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                                   (7,176)           (11,746)             (44,009)
      Decrease ininventory                                                 --                 --                   --
      Increase in accounts payable and accrued expenses                (156,239)            69,835              339,756
                                                                    -----------         ----------         ------------

   Net cash used in operating activities                               (962,424)          (379,657)          (5,138,252)
                                                                    -----------         ----------         ------------
Cash flows from investing activities:
   Purchases of property and equipment                                  (10,849)              --               (400,681)
   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.                                           (199,880)           (13,720)            (238,312)
   Proceeds from the sale of marketable securities                       10,412               --                 51,077
   Purchases of marketable securities                                   (29,018)              --                (99,052)
   Decrease in certificates of deposit                                     --                 --                   --
   Purchase of other assets                                                --                 --               (245,579)
                                                                    -----------         ----------         ------------

   Net cash (used in) provided by investing activities                 (229,335)             7,530           (1,263,662)
                                                                    -----------         ----------         ------------
</TABLE>
--------------------------------------------------------------------------------
5                See accompanying notes to these condensed financial statements.


<PAGE>

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

<TABLE>

<S>                                                                 <C>                 <C>                 <C>
Cash flows from financing activities:
   Principal repayments on notes payable and capital leases             (38,110)           (10,888)            (269,987)
   Proceeds from notes payable                                             --                 --                622,776
   Issuance of common stock for cash                                  2,476,649            292,576            6,650,521
   Increase in notes receivable stockholder                                --                 --               (317,203)
   Proceeds from sale of treasury stock                                  56,553              7,829              177,159
   Purchase of treasury stock                                           (29,646)            (8,253)            (184,356)
   Proceeds from issuance of convertible debt                              --                 --              1,060,000
   Principal repayments on convertible debt                                --                 --                (13,451)
                                                                    -----------         ----------         ------------

   Net cash provided by financing activities                          2,465,446            281,264            7,725,459
                                                                    -----------         ----------         ------------
Net increase (decrease) in cash                                       1,273,687            (90,863)           1,323,545

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

Cash at end of period                                               $ 1,323,545         $     --           $  1,323,545
                                                                    ===========         ==========         ============
</TABLE>

See  accompanying  notes to the condensed  financial  statements  for additional
information  relating to non-cash investing and financial  activities during the
three month period ended September 30, 2003.

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



<PAGE>

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 September 30, 2003,  and the results of  operations  for the nine
months and three months ended September 30, 2003 and 2002 and cash flows for the
nine months ended September 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." 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  September  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.


7
<PAGE>

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.

As a result, the accompanying  condensed 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 September  30,  2003, a deficit  accumulated
during the development  stage of $12,254,119  losses from operations and lack of
operational  history,  among other matters,  which raise substantial doubt about
its ability to continue as a going concern.


8
<PAGE>

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Development Stage and Going Concern (continued)
-----------------------------------------------

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.

Stock Based Compensation
------------------------

At September 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.


<TABLE>
<CAPTION>
                                                              2003            2002
                                                          ------------    -----------
<S>                                                      <C>               <C>
Net loss:
    As reported                                          $ (1,378,035)     $(958,536)
    Deduct: Total stock-based employee compensation
          expense determined under fair value based
          method for all awards                                  --           (7,500)
                                                         ------------      ---------
    Pro forma                                            $ (1,378,035)     $(966,036)
                                                         ============      =========
Basic and diluted net loss per share:
    As reported                                          $       --        $   (0.01)
                                                         ============      =========
    Pro forma                                            $       --        $   (0.01)
                                                         ============      =========
</TABLE>

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

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 period
ending  September  30, 2003 did not have a  significant  impact on the Company's
condensed financial statements.


2. STOCKHOLDERS' EQUITY

Common Stock
------------

On August 12, 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 1,950,000,000 to 2,500,000,000 common shares.


9
<PAGE>

During the three month  period  ended  September  30,  2003,  the  Company  sold
467,650,000  shares of common stock for  approximately  $1,456,000 in cash;  all
shares were sold for less than $0.01.

During the three month  period ended  September  30,  2003,  the Company  issued
114,500,000  shares  of  common  stock  for  services,   which  were  valued  at
approximately  $409,000 (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 condensed statement of operations.

During the three month period ended  September 30, 2003, in accordance  with the
applicable  convertible note payable  agreement,  the Company issued 130,000,000
shares of common  stock at  conversion  prices of less than $0.01 in  connection
with the  conversion of notes payable  principal of  approximately  $177,000 and
approximately $50,000 of accrued interest.

Treasury Stock
--------------

During  the nine month  period  ended  September  30,  2003,  the  Company  sold
9,950,000  shares of  treasury  stock for  approximately  $57,000  in cash.  The
related  gain  of  approximately   $32,000  was  recorded  in  the  accompanying
statements of operations.

Subsequent Event
----------------

In November  2003, the Company  reduced the carrying  value of its'  convertible
debentures by  approximately $ 450,000 of principal and accrued  interest.  Such
reduction  consisted  of the  payment of  approximately  $256,000  in cash,  the
issuance  of  approximately   35,000,000  shares  of  common  stock  (Valued  at
approximately  $145,000  based on the  market  price on the date of grant) and a
forgiveness  of  approximately  $49,000.  The net  effect has been to reduce the
outstanding debentures by approximately 41%.


                 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.


10
<PAGE>

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.

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 vide 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


11
<PAGE>

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.

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 second
quarter  2004.  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 September 30, 2003 had a deficit  accumulated during the development stage of
$12,254,119

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 September 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 September 30, 2003 has been restated and is now $0. Billings
and collections through September 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  increased to $94,077 in the third quarter of 2003 from $21,660
in the third 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 $561,789 in the third  quarter of 2003 from
$180,516 in the third  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
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 ($12,240) in the
third quarter of 2003 from  ($20,222) in the

<PAGE>

12

third  quarter  of  2002  due  primarily  to the  additional  interest  expense,
recognized  during  the  period,  partially  offset  by the gain on the sales of
treasury stock.

Comparison of the Nine-month Periods Ended September 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  increased  to  $129,088  in the first nine months of 2003 from
$68,169  in the first  nine  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  $1,153,295 in the first nine months of 2003
from  $640,881  in the  first  nine  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 ($45,652) in the
third quarter of 2003 from  ($64,486) in the third quarter of 2002 due primarily
to gain on sale of  treasury  stock.  There  was a  larger  loss on our  Biomoda
Investment  due to the increased  activity at Biomoda and the related  increased
expenses.

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
September 30, 2003 we have raised net proceeds of approximately $8,500,000.

The  cash  balance  at  the  end  of  the  quarter  of   $1,323,545   represents
approximately twelve months of cash operating expenses.

Subsequent  to the end of the  third  quarter  2003,  the  Company  has  retired
approximately 41% of its Convertible Debentures.

We have also utilized equipment loans and capital lease financing. 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
September 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


13
<PAGE>

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 $94,077 for the quarter ended September
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 second quarter 2004. 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.

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


14
<PAGE>

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)  which
includes  inquiries  made  to  certain  other  of our  employees.  Based  on the
foregoing,  the  Principal  Executive  Officer and Principal  Financial  Officer
concluded that the Company's disclosure controls and procedures are effective to
timely alert them to any material  information 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 or in other factors that could significantly  affect internal controls
subsequent to the date of the most recent evaluation.

                           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  September  30,  2003,  the status of the common stock of the Company was:
2,500,000,000 shares authorized and 2,336,982,960 shares issued and outstanding.

During the three month  period  ended  September  30,  2003,  the  Company  sold
467,650,000  shares of common stock for $1,456,000 in cash; all shares were sold
for less than $0.01.

During the three month  period ended  September  30,  2003,  the Company  issued
114,500,000  shares of common stock for services,  which were valued at $409,000
(based on the  closing  market  price on the date of grant,  which was less than
$0.01).

During the period ended  September 30, 2003, in accordance  with the  applicable
convertible note payable  agreement,  the Company issued  130,000,000  shares of
common  stock at  conversion  prices of less than $0.01 in  connection  with the
conversion of notes payable of approximately  $177,000  including  approximately
$50,000 of accrued interest.


15
<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 third 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 were filed during the third quarter of 2003.


16
<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 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)


17