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 OF
                  1934
For the quarterly period ended December 31, 1998 
                    
( )TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT
           COMMISSION OF 1934
For the Transition period from          To December 31, 1998
                    
     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)      (IRS Employer
                              Identification No.)
                    
          26883 Ruether Avenue
        Santa Clarita,  CA 91351
(Address of principal executive offices)

             (805)298-3333
      (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, 1998 was 29,640,252.

Transitional Small Business Disclosure Format (check one):

Yes                           No   X     

   ADVANCED OXYGEN TECHNOLOGIES, INC.
                    
                    
                 INDEX
                    


PART 1 - FINANCIAL INFORMATION

Item 1.   Financial Statements
     
     Balance sheet as of December 31,1998

     Statement of income for the three month period ended 
     December 31,1998

     Statement of cash flows for the three month period
     ended December 31, 1998

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
     Exhibit 1

Item 27. Financial Data Schedules

SIGNATURE


PART 1: FINANCIAL INFORMATION

Item I: Financial Statements

                         BALANCE SHEET ADVANCED OXYGEN
                  TECHNOLOGIES INC. FOR THE 3 MONTHS ENDING
                          DECEMBER 31, 1998 (UNAUDITED) 



                              AOXY, Inc.
                             Balance Sheet
                           December 31, 1998
                                 ASSETS
<TABLE>
<S>                                                <C>
Current Assets                                  12/31/98                            

Regular Checking Account                     <20,438.15>                           

Payroll                                        3,959.72 
 Checking                   

Money Market                                 <13,863.21>
 Account                    

Money Market                                  <2,519.01>
 Savings                    

Client Fees A/R                              126,545.19

Contracts                                     53,146.99
 Receivables                

K/A Receivables                               19,272.90                           

ITSMA Receivables                             <3,495.50>

Mecklermedia A/R                               2,742.59                           

Other Receivables                             <2,163.50>

Db Management A/R                              5,929.58                          

Inventory                                        156.26                             

Inventory                                      6,678.70 

Inventory CD's                                  <200.00> 

Total Current                                175,752.56
Assets                     
               </TABLE>
 

<TABLE>
<S>                          <C>                <C>
Property and Equipment    

Furniture & Fixtures                          31,869.00

Office Equipment                              17,882.00

Equipment                                     98,858.00

Capitalized Equipment                         25,406.00

Other                                        911,391.00
 Depreciable Property      

Accum. Depreciation-Furniture                 <3,391.86>
                          

Accum. Depr. OfficeEquipment                  <1,788.00>
                          

Accum. Depreciation-Equipment                <23,096.23>
                          

A/D Capitalized Equipment                      <2118.00>

Accum.                                       <76,098.57>
 Depreciation Other        

Total Property & Equipment                   978,913.34

Other Assets                                       0.00    

Total Assets                               1,154,665.90
                          
</TABLE>

          LIABILITIES AND CAPITAL
 
<TABLE>
<S>                                      <C>       <C>
CURRENT LIABILITIES         

Accounts Payable                              10,753.90 

Accounts Payable                             146,280.72

Sales Tax Payable                                <27.06>   

Sales Tax Payable                              2,213.58  

Health Care Contributions                      5,051.11

Federal Payroll Taxes Payable                 37,392.23
                            
State Payroll                                  4,791.54  
  Taxes Payable               

SUTA Tax Payable                                <178.17>  

State Tax Payable                                800.00    

Total Current Liabilities                    207,077.85
                            

                            

LONG TERM LIABILITIES       

Capital Lease Obligation                       23,637.00

Note Payable, Crossfield                        9,518.49

Note Payable, Crossfield                       <4,260.50>

Note Payable,                                 516,714.06
 IMA 550,000                 

Other Long-Term Liabilities                         1.00

Other Long-Term Liabilities                     7,188.00

TOTAL LONG TERM                               552,798.05
 LIABILITIES                 

TOTAL LIABILITIES                             759,875.90
                            

                            

CAPITAL                     

Beginning                       16,700.00 
 Balance Equity              

Preferred Stock                     50.00     

Common Stock                   296,403.00

Paid-in-Capital             20,398,631.00

Retained Earnings          <20,444,662.14>
                            

Net Income                              127,668.14

TOTAL CAPITAL                           394,790.00
                            
</TABLE>
<TABLE>
<S>               <C>     <C>
                          

TOTAL                                  1,154,665.90
LIABILITIES & CAPITAL                   
</TABLE>


     
                    
                    
                      INCOME STATEMENT 
                       ADVANCED OXYGEN
                      TECHNOLOGIES, INC. 
            FOR THE 3 MONTHS ENDING DECEMBER 31, 1998
                         (UNAUDITED)
                    
                    
                           AOXY, Inc.
                        Income Statement
            For the Six Months Ending December 31, 1998

          
<TABLE>
<S>                             <C>       <C>
                            6 months  Year To Date

REVENUES                       

Income Consulting           5,200.00    105,200.00

CA Registrations           78,249.89    334,154.17

CD Sales Santa Clarita     90,982.93    145,056.93

CA Client Contract          1,102.88     12,190.19
 Income

CA Database Mgmt                0.00         85.00

Commission                      0.00     69,099.00

Bad Receivables           <80,309.57>   <91,433.16>
 Income

Other Income               18,916.26     18,916.26

Shipping Charges             1,842.20     4,052.15
 Reimbursed

TOTAL REVENUES             115,984.59   607,320.54

                               

COST OF SALES                  

Cost of Goods                   29.63      5035.81
 Prod/Reg/ Spons                

Cost of Sales Freight            0.00    <5,387.90>

Independent Contractor      19,258.01    52,339.75
 Commission                               

Royalty Fees on Sales      <85,436.71>   16,008.53

Purchase Returns               510.00       510.00
 and Allowances                 

TOTAL COST OF SALES        <65,639.07>   68,506.19

GROSS PROFIT               181,623.66   538,814.35

                               

EXPENSES                       

IC Reimbursable Expense         51.00      411.00

Advertising Expense             16.00   <5,859.58>

Accounting/Prof. Fee        36,274.25   43,774.25

Bad Debt Expense           <45,554.00> <45,554.00>

Bank Charges                 3,895.83  16,810.85

Closing Costs                    0.00  26,910.15

Commissions & Fees Exp         354.77    <437.31>

Depreciation Expense        13,565.74  22,054.74

Dues and                     1,015.00   1,605.00
 Subscriptions Exp              

Employee Benefit             6,154.21   7,556.38
 Program Expense                        

Freight Expense             <4,452.70>  <2,081.25>

Interest Expense            16,144.04   24,216.06

Laundry and                      0.00       <3.00>
 Cleaning Expense               

Laundry and                    382.43    1,132.43
 Cleaning Expense               

Legal and                  <24,821.00>  <24,821.00>
 Professional Expense           

Legal and                   17,856.26    <8,259.89>
 Professional Expense           

Maintenance Expense              0.00       718.00

Moving Expense                 971.36       971.36

Meals and                        0.00       <47.02>
 Entertainment Exp              

Office Expense                 228.90     1,019.94

Payroll Tax Expense          5,768.35    13,639.45

Postage Expense              1,751.47     5,451.10

Printing and Reproduction    2,900.00    17,355.24

Professional                    40.00        40.00
 Salaries Billable              

Share/Transfer                 235.00        235.00
 Agent Expenses                 

Professional                   <95.00>       <95.00>
 Salaries Non-Billable
           
Professional                     0.00        790.74
 Salaries Non-Billable          

Rent or Lease Expense       11,466.50     16,229.00

Computer &                  16,535.10     23,455.88
 Equipment Leases               

Repairs Expense                400.00         550.00

Transcribing Expense        18,028.31      34,819.74

Salaries Expense            53,487.49      90,566.57

Employee Commission Expense  2,154.73       7,345.72

Subcontract fees             5,159.00      15,594.18

Supplies Expense              <302.82>      2,717.39

Computer Software Upgrades   4,231.66       4,787.76

Telephone Expense           23,701.97      46,851.74

Travel Expense               4,168.93       8,723.47

Utilities Expense             <554.90>      1,981.59

Wages Expense               16,614.89      59,630.29

CA Overtime Wage Expense         0.00         146.25

Other Expense                    0.00         212.99

TOTAL EXPENSES             187,772.77     411,146.21

                               

NET INCOME                  <6,149.11>     127,668.14
</TABLE>


                                 AOXY, INC.
                            Statement of Cash Flow
                   For the six months ended December 31, 1998

<TABLE>
<S>                                  <C>       <C>
                             Current Month  Year to Date
                                     
CASH FLOWS FROM                
 OPERATING ACTIVITIES           

Net Income                       <6,149.11> 127,668.14

Adjustments to                 
 reconcile net                  
 income to net cash             
 provided by                    
 operating activities           

Accum. Depreciation-Furniture       205.50    1,798.50

Accum. Dep. Office Equipment          0.00      894.00

Accum Dep. Equipment             13,210.63   18,153.63

A/D Capitalized Equipment             0.00    1,059.00

Accum. Depreciation                 149.61      149.61
 - Other                        

Money Market Acct                <9,122.51> <13,863.21>

Client Fees Receivables         <83,285.58> <29,154.18>

Contracts Receivable            <52,332.57> <52,332.57>

Knowledge Alliance Receivables   <7,450.40> <16,882.90>

ITSMA Receivables                27,600.50   36,160.50

DMDNY Receivables                 4,000.00    4,000.00

NMS Receivables                   1,190.00    1,190.00

M3 Learning                       4,590.00    4,590.00

Mecklermedia                         13.18    6,914.41
Internet World                 

Other Receivables                10,210.26   10,529.76

Database Receivables             <5,929.58>  <5,929.58>

A/R Reserve                     <45,554.00> <45,554.00>

Inventory                           <4.72>     <156.26>

Inventory                         <940.15>   <3,153.70>

Inventory CD's                       0.00       200.00

Accounts Payable                <1,681.86>      947.43

Accounts Payable                23,164.99    89,596.72

Accrued Expenses               <24,821.00>  <24,821.00>

Accrued Expenses                     0.00   <16,484.00>

Sales Tax Payable                  281.96       537.59

Health Care Contributions        1,226.49     3,700.17

Federal Payroll                 15,180.30    10,231.45
 Taxes Payable                  

State Payroll Taxes Payable        839.10     3,150.82

SUTA Tax Payable                    25.82        41.37

Payable to Client                    0.00   <61,418.00>

Deferred Income Commission           0.00    <7,681.00>

TOTAL ADJUSTMENTS               37,337.13   <55,859.02>

NET CASH PROVIDED BY            31,188.02    71,809.12
OPERATIONS                     

CASH FLOWS FROM                
INVESTING ACTIVITIES USED                
FOR NET CASH USED IN                 0.00         0.00
INVESTING                      

                               

CASH FLOWS FROM                
FINANCING ACTIVITIES           
PROCEEDS FROM                  

Notes Payable Jens Olsen             0.00      8,400.00

Notes Payable Crossfield             0.00      4,037.50

Note Payable Crossfield              0.00      5,314.50

Note Payable Crossfield              0.00     10,000.00

                               

Preferred Stock                
 Used For                       

Notes Payable Jens Olsen             0.00     <1,740.50>

Notes Payable Jens Olsen             0.00     <8,400.00>

Note Payable Crossfield         <2,519.01>    <2,519.01>

Note Payable Crossfield         <4,500.00>   <19,500.00>  
                               

Note Payable IMA 550,000             0.00    <11,752.42>

Other Long Term Liabilities          0.00     <7,812.00>

Preferred Stock                      0.00    <10,000.00>

Net Cash Used in Financing      <7,019.01>   <33,971.93>
                                     
NET INCREASE <DECREASE>IN CASH  24,169.01     37,837.19
                                                             

SUMMARY                        

Cash Balance at End           <18,997.44>    <18,997.44>
of Period                      

Cash Balance at                <6,355.76>     56,834.63
Beginning of                   
Period                         

Net Increase                  <25,353.20>    <37,837.19>
<decrease> in Cash             
</TABLE>

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

     On March 9, 1998, pursuant to an Agreement for Purchase and Sale of 
Specified Business Assets ("Purchase Agreement"), a Promissory Note ("Note"),
 and a Security Agreement ("Security Agreement") all dated March 9, 1998, 
Advanced Oxygen Technologies, Inc.(the "Company") purchased certain tangible 
and intangible assets (the "Assets") including goodwill and rights 
under certain contracts, from Integrated Marketing Agency, Inc.,
a California Corporation ("IMA").

     The Company used the Assets to generate revenues from sales of Multi-Media
CD-Roms, database management and fax broadcasting.

     Pursuant to an employment agreement dated March 09, 1998 between the
Company and John Teuber ("Employment Agreement"), on September 04, 1998 the
Company terminated John Teuber for cause without relinquishing any of its
rights or
remedies. 

     Pursuant to the Note, the  Purchase Agreement,  and the Security Agreement
between the Company and ("IMA"), the Company on September 04, 1998 exercised
its right of Set Off" of the Note, as defined therein due to IMA's breach of
numerous representations, warranties and covenants 
contained in the Note and certain ancillary documents. 

The Company further reserved any and all rights and remedies 
available to it under the Note, Purchase Agreement and Security Agreement.

     The Company entered into a two year employment agreement ("NAG
Agreement" as contained in Exhibit I of the registrants  SEC Form 10-K for the
period ending June 30, 1998) with Nancy Gaylord on March 13, 1998.  On
September 18, 1998, Nancy  Gaylord terminated her employment with the Company. 
The NAG Agreement had no provision for this termination.

     The Company entered into a lease agreement as contained in Exhibit I of
the registrants SEC Form 10-QSB for the period ending September 30, 1998 with
America-United Enterprises Inc. on October 01, 1998 and took possession of the
4700 of premises on November 06,1998 in Santa Clarita for its CA location. 
Currently, this is the only California location of the Company.

     On September 09, 1998 the Company appeared before the Santa Clarita
County small claims court to represent itself in a motion ("Motion") filed by a
plaintiff, Alpha Graphics, against John Teuber for a judgement on July 06,
1998 from a case filed May 29,1998, to be amended to the Company. 
The Motion was denied and the judgement was not amended to reflect 
the Company as a defendant.

     On November 6, 1998, the Company completed its move to its new
California location, 28633 Ruether Avenue, Santa Clarita, CA 91351. Currently 
this location is the only location the Company has operations.

     On November 10, 1998 the Company entered into a lease (Lease attached
hereto as Exhibit I) with NEC Leasing company for a lease of NEC NEAX 2000 IVS
phone system for the Santa Clarita CA location.

On December 9, 1998 the company delivered to IMA, "Notification to Indemnifying
Party and Demand for Indemnification for $2,251,266."  Pursuant to the Note, the
Purchase Agreement, the Security Agreement, and the Employment Agreement
(collectively the "Agreements"), the Company demanded that IMA pay $2,251,266
or defend the Company against the Liabilities (as defined therein) due to, among
other things, IMA's breach, representations, warranties, and violation of the
Agreements.

The Company continues to explore potential mergers, acquisitions, sales and
purchases with other companies.
     
Y2K (Year 2000 Problem)

     Y2K, or the Year 2000 Problem is a potential problem for computers
whereby the system would not recognize the date 2000 as year 2000 but instead as
1900 due to the fact that the computer industry standard for dating was a 2 
digit system and not 4 digits.  Each date represented was the last
two digits of the year, i.e.: 1998 was 98.  This problem could 
render important computer and communication systems inoperable which 
could have a significant effect on the Company's operations.  The 
Company's current exposure to potential Y2K systems that would
be affected could include (but not limited to): computers, telephones, all
forms of electronic communications, switches, routers, software, 
accounting software, banking,electricity, credit card processors, 
electronic data exchange, security systems, fax broadcasting 
software and hardware, database software, archives, data,
records, and others.  

     In an effort to minimize the Company's exposure to the potential Y2K
problem, the Company has contacted each of our vendors to assess how Y2K will
effect our operations. Although some vendors make verbal assurances of Y2K
compliance, there can be no certainty that the systems that the Company use
will not be affected.  AOXY continues to examine the risks associated 
with its most reasonably likely worst case Year 2000 scenarios. Scenarios 
might include a possible but presently unforeseen failure of key 
supplier or customer business, processes, or systems. These 
situations could conceivably persist for some months 
after the millennium transition and could lead to possible 
revenue losses. The Company also may not have 
the applicable capital resources to correct or replace certain
systems to be compliant with Y2K.  The Company may be able to 
replace or correct the Y2K problem within the organization, and 
still be affected by outside utilities and or vendors.  

     The Company may not directly experience any effect from the Y2K
problem, but the suppliers, vendors, clients or other associates of the
Company, may be affected and could possibly cause the Company harm by loss of
clients, loss of contracts, inability to receive supplies, etc.  The Y2K 
element alone could significantly alter the Company's operations and 
profitability.


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,
thereunto duly authorized.

Date: January 27, 1999     /s/ Robert E. Wolfe
                           Robert E. Wolfe, Chairman of the Board and
                           Chief Executive Officer and Principal
                           Financial Officer



Item 6.  Exhibits and Reports on Form 8-K
  (A) Exhibit 1  
ADVANCED OXYGEN TECHNOLOGIES, INC.
26883 RUETHER AVE.
SANTA CLARITA, CA 91351

Date:   October 7, 1998

NEC America,  Inc.
Attention:  PALMA RIZZI
300 Frank W. Burr Blvd. 7th Floor
Teaneck, New Jersey 07666

Re: Lease Agreement/Master Lease Agreement/Schedule A/ dated between
ADVANCED  OXYGEN TECHNOLOGIES, INC. as Lessee and NEC America,
Inc. as Lessor.

Gentlemen:

This letter hereby authorizes  NEC America, Inc. to amend and correct the above
referenced documents and/or any and all other documents as it relates to the
above captioned to read as follows:

TO:     PURCHASE OPTION: FAIR MARKET VALUE NOT TO EXCEED 40%
OF ORIGINAL COST

Such amendment shall have the same force and effect as if the Lease
Agreement/Master Lease Agreement/Schedule A and/or any and all of the other
related documents to the above captioned has originally so stated. NEC
America, Inc. is hereby authorized to file and/or refile an original or a 
reproduction hereof as or with a financing statement(s) in all appropriate
locations. The undersigned acknowledges and agrees that a copy, reproduction 
or facsimile of this letter shall have the same effect as having the original
hereof.

Sincerely,

ADVANCED OXYGEN TECHNOLOGIES, INC.

By:

Robert E. Wolfe,  Chairman of the Board and CEO
Printed Name, Title 

Accepted and Agreed to NEC America, Inc.

By:

16687October 7, 1998

NEC America, Inc. Leasing Operations 
Phone number 201-287-8300   Fax number 201-287-9555

NEC AMERICA,  INC.
300 FRANK W. BURR BLVD., 7TH FLOOR, TEANECK, NJ 07666
(201) 287-8300   (201) 287-9555 FAX

LANDLORD INFORMATION

DATE:  10/15/98

LESSEE:     ADVANCED OXYGEN TECHNOLOGIES 
            26883 RUETHER AVE.
            SANTA CLARITA, CA 91351


EQUIPMENT LOCATION:  26883 RUETHER AVE.
                     SANTA CLARITA, CA 91351

LANDLORD NAME:        America United Enterprises Inc.
ADDRESS:              9944 Glade Avenue
                      Chatsworth,  CA  91311

CONTACT:    John Capra

TELEPHONE: 818-886-0812  

PLEASE SUPPLY LANDLORD INFORMATION FOR EQUIPMENT
LOCATION ADDRESS

APP#16687

CERTIFICATE OF ACCEPTANCE

NEC America,  Inc.
300 Frank W. Burr Blvd., 7th Floor    Lease Number: 100-1016687
Teaneck, NJ 07666      Schedule Number:_________

Tel:   (201) 287-8300 Fax: (201) 287-9555

We hereby acknowledge receipt of the Equipment described in the above-referenced
Lease (the "Equipment") and after full inspection of the Equipment have found
it to be fully installed and in good working condition and satisfactory for al1
purposes of the app1icab1e Lease Agreement or Lease Schedule we both signed.
We hereby irrevocably authorize you to pay for and purchase the Equipment.

TO THE EXTENT THAT THE COST OF THE EQUIPMENT INCLUDES ANY
MAINTENANCE /WARRANTY CONTRACT, WE CLEARLY UNDERSTAND
AND AGREE THAT YOU HAVE NO RESPONSIBILITY TO US OR ANYONE
ELSE IN CONJUNCTION WITH THE RESPONSIBILITIES AND
OBLIGATIONS OF THE SUPPLIER WITH RESPECT TO THE
MAINTENANCE/WARRANTY CONTRACT AND THAT YOU DO NOT AND
WILL NOT ACCEPT ANY OBLIGATION OF ANY TYPE TO PERFORM ANY
SERVICE, REPAIR, REPLACEMENT OR MAINTENANCE OF THE
EQUIPMENT, AND THAT YOU ARE NOT A  PARTY TO THE
MAINTENANCE/WARRANTY CONTRACT. IN ALL CIRCUMSTANCES, WE
UNDERSTAND AND AGREE THAT YOU WILL ONLY SEEK TO HAVE THE
SUPPLIER PERFORM UNDER THE MAINTENANCE/WARRANTY
CONTRACT AND REGARDLESS OF ANY DISPUTE OR DISSATISFACTION
WE MAY HAVE WITH THE SUPPLIER OR THEIR SERVICES, WE AGREE
TO CONTINUE TO PAY YOU ALL THE RENTALS DUE UNDER THE
AGREEMENT AND THE PAYMENT DUE UNDER THIS LEASE SCHEDULE.

We understand that based on representations made by us herein and elsewhere, 
that you are about to purchase the Equipment and pay the Supplier.

Lessee: ADVANCED OXYGEN TECHNOLOGIES
By:   ________________________
      Authorized Signature/Title

Date Signed: ____________

1016687


NEC
LEASE AGREEMENT  LEASE NUMBER 100-1016687-1

NEC America, Inc. 300 Frank W. Burr Blvd., New  Jersey 07666
Tel: (201) 287-8300
Fax: (201) 287-9555

LESSEE (LEGAL NAME & ADDRESS)
ADVANCED OXYGEN TECHNOLOGIES, INC.
26883 RUETHER AVE
SANTA CLARITA, CA 91351
CONTACT:    BOB WOLE 
TELEPHONE:  805.298.3333

SUPPLIER
DIGITAL TELECOMMUNICATIONS, INC. 
8138 FOOTHILL BOULEVARD
SUNLAND, CA 91040
CONTACT:    DON COPELAND
TELEPHONE:    818.951.5314

EQUIPMENT DESCRIPTION: NEC NEAX2000 IVS telephone system; NEAX
AD-40 VOICE MAIL Together with all accessories, additions and attachments
thereto, replacements and substitutions therefor, now owned or hereafter 
acquired.

EQUIPMENT LOCATION: SAME AS ABOVE

RENTALS: PAYABLE
1 rentals of $10,057.00 each, plus applicable taxes followed by 39 rentals of
$1,243.05 each, plus applicable taxes

ADVANCE RENTALS (NOT A DEPOSIT)
First rental totaling $10,057.00 plus applicable taxes.


PURCHASE OPTION: FAIR MARKET VALUE plus applicable taxes.

This is a legal document. You should make sure that you understand everything in
this document before you agree to the terms by signing where indicated. Please
read this document carefully. If you do not understand something you should 
contact a legal counselor for advice. From this point on, we may use the words
you and yours to mean the Lessee as shown above. We may use the words we, us, 
and our to refer to the Lessor as shown below. 

1. AGREEMENT to LEASE: We are the owners of the Equipment described above
and on any Lease Schedule between you and us which we may agree to add to this
Agreement in the future Under the terms of this Agreement we agree to provide
the Equipment to you for your exclusive use in exchange for payment 
of Rentals and your continued performance of all of the obligations 
stated in this Agreement. You agree to make payments to us as described 
above under "Rentals" ["Rental Payments" or "Rent Payments"] and we agree 
to give you the exclusive use of the Equipment described above. You also 
agree to perform all of your obligations and to observe all of the conditions 
which apply to you and your use of the Equipment. 
Whenever we refer to an obligation or a right under this Agreement, the same
obligation or right is intended to apply to Equipment described in a Lease 
Schedule to this Agreement which incorporates these terms into a contract 
for additional equipment. ONCE WE ACCEPT THE AGREEMENT YOU MAY NOT 
CANCEL IT DURING THE RENTAL PERIOD.

2.  PURCHASE OPTION:  We will notify you 30 days before the end of the Lease
Term) as defined in paragraph 3), about your option to purchase the Equipment.
We may determine the fair market value based on our experience and sources
which we believe are reliable. You do not have the right to participate in this
determination or to object to the manner in which we determine the fair market
value.  If you agree to purchase the Equipment we will transfer all our rights
in the
Equipment to you on an AS-IS BASIS, WITHOUT ANY EXPRESS OR IMPLIED WARRANTY.

3.  RENT: The terms of this Agreement begin to apply to Equipment on the date
the Equipment is delivered to you and will continue until you have met all of 
your obligations under the Agreement ["Lease Term"]. During the Lease Term you 
will pay Rental Payments, plus applicable taxes, when each payment is due, 
whether or not you receive an invoice from us.  The Advance Rentals are due 
on the date you sign the Agreement. We will advise you when and where 
future Rental Payments are to be paid. If there is a change in the cost 
of the Equipment or other related expenses after you sign this Agreement or
any Lease Schedule, you agree that we may increase the Rent and Purchase 
Option Price by as much as 20% without your consent. You authorize us to 
insert or correct missing or incorrect information on the Agreement and 
we will send you copies of any document which include such changes.

4.  LATE PAYMENTS: In addition to our rights as stated under Section 17
REMEDIES, if we do not receive any Rental Payment or any other amount due
from you when due, you agree to pay us a later charge equal to Five Dollars
($5.00) or five (5%) percent of the amount to paid on time for each month 
payment is not received by us, which ever amount is higher. If we are 
not legally permitted to charge this amount, you agree to pay us the 
maximum amount permitted by law.

5. DISCLAIMER OF WARRANTIES: YOU AGREE TO LEASE THE EQUIPMENT "AS IS" 
AND UNDERSTAND THAT WE MAKE NO WARRANTIES, EXPRESS OR IMPLIED, CONCERNING 
THE EQUIPMENT, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF FITNESS
FOR A PARTICULAR PURPOSE OR OF MERCHANTABILITY.  YOU
HEREBY WAIVE ANY CLAIM (INCLUDING ANY CLAIM BASED ON
STRICT OR ABSOLUTE LIABILITY IN TORT) YOU MAY HAVE AGAINST
US OR ANY LOSS, DAMAGE (INCLUDING INCIDENTAL OR
CONSEQUENTIAL DAMAGES) OR EXPENSE RELATING TO THE
EQUIPMENT. YOU ARE AGREEING TO MAKE THE EQUIPMENT
AVAILABLE TO YOU BASED ON OUR UNDERSTANDING THAT YOU
HAVE SELECTED THE EQUIPMENT USING YOUR BEST JUDGEMENT
AND NOT ON THE BASIS OF ANY STATEMENTS OR
REPRESENTATIONS MADE BY US. YOU UNDERSTAND AND AGREE,
THAT NEITHER THE SUPPLIER OF THE EQUIPMENT NOR ANY AGENT
OF THE SUPPLIER OF THE EQUIPMENT, IS AUTHORIZED TO CHANGE
OR RELEASE ANY TERM OR CONDITION OF THIS AGREEMENT. NO
STATEMENT ABOUT THE EQUIPMENT OR ANY OTHER MATTER BY
THE SUPPLIER OR ITS AGENTS WILL AFFECT YOUR DUTY TO
PERFORM YOUR OBLIGATIONS AS SET FORTH IN THIS AGREEMENT.
We agree however, to the extent the manufacturer or vendor of the Equipment has
provided us warranty rights and to the extent we are able to do so, to assign
all of those warranty rights to you. If we are funding an Equipment 
maintenance for you, you understand that we are not responsible for the 
quality of the maintenance services.  If you have dispute regarding 
maintenance service you agree that you may continue to make payments as 
required under this Agreement and resolve any
complaints or  claims involving maintenance with the maintenance provider.

6.  NATURE OF THE PAYMENT OBLIGATION: You agree that you are
unconditionally obligated to make all Rental Payments and other amounts due for
the entire Lease Term even if you cannot use the Equipment or the Equipment is
not functioning properly or is damaged or destroyed. You cannot withhold or
reduce your payments under this Agreement whether or not we or anyone to whom
we transfer this Agreement, owe you a debt or is subject to any type of claim 
you may have under this Agreement or on any other basis.

7.  ASSIGNMENT: YOU MAY NOT SELL, TRANSFER, ASSIGNOR
SUBLEASE OR IN ANY WAY DISPOSE OF OR OTHERWISE RELINQUISH
POSSESSION OR CONTROL OF ALL OR ANY PART OF THE EQUIPMENT.
ON THE OTHER HAND, WE MAY SELL, ASSIGN OR TRANSFER OUR
RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT AND TO THE
EQUIPMENT WITHOUT NOTICE TO YOU. IF WE DO SO, YOU AGREE
THAT THE NEW LESSOR WILL HAVE THE SAME RIGHTS AND
BENEFITS THAT WE NOW HAVE BUT WE WILL STILL HAVE THE
SAME OBLIGATIONS TO YOU UNDER THIS AGREEMENT. YOU AGREE
THAT THE RIGHTS OF THE NEW LESSOR WILL NOT BE SUBJECT TO
ANY CLAIMS, DEFENSES OR SETOFFS THAT YOU MAY HAVE
AGAINST US.

8.  ENTIRE AGREEMENT: This Agreement contains our entire agreement and
supersedes any conflicting provision of any contract, purchase order or 
any other verbal or written agreement. No term or provision of this Agreement
may be amended, altered, waived, discharged or terminated except by a 
written instrument signed by the Lessor and Lessee, and in 
compliance with Section 2A-208(2) of the New York  Uniform 
Commercial Code requiring a separate signature.

Lessee initials _________

By signing this Agreement you are confirming to us that you have read all of the
terms on the face and reverse of this Agreement and if this is signed by your 
agent, the signer represents to us that he or she has authority to sign this
Agreement and agree to the terms on behalf of the Lessee. LESSEE WARRANTS THAT
EQUIPMENT IS FOR COMMERCIAL USE ONLY.

LESSOR: NEC AMERICA, INC.

By: __________
Authorized Signature
Printed Name, Title
Date

LESSEE: ADVANCED OXYGEN TECHNOLOGIES, INC.
By:
Authorized Signature
Chairman of the Board, CEO
Printed Name, Title
Witnessed by:


9. MAINTENANCE. USE, INSPECTION,
LOCATION AND ALTERATIONS: You agree to
(a)  maintain the Equipment in good condition; (b)
maintain for the Lease Term a maintenance
contract acceptable to us for the Equipment with a
manufacturer authorized dealer; and (c)  provide us
with a copy of the contract. The Equipment shall
be used and operated by you only in the ordinary
conduct of your business by your qualified
employees and in accordance with all applicable
operating instructions, and applicable governmental
laws, rules and regulations. Upon reasonable prior
notice, you shall make the Equipment and all
related components available to us for inspection
during normal business hours at the location of
such equipment. The Equipment shall not be
removed from the location specified in the
Agreement without our written consent.  You agree
not to make or permit anyone else to make any
alterations or modifications to the Equipment
without our prior written consent.
10.    TITLE: We own the Equipment and
except for your right to use the Equipment as
described in this Agreement, no one else has any
rights in the Equipment. You agree that you will at
all times keep the Equipment free from any claims
such as mortgages, liens or security interests. If
anyone else advises you that they have a claim
regarding the Equipment, you agree to advise us
immediately.  Unless that claim results from some
action or inaction on our part, you agree to take any
action which we believe is reasonably necessary to
defend our title to the Equipment, at your expense.
11.    TAXES: You agree to pay us, when due,
all taxes, fines and penalties relating to this
Agreement or to the Equipment that are now or in
the future assessed or levied by any state, local or
other government authority. We will file all
personal property, use or other tax returns, required
by law and you agree to pay us a fee for making
such filings.  We do not have to contest any taxes,
fines or penalties.  You will pay estimated property
taxes whenever invoiced by us.
12.    INDEMNITY: We are not responsible for
any injuries, damages, penalties, claims or losses,
including legal expenses, incurred by you or any
other person that may be caused by the
manufacture, installation, use, maintenance,
condition, return or disposition of the Equipment. 
You agree to defend us against any claims for such
losses, damages, penalties, claims, injuries or
expenses and to pay on our behalf, any fines,
judgments, penalties or costs which may be
charged to us on account of the same. This
obligation continues even after the Agreement has
expired.
13.    INSURANCE: You agree to provide and
maintain at your expense (a)  insurance against
loss, theft, damage or destruction to the Equipment,
for the full replacement value, naming us as loss
payee; and (b) public liability and property damage
insurance naming us as additional insured. Such
insurance must require thirty (30) days prior
written notice to us (or any of our successors or
assignees)  before the coverage lapses or is
canceled or before it materially changes. You agree
to provide us with certificates or other evidence
that you have obtained insurance. If you do not
provide evidence of insurance acceptable to us
within 1 0 days after our request, then we may
either obtain insurance at your expense or treat
your failure to provide insurance as a failure to
perform your obligations under this Agreement. If
any insurance proceeds are paid as a result of loss
or damage to the Equipment, so long as you are
not in default under this Agreement or any other
obligation to us, we may: (I) use the insurance
proceeds to repair or replace the Equipment, or (ii)
apply the insurance proceeds toward your
obligation under this Agreement.  You hereby
appoint us as your attorney-in-fact to make claims
for, receive payment of, and execute and endorse
all documents, checks, or drafts for loss or damage
under any insurance policies.
14.    RISK OF LOSS:  Upon delivery of the
Equipment to you, you will be responsible for the
risk of loss, damage, theft or destruction of the
Equipment or any part thereof, from any and every
cause whatsoever, until it is returned to us.  No
loss, damage, theft or destruction will free you
from your obligation to pay Rent or to comply with
any other provision of this Agreement.  In the
event of damage to any part of the Equipment, you
will immediately repair the Equipment at your own
expense, and return the Equipment to its previous
condition, unless it cannot be repaired. If the
Equipment is lost, stolen, destroyed or irreparably
damaged from any cause whatsoever, you must
promptly notify us and at our option, (a) replace
the Equipment with like equipment in good
condition and working order acceptable to us and
transfer title to the replacement equipment to us,
free and clear of all liens, claims and
encumbrances, which equipment will then become
subject to the Agreement; or (b) pay us the present
value (discounted at the rate of 6%) of the amount
equal to all unpaid Rentals due or to become due
under this Agreement, plus the then fair market
value of the Equipment As defined in Section 2
(the Residual Value) with respect to the affected
equipment, less the net amount of the recovery, if
any, actually received by us from insurance or
otherwise for such loss, damage. theft or
destruction. After compliance with this provision to
our satisfaction, and provided you are not in default
under this Agreement, you shall be subrogated to
our rights with respect to any insurance policies or
claims for reimbursement by others with respect to
such loss, damage, theft or destruction.
Once we receive such payment in full, together
with any Rent and other amounts due under this
Agreement, the Agreement will automatically
terminate as to such Equipment, and our right title
and interest in the Equipment shall immediately
without further action pass to you, on an as-is
where-is basis, without recourse or warranty.
15.    RETURN OF EQUIPMENT:  When the
Lease Term for Equipment ends or upon demand
as permitted under Section 17, you must return all
Equipment to us to any location we select within
the Continental United States in accordance with
instructions we will provide to you, clean, and in
good operating condition and repair, freight
prepaid and insured. You will continue to make
Rental Payments after the lease expires until the
Equipment is returned to us. You agree to pay us
the replacement cost and/or the repair and
refurbishing cost, including cleaning, for an
amount designated by us, if the Equipment is
returned damaged, incomplete, or shows signs of
excessive wear and tear, within 10 days of our
request.
16.    DEFAULT: The failure to comply with
the terms of this Agreement is referred to as a
Default. You are in default under this Agreement
if: (i) we do not receive any Rental Payment or
other payment when due; or (ii)  you or anyone
who has guaranteed your obligations to us breaks
any promises in this Agreement or any guaranty
and does not correct the problem within 10 days
after we send you written notice; or (iii) you or any
of your guarantors become insolvent, are liquidated
or dissolved, merge with another person, transfer
substantially all of your or their stock or assets, stop
doing business or assign your or their rights or
property for the benefit of creditors; or (iv) a
petition is filed by or against you or any of your
guarantors under any bankruptcy or insolvency
law; or (v) without our written permission in
advance, you try to move, sell transfer, pledge, part
with possession, sublet or permit a lien to be filed
on our Equipment; or (vi) any representation or
warranty made by you in this Agreement or any
related document is false or misleading at any time
in any material respect, or  (vii) if you are declared
in default by anyone from whom you borrowed
money.
17.    REMEDIES: Upon the occurrence of any
Default, we may, with or without notice to you,
exercise any one or more of the following
remedies, at our sole discretion:
a) Require you, at your own expense,  to return the
Equipment in accordance with Section 15, or we,
at our option, may enter upon the premises where
the Equipment is located and peaceably repossess
and remove the Equipment; (b) Declare
immediately due and payable all Rental Payments
and other amounts due and Residual Value to
become due under this Agreement; (c) Recover
from you, as liquidated damages for loss of the
benefit of our bargain and not as a penalty, an
amount, (the "Default Payment') equal to the sum
of: if all accrued and unpaid Rent and other
amounts due under the Agreement through the date
we have declared a Default, plus  ii) the present
value discounted at the rate of 6% of the sum of
(A) all amounts to be paid under the Agreement for
the balance of the Lease Term, plus B)  the
Residual Value, plus iii) Interest at 18% per annum
on the sum of items (i) and (ii)  accruing form the
date we declare a Default through the date we
receive such payment, plus all reasonable attorneys'
fees and other expenses and costs incurred by us
relating to the enforcement of our rights under this
Agreement; (d)  Sell by public or private sale, re-

lease, hold, retain or otherwise dispose of the
Equipment in any manner we choose, free and
clear of any claims or rights you may have and we
may recover from you as liquidated damages for
loss of the benefit of our bargain and not as a
penalty: i) if we hold and/or retain the Equipment,
the Default Payment; ii) If we re-lease the
Equipment, the Default Payment less the present
value of the rents to be received by us for such
releasing discounted at the rate of 6% and less the
Residual Value; or iii) if we sell or otherwise
dispose of the Equipment, the Default Payment less
the net proceeds received by us from such sale or
other disposition; e) Upon notice to you, we may
terminate this Agreement, sue to enforce your
performance under this Agreement and/or exercise
any other right or remedy then available to us at
law or equity. If we exercise any of the remedies
identified above, it will not constitute a termination
of this Agreement unless we notify you in writing.
No failure or delay on our part to exercise any right
or remedy under this Agreement will operate as a
waiver of our rights to exercise any such right or
remedy. No express or implied waiver by us of any
Default will constitute a waiver of any other
Default committed by you or a waiver of any of
our rights. No remedy in this section is intended to
be exclusive, but each shall be cumulative and
concurrent to the extent permitted by law, and will
be in addition to any other remedy referred to
above or otherwise available to us in law or equity.
18.    LESSEE'S WAIVERS: To the extent
permitted by applicable law, you hereby waive any
and all rights and remedies made available to you
by sections 2A-508 through 2A-522 of the New
York Uniform Commercial Code, including but
not limited to your rights to: i) cancel this Lease; ii)
repudiate this Lease; iii) reject the Equipment; iv)
revoke acceptance of the Equipment; v) recover
damages from us for any breach of warranty or for
any other reason; vi) hold a security interest in the
Equipment in your possession or control for any
reason; vii) deduct from payments to us, all or any
part of any claimed damages resulting from our
default, if any, under this Agreement; viii) accept
partial delivery of the Equipment; ix)'cover' by
making any purchase or lease, or contract to
purchase or lease, equipment in substitution for
Equipment to be leased from us; x) recover any
general, special. incidental or consequential
damages, for any reason whatsoever; and xi) bring
a proceeding for specific performance, replevin,
detinue, sequestration, claim and delivery or the
like for any Equipment identified to this
Agreement. To the extent permitted by applicable
law, you also hereby waive any rights now or
hereafter conferred by statute or otherwise which
may require us to sell, lease or otherwise use any
Equipment to reduce our damages as set forth in
Section 17 of this Agreement or which may
otherwise limit or modify any of our rights or
remedies under Section 17.
19.    MISCELLANEOUS, NOTICE: a) If you
or we are required under this Agreement to notify
the other of any matter, the notice must be sent by
certified first class mail, postage prepaid, or by a
reputable overnight delivery service, to the address
shown above. If you or we have listed a facsimile
number at the beginning of this Agreement, a
notice may be sent by facsimile to that number.
The address or facsimile number may be changed
by notifying the other party in writing.  Notices
sent by overnight delivery or by facsimile will be
considered effective when received. Notice sent by
first class mail will be effective on the third
business day after deposit in the U.S. Mail. b) If a
court determines that any part of this Agreement
cannot be enforced you and we agree to comply
with all other parts of this Agreement.  c) YOU
GIVE US OR OUR AGENT( S) THE RIGHT TO SIGN IN YOUR NAME AND FILE A
FINANCING STATEMENT IDENTIFYING OUR RIGHTS IN THE EQUIPMENT, WITH
THE GOVERNMENT OFFICE RESPONSIBLE FOR MAINTAINING THESE FILES d) IF
THERE IS A DISPUTE BETWEEN US, YOU AGREE THAT THE DISPUTE WILL BE
RESOLVED BY APPLYING THE LAWS OF THE STATE OF NEW YORK. e) The headings of
this Agreement have been inserted for convenience
only and should not be considered as defining our
rights and obligations. f) Any action brought by
you against us under this Agreement must be
commenced within one (1) year after the claim
arises or it will be considered released. g) WE
AND YOU AGREE TO GIVE UP THE RIGHT TO TRIAL BY JURY IN ANY AND ALL
ACTIONS  OR  PROCEEDINGS  OF  ANY KIND,  NATURE,  OR  DESCRIPTION
WHATSOEVER ARISING OUT OF. UNDER,OR BY REASON OF THIS AGREEMENT. This
waiver also applies to proceedings brought to determine the 
interpretation or validity of any part of this Agreement. 
This clause will survive the expiration or the termination 
of this Agreement.


Item 27.  Financial Data Schedules

               
                   
                   
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