U.S. SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C. 20549
                                   
                             FORM 10-QSB
                            
(X)  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
        SECURITIES EXCHANGE ACT OF1934
        For the quarterly period ended December 31, 1997 or

( )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
      SECURITIES EXCHANGE ACT COMMISSION OF 1934
     FOR THE TRANSITION PERIOD FROM          TO          

Commission file number 0-9951

ADVANCED OXYGEN TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)

Delaware                                 91-1143622
(State of Incorporation)           (I.R.S. Employer Identification No.)

     C/o Crossfield Inc.
     230 Park Avenue, Suite 1000
     New York, NY 10169
(Address of principal executive offices)

     212-808-3061
(Issuer's telephone number)

     Check whether the issuer (1) has filed all reports required to be filled
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 shares of common stock outstanding as of December 31, 1997
was 29,640,252.

Transitional Small Business Disclosure Format (check one):

Yes                                No   X     

                  





                      ADVANCED OXYGEN TECHNOLOGIES, INC.
                                   
                                       INDEX
                                   
PART I- FINANCIAL INFORMATION                   

Item 1.  Financial Statements
     Balance sheet as of December 31,1997

     Statement of income for the three month period ended December 31,1997

     Statement of cash flows for the three month period ended December 31, 1997

Item 2.  Management's discussion and analysis of financial condition and
results of operations

PART II- OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K

Item 27. Financial Data Schedules 

SIGNATURE
     
Item 1
PART I

FINANCIAL INFORMATION
ADVANCED OXYGEN TECHNOLOGIES INC.
FOR THE 3 MONTHS ENDING DECEMBER 31, 1997
(UNAUDITED)

BALANCE SHEET

<TABLE>
<S>                         <C>         <C>
Current Asset                       0.00

TOTAL CURRENT ASSETS                          0.00

Property & Equipment                0.00

TOTAL PROPERTY & EQUIPMENT                    0.00

Other assets                        0.00

TOTAL OTHER ASSETS                            0.00

TOTAL ASSETS                                  0.00

                                        

LIABILITIES AND CAPITAL                 

Current Liabilities            14,500.00

TOTAL CURRENT LIABILITIES                14,500.00

Long Term Liabilities               0.00

TOTAL LONG TERM LIABILITIES                   0.00

TOTAL LIABILITIES                        14,500.00

                                        

CAPITAL                                 

Preferred Stock                 1,770.00
(10,000,000 authorized 
par value $.001@share)
(5,000 outstanding)

Common Stock                   285,463.00
(30,000,000 authorized 
par value $0.01@share)
(29,640,252 outstanding)

Paid in Capital             19,857,051.00

Retained Earnings           (20,187,361.00)

Net Income                     28,577.00

TOTAL CAPITAL                           (14,500.00)
</TABLE>


INCOME STATEMENT

<TABLE>
<S>                          <C>        <C>
REVENUES                                

Other Income                  (6,875.00)

Forgiveness of Debt           286,374.00

TOTAL REVENUES                          279,499.00

                                        

Cost of Sales                       0.00

TOTAL COST OF SALES                           0.00

                                        

GROSS PROFIT                            279,499.00

                                        

Expenses                      250,922.00

TOTAL EXPENSES                          250,922.00

                                        

NET INCOME                               28,577.00
</TABLE>


CASH FLOW STATEMENT

<TABLE>
<S>                           <C>       <C>
Net income                     28,577.00

Adjustments (A/P)              14,500.00

TOTAL ADJUSTMENTS              14,500.00

                                        

Net cash provided by Operations43,077.00

Net cash used in investing          0.00

                                        

Cash Flows from Financing               

     PROCEEDS FROM:                     

     Notes payables to Directors275,000.00

     Other Long Term Liabilities 71,374.00

     Preferred Stock            1,770.00

     Common Stock             285,463.00

     Paid-in-Capital          19,857,051.00

                                        

     USED FOR                           

     Note Payable to directors(275,000.00)

     Other long term Liabilities(71,374.00)

                                        

Net cash used in Financing              20,144,284.00

Net increase (decrease) in cash         20,187,361.00

                                        

SUMMARY                                 

Cash Balance at end of period       0.00

Cash balance at beginning of period  (922.00)

NET INCREASE (DECREASE) IN CASH  (922.00)
</TABLE>


Item 2- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.

PLAN OF OPERATIONS

     The Company had ceased operations since the sale of its technology to
W.R.Grace Conn.  The Company is currently seeking acquisitions, mergers, and 
purchases to begin operations. 

     Pursuant to a Stock Acquisition Agreement dated as of December 18, 1997
the Company has issued 23,750,000 shares of its common stock , par value $.01
at a price of $0.01 per share for $60,000 cash plus consulting services 
rendered valued at $177,500.

     Pursuant to a Purchase Agreement dated as of December 18, 1997, an
aggregate of 800,000 shares of AOXY's common stock was purchased from Edelson 
Technology Partners II, L.P. ("ETPII") for $10,000 cash. AOXY issued 
450,000 shares of its capital stock to ETPII in exchange for consulting
services. The general partner of ETPII is Harry Edelson, 
Chairman of the Board and Chief Executive Officer of AOXY prior to the 
transactions resulting in the change of control (the "Transactions"). Prior
to the Transactions Mr. Edelson directly or indirectly owned approximately 
25% of the issued and outstanding common stock of AOXY, and following the 
completion of Mr. Edelson's consultancy he will own approximately 1.5%.

     Pursuant to a Waiver Agreement dated as of December 18, 1997, Emile
Battat, Richard Jacobson, each a director of AOXY prior to the Transactions,
Sharon Castle, a former officer of AOXY, and EPTII released AOXY from any 
liability for repayment of an aggregate of $275,000 of loans plus all 
interest due thereon previously made by them to AOXY in consideration of an
aggregate amount of $60,000 cash paid to them pro rata in proportion to their
individual loans outstanding.

     On December 18, 1997, pursuant to a Trust Agreement dated as of November
7, 1997 and an Assignment and Assumption Agreement dated as of November 8, 
1997, certain royalty rights and liabilities related to technology AOXY sold 
to a third party in 1995 were transferred to a trust for the benefit of the 
AOXY shareholders. No royalties had been paid or become due with respect to
the rights transferred to the Trust, and no value was assigned to such rights
on the books of AOXY.

     All of the directors and officers of AOXY resigned in connection with the
Transactions. Robert E. Wolfe and Joseph N. Noll were elected as directors
on December 18,1997, and Mr. Wolfe was appointed president.

PART II- OTHER INFORMATION

EXHIBIT INDEX
      Item 6.  Exhibits and Reports on Form 8-K
      (A) Exhibit 8-K filed on December 18, 1997.

      Item 27.  Financial Data Schedules
      (B)  Article 5

SIGNATURE

     In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, 
hereunto duly authorized.

Date: February 15, 1998            /s/ Robert E. Wolfe
                              Robert E. Wolfe, Chairman of the Board and Chief
                              Executive Officer and Principal Financial Officer


<PAGE>

                     Exhibit A

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                          -----------------------------
                                    FORM 8-K

                                 CURRENT REPORT

                     Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                                December 18, 1997
                        (Date of Earliest Event Reported)

                       ADVANCED OXYGEN TECHNOLOGIES, Inc.
             (Exact Name of Registrant as Specified in its Charter)



        Delaware                  000-09951              91-1143622
(State of Incorporation)    (Commission File No.)     (I.R.S. Employer
                                                      Identification No.)

                           C/O Crossfield Incorporated
                           230 Park Avenue, Suite 1000
                               New York, NY 10169
                    (Address of Principal Executive Offices)

                  Registrant's Telephone Number: (212) 808-3061

                         C/O EdelsonTechnology Partners
                               300 Trice Boulevard
                            Woodcliff Lake, NJ 07675
                                (Former Address)

=====================================================================
===========



<PAGE>

ITEM 1:           CHANGES IN CONTROL OF REGISTRANT

     Pursuant to a Stock Acquisition Agreement dated as of December 18, 1997
(Exhibit A), Advanced Oxygen Technologies, Inc. ("AOXY") has issued 23,750,000
shares of its common stock , par value $.01, at a price of $0.01 per share for
$60,000 cash plus consulting services rendered valued at $177,500, to Crossland,
Ltd. ("Crossland"), Eastern Star, Ltd. ("Eastern"), Coastal Oil, Ltd.
("Coastal") and Crossland, Ltd. (Belize) ("CLB"). Crossland and Eastern are
Bahamas corporations. Coastal and CLB are Belize corporations.

     Pursuant to a Purchase Agreement dated as of December 18, 1997 (Exhibit B),
CLB, Triton International, Ltd. ("Triton"), a Bahamas corporation, and Robert E.
Wolfe purchased an aggregate of 800,000 shares of AOXY's common stock from
Edelson Technology Partners II, L.P. ("ETPII") for $10,000 cash. AOXY will issue
450,000 shares of its capital stock to ETPII in exchange for consulting services
to be rendered. The general partner of ETPII is Harry Edelson, Chairman of the
Board and Chief Executive Officer of AOXY prior to the transactions resulting in
the change of control (the "Transactions"). Prior to the Transactions Mr.
Edelson directly or indirectly owned approximately 25% of the issued and
outstanding common stock of AOXY, and following the completion of Mr. Edelson's
consultancy he will own approximately 1.5%.

     Pursuant to a Waiver Agreement dated as of December 18, 1997 (Exhibit C),
Emile Battat, Richard Jacobson, each a director of AOXY prior to the
Transactions, Sharon Castle, a former officer of AOXY, and EPTII released AOXY
from any liability for repayment of an aggregate of $275,000 of loans plus all
interest due thereon previously made by them to AOXY in consideration of an
aggregate amount of $60,000 cash paid to them pro rata in proportion to their
individual loans outstanding by CLB, Triton and Robert E. Wolfe.

     The source of funds for the Transactions was working capital and personal
funds. To the knowledge of the registrant, no arrangements exist which might
subsequently result in a change in control of the registrant.

     All of the directors and officers of AOXY resigned in connection with the
Transactions. Robert E. Wolfe and Joseph N. Noll were elected as directors and
Mr. Wolfe was appointed president.

     Stock of AOXY purchased in the Transactions is owned as follows:

                                        # of Shares           % of Company

       Robert E. Wolfe                       50,000                0.17 %
       Triton-International, Ltd.           375,000                1.26%
       Crossland, Ltd. (Belize)           6,312,500               21.30%
       Crossland, Ltd.                    5,937,500               20.03%
       Coastal Oil, Ltd.                  5,937,500               20.03%
       Eastern Star, Ltd.                 5,937,500               20.03%
                                          ---------               ------
           Total                         24,550,000               82.83%


<PAGE>


ITEM 2:     ACQUISITION OR DISPOSITION OF ASSETS.

     On December 18, 1997, pursuant to a Trust Agreement dated as of November 7,
1997 and an Assignment and Assumption Agreement dated as of November 8, 1997,
(together, Exhibit D) certain royalty rights and liabilities related to
technology AOXY sold to a third party in 1995 were transferred to a trust for
the benefit of the AOXY shareholders. No royalties had been paid or become due
with respect to the rights transferred to the Trust, and no value was assigned
to such rights on the books of AOXY.

ITEM 7.     FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION &
EXHIBITS.

(c)         Exhibits

Exhibit A   Stock Acquisition Agreement
Exhibit B   Purchase Agreement
Exhibit C   Waiver Agreement
Exhibit D   Trust Agreement, Assignment and Assumption Agreement

ITEM 9.     SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.

     The 23,750,000 shares of AOXY common stock sold by AOXY as of December 18,
1997 to Crossland, Eastern, Coastal and CLB pursuant to the Stock Acquisition
Agreement (the "Regulation S Shares") have not been registered under the
Securities Act of 1933, as amended, in reliance on the exemption from
registration provided by Rule 903(c)(2) of Regulation S. Consideration for the
Regulations S Shares consisted of $60,000 cash and consulting services rendered
valued at $177,500.

     Each of the purchasers of the Regulation S Shares (a "Buyer") has
represented to AOXY that (i) it is not a "U.S. Person" as that term is defined
in Rule 902(o) of Regulation S; (ii) the sale of the Regulation S Shares was
taking place outside the United States; (iii) no offer was made in the United
States; (iv) it was purchasing the Regulation S Shares for its own account and
not as a nominee or for the account of any other person or entity; (v) it had no
intention to sell or distribute the shares except in accordance with Regulation
S; and (vi) it agreed that it would not transfer Regulation S Shares to a U.S.
Person before the 41st day from the date the Buyer purchased the Regulation S
Shares.

     AOXY represented to the Buyers that it had not conducted any "directed
selling efforts" as defined in Regulation S, and that it had filed all reports
required to be filed under the Securities Exchange Act of 1934 during the
preceding twelve months.



<PAGE>


                                   SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.


Dated:  January 16, 1998.           ADVANCED OXYGEN TECHNOLOGIES, INC.




                                    BY:/s/ Robert E. Wolfe
                                       -------------------------------
                                       Robert E. Wolfe
                                       President

<PAGE>
                                                                       Exhibit A
                                                                 Execution (iii)


                           STOCK ACQUISITION AGREEMENT
                           ---------------------------


         THIS  AGREEMENT  made  as of the 18 day  of  December,  1997,  (herein,
together with the Schedules attached hereto,  referred to as "Agreement") by and
among  ADVANCED  OXYGEN  TECHNOLOGIES,  INC.,  a Delaware  corporation,  (herein
referred to as "AOXY") and Crossland,  Ltd.  (Belize),  a registered  company of
Belize,  Eastern  Star,  Ltd.,  a  Bahamas  corporation,  Costal  Oil,  Ltd.,  a
registered  company of Belize,  and Crossland Ltd., a Bahamas  corporation (each
herein referred to as a "Purchaser" and, collectively, the "Purchasers").

         In reliance upon the  representations and warranties made herein and in
consideration of the mutual agreements herein contained the parties hereby agree
as follows:

    SECTION 1. SALE AND PURCHASE OF STOCK.

         1.01 Sale of Stock to Purchasers.  (a) AOXY shall at the closing of the
transactions  hereinafter  provided  sell,  transfer,   assign  and  deliver  to
Purchasers an aggregate of 6,000,000  shares (the "Sale  Shares") of the capital
stock of AOXY in the amounts set forth on Schedule 1.01 hereto.

              (b) AOXY  shall at the  closing  of the  transactions  hereinafter
provided  sell,  transfer,  assign and deliver to  Purchasers  an  aggregate  of
17,750,000 shares (the "Consulting  Shares") of the capital stock of AOXY in the
amounts set forth on Schedule  1.01 hereto.  The Sale Shares and the  Consulting
Shares are hereinafter referred to collectively as the "Shares."

         1.02  Consideration  for Stock. (a) In consideration of the sale of the
Sale Shares,  Purchasers shall pay to AOXY the aggregate amount of US $60,000.00
(the  "Purchase  Price") by delivery to Kieffer and Hahn, as attorneys for AOXY,
the Purchase Price in the form of an official bank check or a certified check of
the Purchasers  payable to "Kieffer and Hahn,  IOLA account which funds shall be
used to pay certain creditors of AOXY.

              (b)  In  consideration  of the  sale  of  the  Consulting  Shares,
Purchasers have previously  provided  services to AOXY by identifying  potential
acquisition candidates.

         1.03  Transactions on the Closing Date. (a) Delivery of Shares.  At the
Closing,  AOXY  will  deliver  to  Purchasers  irrevocable  instructions  to the
transfer agent of AOXY for the issuance of stock  certificates  representing the
Shares; and

              (b) Delivery of  Consideration.  At the Closing,  Purchasers  will
deliver to AOXY an official bank check or a certified check of the Purchasers in
the amount of the Purchase Price payable to "Kieffer and Hahn, IOLA account."

<PAGE>


         (c) Resignations.  Resignations of all of the directors and officers of
AOXY other than those  designated in writing by Purchasers  prior to the Closing
Date to remain on the board or in office; and

         (d) Documents. Each of the documents contemplated by this Agreement.

    SECTION 2.  CLOSING.  The Closing  will take place at the offices of Kieffer
and Hahn, 111 Broadway,  New York, New York 10006,  at 10:00 A.M. on the date of
execution and delivery hereof by all of the parties.

    SECTION 3.  REPRESENTATIONS  AND  WARRANTIES OF AOXY.  AOXY  represents 
and
warrants the following to the Purchasers:

         (a)  Organization  and  Standing.   (1)  AOXY  is  a  corporation  duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, the State of its incorporation,  and is authorized to conduct business
in and is in good  standing in each  jurisdiction  in which the character of the
properties owned by it or the nature of the business transacted by it makes such
license or qualification necessary.

         (2)  The  certified  copies  heretofore   delivered  to  AOXY,  of  the
certificate of  incorporation,  of all licenses to transact  business and of the
by-laws of AOXY with all  amendments  to the date hereof are true,  complete and
correct.

         (3) AOXY has no subsidiaries.

         (b) Capital Stock. (1) The capital stock of AOXY consists of (A) thirty
million  (30,000,000)  shares of common stock, par value one cent (US $0.01) per
share  of which  five  million  six  hundred  ninety-six  thousand  two  hundred
fifty-two (5,696,252) shares have been validly issued and are fully paid and are
non-assessable  and are fully  transferable,  three  hundred fifty four thousand
(354,000)  shares  which shall be issued upon  conversion  of 177,000  shares of
preferred  stock  (172,000  shares of preferred  stock shall be  converted  into
344,000  shares on the date of  Closing)  and one  hundred  forty five  thousand
(145,000)  shares of which shall be issued upon  exercise of options and (B) ten
million  (10,000,000) shares of preferred stock par value one cent (US $.Ol) per
share of which  177,000  (172,000  shares of preferred  stock shall be converted
into 344,000 shares on the date of Closing)  shares have been validly issued and
are fully paid and are non- assessable and are fully transferable.

              (2) None of the  issued and  outstanding  shares is subject to any
voting trust agreement or other agreement relating to the voting thereof.

              (3) None of the authorized but unissued shares of AOXY are subject
to any warrants, obligations,  subscriptions, options, convertible securities or
other commitments under


                                       2
<PAGE>


which they are or may be required to be issued.

              (4) No transfer  tax will be payable  with respect to the issuance
of AOXY's stock contemplated hereby.

         (c) Stock  Issuance.  The Shares when issued shall be free and clear of
any encumbrances,  liens or restrictions on sale, other than those applicable to
restricted securities as defined under the rules and regulations  promulgated by
the Securities and Exchange Commission.

         (d)  Validity of  Agreement  Authority.  This  Agreement  has been duly
executed and  delivered by AOXY and  (assuming  valid  execution and delivery by
each  Purchaser) is a valid and binding  obligation,  enforceable  in accordance
with its terms.

         (e)  Authority to take Action.  (1) The  execution and delivery of this
Agreement  and  delivery  of the  subject  shares  and the  carrying  out of the
provisions hereof will not contravene any provisions of law, any order, judgment
and/or decree of any court or other governmental agency or AOXY's certificate of
incorporation, by-laws, or any indenture, agreement or other instrument to which
a AOXY is a party or by which AOXY may be bound,  or by which any property owned
by AOXY may be bound.

              (2) All legal actions required to be taken in connection with this
Agreement pursuant to the laws of any State or other governmental authority have
been so taken.

         (f) Accounts Receivable. AOXY has no accounts receivable.

         (g)  Liabilities of AOXY. AOXY has no liabilities or obligations of any
nature, whether accrued, absolute,  contingent or otherwise,  including, without
limitation,  tax liabilities due or to become due, except for (1)  approximately
$45,000 of accounts payable,  (2) the fees and expenses of counsel in connection
herewith  and (3)  amounts  due and  payable  to  certain  of its  directors  as
evidenced by  Promissory  Notes issued to such persons and the accrued  interest
earned  thereon which do not exceed  $350,000 in the  aggregate  which are to be
spun-off to the liquidating trust as set forth in section .

         (h) No Dividends or  Distributions.  Since June 30, 1995,  AOXY has not
declared,   set  aside  or  paid  to  its  stockholder  any  dividend  or  other
distribution  in  respect of its  capital  stock or  redeemed  or  purchased  or
otherwise acquired any of its capital stock or agreed to take any such action.

         (i) Absence of Material Changes or Events.  Except for matters publicly
disclosed  on (1) AOXY's  Proxy  Statement  in  connection  with the sale of its
oxygen control  technology to W.R. Grace  ("Grace") in February 1995; (2) AOXY's
Reports on Form 10-KSB with respect to AOXY's  fiscal years ended June 30, 1993,
1994  and 1995 and (3)  AOXY's  Reports  on form  10-Q for the  quarters  ending
September  30, 1995 and  December  31, 1995 and AOXY's  8-K's filed prior 


                                       3
<PAGE>

hereto copies of which have been heretofore delivered to Purchasers,  since June
30, 1995 there has been no event or condition of any  character,  materially and
adversely affecting AOXY's financial position,  assets,  liabilities (contingent
or otherwise),  results of operation,  business or business prospects,  and AOXY
has not:

              (1)  Incurred any  obligation  or  liability  (absolute,  accrued,
contingent, or otherwise) except in the ordinary course of business or except in
connection with the performance of this Agreement;

              (2)  Mortgaged,  pledged  or  subjected  to lien,  charge or other
encumbrance, any of its assets, tangible or intangible;

              (3) Sold or transferred any of its assets or canceled any debts or
claims, or waived any right of substantial value;

              (4) Made or committed to make any single  capital  expenditure  in
excess of five hundred dollars ($500.00),  or capital  expenditures in excess of
one thousand dollars ($ 1,000.00) in the aggregate or purchased or contracted to
purchase any land;

              (5) Sustained any damage,  destruction  or loss of its property in
excess of five hundred dollars ($500.00) whether or not covered by insurance;

              (6) Increased  the  compensation  payable or to become  payable by
AOXY to any of its  officers,  employees  or  agents,  or any bonus  payment  or
arrangement made to or with any of them;

              (7) Agreed to modify in any material respect any contract or other
instrument  to which AOXY is a party  except for the patent  purchase  agreement
with Grace;

              (8)  Increased or changed the medical  insurance  provided for the
benefit of its employees and their families.

              (9)  Increased  or  changed  the  amount of  disability  insurance
provided for the benefit of its employees;

              (10)  Entered  into any  transaction  other  than in the  ordinary
course of business; or

              (11) Made any material  change in any method of  accounting or any
accounting practice.

         (j) Title of Property. AOXY has no material assets.



                                        4
<PAGE>

         (k)  Building-Equipment  and  Motor  Vehicles.  AOXY is the owner of no
buildings, equipment or motor vehicles.

         (1) Tax Status. ( 1 ) AOXY has heretofore  furnished to Purchasers true
and complete copies of all federal,  state, local and foreign income tax returns
of AOXY filed for the three (3) years ended June 30,  1995.  Said tax returns of
AOXY have not been audited by the applicable taxing  authorities.  No agreements
made by AOXY for an extension of time for the  assessment  of any tax are now in
effect. All taxes,  including interest and penalties thereon,  shown on said tax
returns to be due and payable by AOXY,  or required to be withheld by AOXY on or
before the date hereof, have been paid or fully reserved for and withheld and no
formal  written claim for any tax,  assessment or levy for which AOXY may become
liable exists which has not been settled.

              (2) All other taxes,  due and payable at the Closing  Date, of any
kind whatsoever,  including, but not limited to, estimated income tax, franchise
tax, excise tax, doing business tax, payroll tax, personal property tax, use tax
and sales tax have been paid or fully reserved for and withheld.

         (m) Status of Contracts.  Except as reflected on Schedule 3(m). AOXY is
not a party  to any  written  or oral (i)  contract  for the  employment  of any
officer  or  individual  employee,  or  any  pension,   profit  sharing,  bonus,
retirement,  stock option or similar incentive or deferred  compensation plan or
arrangement in effect with its officers,  employees or others;  (ii)  continuing
contract for the  acquisition  of real estate or fixed assets;  (iii)  financing
arrangement involving the mortgaging,  pledging or other hypothecation of assets
or  involving  borrowing  which may not be repaid in part or in full on not more
than thirty (30) days' notice with  reference to unearned or amortized  discount
and  without  premium  or  penalty;  (iv)  contract  with any labor  union;  (v)
continuing  contract for the future  purchase of  materials  or  supplies;  (vi)
contract with any agent,  representative  or  distributor;  (vii) any instrument
evidencing or related to  indebtedness  for borrowed money, or pursuant to which
AOXY  is  obligated  to  borrow  money;  (viii)  any  contract,  arrangement  or
understanding under which AOXY has assumed,  guaranteed,  endorsed, or otherwise
become liable in connection with the obligation of any individual,  partnership,
corporation  or other  entity;  (ix) any  contract  not  included  in any of the
foregoing  which  involves  payment  by AOXY of more than five  hundred  dollars
($500.00).  True and  complete  copies of all items listed in Schedule 3( , have
been delivered to AOXY. The parties to such  instruments  have complied with all
the provisions thereof, and they are not in default under any of them.

         (n) Status of Leases.  AOXY is not a party to any leases except for the
month to month lease of document  storage  space at Pacific Mini  Storage,  1913
Sherman Street, Alameda, California.

         (o) Directors and Officers  Compensation:  Banks.  Schedule 3l0) hereto
contains a true an  complete  list  showing (i) the names of all  directors  and
officers of AOXY; (ii) the names of all persons whose compensation from AOXY for
the period beginning July 1, 1995 and ending March 31, 1996 will equal or exceed
ten thousand dollars ($ 10,000.00)  together with a statement of 


                                       5
<PAGE>

the full amount paid or payable to each such person for services  rendered or to
be rendered in such period and the basis  therefor;  (iii) the name of each bank
in which AOXY has an account,  or safe deposit box, and the names of all persons
authorized to draw  thereon,  or to have access  thereto;  (iv) the names of all
persons  holding  powers of attorney from AOXY,  and a summary  statement of the
terms thereof;  and (v) all credit cards and similar  accounts on which AOXY may
be liable.

         (p) Status of Insurance. AOXY has no insurance.

         (q)  Permits  and  Licenses.  AOXY is not  required  to  have  permits,
licenses,  approvals, and authorization of all federal, state, local and foreign
authorities and is presently not conducting any business.

         (r) Litigation.  There is no action, suit,  proceeding or investigation
pending,  or to the  knowledge of AOXY  threatened,  against or  affecting  AOXY
before any court,  arbitrator or administrative or governmental body and AOXY is
not  presently  subject to or in default in respect of any order,  injunction or
decree of any court or government instrumentality.

         (s) Compliance with Laws. Except as reflected on Schedule 3(s), AOXY is
not in  violation of any law,  regulation  or ordinance  which  violation  would
materially and adversely affect it or its operations.

         (t) Books of Accounts and Other Records.  The books of account, and the
minute books,  stock  certificate  books and ledgers of AOXY at the Closing Date
will,  in all  material  respects,  be correct  and  complete  and such books of
account and ledgers will fairly  present the  operations  of AOXY in  accordance
with generally accepted accounting principles.

         (u) Employee Benefit Plans.  AOXY is not party to any bonus,  incentive
compensation, profit-sharing, pension, retirement, stock purchase, stock option,
deferred  compensation,   hospitalization,   group  insurance,   death  benefit,
disability,   collective  bargaining  and  other  fringe  benefit  plans,  trust
agreements, arrangements or commitments.

         (v) No Directed Selling Efforts in Regard to this Transaction.  Neither
AOXY nor any  distributor,  if any,  participating in the offering of the Shares
nor any  person  acting  for  AOXY or any such  distributor  has  conducted  any
"directed  selling  efforts" as that term is defined in  Regulation  S under the
Securities  Act of  1933  ("Regulation  S").  Such  activity  includes,  without
limitation,  the mailing of printed material to investors residing in the United
States, the holding of promotional  seminars in the United States, the placement
of advertisements with radio or television  stations  broadcasting in the United
States or in publications with a general circulation in the United States, which
discuss the offering of the Shares.

         (w) No  Market  Manipulation.  AOXY has not  taken,  and will not take,
directly or  indirectly,  any action  designed to, or that might  reasonably  be
expected to, cause or result in  stabilization  or  manipulation of the price of
the its stock to facilitate the sale or resale of the Shares 


                                       6
<PAGE>

or affect the price at which the Shares are purchasable.

         (x) Reporting  Company.  AOXY is a  publicly-held  company whose common
stock is (and has been for the  past 90 days)  registered  pursuant  to  Section
12(g) of the Securities  Exchange Act of 1934 (the "1934 Act").  Pursuant to the
provisions  of the 1934  Act,  AOXY has filed all  reports  and other  materials
required to be filed  thereunder  with the  Securities  and Exchange  Commission
during the preceding twelve months,  except as otherwise disclosed herein and in
the Schedules annexed hereto and made a part hereof.

         (y) Offer to Buy.  No offer to buy the  Shares  was made to AOXY by any
person in the United States.

         (z) Pre Arranged  Transaction.  The  transactions  contemplated by this
Agreement:

              (1) have  not been  pre-arranged  with a  purchaser  who is in the
United States or is a US Person; and

              (2) are not part of a plan or  scheme  to evade  the  registration
provisions of the Securities Act of 1933 (the "1933 Act").

         (aa) Stop Transfer.  AOXY has not issued, and provided nothing comes to
AOXY's  attention  after the closing  date that will cause it to believe in good
faith  that the  issuance  of the Shares  was in  contravention  with any United
States law, will not issue,  any stop transfer order or other order impeding the
sale and  delivery of the Shares,  or any  underlying  shares  except for a stop
order  restricting  the sale of the Shares into the United  States or to, or for
the  account  or  benefit  of, US  Persons  during  the  Restricted  Period,  as
hereinafter defined.

    SECTION 4. "REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each
Purchaser, as
and for itself,  severally and not jointly,  represents and warrants to AOXY the
following:

         (a) Organizing and Standing.  (I) Each Purchaser is a corporation  duly
organized, validly existing, and in good standing under the laws of the place of
its incorporation.

              (2) The copy  heretofore  delivered to AOXY, of the certificate of
incorporation  with all  amendments  to the date hereof are true,  complete  and
correct.

              (3) Each Purchaser has no subsidiaries, except for those listed on
Schedule 4(a) hereto each of which is duly organized,  validly existing,  and in
good standing under the laws of the place of its incorporation or organization.

         (b)  Validity of  Agreement  Authority.  This  Agreement  has been duly
executed and  delivered by the  Purchasers  and  (assuming  valid  execution and
delivery  by  the  AOXY)  is a  valid  and  binding  obligation  enforceable  in
accordance with its terms.


                                        7
<PAGE>

         (c)  Authority to take Action.  (1) The  execution and delivery of this
Agreement  and  delivery  of the  subject  shares  and the  carrying  out of the
provisions hereof will not contravene any provisions of law, any order, judgment
and/or  decree of any  court or other  governmental  agency or each  Purchaser's
certificate of incorporation or charter, by-laws or any indenture,  agreement or
other instrument to which such Purchaser is a party or by which it may be bound,
or by which any property owned by it may be bound.

              (2) All  corporate  and  legal  actions  required  to be  taken in
connection  with  this  Agreement  pursuant  to the  laws of any  State or other
governmental authority have been so taken.

         (d)  Compliance  with Laws.  No Purchaser  has  received  notice of any
violation of any law,  regulation or ordinance which violation would  materially
and adversely affect it or its operations.

         (e) Consents.  No Purchaser requires consent,  approval,  registration,
qualification  or  filing  with  any  United  States  federal,  state  or  local
government authority or any foreign government authority in connection with such
Purchaser's  execution of this  Agreement or  consummation  of the  transactions
contemplated  hereby,  other than the required  filings  with the United  States
Securities and Exchange Commission.

         (f) Information on Company. The Purchasers have been furnished with and
have read AOXY's  registration  statement on Form S-1 declared  effective by the
Securities  and Exchange  Commission on July 7, 1993,  and all of its Forms 10-Q
and 8-K reports filed subsequent thereto, (collectively,  with exhibits thereto,
hereinafter  referred to as the  "Reports").  In addition,  the Purchasers  have
received from AOXY such other information  concerning its operations,  financial
condition and other matters as the Purchasers have requested, and considered all
factors  the  Purchasers  deem  material  in  deciding  on the  advisability  of
investing in the Shares (such information in writing is collectively, the "Other
Written Information").

         (g)  Information  on  Purchasers.  Each  Purchaser  is  experienced  in
investments and business matters,  has made investments of a speculative  nature
and with its  representatives,  has such  knowledge and experience in financial,
tax and other  business  matters as to enable  such  Purchaser  to  utilize  the
information  made  available  by AOXY to evaluate the merits and risks of and to
make an informed investment decision with respect to the proposed purchase. Each
Purchaser has the  authority  and is duly and legally  qualified to purchase and
own the Shares.

         (h) Site and Condition of Sale.  Each  Purchaser is not a US Person (as
that term is defined in Exhibit A attached hereto). Each Purchaser  acknowledges
that AOXY has not solicited  this offer to purchase the Shares within the United
States and that the sale of the Note and  conversion  into the  Shares  will not
take place within the United States (for this purpose, the "United States" means
the Unites States of America, its territories and possessions,  and any state of
the  United  States  and  the  District  of  Columbia).   Each   Purchaser  also
acknowledges  that the  Shares  have not been  registered  under the laws of any
other  country  or  jurisdiction  and  that  AOXY  takes no  responsibility  


                                       8
<PAGE>

for complying with any such laws.

         (i) Investment Intent. Each Purchaser is subscribing for the Shares for
its own account and benefit and not as a nominee or for the account of any other
person or  entity.  Each  Purchaser  has no  present  intention  of  selling  or
distributing the Shares or any part thereof except for a sale in accordance with
Regulation S, if available. Each Purchaser has sufficient financial resources to
hold the Shares for an indefinite period of time.

         (j) No Market  Manipulation  Short Sales. Each Purchaser has not taken,
and will not take, directly or indirectly, any action designed to, or that might
reasonably  be expected  to, cause or result in a  manipulation  of the price of
AOXY Shares (including  making, or causing to be made, any short sales of AOXY's
common stock) in order to facilitate the sale or resale of AOXY Shares or affect
the price at which such shares are purchasable upon conversion of the Note.

         (k) No Offer in United  States.  No offer to buy the Shares was made to
AOXY by any Purchaser in the United States.

         (1) No Pre-Arranged Transaction.  The transactions contemplated by this
Agreement with respect to the sale of the Shares to the Purchasers:

              (1) have  not been  pre-arranged  with a  purchaser  who is in the
United States or is a US Person; and

              (2) are not part of a plan or  scheme  to evade  the  registration
provisions of the Securities and Exchange Act of I933 (the "Act").

         (m) No Directed Selling Efforts in Regard to this Transaction.  To the
best  knowledge of each Purchaser with respect to the sale of the Shares to such
Purchaser,  neither  AOXY  nor any  distributor,  if any,  participating  in the
offering  of the Shares nor any person  acting for AOXY or any such  distributor
has  conducted  any  "directed  selling  efforts"  as that  term is  defined  in
Regulation S. Such activity includes, without limitation, the mailing of printed
material to investors  residing in the United States, the holding of promotional
seminars in the United  States,  the placement of  advertisements  with radio or
television stations  broadcasting in the United States or in publications with a
general  circulation  in the United  States,  which  discuss the offering of the
Shares.

         (n) To Other Representations. Except as set forth in this Agreement, no
representations or warranties,  oral or otherwise, have been made to Purchasers,
including  without  limitation,   any  representations   concerning  the  future
prospects of AOXY, by AOXY, by any agent of AOXY, any employees or affiliates of
AOXY or by any other person whether or not associated with this  transaction and
in  entering  into  this  transaction   Purchasers  are  not  relying  upon  any
information.


                                       9
<PAGE>

    SECTION 5.  REGULATION S OFFERING.  The sale of Shares  hereby is being made
pursuant to Rule  903(c)(2) of the  Regulation S, and is intended to comply with
the  provisions  of  Regulation  S.  The  Shares  have  not been and will not be
registered  under  the 1933 Act or under  the  securities  laws of any  state or
jurisdiction of the United States ("State Laws").

    SECTION 6.  Transfer of  Securities.  The Shares may not be  transferred  or
resold to any US Person  until the 41st day from the date a Purchaser  purchases
the Shares (the  "Restricted  Period") and then only in accordance with the 1933
Act and  applicable,  State  Laws.  Each  Purchaser  agrees  that  it is  solely
responsible  for  compliance  therewith  with  respect to any such  transfer  or
resale.

    SECTION 7.  CONDITIONS  PRECEDENT TO PURCHASERS'  OBLIGATION TO
COMPLETE THE
TRANSACTION.  The obligation of each  Purchaser to consummate  the  transactions
described  in  Section 1 hereof is  subject  to the  fulfillment  of each of the
following conditions prior to or at the Closing:

         (a) Delivery of Shares.  Purchasers shall have received delivery of the
Shares as contemplated herein.

         (b) Spin-off AOXY shall have spun-off good and marketable  title to its
rights to  royalties  from W. R. Grace  (its only  material  asset) and  certain
liabilities  including  only amounts due to former  employees as a result of the
receipt of the royalties and notes payable to certain directors in the aggregate
principal amount of $275,000 plus the interest earned thereon.

         (c) Other Creditors.  AOXY shall have achieved  settlement in an amount
and on terms reasonably  satisfactory to Purchasers of all of the liabilities of
AOXY,  including,  without  limitation,  all accounts payable, if any, and other
accrued expenses, if any.

         (d)  Resignation  of  Directors  and  Officers.   Upon  appointment  of
directors  chosen by Purchasers  to fill the existing  vacancies on the board of
directors of AOXY, all directors and officers not so chosen by Purchasers  shall
have tendered to AOXY their resignations as directors and/or officers of AOXY.

         (e) Conversion of Preferred  Stock.  All of the issued and  outstanding
preferred stock of AOXY shall have been converted to common stock of AOXY except
for 5,000 shares.

         (f)Representations  and  Warranties of AOXY.  The  representations  and
warranties  made by AOXY  herein  shall  be true  and  correct  in all  material
respects.

         (g) No Actions or Proceeding.  No action or proceeding shall be pending
or threatened  on the Closing Date wherein an  unfavorable  judgment,  decree or
order would prevent or make unlawful the carrying out of this Agreement or would
cause the  transaction  contemplated  by this Agreement to be rescinded or would
require a Purchaser to divest itself of the shares to be acquired.



                                       10
<PAGE>

         It is  understood  that the  certificates  evidencing  the Shares  sold
pursuant hereto may bear legends in substantially the following form:


          THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN OFFERED
          AND  SOLD IN AN  "OFFSHORE  TRANSACTION"  IN  RELIANCE  UPON
          REGULATION S AS  PROMULGATED  BY THE SECURITIES AND EXCHANGE
          COMMISSION.  ACCORDINGLY,  THE  SHARES  REPRESENTED  BY THIS
          CERTIFICATE  HAVE NOT BEEN  REGISTERED  UNDER THE SECURITIES
          ACT OF 1933,  AS AMENDED  (THE "ACT") AND MAY NOT BE OFFERED
          FOR SALE, SOLD OR OTHERWISE TRANSFERRED IN THE UNITED STATES
          OR TO A "US PERSON" (AS DEFINED  UNDER  REGULATION S) EXCEPT
          PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
          ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
          ACT, THE  AVAILABILITY  OF WHICH IS TO BE ESTABLISHED TO THE
          SATISFACTION OF THE COMPANY.

    SECTION 8.  CONDITIONS  PRECEDENT  TO AOXY'S  OBLIGATIONS  TO 
COMPLETE  THE
TRANSACTION.  The obligation of AOXY to consummate the transactions  described m
Section  1  hereof  is  subject  to the  fulfillment  of each  of the  following
conditions prior to or at the Closing:

         (a) Purchase  Price.  AOXY shall have  received  the Purchase  Price as
contemplated herein.

         (b) Spin-off AOXY shall have spun-off good and marketable  title to its
rights to  royalties  from W. R. Grace  (its only  material  asset) and  certain
liabilities  including  only amounts due to former  employees as a result of the
receipt of the royalties and notes payable to certain directors in the aggregate
principal amount of $275,000 plus the interest earned thereon.

         (c) Management Services  Agreement.  Within 30 days of the date hereof,
Purchasers,  or their  duly  appointed  agent,  shall  enter  into a  management
services  agreement for a period of one year on terms and conditions  acceptable
to AOXY.

         (d) presentations and Warranties of Purchasers. The representations and
warranties  made by the  Purchasers  herein  shall  be true and  correct  in all
material respects.

         (e) No actions or proceedings. No action or proceeding shall be pending
or threatened  on the Closing Date wherein an  unfavorable  judgment,  decree or
order would prevent or make unlawful the carrying out of this Agreement or would
cause the transaction contemplated by this Agreement to be rescinded.

         SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All


                                       11
<PAGE>

representations  and  warranties  contained  herein  or made in  writing  by the
parties in connection with the  transactions  contemplated  hereby shall survive
the execution and delivery of this Agreement and the closing of the transactions
contemplated by this Agreement,  regardless of any  investigation  made by or on
behalf of the parties or any payment for and acceptance of stock hereunder.  All
statements  contained  in any  certificate,  list,  letter  or other  instrument
delivered by or on behalf of the parties  pursuant  hereto or in connection with
the  transactions   contemplated  hereby  (including   statements,   letters  or
certificates  of  independent  parties such as public  accountants or attorneys)
shall constitute representations and warranties by the parties hereunder.

    SECTION 10.  Indemnification.  (a) Of AOXY. Each Purchaser agrees to defend,
indemnify  and  hold  harmless  AOXY,  its  current   officers,   directors  and
stockholders  against  and in  respect of (i) any and all  losses,  liabilities,
damages,   deficiencies,   costs  or  expenses  (including,  without  limitation
reasonable  attorneys fees and  disbursements)  resulting from (A) the breach of
any  covenant,  warranty or  agreement  hereunder  by such  Purchaser or (B) any
representations made by such Purchaser in this Agreement, not being complete and
correct or being false and misleading or containing any material misstatement of
fact or omitting any material fact required to be stated to make the  statements
therein not misleading; and (ii) any and all actions, suits, proceeding, claims,
demands,  assessments,   judgments,  costs  and  expenses  (including,   without
limitation,  reasonable attorneys fees and disbursements) incident to any of the
foregoing;  provided, however, that if any such action, suit or proceeding shall
be asserted  against AOXY, its current  officers,  directors and stockholders in
respect of which  AOXY,  its current  officers,  directors  and/or  stockholders
propose  to  demand  indemnification,  the  Purchaser  or  Purchasers  from whom
indemnification is demanded, shall be promptly notified to that effect and shall
have the right to assume the control of the defense,  compromise  or  settlement
thereof,  including,  at  its  or  their  own  expense,  employment  of  counsel
reasonably acceptable to the person against whom such indemnification is sought.

         (b) Of Purchasers.  AOXY agrees to defend,  indemnify and hold harmless
each Purchaser, its officers, directors and stockholders, against and in respect
of (i) any and all losses, liabilities, damages, deficiencies, costs or expenses
(including,  without  limitation  reasonable  attorneys fees and  disbursements)
resulting from (A) the breach of any covenant,  warranty or agreement  hereunder
by AOXY or (B) any  representations  made by AOXY in this  Agreement,  not being
complete and correct or being false and  misleading or  containing  any material
misstatement of fact or omitting any material fact required to be stated to make
the  statements  therein not  misleading;  and (ii) any and all actions,  suits,
proceeding,   claims,  demands,  assessments,   judgments,  costs  and  expenses
(including,  without  limitation,  reasonable  attorneys fees and disbursements)
incident to any of the foregoing;  provided,  however,  that if any such action,
suit or  proceeding  shall be asserted  against a Purchaser  in respect of which
such Purchaser, its officers, directors and/or stockholders,  proposes to demand
indemnification,  AOXY shall be promptly  notified to that effect and AOXY shall
have the right to assume the control of the defense,  compromise  or  settlement
thereof,  including,  at their own  expense,  employment  of counsel  reasonably
acceptable to such Purchaser.

         (c) Payment. Any indemnification  payments required pursuant to Section
10(a) and


                                       12
<PAGE>

10(b) hereof shall be paid in FULL within ten (10) days after  receipt of notice
specifying  (i) the amount  required to be paid and (ii) the nature of the event
or events giving rise to indemnification hereunder.

         (d) Liability. The liability of the parties under this Section 10 shall
be without  limitation,  and the failure of either of them to  withhold  amounts
from any payments  shall not act as a waiver of or diminish the  obligations  of
parties under this Section 10.

         (e)  Interest.  Any and all  amounts  which may become due and  payable
pursuant to this  Section 10 shall bear  interest  from the date when due to the
date of payment at a percentage rate of twelve (12%) percent per annum.

    SECTION  11.  COMMISSIONS  FEES  AND  EXPENSES.  Purchasers  and  AOXY  each
represent  and  warrant  to the other  that the  negotiations  relative  to this
Agreement  and the  transactions  contemplated  hereby  have been  carried on by
Purchasers and AOXY directly and in such manner as not to give rise to any valid
claim  against  either for a brokerage  commission,  finder's  fee or other like
payment except that AOXY is negotiating  with Stephen Golub to compensate him as
a finder.  AOXY is responsible  for and shall pay at closing the fees of Kieffer
and Hahn, its counsel,  in connection with the preparation an negotiation of the
documentation in connection  herewith and in connection with the closing of this
transaction.

    SECTION  12.  APPLICABLE  LAW.  This  Agreement  shall be  governed  by, and
construed in accordance  with, the law of the State of Delaware  (other than its
law with respect to conflicts of laws),  including all matters of  construction,
validity and performance.

    SECTION 13. NOTICES. All notices, requests, permissions,  waivers, and other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given if signed by the  respective  persons giving them (in the case of any
corporation  the signature shall be by an officer thereof and delivered by hand,
sent via facsimile transmission, nationally-recognized overnight courier service
or deposited in the United States mail (registered,  return receipt  requested),
properly  addressed and postage prepaid to the intended recipient thereof to the
address for such  person on the  signature  page(s)  hereof.  All such  notices,
requests,  consents  and  other  communications  shall be  deemed  to have  been
delivered (a) in the case of personal delivery or delivery by telescope,  on the
date of such  delivery,  (b) in the case of dispatch by  nationally-  recognized
overnight  courier,  on the next business day following such dispatch and (c) in
the case of mailing,  on the third  business day after the posting  thereof Such
names and addresses may be changed by such notice.

    SECTION 14. ENTIRE  AGREEMENT;  AMENDMENTS;  HEADINGS; 
COUNTERPARTS  . This
Agreement,  including  the  Schedules  hereto,  all of which are a part  hereof,
contains  the entire  understanding  of the parties  hereto with  respect to the
subject matter  contained  herein and therein,  supersedes and cancels all prior
agreements  with respect  hereto or thereto and may be amended only by a written
instruments  executed by the parties or their respective  successors or assigns.
There are no restrictions, promises, representations,  warranties, agreements or
undertakings  of any party  hereto 


                                       13
<PAGE>

with respect to the transactions under this Agreement other than those set forth
herein or made hereunder in the documents delivered at each Closing. The section
and  paragraph  headings  contained in this  Agreement  and the  description  of
exhibits attached hereto are for reference purposes only and shall not affect in
any way the meaning or interpretation  of this Agreement.  This Agreement may be
executed in one or more  counterparts and each counterpart shall be deemed to be
an original.

     SECTION 15. PARTIES IN INTEREST. Except with the express written consent of
the other parties  hereto,  this Agreement  shall not be assignable or otherwise
transferred in whole or in part.  This  Agreement  shall inure to the benefit of
and be binding upon the parties and their respective successors. Nothing in this
Agreement,  express or implied,  is intended to confer upon any other person any
rights or remedies under or by reason of this Agreement.

     SECTION 16.  SEVERABILITY.  The  invalidity of any portion hereof shall not
affect the validity, force or effect of the remaining portions hereof.

     SECTION 17.  FURTHER  ASSURANCES.  AOXY and  Purchasers  shall  execute and
deliver or cause to be executed and delivered such additional  instruments,  and
take such other actions as the other party may reasonably  request in writing in
order to effectuate the purposes of this Agreement.

                     [Remainder of Page Intentionally Blank]



                                       14
<PAGE>


     [Counterpart Signature Page to Purchase Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:


                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  
                                      ------------------------------------------
                                      Name:  
-----------------------------         Title:  
       Secretary

                                   Address for Notices:

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

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

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


                                   ADVANCED OXYGEN TECHNOLOGIES, INC.

                                   By: /s/ Harry Edelson
                                      ------------------------------------------
                                      Name:  Harry Edelson
                                      Title:  Chairman


                                   Address for Notices

                                   c/o ETP
                                   300 Tice Boulevard, Woodcliffe Lake, NJ
                                   Telecopier:  (201) 930-8899


                                       15

<PAGE>

     [Counterpart Signature Page to Purchase Agreement of December 18, 1997]



         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   Crossland Ltd. (Belize)
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  /s/ L.H. Osterlolt
                                      ------------------------------------------
Bahamas Company Services Ltd.         Name:  L.H. Osterlolt
                                      Title:  Vice President
/s/ Annabel Howorth
-------------------------------
      Secretary
                                   Address for Notices:

                                   Crossland, Ltd. (Belize)
                                   104B Saffrey Square
                                   Bank Lane and Bay Street
                                   Box N-1612
                                   Nassau, Bahamas


                                   ADVANCED OXYGEN TECHNOLOGIES, INC.

                                   By: 
                                      ------------------------------------------
                                      Name:  Harry Edelson
                                      Title:  Chairman


                                   Address for Notices

                                   c/o ETP
                                   300 Tice Boulevard, Woodcliffe Lake, NJ
                                   Telecopier:  (201) 930-8899


                                       15


<PAGE>

     [Counterpart Signature Page to Purchase Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   Coastal Oil, Ltd.
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  /s/ Dr. M. Noguera
                                      ------------------------------------------
   Illegible                          Name:  M. Noguera
-----------------------------         Title:  President
       Secretary

                                   Address for Notices:

                                   Coastal Oil, Ltd.
                                   40 Santa Rita Road
                                   Corozal, Belize, Central America



                                   ADVANCED OXYGEN TECHNOLOGIES, INC.

                                   By: 
                                      ------------------------------------------
                                      Name:  Harry Edelson
                                      Title:  Chairman


                                   Address for Notices

                                   c/o ETP
                                   300 Tice Boulevard, Woodcliffe Lake, NJ
                                   Telecopier:  (201) 930-8899



                                       15

<PAGE>

     [Counterpart Signature Page to Purchase Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   Easternstar Ltd.
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  /s/ Roberta Montgomery
                                      ------------------------------------------
Bahamas Company Services Ltd.         Name:  Roberta Montgomery
       Illegible                      Title:  Vice President
--------------------------------
       Secretary

                                   Address for Notices:

                                   Eastern Star, Ltd.
                                   104B Saffrey Square
                                   Bank Lane and Bay Street
                                   Box N-1612
                                   Nassau, Bahamas


                                   ADVANCED OXYGEN TECHNOLOGIES, INC.

                                   By: 
                                      ------------------------------------------
                                      Name:  Harry Edelson
                                      Title:  Chairman


                                   Address for Notices

                                   c/o ETP
                                   300 Tice Boulevard, Woodcliffe Lake, NJ
                                   Telecopier:  (201) 930-8899


                                       15
<PAGE>


     [Counterpart Signature Page to Purchase Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:


                                   Crossland Ltd. (Belize)
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  /s/ Anthony J.R. Howorth
                                      ------------------------------------------
Bahamas Company Services Ltd.         Name:  Anthony J.R. Howorth
                                      Title:  President
/s/ Pauline Cox
--------------------------------
       Secretary

                                   Address for Notices:

                                   Crossland, Ltd. (Belize)
                                   60 Market Street
                                   P.O. Box 364
                                   Belize City, Belize, Central America


                                   ADVANCED OXYGEN TECHNOLOGIES, INC.

                                   By: 
                                      ------------------------------------------
                                      Name:  Harry Edelson
                                      Title:  Chairman


                                   Address for Notices

                                   c/o ETP
                                   300 Tice Boulevard, Woodcliffe Lake, NJ
                                   Telecopier:  (201) 930-8899


                                       15
<PAGE>


     [Counterpart Signature Page to Purchase Agreement of December 18, 1997]


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:


                                   ---------------------------------------------
                                                  [print name]

ATTEST:                            By:  
                                      ------------------------------------------
-------------------------------       Name:  
       Secretary                      Title:  


                                   Address for Notices:

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

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

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


                                   ADVANCED OXYGEN TECHNOLOGIES, INC.

                                   By: /s/ Harry Edelson
                                      ------------------------------------------
                                      Name:  Harry Edelson
                                      Title:  Chairman


                                   Address for Notices

                                   c/o ETP
                                   300 Tice Boulevard, Woodcliffe Lake, NJ
                                   Telecopier:  (201) 930-8899


                                       15

<PAGE>

                                   EXHIBIT A
                                   ---------

                                   US PERSON

1. "US Person" means:

     (i)    Any natural person resident in the United States;

     (ii)   Any partnership or corporation  organized or incorporated  under the
            laws of the United States;

     (iii)  Any estate of which any executor or administrator is a US person;

     (iv)   Any trust of which any trustee is a US person;

     (v)    Any  agency  or branch of a foreign  entity  located  in the  United
            States;

     (vi)   Any  non-discretionary  account or similar  account  (other  than an
            estate or trust) held by a dealer or other fiduciary for the benefit
            or account of a US person;

     (vii)  Any  discretionary  account or similar account (other than an estate
            or  trust)   held  by  a  dealer  or  other   fiduciary   organized,
            incorporated,  or (if an individual)  resident in the United States;
            and

     (viii) Any  partnership  or corporation  if: (A) organized or  incorporated
            under the laws of any foreign  jurisdiction;  and (B) formed by a US
            person  principally  for the purpose of investing in securities  not
            registered  under the Act,  unless it is organized or  incorporated,
            and owned,  by accredited  investors (as defined in Rule 501(a)) who
            are not natural persons, estates or trusts.

2.  Notwithstanding  paragraph  I of this  rule,  any  discretionary  account or
similar  account (other than an estate or trust) held for the benefit or account
of a non-US  person  by a  dealer  or other  professional  fiduciary  organized,
incorporated,  or (if an individual)  resident in the United States shall not be
deemed a "US person."

3. Notwithstanding  paragraph 1, any estate of which any professional  fiduciary
acting as  executor  or  administrator  is a US person  shall not be deemed a US
person if:

     (i)    An  executor or  administrator  of the estate who is not a US person
            has sole or shared investment  discretion with respect to the assets
            of the estate; and

     (ii)   The estate is governed by a foreign law.

4.  Notwithstanding  paragraph I, any trust of which any professional  fiduciary
acting as Trustee,

<PAGE>

is a US person  shall  not be  deemed a US  person if a trustee  who is not a US
person  has sole or  shared  investment  discretion  with  respect  to the trust
assets,  and no  beneficiary  of the  trust  (and no  settler  if the  trust  is
revocable) is a US person.

5.  Notwithstanding  paragraph  1, an  employee  benefit  plan  established  and
administered  in  accordance  with the law of a country  other  than the  United
States and customary  practices and  documentation  of such country shall not be
deemed a US person.

6.  Notwithstanding  paragraph  1, any  agency or branch of a US person  located
outside the United States shall not be deemed a "US person" if:

     (i)    The agency or branch operates for valid business reasons; and

     (ii)   The agency or branch is  engaged in the  business  of  insurance  or
            banking  and  is  subject  to   substantive   insurance  or  banking
            regulation, respectively, in the jurisdiction where located.

7. The International  Monetary Fund, the International  Bank for  Reconstruction
and Development,  the  Inter-American  Development  Bank, the Asian  Development
Bank, the African  Development  Bank, the United  Nations,  and their  agencies,
affiliates and pension plans, and any other similar international organizations,
their agencies, affiliates and pension plans shall not be deemed "US persons."



<PAGE>

                                 Schedule 4(a)

                            Purchasers' Subsidiaries
                            ------------------------


                                      NONE
<PAGE>

                                 Schedule 3(s)

                              Compliance with Laws
                              --------------------


AOXY has not held an annual meeting since October, 1993. AOXY's qualification to
transact business in California has not been maintained.

<PAGE>

                                 Schedule 3(o)


Directors:

     Harry Edelson
     Emile A. Battat
     Richard O. Jacobson
     Albert James

Officers:

     Harry Edelson            Chairman of the Board and
                                Chief Executive Officer, President, Chief
                                Financial Officer and Director

Banks:

     None


<PAGE>

                                 Schedule 3(m)

                               Contracts of AOXY
                               -----------------

In August  1995 in order to retain  senior  management,  AOXY  agreed to pay Mr.
Kopetz,  Ms.  Castle  and David  Overmyer,  AOXY's  controller,  a bonus if AOXY
successfuly  completed a sale of AOXY or its  technology  by May 31,  1995.  The
bonus would equal 55 of the first million dollars of the gross proceeds from the
Patent Sale, 4% of the next million  dollars of such gross  proceeds,  3% of the
third million,  2% of the fourth million and 1% of all amounts received from the
Patent  Sale over 4 million.  This bonus is shared  equally by Mr.  Kopetz,  Ms.
Castle and Mr.  Overmyer.  Upon the closing,  they  received,  in the  aggregate
$16,750.00 or $5,583.33  each. As no other  royalties have been received to date
from W.R.  Grace,  no additional  sums have been paid. All such bonus is payable
only from the Grace royalty. At closing, the above mentioned liabilities of AOXY
shall have been  assigned  to and  assumed  by AOXY  Liquidation  Inc.  with the
consent of the creditors.


<PAGE>

                                 Schedule 1.01

                                   Purchasers
                                   ----------

                                                       Number of     Number of
Name                                      $ Amount     Sale Shares   Comp.Shares
------------------------------------      ----------   -----------   -----------

Crossland, Ltd. (Belize)                  $15,000.00   1,500,000     4,437,500
60 Market Square
PO Box 364
Belize City, Belize, Central America

Eastern Star, Ltd.                        $15,000.00   1,500,000     4,437,500
104B Saffrey Square
Bank Lane and Bay Street
Box N-1612
Nassau, Bahamas

Costal Oil, Ltd.                          $15,000.00   1,500,000     4,437,500
40 Santa Rita Road
Corazal, Belize, Central America

Crossland, Ltd. 104B Saffrey Square       $15,000.00   1,500,000     4,437,500
Bank Lane and Bay Street
Box N-1612
Nassau, Bahamas


<PAGE>


                                                                 Exhibit B
                                                                 Execution (iii)

                               PURCHASE AGREEMENT

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



         THIS  AGREEMENT  made as of the 18th day of  December,  1997,  (herein,
together with the Schedules attached hereto,  referred to as "Agreement") by and
among the persons listed on Schedule 1 hereto (herein  referred to  collectively
as  "Purchasers"  and each a  "Purchaser")  and the persons listed on Schedule 2
hereto (herein referred to collectively as "Sellers" and each a "Seller").

         In reliance upon the  representations and warranties made herein and in
consideration of the mutual agreements herein contained the parties hereby agree
as follows:

     SECTION 1. SALE AND PURCHASE OF STOCK.

         1.01 Sale of Stock to  Purchasers.  Sellers shall at the closing of the
transactions  hereinafter  provided  sell,  transfer,   assign  and  deliver  to
Purchasers  an  aggregate  of  eight  hundred  thousand  (800,000)  shares  (the
"Shares") of the capital stock of Advanced Oxygen Technologies, Inc., a Delaware
Corporation,  ("AOXY") in an amount to each Purchaser as set forth on Schedule 2
hereto.

         1.02  Consideration  for  Stock.  In  consideration  of the sale of the
Shares,  (a) Purchasers  shall pay to Sellers the aggregate  amount of US$10,000
(the  "Purchase  Price") in the form of an  official  bank check or a  certified
check of the  Purchasers  payable  to each  Seller in the  amount  specified  on
Schedule 1 hereto and (b) Seller shall be retained by AOXY as a  consultant  for
one month on an "as  available"  basis in  consideration  of  450,000  shares of
common  stock of AOXY  delivered  by AOXY to Seller at the Closing  which shares
shall be  registered  by AOXY on Form S-8, or such other form as  available,  as
soon as practicable after Closing, and shall have full "piggyback"  registration
rights in any other registration of securities of AOXY.

         1.03  Transactions on the Closing Date. (a) Delivery of Shares.  At the
Closing, Sellers will deliver to Purchasers stock certificates, representing the
shares duly endorsed for transfer with their respective signatures guaranteed in
form acceptable to the transfer agent of AOXY; and

              (b) Delivery of  Consideration.  At the Closing,  Purchasers  will
deliver  to each  Seller an  official  bank  check or a  certified  check of the
Purchasers payable to each Seller in the amount of the Purchase Price payable to
such Seller as set forth on Schedule 1.

              (c)  Resignations.  Resignations  of  all  of  the  directors  and
officers of AOXY other than those  designated in writing by Purchasers  prior to
the Closing Date to remain on the board or in office; and

              (d)  Documents.   Each  of  the  documents  contemplated  by  this
Agreement.


<PAGE>


     SECTION 2.  CLOSING.  The Closing will take place at the offices of Kieffer
and Hahn, 111 Broadway,  New York, New York 10006,  at 10:00 A.M. on the date of
execution and delivery hereof by all of the parties.

     SECTION 3.  REPRESENTATIONS AND WARRANTIES OF SELLERS.  Each Seller, as
and
for himself or itself,  severally and not jointly,  represents  and warrants the
following to the best of his or its knowledge without independent investigation:

         (a)  Organization  and  Standing.   (1)  AOXY  is  a  corporation  duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, the State of its incorporation,  and is authorized to conduct business
in and is in good  standing in each  jurisdiction  in which the character of the
properties owned by it or the nature of the business transacted by it makes such
license or qualification necessary.

              (2) The  certified  copies  heretofore  delivered to AOXY,  of the
certificate of  incorporation,  of all licenses to transact  business and of the
by-laws of AOXY with all  amendments  to the date hereof are true,  complete and
correct.

              (3) AOXY has no subsidiaries.

         (b) Capital Stock. (1) The capital stock of AOXY consists of (A) thirty
million  (30,000,000)  shares of common stock, par value one cent (US $0.01) per
share  of which  five  million  six  hundred  ninety-six  thousand  two  hundred
fifty-two (5,696,252) shares have been validly issued and are fully paid and are
non-assessable  and are fully  transferable,  three  hundred fifty four thousand
(354,000)  shares  which shall be issued upon  conversion  of 177,000  shares of
preferred  stock  (172,000  shares of preferred  stock shall be  converted  into
344,000  shares on the date of  Closing)  and one  hundred  forty five  thousand
(145,000)  shares of which shall be issued upon  exercise of options and (B) ten
million  (10,000,000) shares of preferred stock par value one cent (US $.01) per
share of which  177,000  (172,000  shares of preferred  stock shall be converted
into 344,000 shares on the date of Closing)  shares have been validly issued and
are fully paid and are non-assessable and are fully transferable.

              (2) None of the  issued and  outstanding  shares is subject to any
voting trust agreement or other agreement relating to the voting thereof.

              (3) None of the authorized but unissued shares of AOXY are subject
to any warrants, obligations,  subscriptions, options, convertible securities or
other commitments under which they are or may be required to be issued.

              (4) No transfer  tax will be payable  with respect to the issuance
of AOXY's stock contemplated hereby.


                                       2

<PAGE>


         (c) Stock  Ownership.  Each Seller shall issue to Purchasers at Closing
authorized  common  stock of AOXY  which is free and clear of any  encumbrances,
liens or  restrictions  on sale,  other  than  those  applicable  to  restricted
securities  as  defined  under  the  rules and  regulations  promulgated  by the
Securities and Exchange Commission.

         (d) Validity of  Agreement;  Authority.  This  Agreement  has been duly
executed and delivered by each Seller and (assuming valid execution and delivery
by Purchasers) is a valid and binding obligation, enforceable in accordance with
its terms.

         (e)  Authority to take Action.  (1) The  execution and delivery of this
Agreement  and  delivery  of the  subject  shares  and the  carrying  out of the
provisions hereof will not contravene any provisions of law, any order, judgment
and/or  decree  of any  court  or other  governmental  agency  or each  Seller's
certificate of incorporation,  by-laws, charter,  partnership agreement, if any,
or any indenture,  agreement or other instrument to which a Seller is a party or
by which a Seller may be bound,  or by which any property  owned by a Seller may
be bound.

              (2) All legal actions required to be taken in connection with this
Agreement pursuant to the laws of any State or other governmental authority have
been so taken.

         (f) Accounts Receivable. AOXY has no accounts receivable.

         (g)  Liabilities of AOXY. AOXY has no liabilities or obligations of any
nature, whether accrued, absolute,  contingent or otherwise,  including, without
limitation,  tax liabilities due or to become due, except for (1)  approximately
US$45,000  of  accounts  payable,  (2) the  fees  and  expenses  of  counsel  in
connection  herewith and (3) amounts due and payable to certain of its directors
as  evidenced  by  Promissory  Notes  issued to such  persons  in the  aggregate
principal  amount of $275,000 plus the interest  accrued thereon which are to be
spun-off to the liquidating trust as set forth in section.

         (h) No Dividends or  Distributions.  Since June 30, 1995,  AOXY has not
declared,   set  aside  or  paid  to  its  stockholder  any  dividend  or  other
distribution  in  respect of its  capital  stock or  redeemed  or  purchased  or
otherwise acquired any of its capital stock or agreed to take any such action.

         (i) Absence of Material Changes or Events.  Except for matters publicly
disclosed  on (1) AOXY's  Proxy  Statement  in  connection  with the sale of its
oxygen control  technology to W.R. Grace  ("Grace") in February 1995; (2) AOXY's
Reports on Form 10-KSB with respect to AOXY's  fiscal years ended June 30, 1993,
1994  and 1995 and (3)  AOXY's  Reports  on Form  10-Q for the  quarters  ending
September  30, 1995 and  December  31, 1995 and AOXY's  8-K's filed prior hereto
copies of which have been heretofore  delivered to Sellers,  since June 30, 1995
there has been no event or condition of any character,  materially and adversely
affecting  AOXY's  financial  position,   assets,   liabilities  (contingent  or
otherwise),  results of operation,  business or business prospects, and AOXY has
not:


                                       3

<PAGE>

              (1)  Incurred any  obligation  or  liability  (absolute,  accrued,
contingent, or otherwise) except in the ordinary course of business or except in
connection with the performance of this Agreement;

              (2)  Mortgaged,  pledged  or  subjected  to lien,  charge or other
encumbrance, any of its assets, tangible or intangible;

              (3) Sold or transferred any of its assets or canceled any debts or
claims, or waived any right of substantial value;

              (4) Made or committed to make any single  capital  expenditure  in
excess of five hundred dollars ($500.00),  or capital  expenditures in excess of
one thousand dollars  ($1,000.00) in the aggregate or purchased or contracted to
purchase any land;

              (5) Sustained any damage,  destruction  or loss of its property in
excess of five hundred dollars ($500.00) whether or not covered by insurance;

              (6) Increased  the  compensation  payable or to become  payable by
AOXY to any of its  officers,  employees  or  agents,  or any bonus  payment  or
arrangement made to or with any of them;

              (7) Agreed to modify in any material respect any contract or other
instrument  to which AOXY is a party  except for the patent  purchase  agreement
with Grace;

              (8)  Increased or changed the medical  insurance  provided for the
benefit of its employees and their families.

              (9)  Increased  or  changed  the  amount of  disability  insurance
provided for the benefit of its employees;

              (10)  Entered  into any  transaction  other  than in the  ordinary
course of business; or

              (11) Made any material  change in any method of  accounting or any
accounting practice.

         (j) Title to Property. AOXY has no material assets.

         (k) Buildings,  Equipment and Motor  Vehicles.  AOXY is the owner of no
buildings, equipment or motor vehicles.

         (l) Tax Status.  (1) AOXY has heretofore  furnished to Sellers true and
complete copies of all federal,  state,  local and foreign income tax returns of
AOXY filed for the three (3) years


                                       4

<PAGE>


ended  June 30,  1995.  Said tax  returns  of AOXY have not been  audited by the
applicable  taxing  authorities.  No agreements made by AOXY for an extension of
time for the  assessment  of any tax are now in  effect.  All  taxes,  including
interest and penalties thereon,  shown on said tax returns to be due and payable
by AOXY,  or required to be withheld by AOXY on or before the date hereof,  have
been paid or fully reserved for and withheld and no formal written claim for any
tax,  assessment  or levy for which AOXY may become  liable exists which has not
been settled.

              (2) All other taxes,  due and payable at the Closing  Date, of any
kind whatsoever,  including, but not limited to, estimated income tax, franchise
tax, excise tax, doing business tax, payroll tax, personal property tax, use tax
and sales tax have been paid or fully reserved for and withheld.

         (m) Status of Contracts.  Except as reflected on Schedule 3(m). AOXY is
not a party  to any  written  or oral (i)  contract  for the  employment  of any
officer  or  individual  employee,  or  any  pension,   profit  sharing,  bonus,
retirement,  stock option or similar incentive or deferred  compensation plan or
arrangement in effect with its officers,  employees or others;  (ii)  continuing
contract for the  acquisition  of real estate or fixed assets;  (iii)  financing
arrangement involving the mortgaging,  pledging or other hypothecation of assets
or  involving  borrowing  which may not be repaid in part or in full on not more
than thirty (30) days' notice with  reference to unearned or amortized  discount
and  without  premium  or  penalty;  (iv)  contract  with any labor  union;  (v)
continuing  contract for the future  purchase of  materials  or  supplies;  (vi)
contract with any agent,  representative  or  distributor;  (vii) any instrument
evidencing or related to  indebtedness  for borrowed money, or pursuant to which
AOXY  is  obligated  to  borrow  money;  (viii)  any  contract,  arrangement  or
understanding under which AOXY has assumed,  guaranteed,  endorsed, or otherwise
become liable in connection with the obligation of any individual,  partnership,
corporation  or other  entity;  (ix) any  contract  not  included  in any of the
foregoing  which  involves  payment  by AOXY of more than five  hundred  dollars
($500.00).  True and complete  copies of all items listed in Schedule  3(m) have
been delivered to AOXY. The parties to such  instruments  have complied with all
the provisions thereof, and they are not in default under any of them.

         (n) Status of Leases.  AOXY is not a party to any leases except for the
lease of document  storage space at Pacific Mini Storage,  1913 Sherman  Street,
Alameda, California.

         (o) Directors and Officers;  Compensation;  Banks. Schedule 3(o) hereto
contains a true an  complete  list  showing (i) the names of all  directors  and
officers of AOXY; (ii) the names of all persons whose compensation from AOXY for
the period beginning July 1, 1995 and ending March 31, 1996 will equal or exceed
ten thousand dollars  ($10,000.00)  together with a statement of the full amount
paid or payable to each such person for  services  rendered or to be rendered in
such  period and the basis  therefor;  (iii) the name of each bank in which AOXY
has an account,  or safe deposit box, and the names of all persons authorized to
draw thereon,  or to have access thereto;  (iv) the names of all persons holding
powers of attorney from AOXY, and a summary statement of the terms thereof;  and
(v) all credit cards and similar accounts on which AOXY may be liable.


                                       5


<PAGE>


         (p) Status of Insurance. AOXY has no insurance.

         (q)  Permits  and  Licenses.  AOXY is not  required  to  have  permits,
licenses,  approvals, and authorization of all federal, state, local and foreign
authorities and is presently not conducting any business.

         (r) Litigation.  There is no action, suit,  proceeding or investigation
pending,  or to the  knowledge of AOXY  threatened,  against or  affecting  AOXY
before any court,  arbitrator or administrative or governmental body and AOXY is
not  presently  subject to or in default in respect of any order,  injunction or
decree of any court or government instrumentality.

         (s) Compliance with Laws. Except as reflected on Schedule 3(s), AOXY is
not in  violation of any law,  regulation  or ordinance  which  violation  would
materially and adversely affect it or its operations.

         (t) Books of Accounts and Other Records.  The books of account, and the
minute books,  stock  certificate  books and ledgers of AOXY at the Closing Date
will,  in all  material  respects,  be correct  and  complete  and such books of
account and ledgers will fairly  present the  operations  of AOXY in  accordance
with generally accepted accounting principles.

         (u) Employee Benefit Plans.  AOXY is not party to any bonus,  incentive
compensation, profit-sharing, pension, retirement, stock purchase, stock option,
deferred  compensation,   hospitalization,   group  insurance,   death  benefit,
disability,   collective  bargaining  and  other  fringe  benefit  plans,  trust
agreements, arrangements or commitments.

     SECTION 4. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each
Purchaser, as
and for itself or himself,  severally and not jointly,  represents  and warrants
the following:

         (a)  Organization  and  Standing.  (1) Each  corporate  Purchaser  is a
corporation  duly organized,  validly  existing,  and in good standing under the
laws of the place of its incorporation.

              (2) The copy heretofore  delivered to Sellers,  of the certificate
of incorporation  or charter of each corporate  Purchaser with all amendments to
the date hereof are true, complete and correct.

              (3) Each corporate  Purchaser has no  subsidiaries,  except as set
forth on Schedule 4(a).

         (b) Validity of  Agreement;  Authority.  This  Agreement  has been duly
executed and  delivered by the  Purchasers  and  (assuming  valid  execution and
delivery by the Sellers) is a valid and binding  obligation  of each  Purchaser,
enforceable in accordance with its terms.

         (c)  Authority to take Action.  (1) The  execution and delivery of this
Agreement  and  


                                       6


<PAGE>


delivery of the subject  shares and the  carrying out of the  provisions  hereof
will not contravene any provisions of law, any order,  judgment and/or decree of
any court or other governmental agency or any corporate Purchaser's  certificate
of  incorporation  or  charter,  by-laws or any  indenture,  agreement  or other
instrument to which any Purchaser is a party or by which it may be bound,  or by
which any property owned by it may be bound.

              (2) All  corporate  and  legal  actions  required  to be  taken in
connection  with  this  Agreement  pursuant  to the  laws of any  State or other
governmental authority have been so taken.

         (c)  Compliance  with Laws.  No Purchaser  has  received  notice of any
violation of any law,  regulation or ordinance which violation would  materially
and adversely affect it or its operations.

         (d)  Consents.  No Purchaser is required to obtain  consent,  approval,
registration,  qualification or filing with any United States federal,  state or
local  government  authority or any foreign  government  authority in connection
with  such  Purchaser's  execution  of this  Agreement  or  consummation  of the
transactions  contemplated  hereby,  other than the  required  filings  with the
United States Securities and Exchange Commission.

         (e)  Investment  Purposes.  Each  Purchaser is acquiring the Shares for
investment,  for its own  account,  and not with a view  to,  or for  resale  in
connection  with,  any   distribution  of  any  part  thereof.   Each  Purchaser
acknowledges  that each Seller is selling the Shares  hereunder in reliance upon
an exemption from the registration  provisions of the Securities Act of 1933, as
amended (the "Act") which depends upon, among other things, the bona fide nature
of the investment  intent and accuracy of such  Purchaser's  representations  as
expressed  herein.  Each  Purchaser  is able to fend  for  itself,  can bear the
economic  risk of this  investment  and has such  knowledge  and  experience  in
financial  or business  matters that it can evaluate the merits and risks of the
investment.  Each  Purchaser,  except for  Robert E.  Wolfe,  is an  "accredited
investor"  within the meaning of Rule 501(a) of Regulation D  promulgated  under
the Securities Act.

         Except  as  set  forth  in  this  Agreement,   no   representations  or
warranties,  oral or otherwise, have been made to Purchasers,  including without
limitation,  any representations concerning the future prospects of AOXY, by any
Seller, by any agent of any Seller, any employees or affiliates of any Seller or
by any other  person  whether or not  associated  with this  transaction  and in
entering into this transaction Purchaser is not relying upon any information.

         Without  in any way  limiting  the  representations  set  forth  above,
Purchaser  further  agrees not to make any  disposition of all or any portion of
the Shares that constitutes  "restricted  securities"  delivered pursuant hereto
unless  (1)  there is then in  effect a  Registration  Statement  under  the Act
covering the  proposed  disposition  and  disposition  is made  according to the
Registration  Statement;  or (2) the  transferee  has agreed in writing  for the
benefit of AOXY to be bound by the  restrictions  set forth in this section,  to
the extent applicable;  and each Purchaser has furnished AOXY with an opinion of
counsel, reasonably satisfactory to AOXY, that such disposition will not


                                       7


<PAGE>


require registration of the shares under the Act.

     SECTION 5. CONDITIONS  PRECEDENT TO PURCHASERS'  OBLIGATION TO
COMPLETE THE
TRANSACTION.  The obligation of each  Purchaser to consummate  the  transactions
described  in  Section 1 hereof is  subject  to the  fulfillment  of each of the
following conditions prior to or at the Closing:

         (a) Delivery of Shares.  Each Purchaser shall have received delivery of
the Shares as contemplated herein.

         (b) Spin-off. AOXY shall have spun-off good and marketable title to its
rights to  royalties  from W. R. Grace  (its only  material  asset) and  certain
liabilities  including  only amounts due to former  employees as a result of the
receipt of the royalties and notes payable to certain directors in the aggregate
principal amount of $275,000 plus the interest earned thereon.

         (c) Other Creditors.  AOXY shall have achieved  settlement in an amount
and on terms reasonably satisfactory to each Purchaser of all of the liabilities
of AOXY, including,  without limitation, all accounts payable, if any, and other
accrued expenses, if any.

         (d)  Resignation  of  Directors  and  Officers.   Upon  appointment  of
directors  chosen by Purchasers  to fill the existing  vacancies on the board of
directors of AOXY, all directors and officers not so chosen by Purchasers  shall
have tendered to AOXY their resignations as directors and/or officers of AOXY.

         (e) Conversion of Preferred  Stock.  All of the issued and  outstanding
preferred stock of AOXY shall have been converted to common stock of AOXY except
for 5,000 shares.

         (f) Stock Acquisition  Agreement.  The transaction  contemplated in the
Stock  Acquisition  Agreement,  dated  the  date  hereof,  among  AOXY  and  the
purchasers, parties thereto, related to the sale by AOXY of 23,750,000 shares of
the common stock of AOXY shall have closed simultaneously herewith.

         (g) Representations and Warranties of Sellers.  The representations and
warranties  made by each Seller herein shall be true and correct in all material
respects.

         (h) No actions or proceedings. No action or proceeding shall be pending
or threatened  on the Closing Date wherein an  unfavorable  judgment,  decree or
order would prevent or make unlawful the carrying out of this Agreement or would
cause the  transaction  contemplated  by this Agreement to be rescinded or would
require a Purchaser to divest itself of the shares to be acquired.

         It is  understood  that the  certificates  evidencing  the Shares  sold
pursuant hereto may bear legends in substantially the following form:


                                       8


<PAGE>


         THE  SECURITIES   REPRESENTED  BY  THIS  CERTIFICATION  HAVE  NOT 
BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). IN
         THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT, THESE
         SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT
         PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION 
REQUIREMENTS
         OF SAID ACT AND UPON  OBTAINING  AN OPINION  OF  COUNSEL  (WHICH
MAY BE
         COUNSEL  TO  THE  COMPANY)   SATISFACTORY  TO  THE  COMPANY  THAT 
SUCH
         DISPOSITION MAY BE MADE WITHOUT  REGISTRATION UNDER SAID ACT, OR
UNLESS
         SOLD PURSUANT TO RULE 144.

     SECTION 6.  CONDITIONS  PRECEDENT  TO SELLERS'  OBLIGATION  TO
COMPLETE THE
TRANSACTION.  The  obligation  of each  Seller to  consummate  the  transactions
described  in  Section 1 hereof is  subject  to the  fulfillment  of each of the
following conditions prior to or at the Closing:

         (a) Purchase Price.  Each Seller shall have received the purchase price
to which each such Seller is entitled hereunder.

         (b) Spin-off. AOXY shall have spun-off good and marketable title to its
rights to  royalties  from W. R. Grace  (its only  material  asset) and  certain
liabilities  including  only amounts due to former  employees as a result of the
receipt of the royalties and notes payable to certain directors in the aggregate
principal amount of $275,000 plus the interest earned thereon.

         (c) Representations  and Warranties of Purchasers.  The representations
and warranties  made by the  Purchasers  herein shall be true and correct in all
material respects.

         (d) No actions or proceedings. No action or proceeding shall be pending
or threatened  on the Closing Date wherein an  unfavorable  judgment,  decree or
order would prevent or make unlawful the carrying out of this Agreement or would
cause the transaction contemplated by this Agreement to be rescinded.

     SECTION 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.  All
representations
and warranties  contained herein or made in writing by the parties in connection
with the  transactions  contemplated  hereby  shall  survive the  execution  and
delivery of this Agreement and the closing of the  transactions  contemplated by
this  Agreement,  regardless  of any  investigation  made by or on behalf of the
parties or any payment for and  acceptance of stock  hereunder.  All  statements
contained in any certificate,  list, letter or other instrument  delivered by or
on behalf of the parties  pursuant hereto or in connection with the transactions
contemplated   hereby   (including   statements,   letters  or  certificates  of
independent  parties such as public  accountants or attorneys)  shall constitute
representations and warranties by the parties hereunder.


                                       9



<PAGE>


     SECTION 8. INDEMNIFICATION.  (a) Of Sellers and AOXY. Each Purchaser agrees
to defend,  indemnify and hold harmless  Sellers and AOXY against and in respect
of (i) any and all losses, liabilities, damages, deficiencies, costs or expenses
(including,  without  limitation  reasonable  attorneys fees and  disbursements)
resulting from (A) the breach of any covenant,  warranty or agreement  hereunder
by such  Purchaser  or (B) any  representations  made by such  Purchaser in this
Agreement,  not being  complete  and  correct or being false and  misleading  or
containing  any material  misstatement  of fact or omitting  any  material  fact
required to be stated to make the statements  therein not  misleading;  and (ii)
any and all actions, suits, proceeding, claims, demands, assessments, judgments,
costs and expenses (including, without limitation, reasonable attorneys fees and
disbursements) incident to any of the foregoing;  provided, however, that if any
such action,  suit or proceeding  shall be asserted  against Sellers and AOXY in
respect  of which  Sellers  or AOXY  propose  to  demand  indemnification,  such
Purchaser shall be promptly  notified to that effect and shall have the right to
assume the control of the defense,  compromise or settlement thereof, including,
at their own expense, employment of counsel reasonably acceptable to Sellers.

         (b) Of Purchasers.  Each Seller,  severally and not jointly,  agrees to
defend, indemnify and hold harmless Purchasers against and in respect of (i) any
and  all  losses,  liabilities,   damages,   deficiencies,   costs  or  expenses
(including,  without  limitation  reasonable  attorneys fees and  disbursements)
resulting from (A) the breach of any covenant,  warranty or agreement  hereunder
by such Seller or (B) any representations made by such Seller in this Agreement,
not being  complete and correct or being false and  misleading or containing any
material  misstatement  of fact or omitting  any  material  fact  required to be
stated  to make the  statements  therein  not  misleading;  and (ii) any and all
actions, suits, proceeding,  claims, demands, assessments,  judgments, costs and
expenses   (including,   without  limitation,   reasonable  attorneys  fees  and
disbursements) incident to any of the foregoing;  provided, however, that if any
such action, suit or proceeding shall be asserted against a Purchaser in respect
of which such Purchaser proposes to demand indemnification, all Sellers shall be
promptly  notified  to that  effect  and the  Seller  or  Sellers  against  whom
indemnification  is sought  shall  have the right to assume  the  control of the
defense,  compromise or  settlement  thereof,  including,  at their own expense,
employment of counsel reasonably acceptable to such Purchaser.

         (c) Payment. Any indemnification  payments required pursuant to Section
8(a) and 8(b) hereof shall be paid in full within ten (10) days after receipt of
notice  specifying (i) the amount required to be paid and (ii) the nature of the
event or events giving rise to indemnification hereunder.

         (d) Liability.  The liability of the parties under this Section 8 shall
be without  limitation,  and the failure of either of them to  withhold  amounts
from any payments  shall not act as a waiver of or diminish the  obligations  of
parties under this Section 8.

         (e)  Interest.  Any and all  amounts  which may become due and  payable
pursuant  to this  Section 8 shall bear  interest  from the date when due to the
date of payment at a percentage rate of twelve (12%) percent per annum.

     SECTION 9. COVENANT OF  PURCHASERS.  Purchasers  covenant and agree that in
the 


                                       10


<PAGE>


event  that  within  36 months of the date of the  Closing  1,400,000  shares of
common stock of AOXY (being the approximate  number of shares retained by all of
the Sellers as at the Closing  Date) do not have an  aggregate  market value for
any 10  consecutive  day period  (being  the  closing  price for 10  consecutive
trading days of the  securities on the NASDAQ or any other  National  Securities
Exchange on which the common stock of AOXY,  or its  successor  in interest,  is
traded)  equal to or greater than  US$750,000  less the "value" of any dividends
paid per share on  1,400,000  shares of common stock of AOXY (the "value" of any
such  dividends  being  determined  on the  date  of  distribution  of any  such
dividend, if in cash - at the cash value or, if in securities - at the per share
closing price of the securities on the date of  distribution  and, if none, then
at the per share closing bid price on the date of  distribution),  then AOXY, or
its successor in interest, or the Purchasers, on a pro rata basis, shall deliver
to the AOXY Management Trust, a New Jersey trust, the number of shares of common
stock of AOXY,  or its  successor in  interest,  to bring the value of 1,400,000
plus the value (as defined  above) of any dividends per share paid on $1,400,000
shares of common stock of AOXY, to US$750,000, whether or not any of such shares
are then held by any Seller.

     SECTION 10.  COMMISSIONS,  FEES AND EXPENSES.  Purchasers  and Sellers each
represent  and  warrant  to the other  that the  negotiations  relative  to this
Agreement  and the  transactions  contemplated  hereby  have been  carried on by
Purchaser  and  Sellers  directly  and in such manner as not to give rise to any
valid claim  against  either for a brokerage  commission,  finder's fee or other
like  payment.  AOXY is  responsible  for and shall pay at closing  the fees and
disbursements  of  Kieffer  and  Hahn,  its  counsel,  in  connection  with this
Agreement and the closing of the transactions contemplated herein.

     SECTION 11.  APPLICABLE  LAW.  This  Agreement  shall be  governed  by, and
construed in accordance  with, the law of the State of Delaware  (other than its
law with respect to conflicts of laws),  including all matters of  construction,
validity and performance.

     SECTION 12. NOTICES. All notices, requests, permissions, waivers, and other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given if signed by the  respective  persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
sent via facsimile transmission, nationally-recognized overnight courier service
or deposited in the United States mail (registered,  return receipt  requested),
properly  addressed and postage prepaid to the intended recipient thereof to the
address for such  person on the  signature  page(s)  hereof.  All such  notices,
requests,  consents  and  other  communications  shall be  deemed  to have  been
delivered (a) in the case of personal  delivery or delivery by telecopy,  on the
date of such  delivery,  (b) in the case of  dispatch  by  nationally-recognized
overnight  courier,  on the next business day following such dispatch and (c) in
the case of mailing,  on the third business day after the posting thereof.  Such
names and addresses may be changed by such notice.

     SECTION 13.  ENTIRE  AGREEMENT;  AMENDMENT;  HEADINGS; 
COUNTERPARTS.  This
Agreement,  including  the  Schedules  hereto,  all of which are a part  hereof,
contains  the entire  understanding  of the parties  hereto with  respect to the
subject matter  contained  herein and therein, 


                                       11


<PAGE>


supersedes and cancels all prior  agreements  with respect hereto or thereto and
may be amended  only by a written  instrument  executed  by the parties or their
respective  successors  or  assigns.   There  are  no  restrictions,   promises,
representations, warranties, agreements or undertakings of any party hereto with
respect  to the  transactions  under this  Agreement  other than those set forth
herein or made hereunder in the documents delivered at each Closing. The section
and  paragraph  headings  contained in this  Agreement  and the  description  of
exhibits attached hereto are for reference purposes only and shall not affect in
any way the meaning or interpretation  of this Agreement.  This Agreement may be
executed in one or more  counterparts and each counterpart shall be deemed to be
an original.

     SECTION 14. PARTIES IN INTEREST. Except with the express written consent of
the other parties  hereto,  this Agreement  shall not be assignable or otherwise
transferred in whole or in part.  This  Agreement  shall inure to the benefit of
and be binding upon the parties and their respective successors. Nothing in this
Agreement,  express or implied,  is intended to confer upon any other person any
rights or remedies under or by reason of this Agreement.

     SECTION 15.  SEVERABILITY.  The  invalidity of any portion hereof shall not
affect the validity, force or effect of the remaining portions hereof.

     SECTION 16. FURTHER  ASSURANCES.  Sellers and Purchasers  shall execute and
deliver or cause to be executed and delivered such additional  instruments,  and
take such other actions as the other party may reasonably  request in writing in
order to effectuate the purposes of this Agreement.

                    [Remainder of Page Intentionally Blank]


                                       12


<PAGE>


 [Counterpart Signature Page to Purchase Agreement of dated December 18, 1997]


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                                    PURCHASERS:


                                                Robert E. Wolfe
                                        -------------------------------
                                                 [print name]


ATTEST:                             By: /s/ Robert E. Wolfe
                                        -------------------------------
                                    Name:  Robert E. Wolfe
                                    Title: Individual

Angela Nevarez
-----------------------
       Witness

                                         Address for Notices:

                                         Robert E. Wolfe
                                         476 Main Street
                                         Maybrook, NY  12543


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


                                    SELLERS:


                                         -------------------------------
                                                  [print name]


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


                                    Address for Notices:


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


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

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


                                       13


<PAGE>

 [Counterpart Signature Page to Purchase Agreement of dated December 18, 1997]


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                                    PURCHASERS:


                                            CROSSLAND LTD. (BELIZE)
                                        -------------------------------
                                                 [print name]


ATTEST:                             By: /s/ Anthony J.R. Howorth
                                        -------------------------------
Bahamas Company Services Ltd.       Name:    Anthony J.R. Howorth
                                    Title:   President

Pauline Cox
-----------------------
       Secretary

                                         Address for Notices:

                                         Crossland, Ltd. (Belize)
                                         60 Market Square
                                         P.O. Box 364
                                         Belize City, Belize, Central America


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


                                    SELLERS:


                                         -------------------------------
                                                  [print name]


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


                                    Address for Notices:


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


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


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


                                       13


<PAGE>


 [Counterpart Signature Page to Purchase Agreement of dated December 18, 1997]


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                                    PURCHASERS:



                                        Triton International Ltd.
                                        -------------------------------
                                                  [print name]


ATTEST:                             By: /s/ Jens S. Olsen
                                        -------------------------------
                                    Name:   Jens S. Olsen
                                    Title:

Illegible
-----------------------
       Secretary

                                         Address for Notices:

                                         Triton International, Ltd.
                                         Euro-Canadian House
                                         Marlboro Street
                                         Nassau, Bahamas


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


                                    SELLERS:


                                         -------------------------------
                                                  [print name]


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


                                    Address for Notices:


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


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


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


                                       13


<PAGE>



 [Counterpart Signature Page to Purchase Agreement of dated December 18, 1997]


         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                                    PURCHASERS:



                                        -------------------------------
                                                  [print name]


ATTEST:                             By: 
                                        -------------------------------
                                    Name:
                                    Title:


-----------------------
       Witness

                                         Address for Notices:

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

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

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


                                    SELLERS:


                                         Edelson Technology Partners II, L.P.
                                         ------------------------------------
                                                     [print name]


                                          /s/ Harry Edelson
                                          -----------------------------------
                                          Harry Edelson, General Partner


                                    Address for Notices:

                                         300 Tice Boulevard
                                         Woodcliff Lake, NJ  07675


                                       13


<PAGE>


                                   Schedule 1

                                   Purchasers


Name                                         $ Amount            # of Shares
----                                         --------            -----------

Robert E. Wolfe                              $  625.00              50,000
476 Main Street
Maybrook, NY  12543

Trion International, Ltd.                    $4,687.50             375,000
Euro-Canadian House
Marlboro Street
Nassau, Bahamas

Crossland, Ltd. (Belize)                     $4,687.50             375,000
60 Market Square
P.O. Box 364
Belize City, Belize, Central America



<PAGE>


                                   Schedule 2

                                    Sellers


Name                                         $ Amount            # of Shares
----                                         --------            -----------

Edelson Technology Partners II, L.P.         $10,000                800,000
300 Tice Boulevard
Woodcliff Lake, NJ
Telecopier:  (201) 930-8899



<PAGE>


                                 Schedule 3(s)

                        Compliance with Laws (Purchaser)


Purchaser  has not held an  annual  meeting  since  October,  1993.  Purchaser's
qualification to transact business in California has not been maintained.



<PAGE>


                                 Schedule 4(a)

                           Subsidiaries of Purchasers



                                      NONE



<PAGE>


                                 Schedule 3(o)



Directors:

     Harry Edelson
     Emile A. Battat
     Richard O. Jacobson
     Albert James

Officers:

     Harry Edelson                 Chairman of the Board and
                                   Chief Executive Officer, President, Chief
                                   Financial Officer and Director

Banks:

     None


<PAGE>


                                 Schedule 3(m)

                               Contracts of AOXY



In August  1995 in order to retain  senior  management,  AOXY  agreed to pay Mr.
Kopetz,  Ms.  Castle  and David  Overmyer,  AOXY's  controller,  a bonus if AOXY
successfully  completed a sale of AOXY or its  technology  by May 31, 1995.  The
bonus would equal 5% of the first million dollars of the gross proceeds from the
Patent Sale, 4% of the next million  dollars of such gross  proceeds,  3% of the
third million,  2% of the fourth million and 1% of all amounts received from the
Patent  Sale over 4 million.  This bonus is shared  equally by Mr.  Kopetz,  Ms.
Castle and Mr.  Overmyer.  Upon the closing,  they  received,  in the  aggregate
$16,750.00 or $5,583.33  each. As no other  royalties have been received to date
from W.R.  Grace,  no additional  sums have been paid. All such bonus is payable
only from the Grace Royalty. At closing, the above mentioned liabilities of AOXY
shall have been  assigned  to and  assumed  by AOXY  Liquidation  Inc.  with the
consent of the creditors.

<PAGE>
                                                                  Exhibit C
                                                                  Execution (ii)


                                WAIVER AGREEMENT
                                ----------------

         THIS AGREEMENT made as of the day of November, 1997, (herein,  together
with the Schedules attached hereto, referred to as "Agreement") by and among the
persons  listed  on  Schedule  1 hereto  (herein  referred  to  collectively  as
"Purchasers"  and each a  "Purchaser"),  Advanced Oxygen  Technologies,  Inc., a
Delaware  corporation  ("AOXY"),  and the  persons  listed on  Schedule ~ hereto
(herein referred to collectively as "Debt Holders" and each a "Debt Holder").

         In reliance upon the  representations and warranties made herein and in
consideration of the mutual agreements herein contained the parties hereby agree
as follows:

    SECTION 1. RELEASE OF DEBT - CONSIDERATION.

         1.01  Release  of  Debt.  Debt  Holders  shall  at the  closing  of the
transactions  hereinafter  provided waive and  relinquish all right,  to collect
from AOXY the debt owed to each of the Debt Holders by AOXY in an amount to each
Debt Holder as set forth on  Schedule 2 hereto  (the  Debt")  plus the  interest
earned thereon;  provided,  however,  the Debt Holders expressly have not waived
and do not waive  their  respective  rights to collect the Debt in excess of the
Consideration  (as  hereinafter  defmed)  from  the  trust  established  for the
collection of royalties, if any, from W. R. Grace (AOXY's only material asset on
the date hereo~ and for the payment of certain liabilities including amounts due
to former  employees  as a result of the receipt of the  royalties,  if any, the
Debt and the principal balance of the Preferred Stock of AOXY with the remainder
of the royalties,  if any, to be paid to the trust benificiaries (holders of the
common  stock  of AOXY on the  date of the  establishment  of the  trust)  after
payment of the expenses of administration.

         1.02  Consideration  for Release.  In  consideration  of the release of
AOXY, (a) Purchasers shall pay to Debt Holders the aggregate amount of US$60,000
(the "Consideration") in the form of an official bank check or a certified check
of the  Purchasers  payable  to each Debt  Holder  in the  amount  specified  on
Schedule 2 hereto.

         1.03  Transactions on each Closing Date. (a) Delivery of Agreement.  At
the Closing,  each Debt Holder will deliver to AOXY a duly executed  counterpart
signahne page to this Agreement; and

              (b) Delivery of Consideration. At the Closing, (a) Purchasers will
deliver to each Debt Holder an official  bank check or a certified  check of the
Purchasers  payable  to each Debt  Holder in the  amount  ofthe  Purchase  Price
payable to such Debt Holder as set forth on Schedule 2 hereto; and

<PAGE>

              (c)  Documents.   Each  of  the  documents  contemplated  by  this
Agreement.

    SECTION 2.  CLOSING.  The Closing  will take place at the offices of Kieffer
and Hahn, 111 Broadway,  New York, New York 10006,  at 10~00 A.M. on the date of
execution and delivery hereof by all of the parties.

    SECTION 3. REPRESENTATIONS AND WARRANTIES OF DEBT HOLDERS. Each Debt
Holder,
as and for himself or itself, severally and not jointly, represents and warrants
the  following  to  the  best  of  his  or  its  knowledge  without  independent
investigation:

         (a) Debt  Ownership.  Each Debt Holder owns his portion of the Debt, as
set forth on  Schedule 2 hereto,  free and clear of any  encumbrances,  liens or
restrictions.

         (b) Validity of  Agreement:  Authority.  This  Agreement  has been duly
executed and  delivered by each Debt Holder and  (assuming  valid  execution and
delivery by Purchasers and AOXY) is a valid and binding  obligation of each Debt
Holder, enforceable in accordance with its terms.

    SECTION 4.  RERESENTATIONS  AND WARRANTIES OF AOXY and PURCHASERS. 
AOXY and
each  Purchaser,  as and for  itself  or  himself,  severally  and not  jointly,
represents and warrants the following:

         (a) Organization and Standing. (1) AOXY is and each corporate Purchaser
is a corporation duly organized,  validly  existing,  and in good standing under
the laws of the place of its incorporation.

              (2)  The  copy  heretofore  delivered  to  Debt  Holders,  of  the
certificate of  incorporation  or charter of AOXY and each  corporate  Purchaser
with all amendments to the date hereof are true, complete and correct.

              (3) AOXY and each corporate Purchaser have no subsidiaries, except
as set forth on Schedule 4(a)

         (b) Validity of  Agreement;  Authority.  This  Agreement  has been duly
executed and delivered by AOXY and the Purchasers and (assuming  valid execution
and delivery by the Debt Holders) is a valid and binding  obligation of AOXY and
each Purchaser, enforceable in accordance with its terms.

         (c)  Authority to take Action.  (1) The  execution and delivery of this
Agreement and the carrying out of the provisions  hereof will not contravene any
provisions  of law,  any  order,  judgment  and/or  decree of any court or other
governmental  agency or  AOXY's  or any  corporate  Purchaser's  certificate  of
incorporation  or  charter,  by-laws  or  any  indenture,   agreement  or  other
instrument  to  which  AOXY or any  Purchaser  is a party  or by which it may be
bound, or by which any property owned by it may be bound.


                                       2
<PAGE>

              (2) All  corporate  and  legal  actions  required  to be  taken in
connection  with  this  Agreement  pursuant  to the  laws of any  State or other
govemmental authority have been so taken.

         (c) Compliance  with Laws.  Neither AOXY nor any Purchaser has received
notice of any  violation of any law,  regulation  or ordinance  which  violation
would materially and adversely affect it or its operations.

         (d)  Consents.  Neither  AOXY nor any  Purchaser  is required to obtain
consent, approval, registration,  qualification or filing with any United States
federal, state or local government authority or any foreign government authority
in connection  with such Purchaser s execution of this Agreement or consummation
of the transactions  contemplated  hereby,  other than the required filings with
the United States Securities and Exchange Commission.

    SECTION 5. CONDITIONS PRECEDENT TO DEBT HOLDERS' OBLIGATION TO
COMPI.FTE THE
TRANSACTION.  The obligation of each Debt Holder to consummate the  transactions
described  in  Section 1 hereof is  subject  to the  fulfillment  of each of the
following conditions prior to or at the Closing:

         (a) Delivery of  Consideration.  Each Debt Holder  shall have  received
delivery of the Consideration as contemplated herein.

         (b) Spin-off. AOXY shall have spun-off good and marketable title to its
rights to  royalties  from W. R. Grace  (its only  material  asset) and  certain
liabilities  including  only amounts due to former  employees as a result of the
receipt of the toyalties  and notes  payable to certain  directors and others in
the principal amount of $275,000 plus the interest eamed thereon.

         (c) No actions or proceedings. No action or proceeding shall be pending
or threatened  on the Closing Date wherein an  unfavorable  judgment,  decree or
order would prevent or make unlawful the carrying out of this Agreement or would
cause the transaction contemplated by this Agreement to be rescinded.

    SECTION 6.  CONDITIONS  PRECEDENT TO PURCHASERS'  and AOXY'S OBL I
GATION TO
COMPLETE  THE  TRANSACTION.  The  obligation  of each  Purchaser  and of AOXY to
consummate  the  transactions  described  in  Section 1 hereof is subject to the
fulfillment of each of the following conditions prior to or at the Closing:

         (a) Waiver.  Each Debt Holder shall have executed and delivered to AOXY
a counterpart signature page to this Agreement.

         (b) Spin-off. AOXY shall have spun-off good and marketable title to its
rights to  royalties  from W. R. Grace  (its only  material  asset) and  certain
liabilities  including  only amounts due to former  employees as a result of the
receipt of the royalties and notes payable to certain directors and the interest
thereon in the approximate aggregate principal amount of $275,000.


                                       3
<PAGE>

         (c) Representations and Warranties of Debt Holders. The representations
and warranties  made by the Debt Holders herein shall be true and correct in all
material respects.

         (d) No actions or proceedings. No action or proceeding shall be pending
or threatened  on the Closing Date wherein an  unfavorable  judgment,  decree or
order would prevent or make unlawful the carrying out of this Agreement or would
cause the transaction contemplated by this Agreement to be rescinded.

    SECTION 7. SURVIVAL OF REPRESENTATIONS  AND WARRANTIES.  All
representations
and warranties  contained herein or made in writing by the parties in connection
with the  transactions  contemplated  hereby  shall  survive the  execution  and
delivery of this Agreement and the closing of the  transactions  contemplated by
this  Ag~eement,  regardless  of any  investigation  made by or on behalf of the
parties or any payment for and  acceptance of stock  hereunder.  All  statements
contained in any certificate, list, letter or other instmment delivered by or on
behalf of the parties  pursuant  hereto or in connection  with the  transactions
contemplated   hereby   (including   statements,   letters  or  certificates  of
independent  parties such as public  accountants or attorneys)  shall constitute
representations and warranties by the parties hereunder.

    SECTION 8.  INDEMNIFICATION.  (a) Of Purchasers  and AOXY.  Each Debt Holder
agrees to defend, indemnify and hold harmless Purchasers and AOXY against and in
respect of (i) any and all losses, liabilities,  damages, deficiencies, costs or
expenses   (including,   without   limitation   reasonable   attomeys  fees  and
disbursements)  resulting  from (A) the  breach  of any  covenant,  warranty  or
agreement hereunder by such Debt Holder or (B) any representations  made by such
Debt Holder in this Agreement, not being complete and correct or being false and
misleading  or  containing  any  material  misstatement  of fact or omitting any
material  fact  required  to be  stated  to  make  the  statements  therein  not
misleading;  and (ii) any and all actions, suits,  proceeding,  claims, demands,
assessments,  judgments,  costs and  expenses  (including,  without  limitation,
reasonable  attorneys fees and disbursements)  incident to any of the foregoing;
provided, however, that if any such action, suit or proceeding shall be asserted
against  Purchasers  and AOXY in respect of which  Purchasers or AOXY propose to
demand  indemnification,  Debt Holders shall be promptly notified to that effect
and shall have the right to assume the  control of the  defense,  compromise  or
settlement  thereof,  including,  at their own  expense,  employment  of counsel
reasonably acceptable to Purchasers.

         (b) Of Debt Holders.  Each  Purchaser,  severally and  notjointly,  and
AOXY,jointly,  agree to defend, indemnify and hold harmless Debt Holders against
and in respect of (i) any and all losses,  liabilities,  damages,  deficiencies,
costs or expenses (including,  without limitation  reasonable attorneys fees and
disbursements)  resulting  from (A) the  breach  of any  covenant,  warranty  or
agteement hereunder by such Purchaser or AOXY or (B) any representations made by
such  Purchaser  or AOXY in this  Agreement,  not being  complete and correct or
being false and  misleading or containing any material  misstatement  of fact or
omitting any material fact required to be stated to make the statements  therein
not  misleading;  and  (ii)  any and all  actions,  suits,  proceeding,  claims,
demands,  assessments,   judgments,  costs  and  expenses  (including,   without
limitation,  reasonable attorneys fees and disbursements) incident to any of the
foregoing;  provided, however, that if any such action, suit or proceeding shall
be asserted  against a Debt Holder in respect of which such Debt 


                                       4
<PAGE>

Holder proposes to demand indemnification, Purchasers and AOXY shall be promptly
notified  to that  effect  and  Purchasers  shall  have the right to assume  the
control of the defense,  compromise or settlement thereof,  including,  at their
own expense, employment of counsel reasonably acceptable to Debt Holders.

         (c) Payment. Any indemnification  payments required pursuant to Section
8(a) and 8(b) hereof shall be paid in full within ten (10) days after receipt of
notice  specifying (i) the amount required to be paid and (ii) the nature of the
event or events giving rise to indemnification hereunder.

         (d) Liability.  The liability of the parties under this Section 8 shall
be without  limitation,  and the failure of either of them to  withhold  amounts
from any payments  shall not act as a waiver of or diminish the  obligations  of
parties under this Section 8.

         (e)  Interest.  Any and all  amounts  which may become due and  payable
pursuant  to this  Section 8 shall bear  interest  from the date when due to the
date of payment at a percentage rate of twelve (12%) percent per annum.

    SECTION 9. COMMISSIONS, FEES AND EXPENSES. Debt Holders, Purchasers and
AOXY
each represent and warrant to the other that the  negotiations  relative to this
Agreement and the transactions  contemplated hereby have been carried on by Debt
Holders,  Purchasers and AOXY directly and in such manner as not to give rise to
any valid claim against either for a brokerage commission, finder's fee or other
like  payment.  AOXY is  responsible  for and shall pay at closing  the fees and
disbursements  of  Kieffer  and  Hahn,  its  counsel,  in  connection  with this
Agreement and the closing of the transactions contemplated herein.

    SECTION  10.  APPLlCABLE  LAW.  This  Agreement  shall be  govemed  by,  and
construed in accordance  with, the law of the State of Delaware  (other than its
law with respect to conflicts of laws),  including all matters of  construction,
validity and performance.

    SECTION 11. NOTICES. All notices, requests, permissions,  waivers, and other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given if signed by the  respective  persons giving them (in the case of any
corporation  the signature shall be by an officer thereo~ and delivered by hand,
sent via facsimile transmission,  nationally-recognized ovemight courier service
or deposited in the United States mail  (registered,  retum receipt  requested),
properly  addressed and postage prepaid to the intended recipient thereof to the
address for such  person on the  signature  page(s)  hereof.  All such  notices,
requests,  consents  and  other  communications  shall be  deemed  to have  been
delivered (a) in the case of personal  delivery or delivery by telecopy,  on the
date of such  delivery,  (b) in the case of  dispatch  by  nationally-recognized
overnight  courier,  on the next business day following such dispatch and (c) in
the case of mailing,  on the third business day after the posting thereof.  Such
names and addresses may be changed by such notice.

    SECTION  12.  ENTIRE  AGREEMENT;  AMENDMENT;  HEADINGS; 
COUNTERPARTS.  This
Agreement,  including  the  Schedules  hereto,  all of which are a part  hereof,
contains  the entire  


                                        5
<PAGE>

understanding of the parties hereto with respect to the subject matter contained
herein and therein,  supersedes  and cancels all prior  agreements  with respect
hereto or thereto and may be amended only by a written  instruxnent  executed by
the  parties  or  their   respective   successors  or  assigns.   There  are  no
restrictions, promises, representations,  warranties, agreements or undertakings
of any party hereto with respect to the transactions  under this Agreement other
than those set forth herein or made hereunder in the documents delivered at each
Closing.  The section and paragraph headings contained in this Agreement and the
description  of exhibits  attached  hereto are for  reference  puxposes only and
shall not affect in any way the  meaning or  interpretation  of this  Agreement.
This Agreement may be executed in one or more  counterparts and each counterpart
shall be deemed to be an original.

    SECTION 13. PARTIES IN INTEREST.  Except with the express written consent of
the other parties  hereto,  this Agreement  shall not be assignable or otherwise
transferred in whole or in part.  This  Agreement  shall inure to the benefit of
and be binding upon the parties and their respective successors. Nothing in this
Agreement,  express or implied,  is intended to confer upon any other person any
rights or remedies under or by reason of this Agreement.

    SECTION 14.  SEVERABILITY.  The  invalidity of any portion  hereof shall not
affect the validity, force or effect of the remaining portions hereo(pound)

    SECTION I5. FURTHER  ASSURANCES.  Debt Holders,  AOXY and  Purchasers  shall
execute  and  deliver or cause to be  executed  and  delivered  such  additional
instruments,  and take such  other  actions  as the other  party may  reasonably
request in writing in order to effectuate the purposes ofthis Agreement.

                     {Remainder of Page Intentionally Blank]


<PAGE>

     [Counterpart Signature Page to Waiver Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   Robert E. Wolfe
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  /s/ Robert E. Wolfe
                                      ------------------------------------------
/s/ Angela Nevarez                    Name:  Robert E. Wolfe
-----------------------------         Title:  Individual
       Witness

                                   Address for Notices:

                                   Robert E. Wolfe
                                   476 Main Street
                                   Maybrook, NY 12543

                              DEBT HOLDERS:

                                   ---------------------------------------------
                                                  [print name]


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


                                   Address for Notices

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

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

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


                                       7

<PAGE>

     [Counterpart Signature Page to Waiver Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   Crossland Ltd. (Belize)
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  /s/ Anthony J.R. Howorth
                                      ------------------------------------------
Bahamas Company Services Ltd.         Name:  Anthony J.R. Howorth 
                                      Title:  President 
/s/ Pauline Cox
-------------------------------
      Secretary
                                   Address for Notices:

                                   Crossland, Ltd. (Belize)
                                   60 Market Street
                                   P.O. Box 364
                                   Belize City, Belize, Central America

                              DEBT HOLDERS:

                                   ---------------------------------------------
                                                  [print name]


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


                                   Address for Notices

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

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

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


                                       7


<PAGE>

     [Counterpart Signature Page to Waiver Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   Triton International Ltd.
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  /s/ Jens S. Olsen
                                      ------------------------------------------
Illegible                             Name:  Jens S. Olsen
-----------------------------         Title:  
       Secretary

                                   Address for Notices:

                                   Triton International Ltd.
                                   Euro-Canadian House
                                   Marlboro Street
                                   Nassau, Bahamas

                              DEBT HOLDERS:

                                   ---------------------------------------------
                                                  [print name]


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


                                   Address for Notices

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

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

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


                                       7

<PAGE>

     [Counterpart Signature Page to Waiver Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  
                                      ------------------------------------------
                                      Name:
-----------------------------         Title:
       Witness

                                   Address for Notices:

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

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

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

                              DEBT HOLDERS:

                                   Edelson Technology Partners II, L.P.
                                   ---------------------------------------------
                                                  [print name]

                                   /s/ Harry Edelson
                                   ---------------------------------------------
                                   Harry Edelson, General Prtner


                                   Address for Notices

                                   300 Tice Boulevard
                                   Woodcliffe Lake, NJ  07675


                                       7

<PAGE>


     [Counterpart Signature Page to Waiver Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  
                                      ------------------------------------------
                                      Name:
-----------------------------         Title:
       Witness

                                   Address for Notices:

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

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

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

                              DEBT HOLDERS:

                                   Sharon C. Castle
                                   ---------------------------------------------
                                                  [print name]

                                   /s/ Sharon C. Castle
                                   ---------------------------------------------
                                                 [Signature]


                                   Address for Notices

                                   P.O. Box 6680
                                   Ketchum, ID  83340


                                       7

<PAGE>


     [Counterpart Signature Page to Waiver Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  
                                      ------------------------------------------
                                      Name:
-----------------------------         Title:
       Witness

                                   Address for Notices:

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

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

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

                              DEBT HOLDERS:

                                   Richard O. Jacobson
                                   ---------------------------------------------
                                                  [print name]

                                   /s/ Richard O. Jacobson
                                   ---------------------------------------------


                                   Address for Notices

                                   Box 224
                                   Des Moines, Iowa  50301


                                       7

<PAGE>


     [Counterpart Signature Page to Waiver Agreement of December 18, 1997]




         IN  WITNESS  WHEREOF,  the  parties  hereto  have  duly  executed  this
Agreement as of the date first above written.

                              PURCHASERS:

                                   
                                   ---------------------------------------------
                                                  [print name]


ATTEST:                            By:  
                                      ------------------------------------------
                                      Name:
-----------------------------         Title:
       Witness

                                   Address for Notices:

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

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

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

                              DEBT HOLDERS:

                                   Emile Battat
                                   ---------------------------------------------
                                                  [print name]

                                   /s/ Emile Battat
                                   ---------------------------------------------
                                                 [Signature]


                                   Address for Notices

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

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

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


                                       7

<PAGE>

     [Counterpart Signature Page to Waiver Agreement of December 18, 1997]


                              Advanced Oxygen Technologies, Inc.


                                   By:  /s/ Harry Edelson
                                      ------------------------------------------
                                      Harry Edelson, Chairman


                                   Address for Notices:

                                   c/o ETP
                                   300 Tice Boulevard
                                   Woodcliff Lake, NJ  07675
                                   Telecopier:  (201) 930-8899



                                       8
<PAGE>



                                   Schedule 1

                                   Purchasers

Name                                                   Amount
---------------------------------                      -------

Robert E. Wolfe                                        $ 3,000
476 Main Street
Maybrook, NY  12543

Trion International, Ltd.                              $30,000
Euro-Canadian House
Marlboro Street
Nassau, Bahamas

Crossland, Ltd. (Belize)                               $27,000
60 Market Square
P.o. Box 364
Belize City, Belize, Central America

<PAGE>

                                   Schedule 2

                                  Debt Holders

                                            Principal
Name                                        Debt Amount            Consideration
------------------------------------        -----------            -------------

Edelson Technology Partners II, L.P.        $100,000               $21,818
300 Tice Boulevard
Woodcliff Lake, NJ
Telecopier: (201) 930-8899

Emile A. Battat                             $ 12,500               $ 2,727
10 Highgate Road
Riverside, Connecticut 06878

Richard O. Jacobson                         $150,000               $32,727
P.O. Box 224
Des Moines, IA 50301

Sharon Castle                               $ 12,500               $ 2,727
(address)




<PAGE>



                                  Schedule 4(a)

                           Subsidiaries of Purchasers
                           --------------------------


                                      NONE

<PAGE>
                                                                  Exhibit D
                                                                  Execution (i)


                                TRUST AGREEMENT


     TRUST  AGREEMENT  dated as of November  7, 1997,  between  ADVANCED  OXYGEN
TECHNOLOGIES,  INC.,  a Delaware  corporation,  having an office at c/o ETP, 300
Tice Boulevard  Woodcliff  Lake,  New Jersey (the  "Company") and HARRY EDELSON,
having  his  office at 300 Tice  Boulevard,  Woodcliff  Lake,  New  Jersey  (the
"Trustee").

     WHEREAS,  the  Company  has  sold  all  of its  patents,  and  all  related
technology  and  intellectual  property  rights  to W. R Grace & Co. - Conn.,  a
Connecticut corporation, under a Patent Rights Purchase Agreement dated February
8, 1995 (the `Patent Rights Purchase Agreement"),  under which the Company is to
receive  royalties  until April 30, 2007, and has no active  business to conduct
other than the collection of royalties and the distribution of such royalties to
shareholders after the payment of the Company's liabilities and expenses.

     WHEREAS,   because  the  transfer  of  an  undivided  interest  in  royalty
receivables of the Company would be impractical,  the shareholders and the Board
of  Directors  of the  Company  have  voted  to  have  the  royalty  receivables
distributed  by the  Company to a trustee to be held in trust for the benefit of
the  shareholders  in order to  preserve  the  property  and  collect the income
therefrom for the shareholders; and

     WHEREAS,  the Company is willing to transfer its royalty  receivables  to a
trust in  consideration of the assumption by the trust of the obligations of the
Company under certain Loan  Agreements and  Promissory  Notes as described in an
Assignment and  Assumption  Agreement (the  "Assignment  Agreement"),  a copy of
which is annexed hereto as Exhibit A.

     NOW, THEREFORE, it is agreed as follows:

                                   Article I

                            Transfer to the Trustee

     1.1  Transfer  to the  Trustee.  The  Company  grants,  releases,  assigns,
transfers,  conveys,  and  delivers to the Trustee all of the  Company's  right,
title,  and  interest in and to the  property  described  in Exhibit A attached,
together with the  appurtenances and all the estate and rights of the Company in
and to the property, in trust nevertheless for the uses and purposes hereinafter
stated,  and the Trustee accepts such property and the trust (the "Trust"),  and
assumes the obligations and liabilities of the Company described in Exhibit A.

     1.2  Instruments of further  assurance.  The Company will,  upon reasonable
request  of  the  Trustees,  execute,  acknowledge,  and  deliver  such  further
instruments  and do such further acts as may


<PAGE>


be  necessary  or proper  to carry out more  effectively  the  purposes  of this
Agreement,  to transfer any property intended to be covered hereby,  and to vest
in the Trustee, its successors and assigns, the estate, powers,  instruments, or
funds in Trust hereunder.

     1.3 Payment of  transferee  liabilities.  Should any  liability be asserted
against the Trustee as the  transferee  of the Trust  Estate,  on account of any
claimed liability of or through the Company, the Trustee may use such pan of the
Trust Estate as may be  necessary in  contesting  the  liability  and in payment
thereof.

                                   Article II

                                  Definitions

     2.1 Certain terms defined. For all purposes of this instrument,  unless the
context otherwise requires:

     (a)  "Agreement"  or  "Agreement  of Trust" shall mean this  instrument  as
originally executed or as it may from time to time be amended.

     (b) "Company" shall mean Advance Oxygen  Technologies,  Inc., a corporation
organized under the laws of the State of Delaware.

     (c)  "Shareholders"  and "Trust  Beneficiaries"  shall mean the  holders of
record of the  shares of the  outstanding  capital  stock of the  Company at the
close of business on the date hereof as listed in Exhibit B:

     (d) "Trust  Estate"  shall mean all the property  held from time to time by
the Trustee under this Trust Agreement.

     (e) "Trust Moneys" shall mean all rents royalties,  income,  proceeds,  and
other  receipts of or from the Trust  Estate,  including  but not limited to (i)
royalties or payments  made under the Patent  Rights  Purchase  Agreement,  (ii)
proceeds of sale of any part of the Trust Estate,  and (iii) interest  earned on
any moneys or securities held by the Trustee under this Trust Agreement.

     (f) "Trustee" shall mean the original Trustee and his successors.

     2.2 Meaning of other terms.  Except where the context  otherwise  requires,
words importing the masculine  gender shall include the feminine and the neuter,
if  appropriate,  words  importing the singular  number shall include the plural
number  and vice  versa,  and  words  importing  persons  shall  include  firms,
associations,  and corporations.  All references to Articles, Sections and other
subdivisions  refer  to  the  corresponding   Articles,   Sections,   and  other
subdivisions of this instrument.



                                       2

<PAGE>


                                  Article III

                              Trust Beneficiaries

     3.1 Trust Beneficiaries. The beneficial interests in the Trust Estate shall
be divided into  4,796,252  equal  undivided  portions  ("Units"),  equal to the
4,796.52 shares of the outstanding  capital stock of the Company at the close of
business on the date  thereof One Unit shall be  allocated  to each share of the
outstanding capital stock of the Company.

     3.2 Rights of Trust  Beneficiaries.  Each Shareholder  shall be entitled to
participation as a Trust Beneficiary according to the number of his Units in the
rights and  benefits  due to Trust  Beneficiaries.  The  interests  of the Trust
Beneficiaries  and all rights and benefits due to them hereunder shall be in all
respects personal property and upon the death of an individual Trust Beneficiary
his interest shall pass to his legal  representative  and such death shall in no
wise  terminate or affect the validity of this  Agreement.  A Trust  Beneficiary
shall have no title to, right to possession  of,  management  of, or control of,
the Trust Estate except as hereunder otherwise  expressly provided.  No widower,
widow,  heir, or devisee of any person who may be a Trust Beneficiary shall have
any right of dower, homestead, or inheritance,  or of partition, or of any other
right,  statutory or otherwise,  in any property  whatever forming a part of the
Trust Estate but the whole  title,  both legal and  equitable,  to all the Trust
Estate  shall be vested  in the  Trustee  and,  the sole  interest  of the Trust
Beneficiary  shall be the  rights  and  benefits  provided  for  under the Trust
Agreement.

     3.3 Records.  The Trustee shall cause to be kept books for the registration
and transfer of Units (the "Register of the Trustees");  and, the Trustee shall,
under reasonable  regulations which he may prescribe,  cause to be registered or
transferred  therein,  any of the Units.  The  Trustee  may  appoint one or more
registrars for this purpose, and may pay the registrar or registrars  reasonable
compensation for services.

     3.4 Transfer of Units. The Units and the interest  represented thereby (but
no  fractional  part  of a  single  Unit)  may  not be  transferred  by a  Trust
Beneficiary  except  upon  the  death  of a Trust  Beneficiary  by the  properly
appointed  legal  representatives  of his  estate  upon  the  delivery  of  such
documents  as the  Trustee  may  reasonably  require and upon the payment of the
reasonable transfer charges, if any,  established by the Trustee for the purpose
of reimbursing  the Trustee for his incidental  expenses.  Until any transfer is
recorded  in the  Register  of the  Trustee,  the  Trustee  may treat each Trust
Beneficiary  as the owner for all  purposes and shall not be charged with notice
of any claim or demand or the interest of any other  person.  The  ownership and
registration  of the Units may be in any form which the  applicable law permits,
subject to the reasonable regulation thereof by the Trustee.

     3.5 Effect of transfer. The recordation in the Register of the Trustee of a
transfer  of a Unit  shall,  for the  purpose  of this  Trust,  transfer  to the
transferee as of the date of  recordation  all right,  title and interest of the
transferor  in and to  the  Unit  to  which  the  transferor  might  then  be or
thereafter become entitled.

     3.6 Ownership of Units by Trustee. The Trustee, either individually or in a
representative  or fiduciary  capacity  (other than as a Trustee of this Trust),
may  acquire,  own,  and dispose of Units to the same extent as if he were not a
Trustee hereunder.


                                       3

<PAGE>


                                   Article IV

                       Duration and Termination of Trust

     4.1 Name. This Trust shall be known as the AOXY Management Trust.

     4.2 Duration.  Unless sooner terminated as hereinafter provided, this Trust
shall  continue until 21 years after the death of the survivor of the members of
the Board of Directors of the Company living on the date hereof In the event the
duration of this Trust is limited by the applicable  laws of any state to a term
which is shorter  than the term  hereinabove  set forth and a court of competent
jurisdiction  has finally  determined that the shorter term must be used and the
laws of such state must be applied in  determining  the  duration of this Trust,
this Trust shall  continue for the maximum  period  permitted  under the laws of
such state for the  duration of this  Trust,  in lieu of the period set forth in
the preceding sentence.

     4.3  Termination  of Trust.  Should the Trustee  sell any part of the Trust
Estate as  permitted by Article VII (other than  investments  of Trust Moneys by
the Trustee pursuant to Section 6.2), the Trust shall be deemed  terminated with
respect to the property sold.

     4.4 Termination by Trust Beneficiaries or by the Trustee.  The Trust may be
terminated  at any time by the action of more than 5O% in  interest  of the Unit
holders as evidenced in the manner  provided in Section 12.1 or by the action of
the Trustee after the expiration of the Royalty Period (as defined in the Patent
Rights Purchase Agreement).

     4.5 Distributions on termination by sale by Trustee.  Upon a termination of
the  Trust,  in part,  as a result of a sale by the  Trustee  of any part of the
Trust Estate, the Trustee shall distribute to the Trust Beneficiaries,  pro rata
according  to the number of Units  outstanding  at the date fixed by the Trustee
for  distribution,  the net proceeds of the sale. The "net  proceeds"  means the
proceeds of the sale,  whether in cash or other  property,  less (i) expenses of
the sale, (ii) expenses of the Trust,  (iii)  liabilities of the Company assumed
by the Trust  which are due and  payable  and (iv) such  reserve as the  Trustee
deems  necessary to  establish  out of the  proceeds to meet  liabilities.  Each
distribution  shall be made by  mailing  checks  to the Trust  Beneficiaries  of
record  at the  close of  business  on the date  fixed by the  Trustee  for such
distribution at their addresses as shown by the Register of Trustees.

     4.6  Distribution  on  termination by passage of time or  determination  of
Trust Beneficiaries or the Trustee. Upon the termination of the Trust by passage
of time or by action of the Trust  Beneficiaries  or the  Trustee in  accordance
with the  provisions  of Section  4.4, the Trustee  shall  proceed as rapidly as
possible to convert the Trust Estate into cash or other property and the Trustee
shall distribute to the Trust Beneficiaries, pro rata according to the number of
Units  outstanding  at the date fixed by the Trustee for  distribution,  the net
proceeds.  The "net proceeds" means the total cash or other property received as
a result of the  conversion  of the Trust Estate to cash or other  property less
(i) expenses of conversion,  (ii) liabilities hereunder,  and (iii) such reserve
as the Trustee  deems  necessary  to establish  to meet  liabilities  hereunder.
However,  if the Trustee  determine that it wilt be in the best interests of the
Trust  Beneficiaries not to convert part or all of the Trust Estate into cash or
other  property,  the Trust Estate not converted shall be distributed in kind to
the Trust  Beneficiaries,  pro rata according to the number of Units outstanding
at the  date of  distribution.  Each  distribution  shall  be made to the  Trust



                                       4

<PAGE>


Beneficiaries  of  record  at the  close of  business  on the date  fixed by the
Trustee for the  distribution at their addresses as shown by the Register of the
Trustees.

     4.7 Continuance of Trust for winding up. After the termination of the Trust
and for the purpose of liquidating and winding up the affairs of this Trust, the
Trustee  shall  continue  to act as  such  until  his  duties  have  been  fully
performed.  Upon  the  distribution  of all of the  Trust  Estate  to the  Trust
Beneficiaries  and the  payment and  discharge  of all debts,  liabilities,  and
obligations  of  the  Trust,  the  Trustee  shall  have  no  further  duties  or
obligations hereunder except to account as provided in Section 5.4.

                                   Article V

                   Collection and Application of Trust Moneys

     5.1 Collection of Trust Moneys.  All Trust Moneys shall be collected by the
Trustee and held as a part of the Trust Estate.

     5.2 Payment of expenses and other  liabilities.  The Trustee shall pay from
Trust Moneys all expenses,  charges,  liabilities,  and obligations of the Trust
Estate  and all  liabilities  and  obligations  which the  Trustee  specifically
assumed and agreed to pay pursuant to this Trust  Agreement  and the  Assignment
Agreement and any transferee liabilities which the Trustee may be obliged to pay
as transferee  including,  but without limiting the generality of the foregoing,
interest, taxes, assessments, and pubic charges of every kind and nature and the
costs,  charges,  and expenses connected with or growing out of the execution or
administration  of this Trust and such other payments and  disbursements  as are
provided in this  Agreement  or which may be  determined  to be a proper  charge
against the Trust Estate by the Trustee.  The Trustee may, in their  discretion,
make provision by reserve or otherwise out of the Trust Moneys,  for such amount
as the Trustee in good faith may  determine  to be  necessary to meet present or
future liabilities of the Trust, whether fixed or contingent.

     5.3 Distribution of Trust Moneys. The Trustee shall, as soon as practicable
distribute  and  pay,  or  cause  to be  distributed  and  paid,  to  the  Trust
Beneficiaries,  in proportion to their respective interests,  pro rata according
to the  number  of Units  owned by each  Trust  Beneficiaries,  remaining  after
payment of, or provision for, the expenses,  liabilities, and obligations of the
Trust Estate as set forth in this Article  (including any reserve referred to in
Section  5.2) and after the  withholding  of the taxes or  charges,  if any,  as
provided  in Section  5.2. In  determining  the amount of any  distribution  the
Trustee may rely upon the advice and  opinion of  independent  certified  public
accountants and of counsel.

     5.4 Reports to holders of Trust Beneficiaries. As soon as practicable after
termination of the Trust,  the Trustee shall submit a written report and account
to the Trust  Beneficiaries  showing (i) the assets and liabilities of the Trust
at the  end of  such  fiscal  year or upon  termination  and  the  receipts  and
disbursements  of the  Trustee  and (ii) any action  taken by the Trustee in the
performance of their duties under this Trust Agreement which materially  affects
the Trust  Estate.  The Trustee  may submit  similar  reports  for such  interim
periods as they deem  advisable.  The  approval by 51 percent


                                       5

<PAGE>


in interest of the Trust Beneficiaries of any report or account shall, as to all
matters  and  transactions  disclosed  therein,  be final and  binding  upon all
persons,  whether in being or not, who may then or thereafter  become interested
in or entitled to share in the Trust as a Trust Beneficiary.  The fiscal year of
the Trust shall end on such date as the Trustee deems advisable.

                                   Article VI

                  Purpose of Trust and Limitations on Trustee

     6.1 Purpose of Trust.  The sole  purpose of this Trust is to  conserve  and
protect the Trust Estate and collect and  distribute  the income and proceeds to
the Trust  Beneficiaries  after the payment of, or provision  for,  expenses and
liabilities.

     6.2 Limitations on Trustee. The Trustee shall not at any time, on behalf of
the Trust or Trust  Beneficiaries,  enter into or engage in any  business.  This
limitation shall apply  irrespective of whether the conduct of any such business
activities  is  deemed  by  the  Trustee  to be  necessary  or  proper  for  the
conservation  and  protection of the Trust Estate.  The Trustee shall not invest
any of the funds held in the Trust  Estate,  except that the Trustee may deposit
money under this Agreement in an interest-bearing bank account or accounts or in
a checking  account or accounts and the Trustee may purchase  obligations of the
United States.  The Trustee shall be restricted to the holding and collection of
the Trust Moneys and its payment and  distribution for the purposes set forth in
this  Agreement and to the  conservation  and protection of the Trust Estate and
the administration thereof in accordance with the provisions of this Agreement.

                                  Article VII

                             Powers of the Trustee

     7.1 Generally.  The Trustee shall hold the legal and equitable title to all
property at any time  constituting a part of the Trust Estate and shall hold the
property in Trust to be  administered  and  disposed of by them  pursuant to the
terms of this Agreement for the benefit of the Trust Beneficiaries.

     7.2 Specific powers  exercisable  without  consent of Trust  Beneficiaries.
Subject to the  provisions  of Article VI, the Trustee  shall have the following
specific powers in addition to the powers conferred upon him by law, exercisable
without the consent of the Trust Beneficiaries,  but their enumeration shall not
be  considered in any way to limit or control the power of the Trustee to act as
specifically  authorized by any other Section or provision of this Agreement and
to act in such  manner as the  Trustee  may deem  necessary  or  appropriate  to
conserve  and protect the Trust  Estate or to confer on the Trust  Beneficiaries
the benefits intended to be conferred upon them by this Agreement:

     (a) To cause any  investments of Trust Moneys pursuant to Section 6.2 to be
registered  and held in the name of a nominee or  nominees  without  increase or
decrease of liability with respect thereto;


                                       6

<PAGE>


     (b) To  collect  and  receive  any and all  money  and  other  property  of
whatsoever  kind or nature due to or owing or belonging to the Trust and to give
full discharge and acquittance therefor;

     (c) To  institute  or defend  actions for  declaratory  judgments  or other
actions  and to take such other  action as the  Trustee  may deem  necessary  or
desirable  to prevent a default or to enforce  the default  provisions  or other
provisions of the Patent  Rights  Purchase  Agreement and any other  instruments
relating to or forming a part of the Trust Estate;

     (d) To perform any act authorized,  permitted, or required under the Patent
Rights Purchase Agreement or any other instruments relating to or forming a part
of the Trust Estate whether in the nature of an approval,  consent,  demand,  or
notice thereunder or otherwise, unless such act would require the consent of the
Trust Beneficiaries in accordance with the express provisions of this Agreement;

     (e) To sell,  transfer,  assign, or otherwise dispose of all or any pact of
the Trust Estate for cash or other consideration.

     (f) To cancel,  terminate or amend the Patent Rights Purchase  Agreement or
any other instruments  relating to or forming a part of the Trust Estate, and to
execute a new  agreement  with  respect  to any  property  in the Trust  Estate,
notwithstanding  that the term of the  agreement  may extend  beyond the term of
this Trust,  provided that no new agreement or other instrument shall permit the
Trustee to engage in any activity prohibited by Article VI.

     (g) To amend  this  Agreement  in any  manner  whatever,  provided  that no
amendment  shall  permit the  Trustee to engage in any  activity  prohibited  by
Article V I.

     (h) To borrow  money and to pledge or mortgage as security for the loan all
or any  part of the  Trust  Estate  when in the  opinion  of the  Trustee  it is
necessary  to borrow  money in order to carry out  properly  the purpose of this
Trust,  and so long as such borrowing does not violate the provisions of Article
VI.

     (i) To do and  perform  any acts or things  and only  those  acts or things
necessary  or  appropriate  for the  conservation  and  protection  of the Trust
Estate,  and in this  connection  to employ  such agents and to confer upon them
such  authority  as the  Trustee  may deem  appropriate,  and to pay  reasonable
compensation therefor.

                                  Article VIII

                             Concerning the Trustee

     8.1  Generally.  The Trustee  accepts and undertakes to discharge the Trust
created by this  Agreement,  upon the terms and conditions  hereof.  The Trustee
shall  exercise such of the rights and powers  vested in him by this  Agreement,
and use the same  degree of care and  skill in his  exercise,  as a prudent  man
would exercise or use under the circumstances in the conduct of his own affairs.
No  provision of this  Agreement  shall be construed to relieve the Trustee from
liability for negligent 


                                       7

<PAGE>


action, negligent failure to act, or willful misconduct, except that:

     (a) the Trustee shall not be  responsible  for the acts or omissions of any
other  Trustee if done or omitted  without his  knowledge  or consent  unless it
shall be proved that the Trustee was  negligent in  ascertaining  the  pertinent
facts, and no successor  Trustee shall be in any way responsible for the acts or
omissions  of any  Trustee  in  office  prior to the date on which he  becomes a
Trustee.

     (b) The  Trustee  shall not be liable  except for the  performance  of such
duties and obligations as are specifically  set forth in this Agreement,  and no
implied  covenants or obligations  shall be read into this Agreement against the
Trustee.

     (c) In the absence of bad faith on the part of the Trustee, the Trustee may
conclusively  rely, as to the truth of the statements and the correctness of the
opinions expressed  therein,  upon any certificates or opinions furnished to the
Trustee and conforming to the requirements of this Agreement; but in the case of
any certificates or opinions which are specifically  required to be furnished to
the  Trustee,  the Trustee  shall be under a duty to examine  them to  determine
whether or not they conform to the requirements of this Agreement.

     (d) The Trustee  shall not be liable for any error of judgment made in good
faith,  unless it shall be proved that the Trustee was negligent in ascertaining
the pertinent facts.

     (e) The  Trustee  shall not be liable with  respect to any action  taken or
omitted to be taken by him in good faith in  accordance  with the direction of a
majority in interest of the Trust  Beneficiaries  relating to the time,  method,
and place of conducting any proceeding for any remedy  available to the Trustee,
or  exercising  any  trust  or  power  conferred  upon the  Trustee  under  this
Agreement.

         8.2 Reliance by Trustee. Except as otherwise provided in Section 8.1:

     (a) The  Trustee  may  rely and  shall  be  protected  in  acting  upon any
resolution,   certificate,   statement,  instrument,  opinion,  report,  notice,
request,  consent,  order,  or other  paper or  document  believed  by him to be
genuine and to have been signed or presented by the proper party or parties.

     (b) The Trustee may consult  with legal  counsel to be selected by him, and
the  Trustee  shall not be liable  for any  action  taken or  suffered  by it in
accordance with the advice of counsel.


                                       8


<PAGE>


     (c) Persons dealing with the Trustee shall look only to the Trust Estate to
satisfy any liability incurred by the Trustee to such person in carrying out the
terms  of this  Trust,  and  the  Trustee  shall  have  no  personal  individual
obligation to satisfy any such liability.

     8.3  Indemnification  of Trustee.  The Trustee shall be  indemnified by and
receive  reimbursement  from the Trust Estate against and from any and all loss,
liability,  expense,  or damage which such Trustee may incur or sustain, in good
faith and without  negligence,  in the  exercise and  performance  of any of the
powers and duties of such Trustee under this Agreement.

                                   Article IX

                 Protection of Persons Dealing with the Trustee

     9.1 Reliance on statement by Trustee.  Any person  dealing with the Trustee
shall be fully protected in relying upon the Trustee's  certificate  that he has
authority  to take any action  under this  Trust.  Any person  dealing  with the
Trustee  shall be fully  protected  in relying  upon the  Trustee's  certificate
setting  forth the facts  concerning  the  calling  of any  meeting of the Trust
Beneficiaries  the  giving  of  notice  thereof,  and the  action  taken at such
meeting, including the number of Units represented by Trust Beneficiaries taking
such action.

     9.2 Application of money paid or transferred to Trustee.  No person dealing
with the Trustee shall be required to follow the  application  by the Trustee of
any money or property which may be paid or transferred to the Trustee.

                                   Article X

                            Compensation of Trustee

     10.1  Amount  of  compensation.  In lieu of  commissions  fixed  by law for
Trustee,  the Trustee  shall  receive as  compensation  for  services as Trustee
hereunder  the sum of $ I5,000 per annum  plus,  in any year in which there is a
distribution   of  all  or  any  portion  of  the  Trust  Estate  to  the  Trust
Beneficiaries,  an  amount  equal  to 3% of the  aggregate  amount  of any  such
distribution and such additional compensation from the cash proceeds of the sale
of any part of the Trust  Estate as may be approved by a majority in interest of
the Trust  Beneficiaries.  In the event of any  substitution of or change in the
Trustee, each Trustee shall receive compensation based only upon such royalties,
and other income and proceeds of sale received and distributed while the Trustee
was in office.

     10.2  Dates of payment. The compensation payable to the Trustee pursuant to
the  provisions of Section 10.1 shall be paid annually or at such other times as
the Trustee may determine.

     10.3  Expenses.  The Trustee shall be reimbursed  from the Trust Estate for
all expenses  reasonably  incurred by them in the performance of their duties in
accordance with this Agreement.


                                       9

<PAGE>
                                   Article XI

                         Trustee and Successor Trustee

     11.1  Resignation and removal.  Any Trustee may resign and be discharged by
giving  written  notice to the other  Trustee.  Such  resignation  shall  become
effective upon the  appointment of the Trustee's  successor and the  successor's
acceptance of the  appointment.  Any Trustee may be removed at any time, with or
without cause, by two-thirds in interest of the Trust Beneficiaries.

     11.2  Appointment  of successor.  Should at any time a Trustee resign or be
removed,  die or become  incapable  of acting,  or be  adjudged  a  bankrupt  or
insolvent, a vacancy shall be deemed to exist in the office of such Trustee, and
a successor shall be appointed by the other Trustee or by a majority in interest
of the Trust Beneficiaries.

     11.3  Acceptance of appointment by successor Trustee. Any successor Trustee
shall execute an  instrument  accepting  the  appointment  and shall deliver one
counterpart each to the other Trustee and to the retiring Trustee. Thereupon the
successor  Trustee  shall  without any further act,  become  vested with all the
estates,  properties,   rights,  powers,  trusts,  and  duties  of  his  or  its
predecessor  in the Trust  with  like  effect as if  originally  named;  but the
retiring Trustee shall nevertheless,  when requested in writing by the successor
Trustee and upon payment of lawful  charges and  disbursements  then unpaid,  if
any, execute and deliver an instrument or instruments conveying and transferring
to the  successor  Trustee  upon the Trust  herein  expressed,  all the estates,
properties,  rights,  powers, and trusts of the retiring Trustee, and shall duty
assign,  transfer,  and deliver to the successor  Trustee all property and money
held by him hereunder.

     11.4  Appointment of successor  Trustee by court. In the event a vacancy in
the  office  of  Trustee  shall  continue  for a period  of at least 90 days,  a
temporary  Trustee may be appointed  by the  Superior  Court of the State of New
Jersey, on the application of any Trust Beneficiary upon such notice, if any, as
the Court may deem proper and  prescribe.  The temporary  Trustee shall act only
until one or more  successor  Trustee are appointed in the manner  prescribed in
Section 11.2.

     11.5 Bonds.  No bond shall be required of any  original  Trustee,  or, if a
bond is required by law, no surety or security  with  respect to such bond shall
be required  unless  required by law. No bond shall be required of any successor
Trustee, or, if a bond is required by law, no surety or security with respect to
such bond shall be required unless required by law.

                                  Article XII

                       Concerning the Trust Beneficiaries

     12.1 Evidence of action by Trust Beneficiaries.  Whenever in this Agreement
it is provided that the Trust  Beneficiaries  may take any action (including the
making of any demand or request,  the giving of any notice,  consent, or waiver,
the removal of a Trustee,  the appointment of a successor Trustee, or the taking
of any other action); the fact of taking any such action may be evidenced (i) by
any  instrument or any number of  instruments  of similar tenor  executed by the
Trust  Beneficiaries in person or by agent or attorney appointed in writing,  or
(ii) by the record of the Trust  Beneficiaries  voting in favor of the action at
any meeting of Trust  Beneficiaries  duly called and held in accordance


                                       10

<PAGE>


with the provisions of Article XIII.

     12.2 Limitation on snits by Trust Beneficiaries. No Trust Beneficiary shall
have any right by virtue of any  provision of this  Agreement  to institute  any
action or  proceeding  at law or in equity  against  any  party  other  than the
Trustee  upon or under or with  respect  to the Trust  Estate or the  agreements
relating to or forming part of the Trust  Estate,  and,  unless not less than 51
percent in interest of the Trust  Beneficiaries  shall have made written request
upon the Trustee to  institute  such action or  proceeding  as Trustee and shall
have offered to the Trustee reasonable  indemnity against the costs and expenses
to be  incurred,  and the Trustee for 30 days after its receipt of such  notice,
request,  and offer of indemnity  shall have failed to institute any such action
or proceeding.

     12.3  Requirement  of  undertaking.  The  Trustee  may request any court to
require,  and any  court  may in its  discretion  require,  in any  suit for the
enforcement of any right or remedy under this Agreement,  or in any suit against
the Trustee  for any action  taken or omitted by them as Trustee , the filing by
any party litigant in the suit of any undertaking to pay the costs of such suit,
and  the  court  may  in  its  discretion  assess  reasonable  costs,  including
reasonable  attorney's fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses  made by the party
litigant.

                                  Article XIII

                        Meetings of Trust Beneficiaries

     13.1  Purpose  of  meetings.  A meeting of the Trust  Beneficiaries  may be
called  at any time and from time to time  pursuant  to the  provisions  of this
Article for the purpose of taking any action  which the terms of this  Agreement
permit a percentage in interest of the Trust Beneficiaries to take either acting
alone or with the Trustee.

     13.2 Meeting called by Trustee.  The Trustee may at any time call a meeting
of the Trust  Beneficiaries to be held at such time and at such place within the
State of New  Jersey (or  elsewhere  if so  determined  by the  Trustee)  as the
Trustee  shall  determine.   Written  notice  of  every  meeting  of  the  Trust
Beneficiaries  shall be given by the  Trustee  (except  as  provided  in Section
13.3),  which  will set forth the time and place of the  meeting  and in general
terms the action  proposed to be taken at the  meeting,  and shall be mailed not
more than 40 nor less than 20 days  before  the  meeting is to be held to all of
the Trust Beneficiaries. The notice shall be directed to the Trust Beneficiaries
at their respective addresses as they appear in the Register of the Trustee.

     13.3 Meeting called on request of Trust Beneficiaries. Within 30 days after
written  request to the  Trustee by at least 25 percent in interest of the Trust
Beneficiaries  to call a meeting of Trust  Beneficiaries,  which written request
shall specify in reasonable detail( the action proposed to be taken, the Trustee
shall  proceed  under the  provisions  of Section  13.2 to call a meeting of the
Trust  Beneficiaries,  and if the Trustee  fails to call the meeting  within the
30-day  period  then the meeting may be called by such 25 percent in interest of
the Trust Beneficiaries or their designated representatives.

     13.4 Persons entitled to vote at meeting of Trust Beneficiaries. Each Trust
Beneficiary of


                                       11

<PAGE>


one or  more  Units  shall  be  entitled  to  vote  at a  meeting  of the  Trust
Beneficiaries  either in person or by his proxy duly authorized in writing.  The
signature of the Trust  Beneficiary  on such written  authorization  need not be
witnesses  or  notarized.  Each person  entitled to vote shall have one vote for
each Unit he holds or represents.

     13.5 Quorum. At any meeting of Trust Beneficiaries,  the presence in person
or by proxy of persons holding Units sufficient to take action on any matter for
the transaction of which the meeting was called shall be necessary to constitute
a  quorum;  but if less  than a  quorum  be  present,  the  persons  holding  or
representing a majority in interest of the Units  represented at the meeting may
adjourn  the meeting  with the same  effect and for all intents and  purposes as
though a quorum had been present.

     13.6  Adjournment  of meeting.  Any meeting of Trust  Beneficiaries  may be
adjourned 8 a.m. time to time and a meeting may be held at such  adjourned  time
and place without further notice.

     13.7 Conduct of meetings.  The Trustee  shall  appoint the Chairman and the
Secretary of the meeting.  The vote upon any resolution submitted to any meeting
of Trust  Beneficiaries  shall be by written  ballot.  Two  Inspectors  of Vote,
appointed  by the  Chairman  of the  meeting  shall  count all votes cast at the
meeting for or against any resolution and shall make and file with the Secretary
of the meeting their verified written report.

     13.8  Record of meeting.  A record of the  proceedings  of each  meeting of
Trust  Beneficiaries  shall be prepared by the  Secretary  of the  meeting.  The
record  shall be signed and verified by the  affidavits  of the Chairman and the
Secretary  of the meeting and shall be  delivered to the Trustee to be preserved
by them. Any record so signed and verified  shall be conclusive  evidence of all
the matters therein stated.

                                  Article XIV

                                   Amendments

     14.1 Consent of Trust  Beneficiaries.  At the direction or with the consent
(evidenced  in the manner  provided in Section  12.1) of the holders of not less
than 66.6  percent  (unless a higher  percentage  is  expressly  required for an
amendment  under the  provisions  of this  Agreement)  in  interest of the Trust
Beneficiaries,  the  Trustee  shall  promptly  make and  execute  a  declaration
amending this  Agreement for the purpose of adding any provisions to or changing
in any  manner  or  eliminating  any of the  provisions  of  this  Agreement  or
amendments,  provided,  however,  that no amendment  shall permit the Trustee to
engage in any activity prohibited by Article VI.

     14.2  Effect  of  amendment.  Upon  the  execution  of any  declaration  of
amendment  by the  Trustee,  this  Agreement  shall be deemed to be modified and
amended in  accordance  therewith  and the  respective  rights,  limitations  of
rights,  obligations,  duties and immunities under this Agreement of the Trustee
and the Trust  Beneficiaries  shall  thereafter be  determined,  exercised,  and
enforced subject in all respects to the modification and amendment,  and all the
terms and  conditions of any  amendment  shall be deemed to be part of the terms
and conditions of this Agreement for any and all purposes.


                                       12

<PAGE>


                                   Article XV

                                 Miscellaneous

     15.1 Filing  Documents.  This agreement  shall be filed or recorded in such
office or offices as the Trustee may determine to be necessary or  desirable.  A
copy of this agreement and all  amendemnts  shall be filed in the office of each
Trustee  and  shall be  available  at all  times  for  inspection  by any  Trust
Beneficiary  or his duly  authorized  representative.  The Trustee shall file or
record any  amendment  of this  Agreement  in the same place where the  original
Agreement is filed or recorded.  The Trustee shall file or record any instrument
which  relates to any changes in the office of Trustee in the same places  where
the original Agreement is filed or recorded.

     15.2 Laws as to  construction.  This  Agreement  shall be  governed  by and
construed in accordance with the laws of the State of New Jersey.

     15.3  Separability.  In the event any  provision  of this  Agreement or its
application  to any person or  circumstances  shall be finally  determined  by a
court of proper  jurisdiction to be invalid or unenforceable to any extent,  the
remaider of this Agreement,  or the appliocation of such provision to persons or
circumstances   other  than   thiose  as  to  which  it  is  held   invalid  ore
unenforceable,  shall  not be  affected  thereby,  and  each  provision  of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.

     15.4 Notices. Any notice or other communication by the Trustee to any Trust
Beneficiary shall be deemed to have been  sufficiently  given, for all purposes,
if given by being deposited,  postage  prepaid,  in a post office or kletter box
addressed to the holder at his address as shown on the Register of the Trustee.

     15.5  Counterparts.  This  Agreemenrt  may be  executed  in any  number  of
counterparts,  each of which shall be an original,  but the  counterparts  shall
together constitute but one and the same instrument.


                                       13

<PAGE>


     IN WITNESS  WHEREOF this  Agreement  has been duly  executed as of the date
first above mentioned.

                                        Advanced Oxygen Technologies, Inc.




                                        By:       /s/ Harry Edelson
                                            ------------------------------
                                                     Chalrman


                                                  /s/ Harry Edelson
                                        -----------------------------------
                                             Harry Edelson, Trustee


STATE OF NEW JERSEY; COUNTY OF BERGEN

         On the 7th day of  November,  1997,  before me  personally  came  Harry
Edelson to me known,  who being by me duly sworn,  did depose and say that he is
the Chairman of Advanced Oxygen Technologies,  Inc., a Delaware corporation, and
that he executed  the  foregoing  instrument  at the  direction  of the board of
directors as the act and deed of said corporation.


                                            --------------------------------
                                                     Notary Public



STATE OF NEW JERSEY; COUNTY OF BERGEN

     On the 7th day of November,  1997,  before me personally came Harry Edelson
to me  known,  who being by me duly  sworn,  did  depose  and say that he is the
Trustee  named in the foregoing  instrument,  and that he executed the foregoing
instrument as his own act and deed.


                                             --------------------------------
                                                     Notary Public


                                       14

<PAGE>

                                                                       Exhibit A


                      ASSIGNMENT AND ASSUMPTION AGREEMENT

     This Agreement  made this 8th day of November,  1997, by and among ADVANCED
OXYGEN  TECHNOLOGIES,   INC.,  a  Delaware  corporation  (the  "Company"),  AOXY
MANAGEMENT  TRUST, a New Jersey Trust (the "Trust"),  and certain lenders to the
Company (the "Lenders" and each a "Lender").

                             PRELIMINARY STATEMENT


     The Company has borrowed the aggregate  amount of $275 000 from the Lenders
pursuant to various Loan  Agreements and various  Promissory  Notes,  (the "Loan
Agreements"  and the  "Promissory  Notes"  respectively).  The  Company has also
entered into a patent  assignment  agreement dated February 8, 1995 (the "Patent
Assignment Agreement") with W. R. Grace & Co. - Conn., a Connecticut corporation
("Grace"), pursuant to which the Company assigned all of its technology to Grace
(the "Patent Sale") in return for the right to receive royalties from Grace.

     The Company desires to assign all of its rights to receive  royalties under
the Patent Assignment Agreement to the Trust, for the benefit of the Lenders the
holders of the  preferred  stock of the  Company  and the  holders of the common
stock of the Company on the date hereof,  respectively,  in consideration of the
assumption by the Trust of the  obligations  of the Company to the Lenders under
the Loan Agreements and the Promissory Notes (the "Loans").

     SECTION 1. Assignment. The Company, irrevocably and unconditionally, hereby
assigns  to the  Trust  all of  its  right,  title  and  interest  in and to the
royalties to be received from Grace under the Patent  Assignment  Agreement (the
"Royalties").

     SECTION 2. Assumption.  In consideration of the assignment of the Royalties
as  provided  in  Section  1  hereof,  the Trust  assumes  all of the  following
obligations associated with the Royalties, in order of priority:

          2.01 Commission to Certain Employees. First, from each royalty payment
received, if any, to Mr. Arnold Copts, Ms. Sharon Castle and Mr. David Overmyer,
in equal shares, 5% of the first million dollars of Royalties,  4% of the second
million  dollars,  3% of the third  million  dollars,  2% of the fourth  million
dollars and 1% of all Royalties  received in excess four million dollars as more
fully set forth on Schedule 2.01 hereto.

          2.02  Repayment  of the Loans  the  Preferred  Stock and the  Balance.
Second, from each royalty payment received,  if any, to the following persons in
the following order of priority:

               (1)  Lenders.  To the Lenders the  aggregate  amount of $275,000,
plus  interest  earned  thereon,  in  proportion  to the amount of each Lender's
outstanding  Loan to the  total  amount  of all of the  Loans,  as set  forth on
Schedule 2.02(1) hereto, until all Lenders are repaid in full.


<PAGE>


               (2)  Preferred  Stockholders.  To the  holders  of the  Company's
issued and outstanding  preferred stock on the date of the  establishment of the
Trust until the principal amount invested in the preferred stock by them, as set
forth on Schedule 2.02121 hereto, until repaid in full.

               (3) Common  Stockholders.  With the  remainder  of the  Royalties
received,  if any, to the holders of the Company's issued and outstanding common
stock on the date of the establishment of the Trust.

     SECTION 3. Consent of Lenders. The Lenders hereby consent to the assignment
of the  Royalties to the Trust and the priority of the payment of the  Royalties
from the Trust as set forth in Section 2 hereof

     SECTION 4. Miscellaneous

          4.01.  Except as otherwise  expressly stated herein,  all computations
required  hereunder  shall  be made by the  application  of  generally  accepted
accounting principles and practices consistently applied.

          4.02.  Neither failure nor delay on the pact of the Lender to exercise
any right, power, or privilege hereunder shall operate as a waiver thereof,  nor
shall any single or partial exercise of any right, power, or privilege hereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right, power, or privilege.

          4.03.  This  Agreement  and the Note  shall be deemed to be a contract
made  under the laws of the State of New Jersey  and for all  purposes  shall be
governed  by the laws of that  state  without  regard  to its  conflict  of laws
provisions.

                    [Remainder of Page Intentionally Blank]



                                       2



<PAGE>


       (counterpart signature page to Assignment and Assumption Agreement]


     IN WITNESS  WHEREOF the parties  hereto have  executed and  delivered  this
Agreement on and as of the date first above written.


                                             ADVANCED OXYGEN TECHNOLOGIES, INC.

                                             By: 
                                                 ------------------------------
                                                  Harry Edelson, Chairman

                                             Address for Notices:
                                             c/o ETP
                                             300 Tice Boulevard
                                             Woodcliff Lake, New Jersey 07675
                                             Telecopier: (201) 930-8899



                                             AOXY MANAGEMENT TRUST

                                             By: 
                                                 ------------------------------
                                                  Harry Edelson, Chairman


                                             Address for Notices:
                                             c/o ETP
                                             300 Tice Boulevard
                                             Woodcliff Lake, New Jersey 07675
                                             Telecopier: (201) 930-8899



                                             LENDERS:

                                             ----------------------------------
                                                      {print name}


                                             BY: 
                                                 ------------------------------
                                             Name:
                                             Title:


                                             Address for Notices:

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

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

                                       3

<PAGE>


                                 Schedule 2.01

                        Commission to Certain Employees




In August 1995 in order to retain senior  management,  the Company agreed to pay
Mr. Arnold  Kopetz,  Ms. Sharon Castle and Mr. David  Overmyer,  officers of the
Company, a bonus if the Company successfully  completed a sale of ihe Company or
its  technology  by May 31, 1995.  The bonus would equal 5% of the first million
dollars of the gross  proceeds  from the  Patent  Sale,  4% of the next  million
dollars  of such  gross  proceeds,  3% of the third  million,  2% of the  fourth
million and 1% of all amounts received from the Patent Sale in excess 4 million.
This bonus is shared equally by Mr. Kopetz,  Ms. Castle and Mr.  Overmyer.  Upon
the closing, they received, in the aggregate $16,750.00 or $5,583.33 each. As no
other  royalties have been received to date from Grace,  no additional sums have
been paid. All such bonus is payable only from the Grace royalty.






<PAGE>


                                Schedule 2.02(1)


                                    LENDERS


                                                  Principal
Name                                             Debt Amount


Edelson Technology Partners II, L.P.              $100,000
300 Tice Boulevard
Wocdcliff Lake, NJ
Telecopier: (201) 930-8899

Emile A. Battat                                   $ 12,500
10 Highgate Road
Riverside, Connecticut 06878

Richard O.Jacobson                                $150,000
P.O. Box 224
Des Moines, IA 50301

Sharon Castle                                     $ 12,500
(address]
                                                  --------

Total                                             $275.000

                                                  ========


<PAGE>


                                Schedule 2.02(2)

                             PREFERRED STOCKHOLDERS


Name                                        # of Shares                $ Amount

Edelson Technology Partners II, L.P.        40,000                     $200,000
300 Tice Boulevard
Woodcliff Lake, NJ
Telecopier: (201) 930-8899

Richard O. Jacobson                         83,000                     $415,000
P.O.Box 224
Des Moines, IA 50301

Emile A. Batatt                             35,000                     $175,000
10 Highgate Road
Riverside, Connecticut 06878

Albert James                                15,000                     $ 75,000
2783 Hidden Oak Drive
Seabrook Island, SC 29455

Amold Kopetz                                   500                     $  5,000
14 West Penny Road
South Barrington IL 60010

Wealth Monitors, Inc.                        5,000                     $ 25,000
11230 College Boulevard, Suite 110
Overland Park, KS 66210
(913)345-2822

Abarta, Inc. Master Trust                   10,000                     $ 50,000
1000 RIDC Plaza, Suite 404
Pittsburgh, PA 15238
(412)963-3165