U. S. SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                   FORM 10-QSB

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

                         SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended: September 30, 2004

                           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
         November 15, 2004 was 3,063,136,349.

         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, 2004
--------------------------------------------------------------------------------

                                   (UNAUDITED)
                                     ASSETS
<TABLE>
<CAPTION>
<S>                                                                       <C>
Current Assets
       Cash                                                               $    645,805
       Costs in excess of billings on uncompleted contract, net                795,000
       Marketable securities                                                    76,153
       Other current assets                                                     41,275
                                                                          ------------

            Total current assets                                             1,558,233

Property and Equipment, net                                                    126,603

Other Assets
       Investment in and advances to Biomoda, Inc.                             787,426
       Investment in GenoMed, Inc.                                             900,000
       Notes receivable                                                         52,500
                                                                          ------------

                                                                             1,739,926
                                                                          ------------
Total Assets                                                              $  3,424,762
                                                                          ============
                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
       Accounts payable                                                   $     73,309
       Accrued expenses                                                         58,411
       Convertible debentures                                                  103,618
                                                                          ------------

            Total current liabilities                                          235,338
                                                                          ------------

Commitments and Contingencies

Stockholders' Equity
       Preferred stock, $0.001 par value, 10,000,000 shares authorized;
         no shares issued and outstanding                                           --
       Common stock, $0.001 par value, 2,950,000,000 shares authorized;
         2,939,936,349 shares issued and outstanding                         2,939,936
       Treasury stock, at cost                                                 (62,953)
       Notes receivable from officer                                           (67,299)
       Additional paid in capital                                           17,074,771
       Accumulated other comprehensive income (loss)                          (122,580)
       Deficit accumulated during the development stage                    (16,572,451)
                                                                          ------------

            Total stockholders' equity                                       3,189,424
                                                                          ------------

Total Liabilities and Stockholders' Equity                                $  3,424,762
                                                                          ============
</TABLE>

--------------------------------------------------------------------------------
Page F-1         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, 2004 and 2003
--------------------------------------------------------------------------------

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    2004               2003
                                                             ---------------    ---------------

CONTRACT REVENUES                                            $            --    $            --
                                                             ---------------    ---------------
<S>                                                          <C>                <C>
OPERATING EXPENSES
  General and administrative                                        (252,876)          (561,789)
  Payroll and related                                               (174,542)                --
  Research and development                                           (21,425)           (94,077)
  Asset impairment                                                        --                 --
                                                             ---------------    ---------------
                                                                    (448,843)          (655,866)

ESTIMATED LOSS ON CONTRACT                                           (86,382)                --
                                                             ---------------    ---------------

OPERATING LOSS                                                      (535,225)          (655,866)
                                                             ---------------    ---------------
OTHER INCOME (EXPENSE)
  Interest income                                                      8,919                 --
  Realized gain (loss) on marketable equity securities                    --              2,041
  Gain (loss) on sale of treasury stock                                   --             31,707
  Equity in losses in Biomoda, Inc.                                       --              3,776
  Gain on extinguishment of debt                                          --                 --
  Interest expense                                                      (450)           (49,764)
                                                             ---------------    ---------------
                                                                       8,469            (12,240)
                                                             ---------------    ---------------
NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE                                             (526,756)          (668,106)

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE                                                                 --                 --
                                                             ---------------    ---------------
NET LOSS                                                     $      (526,756)   $      (668,106)
                                                             ===============    ===============
Basic and diluted net loss available to common shareholder   $         (0.00)   $         (0.00)
                                                             ===============    ===============
per common share

Basic and diluted weighted average common shares
  outstanding                                                  2,933,421,132      2,015,908,862
                                                             ===============    ===============
</TABLE>
--------------------------------------------------------------------------------
Page F-2         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, 2004 and 2003 and For The Period
               May 22, 1996 (Inception) Through September 30, 2004
--------------------------------------------------------------------------------

                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                    May 22, 1996
                                                                                                     (Inception)
                                                                                                       Through
                                                                                                     September 30,
                                                                   2004               2003               2004
                                                             ---------------    ---------------    ---------------

CONTRACT REVENUES                                            $            --    $            --    $            --
                                                             ---------------    ---------------    ---------------
<S>                                                          <C>                <C>                <C>
OPERATING EXPENSES
  General and administrative                                      (1,196,701)        (1,153,295)       (10,349,159)
  Payroll and related                                               (609,803)                --         (1,444,959)
  Research and development                                          (237,309)          (129,088)        (1,630,220)
  Asset impairment                                                        --                 --           (227,570)
                                                             ---------------    ---------------    ---------------
                                                                  (2,043,813)        (1,282,383)       (13,651,908)

ESTIMATED LOSS ON CONTRACT                                          (168,455)           (50,000)        (1,423,455)
                                                             ---------------    ---------------    ---------------

OPERATING LOSS                                                    (2,212,268)        (1,332,383)       (15,075,363)
                                                             ---------------    ---------------    ---------------
OTHER INCOME (EXPENSE)
  Interest income                                                     21,912             11,960            104,281
  Realized gain (loss) on marketable equity securities                17,747              2,041            (43,328)
  Other investment gains                                                  --                 --             59,784
  Gain (loss) on sale of treasury stock                                   --             31,707             31,707
  Equity in losses in Biomoda, Inc.                                  (63,617)           (18,824)          (402,915)
  Loss on disposal of assets                                              --                 --             (4,306)
  Gain on extinguishment of debt                                          --                 --             40,171
  Interest expense                                                   (10,147)           (72,536)        (1,219,462)
                                                             ---------------    ---------------    ---------------
                                                                     (34,105)           (45,652)        (1,434,068)
                                                             ---------------    ---------------    ---------------
NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE                                           (2,246,373)        (1,378,035)       (16,509,431)

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

NET LOSS                                                     $    (2,246,373)   $    (1,378,035)   $   (16,572,451)
                                                             ===============    ===============    ===============

Basic and diluted net loss available to common shareholder   $         (0.00)   $         (0.00)
                                                             ===============    ===============
per common share

Basic and diluted weighted average common shares
  outstanding                                                  2,887,373,986      1,340,815,254
                                                             ===============    ===============
</TABLE>
--------------------------------------------------------------------------------
Page F-3         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, 2004 and 2003 and For the Period
               May 22, 1996 (Inception) Through September 30, 2004
--------------------------------------------------------------------------------

                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                       May 22, 1996
                                                                                        (Inception)
                                                                                          Through
                                                                                        September 30,
                                                            2004            2003            2004
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>            <C>
Cash flows from operating activities:
    Net loss                                            $ (2,246,373)   $ (1,378,035)   $(16,572,451)
    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
       Realized (gain) loss on marketable securities         (17,747)         (2,041)         43,328
       Gain on disposal of assets                                 --              --           4,306
       Loss on investment in Biomoda, Inc.                    63,617          18,824         402,915
       Issuance of common stock for services                 334,991         743,861       6,584,937
       Transfer of marketable securities for services        108,900              --         108,900
       Issuance of notes payable for services                     --              --          50,000
       Loss (gain) on sale of treasury stock                      --         (31,707)        (31,707)
       Allowance for loss on contract                             --              --       1,255,000
       Gain on extinguishment of debt                             --              --         (40,170)
       Interest earned on note receivable from
         stockholder and related parties                          --          (4,120)        (17,823)
       Depreciation and amortization                          26,700          21,835         638,264
       Bad debt expense                                           --              --          15,000
       Asset impairment                                           --              --         227,570
       Other non-cash expenses                                    --              --          33,447
       Accrued interest                                           --              --         340,171
    Changes in operating assets and liabilities:
       Other current assets                                     (837)             --         (75,760)
       Costs in excess of earnings over billings
       on uncompleted contract                                    --        (110,503)     (2,050,000)
       Accounts payable and accrued expenses                (149,674)       (102,478)        104,470
                                                        ------------    ------------    ------------

    Net cash used in operating activities                 (1,880,423)       (844,364)     (8,010,771)
                                                        ------------    ------------    ------------
Cash flows from investing activities:
    Purchases of property and equipment                      (36,552)             --        (491,489)
    Proceeds from sale of property and equipment                  --              --          23,800
    Investment in Biomoda, Inc.                                   --              --        (383,845)
    Proceeds from sale of Biomoda, Inc. stock                     --              --          28,930
    Advances to Biomoda, Inc.                               (518,971)        (11,458)       (835,426)
    Investment in GenoMed, Inc.                             (900,000)             --        (900,000)
    Sale of marketable securities                            154,359              --         195,024
    Purchases of marketable securities                      (404,945)             --        (514,279)
    Increase in notes receivable                             (17,500)             --         (52,500)
    Purchase of other assets                                      --              --        (245,579)
                                                        ------------    ------------    ------------

    Net cash used in investing activities                 (1,723,609)        (11,458)     (3,175,364)
                                                        ------------    ------------    ------------

                                                         Continued
</TABLE>
--------------------------------------------------------------------------------
Page F-4         See accompanying notes to these condensed financial statements.

<PAGE>

<TABLE>
<CAPTION>
                                                                                        May 22, 1996
                                                                                         (Inception)
                                                                                           Through
                                                                                         September 30,
                                                            2004            2003            2004
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>
Cash flows from financing activities:
    Principal repayments on notes payable and
        capital leases                                            --         (27,958)       (269,987)
    Proceeds from notes payable                                   --              --         622,776
    Issuance of common stock for cash                        455,511         468,230      10,660,198
    Increase in note receivable officer                           --              --          (5,422)
    Proceeds from sale of treasury stock                      15,372              --         192,531
    Purchase of treasury stock                               (26,908)             --        (243,561)
    Proceeds from issuance of convertible debt                    --              --       1,270,965
    Principal repayments on convertible debt                (154,000)         (9,000)       (395,560)
                                                        ------------    ------------    ------------

    Net cash provided by financing activities                289,975         431,272      11,831,940
                                                        ------------    ------------    ------------

Net (decrease) increase in cash                           (3,314,057)       (424,550)        645,805

Cash at beginning of period                                3,959,862          49,858              --
                                                        ------------    ------------    ------------

Cash at end of period                                   $    645,805    $   (374,692)   $    645,805
                                                        ============    ============    ============
</TABLE>
--------------------------------------------------------------------------------
Page F-5         See accompanying notes to these condensed financial statements.

<PAGE>

--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
--------------------------------------------------------------------------------

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 financial statements prepared in accordance
with accounting  principles  generally  accepted in the United States of America
have been omitted.  In the opinion of  management,  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,
2004,  and the results of operations  and cash flows for the three periods ended
September 30, 2004 and 2003.

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,
2003,  included in the  Company's  Form  10-KSB  filed with the  Securities  and
Exchange Commission.  The interim results are not necessarily  indicative of the
results for a full year.

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND NATURE OF OPERATIONS

The Company is a development  stage technology  company with its principal focus
on the  development  and  production of  large-scale  flat panel  displays.  The
Company  trades on the Over The Counter  Bulletin Board under the symbol "ADOT."
The  market  for  the  large-scale  flat  panel  displays  includes  advertising
billboards, flat panel computer monitors and cockpit displays. The Company plans
to focus on producing and selling the large-scale flat panel displays  primarily
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.  While  management  believes  this  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 need to obtain additional capital in
order to fund the completion of the contract.

--------------------------------------------------------------------------------
Page F-6

<PAGE>

--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
--------------------------------------------------------------------------------

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ORGANIZATION AND NATURE OF OPERATIONS (continued)

Since May 22, 1996 ("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.

The company's  research and development work in the third and fourth quarters of
2004 have not  completed  the initial  product as  expected.  Completion  of the
product is now  expected  in the first  quarter of 2005.  Because of the lack of
anticipated  revenues  in 2004,  the  Company  has taken  excess  cash funds and
invested  these in what  they  deem to be  sound  investments  that may  produce
additional  funds and gains to the company in 2005.  These funds and gains would
then be used for additional product  development and administrative  expenses in
the  initial  production  stage  of  the  product.   These  investments  include
marketable   securities  of  other  companies   including  several   bio-medical
companies.

DEVELOPMENT STAGE

The  Company has been in the  development  stage  since  Inception,  and has not
generated any revenues from  operations  and there is no assurance of any future
revenues.

The  Company  may  require  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, which include:

      o     Retention of experienced management personnel with particular skills
            in the development and commercialization of such product.

      o     The Company is seeking new contracts.

      o     The Company has an equity method  investment in a start-up  company,
            which management hopes will be profitable (see Note 2).

      o     The Company  has a cost method  investment  in a  development  stage
            company, which management expects will be profitable (see Note 3).

Management  plans to  obtain  revenues  from  product  sales,  but  there are no
significant  commitments 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 or that
if such funds become  available the terms will be  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 F-7

<PAGE>

--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
--------------------------------------------------------------------------------

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEVELOPMENT STAGE (continued)

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 September 30, 2004,  the Company has positive  working  capital
approximating  $1,323,000 including  approximately  $646,000 of cash. Management
believes that such cash balance will be sufficient  to satisfy  working  capital
needs through December 31, 2004.

STOCK BASED COMPENSATION

At September 30, 2004,  the Company has one  stock-based  employee  compensation
plan (the "Plan").  The Company  accounts for the Plan under the recognition and
measurement principles of Accounting Principles Board Opinion No. 25 ("APB 25"),
and related  interpretation.  No stock-based  compensation cost is recognized in
net loss due to all  options  issued to  employees  were at market  value or all
intrinsic value has been expensed in prior periods.  Stock options granted under
the Plan have exercise prices equal to the market value of the underlying common
stock on the dates of grant.  The following table  illustrates the effect on net
income and loss per share if the Company had applied the fair value  recognition
provisions of Statement of Financial  Accounting  Standards No. 123 ("SFAS 123")
to stock-based employee compensation.

<TABLE>
<CAPTION>
                                                  Three Months Ended September 30,     Nine Months Ended September 30,
                                                       2004             2003              2004                 2003
                                                   ------------      ------------      ------------        -----------
<S>                                                <C>               <C>               <C>                 <C>
Net loss:
    As reported                                    $  (526,756)      $  (668,106)      $(2,246,373)        $(3,449,994)
    Deduct: Total stock-based employee
          compensation expense determined under
          fair value based method for all awards            --                --                --                  --
                                                   -----------       -----------       -----------         -----------
    Pro forma                                      $  (526,756)      $  (668,106)      $(2,246,373)        $(3,449,994)
                                                   ===========       ===========       ===========         ===========
Basic and diluted net loss per share:
    As reported                                    $        --       $        --       $        --         $        --
                                                   ===========       ===========       ===========         ===========
    Pro forma                                      $        --       $        --       $        --         $        --
                                                   ===========       ===========       ===========         ===========
</TABLE>

The  above  pro  forma  effects  of  applying  SFAS  123  are  not   necessarily
representative of the impact on reported net loss for future years.

--------------------------------------------------------------------------------
Page F-8

<PAGE>

--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
--------------------------------------------------------------------------------

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

MARKETABLE SECURITIES

The  Company   classifies   its   investments   in   marketable   securities  as
"available-for  sale"  in  accordance  with  the  provisions  of SFAS  No.  115,
"Accounting for Certain  Investments in Debt and Equity Securities." The Company
does not have any investments classified as "trading" or "held to maturity".

Available-for-sale  securities  consist of equity securities in GenoMed (Note 3)
and are  carried  at fair value with the  unrealized  gain or loss,  net of tax,
reported in accumulated other comprehensive income. The fair value of marketable
securities was determined based on available market information. During the nine
months ended September 30, 2004, the Company purchased securities  approximating
$405,000  and  sold  securities  approximating  $154,000,  realizing  a net gain
approximating $18,000 upon sale.

REVENUE RECOGNITION

The  Securities and Exchange  Commission  issued Staff  Accounting  Bulletin 104
("SAB 104"), "Revenue  Recognition," which outlines the basic criteria that must
be met to recognize  revenue and provides  guidance for  presentation of revenue
and  for  disclosure  related  to  revenue  recognition  policies  in  financial
statements  filed with the  Securities and Exchange  Commission.  As the Company
accounts for long-term contracts in accordance to Statements of Position ("SOP")
81-1 (see below),  management  believes that the Company's  revenue  recognition
policy conforms to SAB 104.

In accordance with SOP 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 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 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 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.

--------------------------------------------------------------------------------
Page F-9

<PAGE>

--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
--------------------------------------------------------------------------------

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

REVENUE RECOGNITION (continued)

The contract to produce two outdoor advertising  billboards totals $1.7 million,
with  $885,000  assigned to the first unit. An estimated  loss of  approximately
$1,425,000  from  production  of the  first  unit  has been  recognized  through
September 30, 2004, which includes a current quarter loss approximating $87,000.
The Company's  estimated cost to complete,  as of September 30, 2004 is $125,000
which is expected to be funded with cash,  billings on the contract and proceeds
from the issuance of the Company's  common stock.  Per the agreement,  the first
unit is not to exceed  $885,000,  of which $90,000 has been billed and collected
in prior periods.  Therefore,  all additional costs to complete will be expensed
as incurred.

The anticipated delivery date of the first unit is in March 2005.  Unanticipated
delays have postponed delivery resulting in an amended delivery date. During the
contract  period,  the Company is entitled to bill the customer as the following
milestones are met:

         Completion of board design      $ 65,000
         Production                       265,000
         Completion                       265,000
         Acceptance after installation    290,000
                                         --------
                                         $885,000
                                         ========

Adjustments to the original estimates of total contract revenues, total contract
costs and the extent of progress  toward  completion  are often required as work
progresses  under the contract,  and as  experience  is gained,  even though the
scope of the work may not change. The nature of accounting for contracts is such
that refinements of the estimating process for continuously  changing conditions
and  new  developments  are  a  characteristic  of  the  process.   Accordingly,
provisions  for losses on contracts  are made in the period in which they become
evident under the completed-contract  method. It is at least reasonably possible
that the estimate of completion  costs for this contract will be further revised
in the near-term.

--------------------------------------------------------------------------------
Page F-10

<PAGE>

--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
--------------------------------------------------------------------------------

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

SIGNIFICANT RECENT ACCOUNTING STANDARDS

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable Interest
Entities, an Interpretation of ARB 51." The primary objectives of FIN No. 46 are
to provide  guidance  on the  identification  of entities  for which  control is
achieved through means other than voting rights (variable  interest  entities or
"VIEs")  and  how  to  determine  when  and  which  business  enterprise  should
consolidate the VIE. This new model for  consolidation  applies to an entity for
which  either:  (1) the equity  investors  do not have a  controlling  financial
interest;  or (2) the equity  investment at risk is insufficient to finance that
entity's activities without receiving additional  subordinated financial support
from other  parties.  In  addition,  FIN No. 46  requires  that both the primary
beneficiary and all other enterprises with a significant  variable interest in a
VIE make  additional  disclosures.  As amended in December  2003,  the effective
dates of FIN No. 46 for public  entities  that are small  business  issuers,  as
defined ("SBIs"), are as follows: (a) For interests in special-purpose entities:
periods  ended after  December  15,  2003;  and (b) For all other VIEs:  periods
ending after  December 15, 2004.  The December 2003 amendment of FIN No. 46 also
includes  transition  provisions that govern how an SBI which previously adopted
the  pronouncement  (as it was originally  issued) must account for consolidated
VIEs.  The Company is  evaluating  the effects of FIN No. 46 (as amended) on its
consolidated financial statements.

As disclosed in Note 2, the Company is associated with Biomoda,  Inc. Because of
common ownership  between the Company and Biomoda and other factors discussed in
FIN No. 46R, the Company is evaluating  whether Biomoda  requires  consolidation
under FIN 46R.

Other  recent  accounting  pronouncements  issued  by the  FASB  (including  its
Emerging  Issues  Task  Force),  The  American  Institute  of  Certified  Public
Accountants,  and the  Securities  and  Exchange  Commission  did not or are not
believed by  management to have a material  impact on the  Company's  present or
future financial statements.

--------------------------------------------------------------------------------
Page F-11

<PAGE>

--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
--------------------------------------------------------------------------------

2. INVESTMENTS IN AND ADVANCES TO BIOMODA

As of September 30, 2004, the Company owned approximately  1,132,000 or 15.9% of
the  7,117,000  outstanding  shares of  Biomoda,  a  development  stage  company
involved  in the  development  of  technology  for the early  detection  of lung
cancer.  In addition,  two of the Company's  officers own  approximately  13.5%,
collectively,  of the  outstanding  shares  of  common  stock of  Biomoda.  As a
development stage company,  Biomoda has not had any revenues as of September 30,
2004.

A summary of the investment is as follows:

             Original cost                     $(383,845)
             Additional investment               (48,000)
             Equity in loss of investment        402,915
             Sale of investment                   28,930
             Advances on line of credit, net     787,426
                                               ---------
                                               $ 787,426
                                               =========

The Company will  continue to provide  Biomoda with bridge  financing  needed to
fund  its' day to day  operations,  until  such  time that  Biomoda  has  raised
sufficient capital, to fund operations.

LINE OF CREDIT

In May 2002,  the Company and Biomoda  entered  into a line of credit  agreement
(the "LOC"),  as amended,  with no maximum  borrowings,  accruing interest at an
annual interest rate of 5% and is due on demand.  Interest income related to the
LOC approximated  $22,000 and $5,000 for the nine-month  periods ended September
30, 2004 and 2003, respectively. Interest income related to the LOC approximated
$9,000 and $2,000 for the three-month  periods ended September 30, 2004 and 2003
respectively.

OTHER RELATED PARTY TRANSACTIONS

In May 2002,  the Company  entered  into a sublease  agreement  with  Biomoda to
sublease  office  space to Biomoda  for $300 per  month.  The  sublease  is on a
month-to-month  basis and Biomoda is to abide with all relevant covenants of the
Company's master lease.

In December  2003,  the Company  entered into a lease  agreement with Biomoda to
lease certain lab equipment for $500 per month. The lease is on a month-to-month
basis and  Biomoda  is to abide with all  relevant  covenants  of the  Company's
master lease.

Rental income related to the above leases for the three and  nine-month  periods
ended  September 30, 2004, was  approximately  $2,400 and $7,200,  respectively.
Rental income related to the above leases for the three and  nine-month  periods
ended September 30, 2003, was approximately $900 and $2,700, respectively.

--------------------------------------------------------------------------------
Page F-12

<PAGE>

--------------------------------------------------------------------------------
                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)
--------------------------------------------------------------------------------

3. INVESTMENT IN GENOMED, INC.

On  January 8, 2004,  the  Company  entered  into a Stock  Sale  Agreement  (the
"Agreement") with GenoMed,  Inc., a Florida corporation  ("GenoMed") whereby the
Company purchased approximately  33,300,000 shares of restricted common stock of
GenoMed for  $900,000  in cash,  representing  approximately  17.9% of the total
outstanding shares of GenoMed  immediately after the execution of the Agreement.
The Company has accounted for this investment under the cost method as it cannot
exercise  significant  influence  over the operating  and financial  policies of
GenoMed. In addition,  the Company holds approximately  1,325,000 shares of free
trading  common stock of GenoMed not acquired in connection  with the Agreement,
which the Company has  classified as marketable  securities in the  accompanying
condensed financial  statements.  Management believes that no impairment of this
investment is necessary as of September 30, 2004.

4. STOCKHOLDERS' EQUITY

COMMON STOCK

During the nine months ended  September 30, 2004, the Company issued  42,000,000
shares of common stock for services, which were valued at approximately $335,000
(based on the closing market price on the date of issuance,  which  approximated
less  than  $0.01  per  share).   The  Company  recorded  such  amounts  in  the
accompanying condensed statements of operations.

During  the nine  months  ended  September  30,  2004,  in  accordance  with the
applicable  convertible  debentures  agreement,  the Company issued  103,000,000
shares of common  stock at  conversion  prices of less than $0.01 in  connection
with  the  conversion  of  notes  payable  approximating   $505,000,   including
approximately $160,000 of accrued interest.

During the nine months ended  September 30, 2004, the Company issued  39,800,000
shares of common  stock for cash,  which were valued at  approximately  $455,500
(based on the closing market price on the date of issuance,  which  approximated
$0.01 per share).

5. SUBSEQUENT EVENTS

 In October 2004,  22,200,000 shares of common stock that had been issued in the
 second  quarter of 2004 were  returned  and  cancelled,  as the  agreement  for
 services was terminated.

 In October and November  2004,  118,000,000  shares of common stock were issued
 for cash of approximately  $162,000 and 27,400,000  shares of common stock were
 issued for services in the approximate amount of $57,000.

 In October 2004,  the Company's  Board of Directors  authorized the increase of
 the number of shares of the Company's common stock to 4,000,000,000.

--------------------------------------------------------------------------------
Page F-13

<PAGE>

                 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OR
                               PLAN OF OPERATIONS

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 27A of the  Securities  Act of 1933, as amended and by Section 21E of
the Securities Exchange Act of 1934, as amended.

                                    OVERVIEW

General
-------

Advanced  Optics  Electronics,  Inc.  (the  "Company",  "us",  "we",  or "ADOT")
(ADOT-OTC BB) is a technology  company  based in  Albuquerque,  New Mexico.  Its
primary  focus  is the  development,  production  and  sales  of its  novel  and
innovative  electronic  flat panel  displays.  We maintain an R&D  facility  and
manufacturing plant, and are engaged in building large-scale flat panel displays
utilizing  its  patented  technology.   We  are  currently  investigating  other
applications  of this core technology and different  products  related to optics
and image recognition and analysis.

                                       2
<PAGE>

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.

The  Company's  principal  offices are located at 8301  Washington  NE, Suite 5,
Albuquerque, New Mexico 87113, and its telephone number is (505) 797-7878.

Company Overview
----------------

We are a developmental  stage  technology  company with our primary focus on the
development,  production and sales of our large-scale flat panel displays, which
utilize our patented  technology.  We are  currently  continuing  our  research,
development,  prototyping,  and manufacturing of our products and the underlying
technology.  We are in the process of making the transition from a developmental
stage  company to producing  and selling our product  line.  We plan to focus on
producing  and  selling  our  large-scale  flat panel  displays  for the outdoor
advertising  billboard  industry,  which  represents  the  first  time  that our
technology is available to this industry.  In addition,  there are other markets
and  applications  that  represent   opportunities  for  additional  sources  of
business,  and we are beginning to explore these markets and applications,  such
as e-cinema,  lighting  sources,  stadium and sports  applications  and systems,
control and status monitoring.

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

                                       3
<PAGE>

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

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.  The initial
production model is scheduled to be completed in the first quarter of 2005.

We expect  our  principal  source of  revenue  to be  derived  from sales of our
electronic display product.  To date we have not recognized any revenue,  but we
have developed a functioning prototype and we anticipate sales by the end of the
first  quarter of 2005.  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's  research and development work in the third and fourth quarters of
2004 have not  completed  the  initial  product  as  expected  due to  technical
hurdles. Completion of the product is now expected in the first quarter of 2005.
Because of the lack of  anticipated  revenues  in 2004,  the  Company  has taken
excess cash funds and invested  these in what they deem to be sound  investments
that may  produce  additional  funds and gains to the  Company in 2005 and 2006.
These funds and gains would then be used for additional product  development and
administrative  expenses in the initial  production stage of the product.  These
investments  include marketable  securities of other companies including several
bio-medical companies.

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.

Advanced  Optics  Electronics,  Inc.  completed  filing for its  initial  patent
relating to its hand held color check  device  known as  COLOR-CHEK.  The patent
covers the Company's unique and novel conception and  implementation of hardware
and firmware  system for  determining  the color  optically and  expressing  the
result with vocal  responses.  This invention will initially  benefit the vision
impaired.  ADOT is also developing a color coding kit to enhance the color check
capabilities of a broader application of the color spectrum. Pricing is targeted
in the  $70-85  range.  During  the  first  half of 2005,  ADOT  will  establish
marketing  arrangements  for the  distribution  of the device after a supply has
been manufactured and inventoried.

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, 2004, had a deficit accumulated during the development stage of
$16,572,451.

                                       4
<PAGE>

RESULTS OF OPERATIONS

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, 2004 and 2003
-----------------------------------------------------------------------

RESEARCH AND DEVELOPMENT. Research and 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 and
development, technical costs and increases to the contract expenses increased to
$107,807 in the third  quarter of 2004 from  $94,077 in the same period of 2003.
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  AND PAYROLL.  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 and payroll costs decreased to approximately $427,000
in the third  quarter of 2004 from  $562,000  in the third  quarter of 2003.  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 potential future strategic acquisitions
will also be a contributing factor to increases in this expense.

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, 2004, we have raised net proceeds of approximately $11,865,000.

The cash balance at the end of the quarter of $645,805  represents  an estimated
three months of future cash operating expenses.

We have  also  utilized  equipment  loans and  capital  lease  financing.  As of
September  30, 2004 the only debt  financing is a  Convertible  debenture in the
approximate  amount of $103,000  (including  accrued interest) that we intend to
pay off in its entirety in 2005.

The  Company's  holding in  Biomoda,  Inc  ("Biomoda")  may  provide  additional
liquidity.  Biomoda is a biomedical  development  company.  The Company's direct
ownership of Biomoda,  as of September  30, 2004 was  approximately  15.9%.  Two
officers of ADOT are also securities  holders of

                                       5
<PAGE>

Biomoda in addition to the ADOT  ownership.  Biomoda filed an SB-2  registration
statement  with the  Securities  and  Exchange  Commission,  which was  declared
effective July 11, 2003. Biomoda,  via a PPM initiated in July 2003, is offering
5,000,000 shares at $6.00 per share (for an aggregate  offering of $30,000,000).
Biomoda is in the process of  revising  the SB-2 to offer  10,000,000  shares at
$3.00 (for an  aggregate  offering of  $30,000,000).  It is  anticipated  that a
public  market  for  Biomoda's  securities  will be  established  in 2005 at the
revised price.  Because a market for Biomoda's shares has not been  established,
the   potential   value  of  the  Company's   investment   cannot  be  measured.
Consequently,  there can be no  assurance  that if the  Company was to sell such
investment that it would be able to on terms favorable to the Company or for the
initial  offering  price.  Factors  such as  dilution,  blockage and a lack of a
market may be encountered.

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 changes in the management relationship between the two companies. ADOT has
committed to  providing  bridge  financing  until  sufficient  capital is raised
through the sale of securities of Biomoda.

During the nine  months  ended  September  30,  2004,  $37,000 was spent for the
purchase of computers and software.  Research and development  expenditures were
approximately  $2,000  in the  third  quarter  of 2004.  Funds  for  operations,
research and development and capital expenditures were provided from the sale of
securities and cash reserves.

During the first quarter 2004, we purchased  33,300,000  restricted shares under
Rule  144  of  Genomed,  Inc.,  which  represents   approximately  17.6% of  the
outstanding  shares of  Genomed,  Inc. at  September  30,  2004.  The shares are
restricted  and  must  be  held  for  at  least  one  year  with  certain  other
restrictions  under  Rule 144.  Genomed  is a publicly  traded  biotech  company
working in genomics based disease management.

Management  believes that sales of  securities,  cash  reserves and  anticipated
contract revenue will provide adequate  liquidity and capital  resources to meet
the anticipated  development  stage  requirements  through the end of the fourth
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 2004.

INFLATION

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

                                       6
<PAGE>
                         ITEM 3. CONTROLS AND PROCEDURES

EVALUATION OF CONTROLS AND PROCEDURES

Under the supervision and with the  participation  of our management,  including
our Chief  Executive  Officer ("CEO") and Chief Financial  Officer  ("CFO"),  we
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls  and  procedures  (as defined in Rule  13a-15(e)  and  15d-15(e) of the
Exchange Act as of a date (the "Evaluation Date") within 90 days prior to filing
the Company's  September 30, 2004 Form 10-QSB.  Based upon that evaluation,  the
CEO and CFO concluded  that, as of September 30, 2004, the Company's  disclosure
controls and procedures were of limited effectiveness.

Consequently,  in March 2004, the Company has hired an  independent  third party
contractor to evaluate and revise its existing  control policies and procedures,
including  our  disclosure  controls  and  procedures,  and  to  implement  more
effective and efficient controls and procedures.

CHANGES IN CONTROLS AND PROCEDURES

There were no significant  changes made in our internal  controls over financial
reporting  during the quarter  ended  September  30,  2004 that have  materially
affected or are  reasonably  likely to  materially  affect these  controls.  The
Company,  however,  is  evaluating  changes to its  existing  controls or adding
controls to improve the design effectiveness of its system.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROL

The Company's management, including the CEO, does not expect that our disclosure
controls and procedures or our internal  control over  financial  reporting will
necessarily  prevent all fraud and material errors.  An internal control system,
no matter how well  conceived and  operated,  can provide only  reasonable,  not
absolute,  assurance that the objectives of the control system are met. Further,
the design of a control  system must  reflect  the fact that there are  resource
constraints,  and the benefits of controls must be considered  relative to their
costs.  Because of the inherent  limitations on all internal control systems, no
evaluation of controls can provide  absolute  assurance  that all control issues
and instances of fraud,  if any,  within the Company have been  detected.  These
inherent limitations include the realities that judgments in decision-making can
be faulty,  and that  breakdowns  can occur  because of simple error or mistake.
Additionally,  controls  can be  circumvented  by the  individual  acts  of some
persons,  by collusion of two or more people,  and/or by management  override of
the control.  The design of any system of internal control is also based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance  that any design will  succeed in achieving  its stated goals under
all  potential  future  conditions.  Over time,  controls may become  inadequate
because of changes in  circumstances,  and/or the degree of compliance  with the
policies and procedures may deteriorate.

                                       7
<PAGE>
                           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,  2004,  the status of the common stock of the Company was:
2,950,000,000 shares authorized and 2,939,936,349 shares issued and outstanding.

During the three month period  ended  September  30,  2004,  the Company did not
issue any  securities.  22,200,000  shares of stock that had been  issued in the
second quarter of 2004 for services were cancelled on October 11, 2004.  This is
a subsequent event to the September 30, 2004 financial statements.

In October and November 2004, 118,000,000 shares of common stock were issued for
cash of approximately $162,000 and 27,400,000 shares of common stock were issued
for services in the approximate amount of $57,000.  These were subsequent events
to the September 30, 2004 financial statements.

The Board approved the increase in the authorized  common stock to 4,000,000,000
as of October 14, 2004.  This is a subsequent  event to the  September  30, 2004
financial statements.

Item 3.  Defaults upon senior securities - None

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 2004.

Item 5.  Other Information - Not applicable

Item 6.  Exhibits

                                       8
<PAGE>

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.

                                       9
<PAGE>

                                   SIGNATURES

In  accordance  with  Section 13 or 15(d) 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 15, 2004

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)


                                       10