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PART 1: FINANCIAL INFORMATION

See accompanying notes to condensed Consolidated Financial Statements.consolidated financial statements.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 217

NOTE 1- ORGANIZATION AND LINE OF BUSINESS

Organization and Basis of Presentation:

The accompanying unaudited interim condensed consolidated financial statements of Advanced Oxygen Technologies, Inc. (“Group” or the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes required by generally accepted accounting principles for annual audited financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included.

The results of operations for the threesix months ended September 30,December 31, 2017 are not necessarily indicative of the results to be expected for the year ending June 30, 2018. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes related thereto for the years ended June 30, 2017 and 2016 included in Form 10-K filed with the SEC.

Lines of Business:

The Company, through its wholly owned subsidiary Anton Nielsen Vojens ApS owns income producing commercial real estate leased until 2026. The real estate consists solely of the land with no buildings or improvements (“Land”). All improvements on the Land are those of the tenant.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Foreign currency transactions are translated applying the current rate method. Assets and liabilities are translated at current rates. Stockholders' equity accounts are translated at the appropriate historical rates and revenue and expenses are translated at weighted average rates for the year. Exchange rate differences that arise between the rate at the transaction date and the one in effect at the payment date, or at the balance sheet date, are recognized in the income statement.

Income Taxes:

The Company accounts for income taxes under the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is required when it is less likely than not that the Company will be able to realize all or a portion of its deferred tax assets. Because it is doubtful that the net operating losses of recent years will ever be used, a valuation allowance has been recognized equal to the tax benefit of net operating losses generated.

Net Earnings per Share:

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. As of September 30,December 31, 2017 and September 30,December 31, 2016 there were 10,000 and 10,000 potential dilutive shares that need to be considered as common share equivalents andequivalents. As of December 31,2016, because of the net loss, the effect of these potential common shares is anti-dilutive for September 30, 2017.December 31, 2016.

Cash and Cash Equivalents:

For purposes of the statement of cash flows, the Company considers all highly-liquid investments purchased with original maturities of three months or less to be cash equivalents. 

The Company maintains its cash in bank deposit accounts which, at September 30,December 31, 2017 did not exceed federally insured limits. The Company has not experienced any losses in such accounts and believes that it is not exposed to any significant credit risk on such amounts.

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 disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates.

Concentrations of Credit Risk:

Financial instruments that potentially subject the Company to major credit risk consist principally of a single subsidiary of Anton Nielsen Vojens ApS.

Reclassification:

Certain balances in previously issued financial statements have been reclassified to be consistent with the current period presentation.

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Recently Issued Accounting Standards:

In September 2017, FASB issued ASU No. 2017-01 – Business Combinations (Topic 805): Clarifying the Definition of a Business. The issuance is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, and consolidation. It is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. We do not expect that the adoption of ASU 2017-02 will have any impact on our consolidated financial statements.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board (IASB)a new standard to improve financial reporting by creating commonachieve a consistent application of revenue recognition guidance for GAAP and International Financial Reporting Standards (IFRS). Subsequently,within the FASB has issued several additional ASUsU.S., resulting in a single revenue model to clarifybe applied by reporting companies under U.S. generally accepted accounting principles. Under the implementation. The new model, recognition of revenue standard applies to all companies that enter into contracts with customers to transferoccurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, the new standard requires that reporting companies disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On July 9, 2015, the FASB agreed to delay the effective date by one year; accordingly, the new standard is effective for public entities for interimus beginning in the first quarter of 2018 and annual reporting periods beginning after December 15, 2017. We willwe expect to adopt theit at that time. The new revenue standard effective January 1, 2018. Entities have the choiceis required to apply the new revenue standard eitherbe applied retrospectively to each prior reporting period presented or by recognizingretrospectively with the cumulative effect of initially applying the new revenue standardit recognized at the date of initial application andapplication. We have not adjusting comparative information. We expect to adopt the new revenue standard using the cumulative effectyet selected a transition method.

In May 2017, the FASB issued ASU 2017-09, "Stock Compensation (Topic 718): Scope of Modification Accounting." ASU 2017-09 provides clarity and reduces complexity in applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. The new standard will be effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is in the process of evaluatingmethod, nor have we determined the impact of thisthe new guidance.

In February 2016, the FASB issued ASU No. 2016-02 - Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either financing or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The standard is effective on January 1, 2019, however early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02 (ASU 2015-02) "Consolidation (Topic 810): Amendments to the Consolidation Analysis." ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. It is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We do not anticipate that the adoption of ASU 2015-02 will have any impact on our consolidated financial statements.

Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on the Company's present or future financial statements.

 NOTE 3 - MAJOR CUSTOMER:

The Company's subsidiary, Anton Nielsen Vojens, ApS has sales to major customers who were non related parties. For the period ending September 30,December 31, 2017, and September 30,December 31, 2016 the major customer concentrations were as follows:

NOTE 4 - LAND AND BUILDINGS :

The Land owned by the Company's wholly owned subsidiary constitutes the largest asset of the Company. During the 3six month period ending September 30,December 31, 2017 the Company recorded an increase in the carrying value of the Land of $21,276$32,224 due to the currency translation difference. The carrying value of the Land of the Company was as follows:

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NOTE 5 - RELATED PARTY TRANSACTIONS:

Advances payable to Crossfields, Inc., a company that the CEO, Robert Wolfe is an officer and director, which are not collateralized, non-interest bearing, and payable upon demand, however, the Company did not expect to make payment within one year. During the threesix month period ended September 30,December 31, 2017 and December 31, 2016 the Company had a balance of $102,278 and the CEO paid $9,155 of Company expenses and was repaid $4,057 for a net advance to the Company of $5,553. During the three month period ended September 30, 2016 the Company and $80,563$104,943 and was advanced $2,000$11,655

and had a balance of $92,430 and was advanced $14,168 respectively, to meet expenses.

Advances payable to Crossfields, Inc., a company that the CEO, Robert Wolfe is an officer and director, which are not collateralized, non-interest bearing, and payable upon demand, however, the Company did not expect to make payment within one year. During the 3 months ended September 30, 2016 and September 30, 2015 the Company had a balance of $80,563 and was advanced $2,301 and $63,423 and was advanced $2,425 respectively, from affiliates and officers to meet expenses. The balances were not collateralized, were non-interest bearing and were payable on demand.

NOTE 6 - NOTES PAYABLE:

The Company issued a promissory note ("Note") for $650,000, payable to the Borkwood Development Ltd, a previous shareholder of the Company ("Seller"), payable and amortized monthly and carrying an interest at 5% per year. The Company has the right to prepay the note at any time with a notice of 14 days. To secure the payment of principal and interest the Sellers will receive a perfect lien and security interest in the Shares in the company ANV until the note with accrued interest is paid in full., and, 2) In the case that the Note has not been repaid within 12 months from the day of closing the Sellers have the right to convert the debt to common stock of Advanced Oxygen Technologies, Inc. in an amount of non diluted shares calculated on the conversion Date, equal to the lesser of : a) Six hundred and Fifty thousand (650,000) or the Purchase Price minus the principal payments made by the buyer, whichever is greater, divided by the previous ten day closing price of AOXY as quoted on the national exchange, or b) Fifteen million shares, whichever is lesser. The Note has been extended until July 1, 2018 and interest waived through the period ending July 1, 2018. The balance on the note as of September 30,December 31, 2017 and June 30, 2017 was $127,029.

The amounts stated in this note reflect the Company's commitments in the currencies that those commitments were made and the amounts are an estimate of what the US dollar amount would be if the currency rates did not change going forward. 

NOTE 7 - SHAREHOLDERS' EQUITY:

Common Stock:

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 Preferred Stock:

The Company is authorized to issue 10,000,000 shares of $0.01 par value preferred stock. The Company may issue any class of preferred shares in series. The board of directors has the authority to establish and designate series and to fix the number of shares included in each such series.

Series 2 Convertible Preferred Stock:

Each Series 2 preferred share is convertible into two shares of common stock at the option of the holder. Each Series 2 preferred share also includes one warrant to purchase two common shares for $5.00. The warrants are exercisable over a three-year period. In the event of the liquidation of the Company, holders of Series 2 preferred stock would be entitled to receive $5.00 per share, plus any unpaid dividends declared on the Series 2 preferred stock from the funds remaining after the Company's creditors, including directors, have been paid. There have been no dividends declared.  During November 1997, 172,000 shares of Series 2 preferred stock were converted into 344,000 shares of the Company's common stock. As of September 30,December 31, 2017, there were 5,000 shares issued, which are convertible into 2 common shares. There are no warrants outstanding that have been issued in connection with the preferred shares.

Series 3 Convertible Preferred Stock:

Each share automatically converts on March 2, 2000 into either (a) one (1) share of the Company's common stock if the average closing price of the common stock during the ten trading days immediately prior to March 1, 2000 is equal to or greater than sixty-six cents ($0.66) per share, or (b) one and one-half (1 1/2) shares of common stock if the average closing price of the common stock during the ten trading days immediately prior March 1, 2000 is less than sixty-six cents ($0.66) per share.

Series 5 Convertible Preferred Stock:

The shares are collectively convertible to common stock of the Company on March 5, 2004, in an amount equal to the greater of a) 290,000 shares divided by the ten day closing price, prior to the date of acquisition of IPS, of the Company's common stock as quoted on the national exchange and not to exceed twenty million shares, or b) six million shares.

NOTE 8 - SUBSEQUENT EVENTS:

In accordance with ASC 855-10, Company management reviewed all material events through the date of this report. There are no material subsequent events to report.

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

The following should be read in conjunction with our Consolidated Financial Statements and the notes thereto included in the Financial Statements.

FORWARD LOOKING STATEMENTS:

Certain statements contained in this report, including statements concerning the Company's future and financing requirements, the Company's ability to obtain market acceptance of its products and the competitive market for sales of small production business' and other statements contained herein regarding matters that are not historical facts, are forward looking statements; actual results may differ materially from those set forth in the forward looking statements, which statements involve risks and uncertainties, including without limitation to those risks and uncertainties set forth in any of the Company's Registration Statements under the heading "Risk Factors" or any other such heading. In addition, historical performance of the Company should not be considered as an indicator for future performance, and as such, the future performance of the Company may differ significantly from historical performance.

RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODPERIODS ENDING SEPTEMBER 30,DECEMBER 31, 2017 COMPARED TO 2016:

Revenues: Revenues from operations for the three month period ending September 30,December 31, 2017 and September 30,December 31, 2016 were $9,704$9,930 and $9,149$8,837 respectively, and the revenues from operations for the six month period ending December 31, 2017 and December 31, 2016 were $19,634 and $17,986 respectively. They were attributable to operations of the Company's wholly owned subsidiary Anton Nielsen Vojens. The fluctuation was due to currency fluctuations.

Selling, general and administrative expenses: G&A expenses for the three month period ending September 30,December 31, 2017 and September 30,December 31, 2016 were $1,234$701 and $2,062$1,390 respectively and the G&A expenses for the six month period ending December 31, 2017 and December 31, 2016 were $1,935 and $3,627 respectively. Professional fees for the three month period ending December 31 2017 and December 31, 2016 were $2,000 and $8,023 and the expenses for the six month period ending December 31, 2017 and December 31, 2016 were $9,500 and $12,023. The 2016 expenses are mainly attributable to ANV's operations.the engagement of new auditors.

Interest expense: Interest expense for the three month period ending September 30,December 31, 2017 and SeptemberDecember 30, 2016 was $1,690$1,406 and $1,010$1,663 respectively. Interest expense for the six month period ending December 31, 2017 and December 30, 2016 was $3,096 and $3,476 respectively. Interest expenses for 20162017 are lower primarily due to the currency fluctuations and the reduction of debt.

Net income (loss) attributed to common stockholders: Net income (loss) attributed to common stockholders was $(3,122)$3,462 or $(0.0014)$0.0015 per share for the three month period ending September 30,December 31, 2017 as compared to $1,913$(5,478) or $0.0008$(0.0024) per share for September 30, 2016 andDecember 31, 2016. Net income (loss) attributed to common stockholders was $340 or $0.0001 per share for the six month period ending December 31, 2017 as compared to $(4,379) or $(0.0019) per share for December 31, 2016. The fluctuations are mainly attributable to the Company's auditorsprofessional fees and currency fluctuations.

Liquidity and capital resources:  At September 30,December 31, 2017 and June 30, 2017, the Company had cash and cash equivalents of $46,107$50,443 and $50,331 respectively. At September 30,December 31, 2017 and June 30, 2017, the Company had a working capital deficit of $238,721$239,903 and $230,605 respectively. The change in cash is primarily associated with currency fluctuations, and the decrease in the working capital deficit is primarily due to payment of debt and normal operations.

Net cash provided from (used for) operating activities for threesix month period ending September 30,December 31, 2017 and September 30,December 31, 2016 was $5,183$15,985 and $3,423,$13,763, respectively. The net cash used by operating activities was primarily due to the operations of ANV and the payment of ANV taxes and expenses paid for on behalf of a related party.taxes.

Net cash provided from (used for) financing activities for threesix months period ending September 30,December 31, 2017 and September 30,December 31, 2016 was $(11,100)$(18,431) and $(5,377)$(12,413) respectively. Net cash provided from or used for financing activities for both periods is related to the company's borrowings from banks, officers and directors, and the repayment of debt.

OFF BALANCE SHEET ARRANGEMENTS:

We do not currently have any off balance sheet arrangements.

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 ACQUISITION EFFORTS:

The Company continues its efforts to raise capital to support operations and growth, and is actively searching acquisition or merger with another company that would complement AOXY or increase its earnings potential. During this period, the Company has been in discussion with Companies looking to be acquired. AOXY has not negotiated any terms nor proposed any acquisitions of any of these companies that have been accepted. In addition, the Company is in discussion with potential lending institutions to assist in financing any proposed acquisition. The Company expects difficulty in financing the growth of the increased business or acquisition and has been concentrating on raising capital and/or obtaining a line of credit.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk:

Smaller reporting companies are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES