U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 1999         Commission file No. 0-24511


                        ADVANCED OPTICS ELECTRONIC, INC.
                 (Name of small business issuer in its charter)

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

           8301 Washington NE, Suite 5, Albuquerque, New Mexico 87113
           (Address of principal executive offices including zip code)

Issuer's telephone number, including area code:                   (505) 797-7878

Securities registered under Section 12(b) of the Exchange Act:     None

Securities  registered  under Section  12(g) of the Exchange Act: Common Stock,
                                                                 $.001 par value
                                                                (Title of class)

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

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. _X_

The issuer's revenues for its most recent fiscal year were $310,345.

The aggregate market value of the voting stock held by non-affiliates of the
issuer on December 31, 1999 based upon the average bid and asked prices of such
stock on that date was $33,084,179. The number of issuer's shares of Common
Stock outstanding as of December 31, 1999 was 46,261,678.
Transitional Small Business Disclosure Format (check one): Yes __ No _X_


<PAGE>


                                     PART I


                         ITEM 1. DESCRIPTION OF BUSINESS

General

Advanced Optics Electronics, Inc. (ADOT-NASDAQ BB) is a technology company based
in Albuquerque, New Mexico. Its primary focus is the development, production and
sales of its novel and innovative electronic flat panel displays. The company
maintains an R&D facility and manufacturing plant, and is engaged in building
large-scale flat panel displays utilizing its patented technology.

The Company was organized as a Nevada corporation on May 22, 1996. On November
7, 1996, the Company acquired the business and patents of PLZTech, a company
involved in the development of flat panel displays.

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

Products

The primary initial product, which will be marketed to users of Outdoor
Advertising Billboards, is a large-scale electronic flat panel display. The
development of AOE's product represents the first time that such display
technology is available for Outdoor Advertising Billboards.

The Company's product has benefits over traditional billboards of providing
dynamic, eye-catching ads and rapid change of image to provide for multiple
advertisers during a 24-hour period. The ability to change images from a remote
location will provide advertisers with immediate access to billboard markets.

The AOE billboard display will provide an image 13' X 36' which is approximately
the same size as existing billboards.

The major advantages of the Advanced Optics Electronics, Inc. flat panel
displays are better viewing quality, affordability, customer system integrity,
and remote change in seconds to reduce advertising site maintenance.

In addition, none of these technologies can be scaled (driven larger or smaller)
as well as can the Advanced Optics Electronics, Inc. solution.



                                                                               3
<PAGE>

Marketing

After researching various markets including laptop computers, HDTV flat screen
industries, and Outdoor Advertising/Billboards, management has decided to
concentrate its full efforts and attention on marketing to the Electronic
Outdoor Advertising/Billboards industry. The Billboard segment of the outdoor
advertising market exceeds $2 billion per year.

Management believes that, due to the Highway Beautification Act, the number of
billboards nationwide will not increase dramatically but should remain stable.
Advertisers will place increased focus on securing and developing prime
billboard locations. The customer base for billboards is diversifying as more
advertisers are attracted to this media. The billboard industry is experiencing
rapid consolidation through mergers and acquisitions driven by the top
providers. Management's market penetration analysis is based on capturing
existing sites in a stable market.

It is anticipated that the company's product and marketing strategy will create
a new segment of the outdoor advertising market while leveraging the underlying
growth and excellent fundamentals of the existing market.

Revenues will be derived from a combination of direct sales, owned and operated
billboards, leasing, licensing, and partnerships. Experienced professionals in
finance, marketing, and research are leading management.

Customers

Over the past ten years, there has been considerable consolidation in Outdoor
Advertising. The four leaders in the industry currently account for
approximately 50% of the billboard market. Media companies have been buying
billboard owners in order to offer packages of TV, radio, internet and newly
acquired outdoor space to advertisers.

Initial customer contact will be through the company by directly communicating
with potential customers. Management is developing a marketing department to
follow through on each transaction and coordinate with manufacturing.

Competition

Advanced Optics Electronics, Inc. will compete against established forms of
electronic display technology. Management believes that its planned products
will be superior to these established products. Management nevertheless believes
that its products and technologies will be subject to substantial competition as
the market and technologies evolve.

The Company will compete with the existing Billboard display techniques of hand
painted or printed and pasted signs. Recently, the trend has been toward
creating the art digitally, but these images are still printed on large sheets
and pasted up in the same manner as before World War I. Management believes
these forms of billboard presentations will, in the future, only be viable in
low density/low traffic areas.



                                                                               4
<PAGE>

Approximately half of the available billboards were booked on 12-month contracts
last year. These relatively long-term contracts could potentially limit the
company's market penetration during the start-up period. Management believes
however, that the trend is to go to shorter-term contracts and shared sites.

Research and Development Activities

In fiscal 1999, which ended December 31, 1999, $239,029 was spent on research
and development activities. In 1998, $148,123 was spent on research and
development activities. The expenditures are primarily the result of costs
associated with the Company's efforts in developing its proprietary flat panel
display.

Employees

As of December 31, 1999, the Company has approximately 10 full-time employees
and two part-time employees. The Company also contracted with other personnel
and subcontractors for various projects on an as-needed basis.

ITEM 2. DESCRIPTION OF PROPERTY

The company maintains a 5,000 square foot headquarters facility at 8301
Washington NE, Suite 5 in Albuquerque, New Mexico. This includes the executive
offices, research and development facility and manufacturing plant. The facility
is in good condition with no material defects or deferred maintenance. The
facility is leased from unaffiliated third parties under a lease that expires
June 16, 2000. The lease may be extended at the Company's option for an
additional one-year term. Management believes that its existing facility space
currently under lease is sufficient for its current activities and potential
growth in the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the Company's security holders
during the fiscal year ended December 31, 1999.



                                                                               5
<PAGE>


                                     PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock began trading on the NASDAQ Bulletin Board Market
("NASDAQ") under the symbol "ADOT" during the first quarter of 1997. Prior to
that time the stock was not listed or traded on any organized market system. The
holders of the Company's Common Stock are entitled to one vote per share. The
Common Stock holders do not have preemptive rights to purchase, subscribe for,
or otherwise acquire any shares of Common Stock.

The table below sets forth the high and low bid prices for the Common Stock for
each quarter within the last two fiscal years as reported by America On Line.
These over-the-counter market quotations may reflect inter-dealer prices without
retail mark-up, markdown or commission and may not necessarily represent actual
transactions.

                                              Common Stock Bid
                                            High             Low
Fiscal 1998:
                 1st Quarter                $.57             $.15
                 2nd Quarter                 .30              .18
                 3rd Quarter                 .23              .11
                 4th Quarter                 .12              .04
Fiscal 1999:
                 1st Quarter                $.16            $.051
                 2nd Quarter                 .12             .065
                 3rd Quarter                 .49            .0825
                 4th Quarter                .875              .25


As of December 31, 1999 the Company estimates that there were approximately 5800
shareholders directly and in street name. The Company has never paid cash
dividends on its Common Stock and does not anticipate paying cash dividends in
the near future.

ITEM 6.  MANAGEMENT DISCUSSION AND ANALYSIS

Forward - Looking Statements

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



                                                                               6
<PAGE>

underlying such expectations  should  materialize,  the Company's actual results
may differ materially from those indicated by the forward-looking statements.

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

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

Liquidity and Capital Resources

The Company relies upon the current placement of its securities to provide
capital for its development of prototype units and manufacturing operations. The
Company's holding in BioModa, Inc and Wizard, Inc. will provide additional
liquidity.

BioModa is a biomedical develop. The Company's ownership of BioModa, as of
December 31, 1999, was 20%. The biotech company presently holds patents pending
domestically and internationally in the technology for early detection of lung
cancer. BioModa Inc. has signed a mutual Letter of Intent to form a joint
venture with the Cancer Center of Sun Yat Sen University of Medical Science in
Guangzhou, China (SUMS/CC). The joint venture will develop a China-wide cancer
diagnostics business, consisting of multiple, full service diagnostic centers.
The business of the Centers will be to process patient specimens from "at risk"
populations, utilizing BioModa's patented, proprietary technology, for
diagnosing cancer in several organs of the human body. SUS/CC is the largest and
most prestigious cancer center in China, which screens and treats nearly 300,000
patients per year. The Center is a World Health Organization, Research Affiliate
and is also the Cancer Clinical Study Center for the Country of China. No
immediate family members of officers or directors of Advanced Optics
Electronics, Inc. are securities holders of BioModa.

Wizard  Technologies,  Inc.  is  a  high-tech  development  company  located  in
Albuquerque,  New Mexico. Its primary focus is the development and production of
switches for fiber optic telecommunications systems. No immediate family members
of officers or directors of Advanced  Optics  Electronics,  Inc. are  securities
holders of Wizard.

It is believed that sales of securities will provide adequate capital resources
to meet the anticipated developmental stage requirements through the first half
of fiscal year 2000. At that time it is anticipated that sales of displays will
begin and contribute to operating revenues.


                                                                               7
<PAGE>

During the fiscal year ended December 31, 1999 $119,393 was spent for the
purchase of equipment. Product development expenditures were $239,029 in 1999.
Funds for operations, product development and capital expenditures were provided
from the sale of securities and cash reserves.

In August 1998 Advanced Optics Electronics, Inc. entered into a lease agreement
for the financing of equipment for the development of its flat panel display
systems. The Company is required to repay the $101,000 in equal monthly payments
of the lease. Monthly payments on the lease are approximately $2,850. The term
of the lease is 3 years and is backed by the credit of the Company.
Results of Continuing Operations

Fiscal 1999 Compared to Fiscal 1998

Revenues increased 74% to $310,345 in 1999 from $178,200 in 1998. The increase
was due primarily to revenues from the contract in place.

Research development and technical costs increased to $239,029 in 1999 from
$148,123 in1998. The increase in these costs is due primarily to research and
development efforts.

General and administrative costs increased to $1,952,600 in 1999 from $490,296
in 1998 due to increases in salaries related to changes in personnel and
increases in professional fees.

Depreciation increased to $102,691 in 1999 from $35,133 in 1998 due primarily to
depreciation expense for equipment acquired under capital leases.

Fiscal 1998 Compared to Fiscal 1997

Revenues increased 247.5% to $178,200 in 1998 from $72,000 in 1997. The increase
was due primarily to revenues from the contract in place.

Research development and technical costs increased to $148,123 in 1998 from
$10,521 in1997. The increase in these costs is due primarily to research and
development efforts.

General and administrative costs increased to $490,296 in 1998 from $73,421 in
1997 due to increases in salaries related to changes in personnel and increases
in professional fees.

Depreciation increased to $60,037 in 1998 from $37,156 in 1997 due primarily to
depreciation expense for equipment acquired under capital leases.

Accounting Matters

The Financial Accounting Standards Board ("FASB") periodically issues accounting
standards, which may affect the financial accounting or disclosures of the
Company. There are no accounting standards that have been issued, but not yet
adopted by the Company, which would



                                       8
<PAGE>

have a material effect on the financial  position or results of operation of the
Company.

ITEM 7.   FINANCIAL STATEMENTS

The financial statements and notes thereto, together with the report thereon of
Neff and Company (the Company's accountants) dated February 18, 2000, included
elsewhere in this report, are incorporated by reference in answer to this Item
7.


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE.

None.


                                                                               9
<PAGE>


                                    PART III

ITEM 9.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth information, as of December 31, 1999, concerning the
Company's directors and executive officers:

Name               Age      Position                               Since
Michael Pete       53       President, Treasurer, Director         July 1994
Leslie S. Robins   61       Exec. Vice Pres., Secretary, Chairman  November 1992
John J. Cousins    43       Vice President-Finance                 June 1999
Harold C. Herman   74       Director                               December 1998

Michael H. Pete, President, Director - With over 25 years of business and
professional experience, Mr. Pete has been President of ADOT and its predecessor
PLZ Tech since 1994. His prior experience included chief executive positions in
two high tech companies, project manager for Booz, Allen and as a technical
consultant for the U.S. Department of Energy.

Leslie S. Robins, Chairman and Executive Vice President of ADOT and its
predecessor PLZ Tech since late 1992. Mr. Robins has held executive positions in
investment banking and management focusing on small technology companies and the
entertainment industry.

John J. Cousins, Vice President of Finance - Mr. Cousins began his business
career as a design engineer for Ampex Corp and the American Broadcasting
Company. After receiving his MBA from the Wharton School he held several senior
financial management positions focusing on capital markets and business
development. He holds undergraduate degrees from Boston University and the
Lowell Institute School at MIT.

Harold C. Herman, Director since December 1998 to the present. Formerly a senior
partner of a NYC law firm and supervisor in the Patent Department of Bell
Telephone Laboratories. He is a member of the NY and CA Bars. He is a general
partner of numerous limited real estate partnerships. Mr. Herman is an engineer
holding an advanced degree in mathematics.

ITEM 10.   EXECUTIVE COMPENSATION

The following table discloses the annual and long-term compensation earned for
services rendered in all capacities by the Company's Chairman of the Board and
President and the Company's other most highly compensated executive officers for
1997, 1998 and 1999:



                                                                              10
<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                Annual Compensation                         Long-Term Compensation
                                -------------------------------------              Awards
                                                                          --------------------------
                                                         Other Annual      Restricted     Securities      LTIP        All Other
                                                         Compensation    Stock Award(s)   Underlying      Payouts     Compensation
                                                         (1)                              Options
Name and            Year       Salary ($)    Bonus ($)   ($)                   ($)        (#)             ($)         ($)
Principal Position
------------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>         <C>             <C>          <C>           <C>            <C>              <C>             <C>
Michael Pete,
President,
Director
                    1997        $  10,000        --          --                 --             --          --              --
                    1998        $  30,000        --          --                 --             --          --              --
                    1999        $  36,000        --          --            $   7,350        800,000        --              --
Leslie S. Robins,
Chairman of the
Board and Exec. VP
                    1997        $  18,000        --          --                 --             --          --              --
                    1998        $  67,600                    --                $2448           --          --              --
                    1999        $ 109,340        --        $7,352          $ 131,915      5,000,000        --              --
John J. Cousins,
VP Finance
                    1997             --          --          --                 --             --          --              --
                    1998             --          --          --                 --             --          --              --
                    1999        $  41,495        --          --            $   3,375        300,000        --              --
</TABLE>

----------
(1)  Other Annual Compensation for Leslie Robins was in the form of 12 months of
     a car lease.

OPTION GRANTS IN FISCAL YEAR 1999

<TABLE>
<CAPTION>
Name                             Number of              % of Total Options   Exercise Price        Expiration Date
                                 Securities             Granted to           ($/Sh)
                                 Underlying             Employees in
                                 Options(O) and         Fiscal Year
                                 Warrants(W)
------------------------------------------------------------------------------------------------------------------
<S>                               <C>                      <C>                 <C>                   <C>
Michael Pete                        300,000(O)              4.35%              $   0.09              1/5/2003
Michael Pete                        500,000(W)              7.25%              $   0.15              6/15/2004
Leslie Robins                     2,000,000(O)             28.99%              $   0.12              2/6/2003
Leslie Robins                     3,000,000(W)             43.48%              $   0.15              6/15/2004
John Cousins                        300,000(O)              4.35%              $   0.15              6/28/2003
Harold Herman                       150,000(O)              2.17%              $   0.09              1/5/2003
Harold Herman                       350,000(W)              5.07%              $   0.15              6/15/2004
</TABLE>


                                                                              11
<PAGE>

                 AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
                     AND OPTION VALUES AT DECEMBER 31, 1998

No options were exercised in fiscal year 1999.

<TABLE>
<CAPTION>
Name                 Shares Acquired       Value              Number of Securities Underlying           Value of Unexercised
                     on Exercise (#)     Realized ($)          Unexercised Options(O) and        In-the-Money Options at Fiscal
                                                              Warrants(W) at Fiscal Year End               Year End ($)
------------------------------------------------------------------------------------------------------------------------------------
                                                              Exercisable      Unexercisable   Exercisable       Unexercisable
------------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>               <C>              <C>                    <C>       <C>                    <C>
Michael Pete               --                --                 300,000(O)           --        $  235,500             --
Michael Pete               --                --                 500,000(W)           --        $  362,500             --
Leslie Robins              --                --               2,000,000(O)           --        $1,510,000             --
Leslie Robins              --                --               3,000,000(W)           --        $2,175,000             --
John Cousins               --                --                 300,000(O)           --        $  217,500             --
Harold Herman              --                --                 150,000(O)           --        $  117,750             --
Harold Herman              --                --                 350,000(W)           --        $  253,750             --
</TABLE>


                            LONG-TERM INCENTIVE PLANS

As of December 31, 1998 there is no long-term incentive plan.

                              Director Compensation

Non-employee directors of the Company received in 1999 a $1500 annual retainer
and $1500 for each board meeting attended.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 31, 1999 by (i) each
person or entity known to the Company to own beneficially five percent or more
of the Company's Common Stock, (ii) each of the Company's directors, (iii) the
Named Executive Officers, and (iv) all directors and executive officers of the
Company as a group.

                                                                              12
<PAGE>

Name and Addresses (1)                Number of Shares      Percent Beneficially
                                      Beneficially Owned           Owned
-------------------------------------------------------------------------------
John J. Cousins                            150,000 (2)               .11%
Harold Herman                               50,000 (3) (6)           .32%
Michael Pete                               214,524 (4) (6)           .46%
Leslie S. Robins                         4,748,795 (5) (6)         10.27%
All Directors and Officers as a          5,163,319                 11.16%
group
TOTAL SHARES OUTSTANDING                46,261,678                   100%

----------
(1)  The address of all persons who are  executive  officers or directors of the
     Company is in care of the Company, 8301 Washington NE, Suite 5, Albuquerque
     New Mexico 87113.

(2)  John J. Cousins has options  totaling  300,000 shares.  If all options were
     exercised Mr. Cousins would own .97% of the Company.

(3)  Harold Herman is a Director of the Company and has options totaling 150,000
     shares and warrants  totaling  350,000.  If all options and  warrants  were
     exercised Mr. Herman would own 1.18% of the Company.

(4)  Michael  Pete is a Director  and  Officer of the  Company  and has  options
     totaling 300,000 shares.  Mr. Pete has warrants totaling 500,000 shares. If
     all options and  warrants  were  exercised  Mr. Pete would own 2.16% of the
     Company.

(5)  Leslie S.  Robins  has  options  totaling  2,000,000  shares  and  warrants
     totaling  3,000,000  shares. If all options and warrants were exercised Mr.
     Robins would own 18.65% of the Company.

(6)  Warrants: There are 3,850,000 warrants outstanding.


ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In 1998 the Company issued 315,000 shares to Leslie S. Robins, an officer of the
Company, in exchange for a note receivable of $29,000. The note bears interest
at the rate of 7% with interest due semiannually and the principal due July of
2001.



                                                                              13
<PAGE>

                                     PART IV

ITEM 13. EXHIBITS,  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES,  AND
REPORTS ON FORM 8-K

     Financial Statements and Financial Statement Schedules








                                                                              14
<PAGE>



                                               ADVANCED OPTICS ELECTRONICS, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)

                                                                FINANCIAL REPORT

DECEMBER 31, 1999



<PAGE>


                        ADVANCED OPTICS ELECTRONICS, INC.
                          (A DEVELOPMENT STAGE COMPANY)



                                    CONTENTS

                                                                           Page

INDEPENDENT AUDITORS' REPORT                                                1

FINANCIAL STATEMENTS

      Balance Sheet                                                         2

      Statements of Operations                                              4

      Statements of Changes in Stockholders' Equity                         5

      Statements of Cash Flows                                              7

      Notes to Financial Statements                                         8



<PAGE>


NEFF & RICCI LLP


CERTIFIED PUBLIC ACCOUNTANTS
7001 PROSPECT PLACE NE
ALBUQUERQUE, NM  87110


                          Independent Auditors' Report

Board of Directors
Advanced Optics Electronics, Inc.

We have audited the balance sheet of Advanced Optics Electronics, Inc. (a
development stage company) as of December 31, 1999, and the related statements
of income, retained earnings, and cash flows for the years ended December 31,
1999 and 1998, and for the 1999 and 1998 portion of the period from May 22, 1996
(inception) through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The financial
statements for the 1996 and 1997 portion of the period from May 22, 1996
(inception) through December 31, 1999, were audited by other auditors whose
report dated February 5, 1998, expressed an unqualified opinion on those
statements.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 1999 financial statements referred to above present fairly,
in all material respects, the financial position of Advanced Optics Electronics,
Inc. as of December 31, 1999, and the results of its operations and its cash
flows for the years ended December 31, 1999 and 1998, and for the 1999 and 1998
portion of the period from May 22, 1996 (inception) through December 31, 1999,
in conformity with generally accepted accounting principles.



/s/ Neff & Ricci LLP

Albuquerque, New Mexico
February 18, 2000


                                                                               1
<PAGE>


ADVANCED OPTICS ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
December 31, 1999


ASSETS

CURRENT ASSETS
    Cash and cash equivalents                                       $   190,387
    Certificate of deposit                                              104,582
    Marketable equity securities                                         36,474
    Costs and estimated earnings
        in excess of billings on
        uncompleted contract                                            560,545
    Raw materials                                                        35,293
    Due from officer and shareholder                                     67,494
                                                                    -----------

           Total current assets                                         994,775
                                                                    -----------


FIXED ASSETS, at cost
    Furniture and fixtures                                               28,097
    Computers                                                            35,900
    Technical equipment                                                 187,397
    Automobile                                                           43,313
    Equipment under capital lease                                       101,359
    Leasehold improvements                                               16,775
    Less accumulated depreciation                                      (102,691)
                                                                    -----------

           Total fixed assets                                           310,150
                                                                    -----------


OTHER ASSETS
    Note receivable from officer                                         31,030
    Investment in Bio Moda, Inc.                                        207,334
    Investment in Wizard Technologies, Inc., at cost                     65,000
    Debt origination costs, net of accumulated
        amortization of $5,831                                           14,169
    Goodwill, net of accumulated amortization
        of $396                                                           4,604
    Patents, net of accumulated amortization
        of $43,594                                                      198,745
    Other assets                                                         30,000
                                                                    -----------

           Total other assets                                           550,882
                                                                    -----------

           Total assets                                             $ 1,855,807
                                                                    ===========

  The Notes to Financial Statements are an integral part of these statements.



                                                                               2
<PAGE>



LIABILITIES AND SHAREHOLDERS' EQUITY


CURRENT LIABILITIES
    Accounts payable                                                $    64,175
    Notes payable                                                         4,726
    Accrued liabilities                                                  16,205
    Current portion of long-term debt
        and capital lease obligation                                     44,105
    Allowance for loss on contract                                       71,545
                                                                    -----------
           Total current liabilities                                    200,756
                                                                    -----------

Long-term portion of long-term debt
    and capital lease obligation                                        408,790
                                                                    -----------

COMMITMENTS

SHAREHOLDERS' EQUITY
    Common stock, authorized 75,000,000 shares,
        $.001 par value, 46,140,973 shares issued
        and outstanding                                                  46,141
    Additional paid-in capital                                        4,870,257
    Deficit accumulated during the development stage                 (3,639,507)
    Treasury stock                                                      (30,630)
                                                                    -----------

           Total shareholders' equity                                 1,246,261
                                                                    -----------


           Total liabilities and shareholders' equity              $  1,855,807
                                                                   ============



                                                                               3
<PAGE>



ADVANCED OPTICS ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Years Ended December 31, 1999 and 1998,
and the Period from May 22, 1996 (Inception)
Through December 31, 1999

<TABLE>
<CAPTION>
                                                                                                                           5/22/96
                                                                                                                         (Inception)
                                                                                                                            Through
                                                                                1999                   1998                12/31/99
                                                                             ------------           ----------          ------------
<S>                                                                          <C>                       <C>                  <C>
REVENUES
    Contract revenue                                                         $    310,345              178,200              560,545
                                                                             ------------           ----------          ------------

COSTS AND EXPENSES
    General and administrative                                                  1,952,600              490,296            2,572,735
    Contract costs                                                                468,221              215,472              741,361
    Research and development                                                      239,029              148,123              428,147
                                                                             ------------           ----------          ------------

           Total expenses                                                       2,659,850              853,891            3,742,243
                                                                             ------------           ----------          ------------

    Operating loss                                                             (2,349,505)            (675,691)          (3,181,698)
                                                                             ------------           ----------          ------------

OTHER INCOME AND (EXPENSES)
    Interest income                                                                10,865                  851               11,716
    Unrealized gain (loss) on marketable
        equity securities                                                         (26,684)              (6,875)             (33,559)
    Loss on Bio Moda, Inc.                                                       (108,086)             (68,424)            (176,510)
    Interest expense                                                             (189,374)              (1,972)            (196,436)
                                                                             ------------           ----------          ------------

           Total other expenses                                                  (313,279)             (76,420)            (394,789)
                                                                             ------------           ----------          ------------

           Net loss before cumulative effect
               of change in accounting principle                               (2,662,784)            (752,111)          (3,576,487)
                                                                             ------------           ----------          ------------

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

           Net loss                                                            (2,725,804)            (752,111)          (3,639,507)
                                                                             ------------           ----------          ------------

Net loss per share before cumulative effect
    of change in accounting principle                                               (.070)               (.055)               (.188)

Cumulative effect of change in
    accounting principle                                                            (.002)                --                  (.002)
                                                                             ------------           ----------          ------------

Net loss per share                                                           $      (.072)               (.055)               (.190)
                                                                             ============           ==========           ==========

Weighted average shares outstanding                                            37,809,084           13,723,302           18,969,584
                                                                             ============           ==========           ==========
</TABLE>

  The Notes to Financial Statements are an integral part of these statements.


                                                                               4
<PAGE>


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

<TABLE>
<CAPTION>
                                                        Common Stock
                                              ---------------------------------
                                                                         Par
                                                        Shares          Value
<S>                                                 <C>              <C>
Balance, May 22, 1996                                         --    $        --

Stock issued to incorporators for cash                   500,000            500

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

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

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

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

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

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

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

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

Stock issued in exchange for note receivable             315,000            315

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

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

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

Stock issued for cash                                  8,681,624          8,682

Stock issued for services                             17,094,313         17,094

Intrinsic value of beneficial conversion
    feature of notes payable                                  --             --

Fair value of warrants related to notes payable               --             --

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

Purchase of treasury stock                                    --             --

Sale of treasury stock                                        --             --

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

Balance, December 31, 1999                            46,140,973    $    46,141
                                              =================================
</TABLE>


  The Notes to Financial Statements are an integral part of these statements.


                                                                               5
<PAGE>


ADVANCED OPTICS ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)

<TABLE>
<CAPTION>
                                                                                   Equity
                                                                                  (Deficit)
                                                                                 Accumulated
                  Treasury Stock                         Additional               During the               Total
       -----------------------------------                Paid-In                Development            Shareholders'
             Shares               Cost                    Capital                   Stage                  Equity
       -------------------------------------------------------------------------------------------------------------
       <S>                    <C>                       <C>                     <C>                       <C>
             --               $       --                       --                       --                       --

             --                       --                   24,500                       --                   25,000

             --                       --                  281,096                       --                  285,596

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

             --                       --                  305,596                  (76,902)                 233,694

             --                       --                  362,720                       --                  365,001

             --                       --                       --                  (84,690)                 (84,690)
       -------------------------------------------------------------------------------------------------------------
             --                       --                  668,316                 (161,592)                 514,005

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

             --                       --                  293,719                       --                  296,470

             --                       --                   28,685                       --                   29,000

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

             --                       --                       --                 (752,111)                (752,111)
       -------------------------------------------------------------------------------------------------------------
             --                       --                2,232,535                 (913,703)               1,339,686

             --                       --                  855,101                       --                  863,783

             --                       --                1,469,320                       --                1,486,414

             --                       --                  174,610                       --                  174,610


             --                       --                  125,000                       --                  125,000

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

       (229,000)                 (41,760)                      --                       --                  (41,760)

         85,000                   11,130                   24,334                       --                   35,464

             --                       --                       --               (2,725,804)              (2,725,804)
       -------------------------------------------------------------------------------------------------------------
       (144,000)              $  (30,630)               4,870,257               (3,639,507)               1,246,261
</TABLE>



                                                                               6
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                                               5/22/96
                                                                                                             (Inception)
                                                                                                               Through
                                                                           1999                1998           12/31/99
<S>                                                                    <C>                   <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
    Net (loss)                                                         $(2,725,804)          (752,111)        (3,639,507)
    Adjustments to reconcile net loss to net cash
        provided by operating activities:
           Amortization and depreciation expense                            87,755             66,037            194,526
           Write off of organization costs                                  63,020                 --             63,020
           Amortization of discounts on convertible notes                  135,532                 --            135,532
           Unrealized loss on marketable securities                         26,684              6,875             33,559
           Loss on Bio Moda, Inc.                                          108,086             68,424            176,510
           Issuance of common stock for services                         1,486,414            296,470          1,782,884
           Issuance of notes for services                                   50,000                 --             50,000
           Contract receivable                                            (310,345)          (178,200)          (560,545)
           Allowance for loss on contract                                   71,545                 --             71,545
           Other receivables                                               (22,477)           (13,704)           (79,874)
           Inventory                                                       (35,293)                --            (35,293)
           Accrued liabilities and accounts payable                         44,967             29,988             80,380
                                                                       -------------------------------------------------
               Net cash applied to operating
                  activities                                            (1,019,916)          (476,221)        (1,727,263)
                                                                       -------------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of equipment                                                 (133,824)          (135,334)          (312,340)
    Investment in Bio Moda, Inc.                                           (25,000)          (358,845)          (383,845)
    Purchase of marketable securities                                           --            (70,034)           (70,034)
    Purchase of certificate of deposit                                     (54,582)           (50,000)          (104,582)
    Purchase of other assets                                                (9,650)           (20,050)           (96,427)
    Investment in Wizard Technologies, Inc.                                (65,000)                --            (65,000)
                                                                       -------------------------------------------------
               Net cash applied to investing
                  activities                                              (288,056)          (634,263)        (1,032,228)
                                                                        ------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Additions to notes payable                                             478,050             41,733            572,776
    Payments on notes payable and capital
        lease obligation                                                   (30,658)           (63,380)          (121,576)
    Issuance of common stock                                               863,783          1,292,707          2,546,491
    Sale of treasury stock                                                  35,464                 --             35,464
    Purchase of treasury stock                                             (52,892)           (30,385)           (83,277)
                                                                       -------------------------------------------------
               Net cash provided by financing
                  activities                                             1,293,747          1,240,675          2,949,878
                                                                       -------------------------------------------------

Net increase (decrease) in cash                                            (14,225)           130,191            190,387

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

Cash, end of period                                                    $   190,387            204,612            190,387
                                                                       =================================================
</TABLE>


  The Notes to Financial Statements are an integral part of these statements.


                                                                               7
<PAGE>


NOTE 1.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Cash and Cash Equivalents. Cash and cash equivalents include all cash balances
and highly liquid debt instruments with an original maturity of three months or
less. The Company's cash is deposited in financial institutions and is insured
only up to $100,000 by the Federal Deposit Insurance Corporation at each
institution. As of December 31, 1999, approximately $90,000 was not insured.

Marketable Equity Securities. The Company classifies all of its marketable
equity securities as available for sale securities. Available for sale
securities are carried at fair value with the unrealized gains and losses
reported in Other Comprehensive Income. As of December 31, 1999, gross
unrealized losses were $26,684 and not considered significant to the financial
statements taken as a whole. Therefore, they have been reported in the income
statement. Realized gains and losses were not material.

Inventories.  Inventory consists of raw materials and is carried at the lower of
cost (specific identification) or market.

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

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


                                                                               8
<PAGE>


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

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

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

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

Effect of New Accounting Pronouncements. Effective January 1, 1999, the Company
adopted Statement of Position 98-5 Reporting the Costs of Start-up Activities,
which requires that organization costs be expensed. The impact of this change in
accounting principle was to reduce assets and increase the deficit accumulated
during the development stage by $63,020 as of December 31, 1999.

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

Stock-Based Compensation. As described in Note 9, the Company has elected to
follow the accounting provisions of Accounting Principles Board Opinion (APBO)
No. 25, Accounting for Stock Issued to Employees, for stock-based compensation
and to furnish the pro forma disclosures required under SFAS No. 123, Accounting
for Stock-Based Compensation.



                                                                               9
<PAGE>


NOTE 1.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
               (CONTINUED)

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

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

The contract to produce two outdoor advertising billboards totals $1.7 million,
with $885,000 allocated to the first unit. An estimated total loss of
approximately $195,000 in the first unit has been recognized as of December 31,
1999. The Company's estimated cost to complete as of December 31, 1999 is
$396,000 which it expects to fund with cash, billings on the contract and
additional capital.

In accordance with the contract, the Company will bill the customer when certain
milestones have been met. There have been no billings through December 31, 1999.

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

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


NOTE 2.        RELATED PARTY RECEIVABLES

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

     Due from officer                                     $52,494
     Note receivable from former shareholder bearing
         interest at 8% and due in June, 2000              15,000
                                                        ---------

                                                          $67,494


                                                                              10
<PAGE>


NOTE 3.        INVESTMENTS

During 1999 Bio Moda, Inc. sold additional shares, therefore the Company's
investment in Bio Moda, Inc. decreased from 22 to 20 percent. Bio Moda, Inc. is
a development stage company involved primarily in the development of technology
for the early detection of lung cancer. As a development stage company, Bio
Moda, Inc. has not had any revenues and, as of December 31, 1999, was in the
process of conducting clinical trials.

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

A summary of the unaudited financial data relative to Bio Moda, Inc. as of
December 31, 1999 is as follows:

     Assets:
         Current assets                                          $  30,730
         Other assets                                               24,465
                                                                 ---------
                                                                    55,195

         Fixed assets                                                2,515
                                                                 ---------

     Total assets                                                $  57,710
                                                                 =========

     Liabilities and equity
         Current liabilities                                     $      --
         Notes payable to stockholders                              92,711
         Common stock                                              760,037
         Deficit accumulated during the development stage         (795,038)
                                                                 ---------

     Total liabilities and equity                                $  57,710
                                                                 =========

The investment in Bio Moda, Inc. is accounted for using the equity method. A
summary of the investment is as follows:

     Original cost, all of which exceeded book value             $ 358,845
     Additional purchase in 1999                                    25,000
     Share of net loss                                            (134,011)
     Amortization of excess of cost
         over book value                                           (42,500)
                                                                 ---------

     Net investment                                              $ 207,334
                                                                 =========

In August 1999, the Company issued 200,000 shares of its common stock to Wizard
Technologies, Inc. for $88,580. The Company then purchased a 10 percent
ownership in Wizard for $65,000 with the proceeds. The Company is applying the
cost method of accounting for the investment as there is no market value for the
stock of Wizard. The related agreement includes a provision for the Company to
increase its investment to 20 percent in 2000. The Company's decision to
increase their investment is contingent upon Wizard meeting certain progress
objectives.


                                                                              11
<PAGE>


NOTE 4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION

Capital Lease Obligation. In July, 1998, the Company entered into a capital
lease agreement for equipment valued at $100,499 (net book value of $71,100 at
December 31, 1999). The Company made a down payment of $20,170. The remaining
amount was financed on a lease with 36 monthly payments of $2,810. Future
minimum lease payments are as follows for the years ending December 31:

     2000                                                         $ 33,720
     2001                                                           18,674
                                                                  --------
                                                                    52,394
     Less amounts representing interest                             (5,707)
                                                                  --------
                                                                  $ 46,687
                                                                  ========

Long-Term Debt. In November 1999, the Company obtained a note payable from a
bank to purchase equipment. The note is due in 36 monthly installments of
principal and interest (bank index rate plus 1.5 percent which was 10 percent at
December 31, 1999) of $354. The note is secured by equipment and the balance
outstanding at December 31, 1999 was $10,817.

In October 1998, the Company obtained a note payable from a bank as part of the
purchase of an automobile. The note is due in monthly installments of principal
and interest (fixed rate of 8 percent) of $817 until October 2002. The note is
secured by the automobile and the balance outstanding at December 31, 1999 was
$25,454.

In April 1999, the Company obtained a note payable from a bank to purchase
equipment. The note is due in 36 monthly installments of principal and interest
(bank index rate plus 1.5 percent which was 10 percent at December 31, 1999) of
$409. The note is secured by equipment and the balance outstanding at December
31, 1999 was $10,726.

Convertible Notes. On June 3, 1999, the Company issued $500,000 in convertible
notes which bear interest at an annual rate of 8 percent and mature (principal
and interest) on May 31, 2001. Effective August 1, 1999, the notes are
convertible into shares of common stock at a 25 percent discount to the closing
bid price of a share of common stock at the time of conversion or the time of
exercise. The notes were issued in exchange for $430,000 in cash, $50,000 in
legal services and $20,000 in commissions. The commissions have been capitalized
as debt origination costs and are being amortized over the life of the notes.
The notes are unsecured.



                                                                              12
<PAGE>


NOTE 4. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION (CONTINUED)

The intrinsic value of the conversion feature of the principal and accrued
interest was estimated to be $174,610. This has been recorded as an increase in
paid-in capital and a discount to the convertible notes payable, with related
amortization being charged to interest expense. The discount is being amortized
over a one year period, which is management's estimate of time before any
conversion will be exercised. The convertible notes also include detachable
warrants for the purchase of 12,500,000 shares of common stock at the lower of
75 percent of the closing bid price of a share of common stock at the time of
exercise or September 1, 1999. The warrants expire on June 3, 2002. Management
estimates that approximately half the warrants will be exercised prior to
expiration.

Management estimated the fair market value of these warrants at $125,000 and
recorded this amount as an increase in paid-in capital and a discount to the
convertible notes payable. The discount is being amortized over the two year
life of the notes.

A significant contingency required by the aforementioned convertible note and
warrant agreements is the registration of the underlying shares with the
Securities and Exchange Commission. The company is to use its best efforts to
register these shares and is in the process of preparing the registration
statement.

Principal payments for long-term debt and convertible notes for the years ending
December 31 are as follows:

      2000                                                            $  15,500
      2001                                                              540,735
      2002                                                               14,592
                                                                      ---------

                                                                        570,827

     Less unamortized discount and interest on convertible notes       (164,619)
                                                                      ---------

     Total                                                            $ 406,208
                                                                      =========

NOTE 5. EQUITY TRANSACTIONS

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


                                                                              13
<PAGE>


NOTE 5. EQUITY TRANSACTIONS (CONTINUED)

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

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

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

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

In 1999 the Company repurchased 489,251 shares of its outstanding stock for
$11,132 in cash. These shares were retired. The Company also repurchased 229,000
shares for $41,760 and resold 85,000 of these shares for $35,464. The remaining
144,000 treasury shares have been recorded at cost.

The Company also sold 8,681,624 shares for $863,782 in cash, and issued
17,094,313 shares for services from contractors, officers and others, which were
valued at $1,486,414.

NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

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


                                                                              14
<PAGE>


NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

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

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

     Cash and cash equivalents                        $190,388       190,388
     Certificate of deposit                            104,581       104,581
     Marketable equity securities (with an
         original cost of $63,159)                      36,474        36,474
     Notes receivable                                   67,493        67,493
     Notes payable                                       4,726         4,726
     Long-term debt and capital lease obligation       452,897       452,897

NOTE 7. INCOME TAXES

At December 31, 1999, the Company had deferred tax assets amounting to
approximately $1,280,000. The deferred tax assets consist primarily of the tax
benefit of net operating loss carryforwards and are fully offset by a valuation
allowance of the same amount.

The net change in the valuation allowance for deferred tax assets was an
increase of approximately $960,000 in the year ending December 31, 1999. The net
change is due primarily to the increase in net operating loss carryforwards.

At December 31, 1999, the Company had net operating loss carryforwards of
approximately $3,200,000 available to offset future state and federal taxable
income. These carryforwards will expire in 2016 to 2019 for federal tax purposes
and 2001 to 2004 for state tax purposes.

NOTE 8. COMMITMENTS

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



                                                                              15
<PAGE>


NOTE 8. COMMITMENTS (CONTINUED)

Rent expense during 1999 and 1998 was $34,600 and $13,634, respectively.

Future minimum lease payments are as follows:

                                                 2000               $16,200

     NOTE 9.                                                        STOCK PLANS

During 1999, the Company started a stock-based compensation plan, which is
described below. The Company applies APB Opinion 25 and related Interpretations
in accounting for this plan. Accordingly, no compensation cost has been
recognized for its Stock Option Plan. Had compensation cost for the Company's
stock-based compensation plan been determined based on the fair value at the
grant dates for awards under the plan consistent with the method of FASB
Statement 123, the Company's net income and earnings per share would have been
reduced to the pro forma amounts indicated below.

                                                 1999             1998

     Net loss - as reported               $   (2,725,804)         (752,111)
       Pro forma                              (2,940,633)         (752,111)

     Loss per share - as reported                   .072              .055
       Pro forma                                    .072              .055

On January 4, 1999, the Board of Directors of the Company adopted an Incentive
Stock Option Plan. Pursuant to the plan, up to 10,000,000 shares of common stock
of the Company may be granted as options to key employees. The shares issued
upon exercise of the options may be authorized and unissued shares or shares
held by the Company in its treasury. The exercise date of options granted is
based upon the related agreement as approved by the Board of Directors. The
Incentive Stock Option Plan expires on January 4, 2009.

During the year, 3,050,000 stock options were granted. The fair value of each
option grant for the above pro forma disclosures is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions: dividends of $0 per year; expected volatility
ranging from 143 percent to 173 percent; risk-free interest rate ranging from
4.62 percent to 5.86 percent; and expected lives of 4 years.


                                                                              16
<PAGE>


NOTE 9. STOCK PLANS (CONTINUED)

The Company also issued Stock Purchase Warrant Agreements to each of its
Directors. The total number of "warrant shares" issued under these agreements
was 3,850,000 shares, which are exercisable at any time until they expire on
June 15, 2004. The price established for the shares upon exercise is .15 cents
per share.

A summary of the common option and warrant activity for employees, directors and
officers is as follows:

                                    Warrants         Weighted
                                       And            Average
                                     Options       Option Price    Exercisable

Balance, December 31, 1997             153,954        $   .58          153,954

Balance, December 31, 1998             153,954            .58          153,954
                                                                    ==========
    Granted                          6,900,000            .16
    Expired                           (153,954)           .58
                                    ----------

Balance, December 31, 1999           6,900,000            .16        6,185,000
                                    ==========                      ==========


The option price established for the shares upon exercise ranges from .09 cents
per share to .30 cents per share, and expire from January 2003 to June 2004,
with a weighted average expiration date of November 2003. The options vest over
a one year period and the warrants are exercisable immediately.


                                                                              17
<PAGE>

     Indexes to financial  statements  appear after the  signature  page to this
Form 10-KSB.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Exhibits
-------------------------------------------------------------------------------------------------------------
<S>     <C>                                                           <C>
2       Plan of Acquisition, Reorganization, arrangement,             None
        liquidation, or succession

3.1     Articles of Incorporation                                     Incorporated by reference to Exhibit
                                                                      3(i) of the Company's Registration
                                                                      Statement No.1000-24511 on Form
                                                                      10-SB filed June 23,1998.
3.2     By-Laws                                                       Incorporated by reference to Exhibit
                                                                      3(ii) of the Company's Registration
                                                                      Statement No.1000-24511 on Form
                                                                      10-SB filed June 23,1998.

4       Instruments defining the rights of holders, including         Incorporated by reference to Exhibit
        Indentures                                                    3.2

7       Opinion re: liquidation preference                            Incorporated by reference to Exhibit
                                                                      3.2

10.1    Incentive Stock Option Plan                                   Filed Herewith

10.2    Lease Agreement Advanced Optics Electronics, Inc. and JMP     Incorporated  by  reference  to  Exhibit
        Company Inc                                                   10.2  of  the   Company's   Registration
                                                                      Statement  No.1000-24511  on Form  10-SB
                                                                      filed June 23,1998.

10.3    State of Nevada Corporate Charter                             Incorporated by reference to Exhibit
                                                                      10.3 of the Company's Registration
                                                                      Statement No.1000-24511 on Form
                                                                      10-SB filed June 23,1998.

24      Power of Attorney                                             Incorporated by reference to Exhibit
                                                                      3.2

27      Financial Data Schedule                                       Filed Herewith
</TABLE>


                               Reports on Form 8-K

During the 1999 fiscal year, the Company filed no reports on Form 8-K.



<PAGE>




                                   SIGNATURES


In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report on Form 10KSB to be signed on its behalf by the undersigned,
thereunto duly authorized.


Dated:    March 7, 2000

ADVANCED OPTICS ELECTRONICS, INC.

                                           BY:/s/John J. Cousins
                                           John J. Cousins
                                           Vice President of Finance
                                           (Principal Accounting Officer)



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