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: March 31, 1999


                           Commission file No.0-24511


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

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

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

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


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___

The number of issuer's  shares of Common Stock  outstanding as of March 31, 1999
was 25,678,550

Transitional Small Business Disclosure Format (check one): Yes ___ No _X_   



<PAGE>



NEFF & RICCI
------------
         LLP


                               Accountants' Report



Board of Directors
Advanced Optics Electronics, Inc.


We have compiled the accompanying  balance sheet of Advanced Optics Electronics,
Inc.  (a  development  stage  company)  as of March  31,  1999  and the  related
statements of operations, changes in stockholders' equity and cash flows for the
quarter then ended,  the quarter  ended March 31, 1998,  and the period from May
22, 1996  (inception)  through March 31, 1999, in accordance  with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.

A  compilation  is limited to  presenting  in the form of  financial  statements
information  that is the  representation  of management.  We have not audited or
reviewed the accompanying financial statements and, accordingly,  do not express
an opinion or any other form of assurance on them.

Neff & Ricci LLP

Albuquerque, New Mexico
April 21, 1999


                                                                               2
<PAGE>



BALANCE SHEET
March 31, 1999



ASSETS

CURRENT ASSETS
    Cash and cash equivalents                                       $    66,666
    Certificate of deposit                                               50,000
    Marketable equity securities                                         53,191
    Costs and estimated earnings
        in excess of billings on
        uncompleted contract                                            316,575
    Raw materials inventory                                              41,324
    Related party receivables                                            53,001
                                                                    -----------

           Total current assets                                         580,757
                                                                    -----------

FIXED ASSETS, at cost
    Furniture and fixtures                                               25,897
    Computers                                                            29,718
    Technical equipment                                                  98,598
    Automobile                                                           43,313
    Equipment under capital lease                                       100,499
    Leasehold improvements                                                8,595
    Less accumulated depreciation                                       (55,067)
                                                                    -----------

           Total fixed assets                                           251,553
                                                                    -----------

OTHER ASSETS
    Note receivable from officer                                         29,000
    Investment in Bio Moda, Inc.                                        265,850
    Goodwill, net of accumulated amortization
        of $302                                                           4,698
    Patents, net of accumulated amortization
        of $32,917                                                      209,422
    Other assets                                                         30,350
                                                                    -----------
           Total other assets                                           539,320
                                                                    -----------
           Total assets                                             $ 1,371,630
                                                                    ===========


See accompanying notes and accountant's report.


                                                                               3
<PAGE>



LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                $    27,602
    Notes payable                                                         5,384
    Accrued liabilities                                                   8,927
    Current portion of long-term debt
        and capital lease obligation                                     33,331
                                                                    -----------
           Total current liabilities                                     75,244
                                                                    -----------
Long-term portion of long-term debt
    and capital lease obligation                                         58,828
                                                                    -----------
COMMITMENTS

SHAREHOLDERS' EQUITY
    Common stock, authorized 75,000,000 shares,
        $.001 par value, 29,650,897 shares issued
        and outstanding                                                  29,651
    Additional paid-in capital                                        2,394,913
    Deficit accumulated during the development stage                 (1,187,006)
                                                                    -----------

           Total shareholders' equity                                 1,237,558
                                                                    -----------



           Total liabilities and shareholders' equity               $ 1,371,630
                                                                    ===========


                                                                               4
<PAGE>



STATEMENTS OF OPERATIONS
Quarters Ended March 31, 1999 and 1998,
and the Period from May 22, 1996 (Inception)
Through March 31, 1999

<TABLE>
<CAPTION>
                                                                                       5/22/96
                                                                                     (Inception)
                                                                                       Through
                                                         1999              1998        3/31/99

REVENUES
<S>                                                <C>                <C>            <C>    
    Contract revenue                               $     66,375          72,000         316,575
                                                   --------------------------------------------

COSTS AND EXPENSES
    General and administrative                          106,570          53,263         726,705
    Contract costs                                       85,941          35,355         359,081
    Research and development                             48,273           6,690         237,391
                                                   --------------------------------------------

           Total expenses                               240,784          95,308       1,323,177
                                                   --------------------------------------------

    Operating loss                                     (174,409)        (23,308)     (1,006,602)
                                                   --------------------------------------------

OTHER INCOME AND (EXPENSES)
    Interest income                                       1,964              --           2,815
    Unrealized gain (loss) on marketable
        equity securities                                (9,968)             --         (16,843)
    Loss on Bio Moda, Inc.                              (24,571)             --         (92,995)
    Interest expense                                     (3,299)           (247)        (10,361)
                                                   --------------------------------------------

           Total other expenses                         (35,874)           (247)       (117,384)
                                                   --------------------------------------------

           Net loss before cumulative effect
               of change in accounting principle       (210,283)        (23,555)     (1,123,986)

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

           Net loss                                    (273,303)             --      (1,187,006)
                                                   --------------------------------------------

Net loss per share before cumulative effect
    of change in accounting principle                     (.008)          (.002)          (.117)

Cumulative effect of change in
    accounting principle                                  (.003)             --           (.007)
                                                   --------------------------------------------

Net loss per share                                 $      (.011)          (.002)          (.124)
                                                   ============================================

Weighted average shares outstanding                  25,252,592       9,728,600       9,569,549
                                                   ============================================
</TABLE>

See accompanying notes and accountant's report.


                                                                               5
<PAGE>



STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from May 22, 1996 (Inception) Through
March 31, 1999



                                                             Common Stock     
                                                       ------------------------
                                                                         Par
                                                        Shares          Value

Balance, May 22, 1996                                         --    $        --

Stock issued to incorporators for cash                   500,000            500

Stock issued for the net assets of PLZ Tech, Inc.      4,500,000          4,500

Net loss                                                      --             --
                                                      -------------------------

Balance, December 31, 1996                             5,000,000          5,000

Stock issued in public offering                        2,281,212          2,281

Net loss                                                      --             --
                                                      -------------------------

Balance, December 31, 1997                             7,281,212          7,281

Stock issued for cash                                 10,979,275         10,979

Stock issued for services                              2,751,000          2,751

Stock issued in exchange for note receivable             315,000            315

Purchase and retirement of treasury stock               (472,200)          (472)

Net loss                                                      --             --
                                                      -------------------------

Balance, December 31, 1998                            20,854,287         20,854

Stock issued for cash                                  3,259,180          3,259

Stock issued for services                              6,026,681          6,027

Purchase and retirement of treasury stock               (489,251)          (489)

Net loss                                                      --             --
                                                      -------------------------

Balance, March 31, 1999                               29,650,897    $    29,651
                                                      =========================

See accompanying notes and accountant's report.


                                                                               6
<PAGE>



                                       Equity       
                                      (Deficit)     
                                     Accumulated    
                      Additional     During the       Total
                        Paid-In      Development   Shareholders'
                        Capital         Stage         Equity
                                                  
               $            --             --             --

                        24,500             --         25,000

                       281,096             --        285,596

                            --        (76,902)       (76,902)
               ---------------------------------------------

                       305,596        (76,902)       233,694

                       362,720             --        365,001

                            --        (84,690)       (84,690)
               ---------------------------------------------

                       668,316       (161,592)       514,005

                     1,281,728             --      1,292,707

                       293,719             --        296,470

                        28,685             --         29,000

                       (39,913)            --        (40,385)

                            --       (752,111)      (752,111)
               ---------------------------------------------

                     2,232,535       (913,703)     1,339,686

                       151,361             --        154,620

                        21,660             --         27,687

                       (10,643)            --        (11,132)

                            --       (273,303)      (273,303)
               ---------------------------------------------

                   $ 2,394,913     (1,187,006)     1,237,558
               =============================================


                                                                               7
<PAGE>



STATEMENTS OF CASH FLOWS
Quarters Ended March 31, 1999 and 1998,
and the Period from May 22, 1996 (Inception) Through
March 31, 1999

<TABLE>
<CAPTION>
                                                                                    5/22/96
                                                                                  (Inception)
                                                                                    Through
                                                          1999           1998      12/31/98
<S>                                                   <C>              <C>        <C>        
CASH FLOWS FROM OPERATING ACTIVITIES
    Net (loss)                                        $ (273,303)      (23,555)   (1,187,006)
    Adjustments to reconcile net loss to net cash
        provided by operating activities:
           Amortization and depreciation expense          23,529         9,470       130,300
           Write off of organization costs                63,020            --        63,020
           Unrealized loss on marketable securities        9,968            --        16,843
           Loss on Bio Moda, Inc.                         24,571            --        92,995
           Issuance of common stock for services          27,687            --       324,157
           Contract receivable                           (66,375)      (72,000)     (316,575)
           Other receivables                              (5,954)       (7,500)      (63,351)
           Inventory                                     (41,324)           --       (41,324)
           Accrued liabilities and accounts payable        1,116         7,047        36,529
                                                      --------------------------------------
               Net cash applied to operating
                  activities                            (237,065)      (86,538)     (944,412)
                                                      --------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of equipment                                (27,605)         (549)     (206,121)
    Investment in Bio Moda, Inc.                              --            --      (358,845)
    Purchase of marketable securities                         --       (35,191)      (70,034)
    Purchase of certificate of deposit                        --            --       (50,000)
    Purchase of other assets                             (10,000)           --       (96,777)
                                                      --------------------------------------
               Net cash applied to investing
                  activities                             (37,605)      (35,740)     (781,777)
                                                      --------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Additions to notes payable                                --            --        94,726
    Payments on notes payable and capital
        lease obligation                                  (6,764)       (3,650)      (97,682)
    Issuance of common stock                             154,620       791,000     1,837,328
    Purchase of treasury stock                           (11,132)           --       (41,517)
                                                      --------------------------------------
               Net cash provided by financing
                  activities                             136,724       787,350     1,792,855
                                                      --------------------------------------

Net increase (decrease) in cash                         (137,946)      665,072        66,666

Cash, beginning of period                                204,612        74,421            --
                                                      --------------------------------------

Cash, end of period                                   $   66,666       739,493        66,666
                                                      ======================================
</TABLE>

See accompanying notes and accountant's report.


                                                                               8
<PAGE>


     NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Cash and Cash Equivalents.  Cash and cash equivalents  include all cash balances
and highly liquid debt instruments with an original  maturity of three months or
less. The Company's cash and  certificates of deposit are deposited in financial
institutions  and  are  insured  only  up to  $100,000  by the  Federal  Deposit
Insurance Corporation at each institution.

Marketable  Equity  Securities.  The Company  classifies  all of its  marketable
equity securities as trading securities.  Trading securities are carried at fair
value with the unrealized gains and losses reported in the income statement.  As
of March 31, 1999,  gross  unrealized  gains were  $24,983 and gross  unrealized
losses were $41,826. Realized gains and losses were not material.

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

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


                                                                               9
<PAGE>


     NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Other Assets.  Organization  costs were amortized on a straight-line  basis over
the period to be benefited of five years up until December 31, 1998. Patents are
amortized on a straight-line  basis over the remaining  estimated useful life of
15 years.  Goodwill is amortized  over the period to be benefited,  or 40 years,
whichever  is less.  The  Company  continually  reviews  other  assets to assess
recoverability from estimated future net cash flows. To date, these reviews have
not resulted in a reduction of other assets.

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

Advertising.  Advertising costs are expensed as incurred and amounted to $538 in
1999 and $1,602 in 1998.

Income  Taxes.  The Company  accounts for its income  taxes using the  liability
method.  Under this method,  deferred tax  liabilities and assets are determined
based on the difference between the financial statement carrying amounts and tax
basis of assets and  liabilities  using enacted tax rates in effect in the years
in which the  differences  are  expected to reverse.  The Company has provided a
valuation   allowance  to  offset  the  benefit  of  any  net   operating   loss
carryforwards or deductible temporary differences

Loss per share.  Loss per share is computed on the basis of the weighted average
number of common  shares  outstanding  during the year and did not  include  the
effect of potential  common stock as their  effect  would be  antidilutive.  The
numerator  for the  computation  is the net  loss  and  the  denominator  is the
weighted average shares of common stock outstanding.

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

Use of Estimates.  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting  period.  Actual  results  could  differ  from  those  estimates.  The
principal  areas  requiring  estimation  are  revenue  recognition  based on the
percentage of completion method, loss reserves and the valuation of common stock
issued for services.


                                                                              10
<PAGE>


     NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

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

The contract to produce two outdoor advertising  billboards totals $1.7 million,
with  $885,000  allocated  to  the  first  unit.  An  estimated  total  loss  of
approximately  $23,000  in the first  unit has been  recognized  as of March 31,
1999. The Company's  estimated cost to complete as of March 31, 1999 is $495,000
which it expects to fund with cash,  billings  on the  contract  and  additional
capital.

In accordance with the contract, the Company will bill the customer when certain
milestones have been met. There were no billings as of March 31, 1999.

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

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


NOTE 2. RELATED PARTY RECEIVABLES

Related party receivables at March 31, 1999, consist of the following:

      Due from Bio Moda, Inc.                                            $ 5,000
      Due from officer                                                    33,001
      Note receivable from former shareholder bearing
          interest at 8% and due in February, 1999                        15,000
                                                                         -------
      
                                                                         $53,001
                                                                         =======

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


                                                                              11
<PAGE>


     NOTE 3. INVESTMENT IN BIO MODA, INC.

During 1998 the Company  increased  its  investment  in Bio Moda,  Inc. to 21.93
percent. Bio Moda, Inc. is a development stage company involved primarily in the
development  of  technology  for  the  early  detection  of  lung  cancer.  As a
development  stage company,  Bio Moda,  Inc. has not had any revenues and, as of
March 31, 1999, was in the process of conducting clinical trials.

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

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

     Assets:
         Current assets                                               $  56,223
         Other assets                                                    17,000
                                                                      ---------
                                                                      $  73,223
                                                                      =========
     Liabilities and equity
         Current liabilities                                          $  32,148
         Notes payable to stockholders                                   84,884
         Common stock                                                   372,273
         Deficit accumulated during the development stage              (416,082)
                                                                      ---------
                                                                      $  73,223
                                                                      =========
The  investment in Bio Moda,  Inc. is accounted for using the equity  method.  A
summary of the investment as of March 31, 1999 is as follows:

     Original cost, all of which exceeded book value                  $ 358,845
     Share of net loss                                                  (70,104)
     Amortization of excess of cost                        
         over book value                                                (22,891)
                                                                      ---------
     Net investment                                                   $ 265,850
                                                                      =========
                                                           
                                                         


                                                                              12
<PAGE>


     NOTE 4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION

Capital Lease  Obligation.  In July,  1998,  the Company  entered into a capital
lease  agreement for equipment  valued at $100,499 (net book value of $82,073 at
March 31,  1999).  The Company  made a down  payment of $20,170.  The  remaining
amount  was  financed  on a lease  with 36 monthly  payments  of $2,810.  Future
minimum lease payments are as follows for the years ending March 31:

     1999                                                              $ 33,720
     2000                                                                33,720
     2001                                                                 5,620
                                                                       --------
                                                                         73,060
                                                            
     Less amounts representing interest                                 (12,475)
                                                                       --------
      
                                                                       $ 60,585
                                                                       ========
      
Long-Term Debt. In October 1998, the Company obtained a note payable from a bank
as  part  of  the  purchase  of an  automobile.  The  note  is  due  in  monthly
installments  of principal and interest  (fixed rate of 8 percent) of $817 until
October 2002. The note is secured by the automobile and the balance  outstanding
at March 31, 1999 was $31,574.

Principal payments for the years ending March 31 are as follows:

     2000                                                              $  7,475
     2001                                                                 8,068
     2002                                                                 8,738
     2003                                                                 7,293
                                                                       --------

                                                                       $ 31,574
                                                                       ========

NOTE 5. EQUITY TRANSACTIONS

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

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


                                                                              13
<PAGE>


     NOTE 5. EQUITY TRANSACTIONS (CONTINUED)

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

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

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

During the quarter ended March 31, 1999, the Company  repurchased 489,251 shares
of its  outstanding  stock for $11,132 in cash.  These shares were retired.  The
Company also sold  3,259,180  shares for  $154,620 in cash and issued  5,537,430
shares for services which were valued at $27,687.

NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

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

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


                                                                              14
<PAGE>


     NOTE 6.   FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The carrying amounts and fair values of the Company's financial  instruments are
as follows at March 31, 1999:
                                                                     Estimated
                                                         Carrying       Fair
                                                          Amount       Value

     Cash and cash equivalents                           $66,666       66,666
     Certificate of deposit                               50,000       50,000
     Marketable equity securities (with an
         original cost of $70,034)                        53,191       53,191
     Notes receivable                                     82,001       82,001
     Notes payable                                         5,384        5,384
     Long-term debt and capital lease obligation          92,159       92,159
     
NOTE 7. INCOME TAXES

At  March  31,  1999,   the  Company  had  deferred  tax  assets   amounting  to
approximately  $400,000.  The deferred tax assets  consist  primarily of the tax
benefit of net operating loss  carryforwards and are fully offset by a valuation
allowance of the same amount.

The net  change in the  valuation  allowance  for  deferred  tax  assets  was an
increase of approximately  $80,000 in the quarter ending March 31, 1999. The net
change is due primarily to the increase in net operating loss carryforwards.

At  March  31,  1999,  the  Company  had net  operating  loss  carryforwards  of
approximately  $1,000,000  available to offset future state and federal  taxable
income. These carryforwards will expire in 2016 to 2018 for federal tax purposes
and 2001 to 2003 for state tax purposes.

NOTE 8. COMMITMENTS

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

Rent expense during 1998 and 1997 was $9,875 and $2,100, respectively.

Future minimum lease payments for the years ending March 31, are as follows:

     2000                                                        $32,400
     2001                                                          8,100
              
As of March 31, 1999, there was one stock option outstanding for the purchase of
153,954  shares at $.58 per  share by an  officer  of the  Company.  The  option
expires August 1, 1999. During the quarters ended March 31, 1998 and 1999, there
was no stock option activity.


                                                                              15
<PAGE>


                        ADVANCED OPTICS ELECTRONICS, INC.


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

                  FINANCIAL CONDITION AND RESULTS OF OPERATION

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

Forward - Looking Statements

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

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

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

Liquidity and Capital Resources

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


                                                                              16
<PAGE>


     BioModa is a biomedical  development  company.  The Company's  ownership of
BioModa, as of March 31, 1999, was 21.93%. The Company holds options to increase
this position to 26.4%. No immediate  family members of officers or directors of
Advanced Optics Electronics, Inc. are securities holders of BioModa.

During the quarter  ended March 31, 1999  $75,878 was spent for the  purchase of
equipment and product  development  costs.  Funds for operation  needs,  product
development and capital  expenditures  were provided from the sale of securities
and  cash  reserves.   Product  development  expenditures  are  expected  to  be
approximately $200,000 in fiscal 1999.

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

Results of Continuing Operations

Comparison of the Three-Month Periods Ended March 31, 1999 and 1998

Revenues  decreased  to $66,375  in the first  quarter  of 1999 as  compared  to
$72,000 in the first quarter of 1998.

Research,  development  and  technical  costs  increased to $48,273 in the first
quarter of 1999 from $6,690 in the first quarter of 1998.  The increase in these
costs is due  primarily  to  increased  research  and  development  efforts  and
resources.

General and  administrative  costs increased to $106,570 in the first quarter of
1999 from  $53,263 in the first  quarter of 1998 due to  increases  in  salaries
related to additional personnel and increases in professional fees.

Depreciation  increased  to $23,529 in the first  quarter of 1999 from $9,470 in
the first  quarter of 1998 due primarily to  depreciation  expense for equipment
acquired under capital leases.


                                                                              17
<PAGE>


                           PART II. OTHER INFORMATION

Item 1. Legal proceedings

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

Item 2. Changes in securities

During the first  quarter of fiscal year 1999 there was a 4,949,972  increase in
shares of common stock.

Item 3. Defaults upon senior securities - Not applicable

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

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

Item 5. Other Information - Not applicable

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits
27.1 Financial Data Schedule

(b) Reports on Form 8-K
No reports on Form 8-K were filed by the company during the  three-month  period
ending March 31, 1999


                                                                              18
<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: April 23, 1999

                                            ADVANCED OPTICS ELECTRONICS, INC.


                                            BY: /s/Leslie S. Robins
                                                ----------------------------
                                            Leslie S. Robins
                                            Chief Accounting Officer
                                            (Principal Accounting Officer)


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


                                                                              19
<PAGE>



                   Appendix A to Item 601(c) of Regulation S-B
                       Commercial and Industrial Companies
                           Article 5 of Regulation S-X


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
      Item Number                       Item Description                                       Amount
----------------------------------------------------------------------------------------------------------
<S>               <C>                                                                          <C>    
5-02(1)           Cash and cash items                                                             $66,666
----------------------------------------------------------------------------------------------------------
5-02(2)           Marketable securities                                                           $53,191
----------------------------------------------------------------------------------------------------------
5-02(3)(a)(1)     Notes and accounts receivable-trade                                             $53,001
----------------------------------------------------------------------------------------------------------
5-02(4)           Allowances for doubtful accounts                                                    N/A
----------------------------------------------------------------------------------------------------------
5-02(6)           Inventory                                                                       $41,324
----------------------------------------------------------------------------------------------------------
5-02(9)           Total current assets                                                           $580,757
----------------------------------------------------------------------------------------------------------
5-02(13)          Property, plant and equipment                                                  $251,553
----------------------------------------------------------------------------------------------------------
5-02(14)          Accumulated depreciation                                                      ($55,067)
----------------------------------------------------------------------------------------------------------
5-02(18)          Total assets                                                                 $1,371,630
----------------------------------------------------------------------------------------------------------
5-02(21)          Total current liabilities                                                       $75,244
----------------------------------------------------------------------------------------------------------
5-02(22)          Bonds, mortgages and similar debt                                               $58,828
----------------------------------------------------------------------------------------------------------
5-02(28)          Preferred stock-mandatory redemption                                                N/A
----------------------------------------------------------------------------------------------------------
5-02(29)          Preferred stock-no mandatory redemption                                             N/A
----------------------------------------------------------------------------------------------------------
5-02(30)          Common stock                                                                 $1,237,558
----------------------------------------------------------------------------------------------------------
5-02(31)          Other stockholder's equity                                                          N/A
----------------------------------------------------------------------------------------------------------
5-02(32)          Total liabilities and stockholder's equity                                   $1,371,630
----------------------------------------------------------------------------------------------------------
5-03(b)1(a)       Net sales of tangible products                                                  $66,375
----------------------------------------------------------------------------------------------------------
5-03(b)1          Total revenues                                                                  $66,375
----------------------------------------------------------------------------------------------------------
5-03(b)2(a)       Cost of tangible goods sold                                                    $240,784
----------------------------------------------------------------------------------------------------------
5-03(b)2          Total costs and expenses applicable to sales and revenues                      $240,784
----------------------------------------------------------------------------------------------------------
5-03(b)3          Other costs and expenses                                                        $35,874
----------------------------------------------------------------------------------------------------------
5-03(b)5          Provision for doubtful accounts and notes                                           N/A
----------------------------------------------------------------------------------------------------------
5-03(b)8          Interest and amortization of debt discount                                     ($3,299)
----------------------------------------------------------------------------------------------------------
5-03(b)10         Income before taxes and other items                                          ($273,303)
----------------------------------------------------------------------------------------------------------
5-03(b)11         Income tax expense                                                                  N/A
----------------------------------------------------------------------------------------------------------
5-03(b)14         Income/loss continuing operations                                            ($174,409)
----------------------------------------------------------------------------------------------------------
5-03(b)15         Discontinued operations                                                             N/A
----------------------------------------------------------------------------------------------------------
5-03(b)17         Extraordinary items                                                                 N/A
----------------------------------------------------------------------------------------------------------
5-03(b)18         Cumulative effect-changes in accounting principals                            ($63,020)
----------------------------------------------------------------------------------------------------------
5-03(b)19         Net income or loss                                                           ($273,303)
----------------------------------------------------------------------------------------------------------
5-03(b)20         Earnings per share - primary                                                   ($0.011)
----------------------------------------------------------------------------------------------------------
5-03(b)20         Earnings per share - fully diluted                                                  N/A
----------------------------------------------------------------------------------------------------------
</TABLE>