UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




**FORM
      10-QSB**




(Mark
                One)ý
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
              for
                the quarterly period ended December 31, 2005o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934
              for
                the transition period from to





COMMISSION
      FILE NUMBER: 0-5014





aeroTelesis,
      Inc.







(Exact
      Name of Small Business Issuer as Specified in its Charter)


Delaware
            95-2554669(State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            (I.R.S.
                Employer
              Identification
                No.)





11150
      W.
      Olympic Blvd., Suite 860, Los Angeles, CA 90064





(Address
      of Principal Executive Offices)





(310)
      235-1727





(Issuer’s
      Telephone Number, Including Area Code)










(Former
      Name, Former Address and Former Fiscal Year, if Changed Since Last
      Report)





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 the filing requirements for the past 90 days.          Yes ý No o








Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). o Yes ý No





APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY


PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS





Check
      whether the registrant filed all documents and reports required to be filed
      by
      Sections 12, 13 or 15(d)of the Exchange Act subsequent to the distribution
      of
      securities under a plan confirmed by a court.     o Yes o No


APPLICABLE
      ONLY TO CORPORATE ISSUERS:





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date:


Class
            Outstanding
                as of December 31, 2005Common
                stock, $0.00008 par value
            88,397,794




Transitional
      Small Business Disclosure Format (check one): o Yes ý No


















**TABLE
        OF CONTENTS**
  **FINANCIALS
        ARE IN MI-200202**
    **Page**PART
                I FINANCIAL INFORMATION
              1ITEM
                  1. FINANCIAL STATEMENTS
              1PART I FINANCIAL
                INFORMATION
              7ITEM
                  2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATION.
              7ITEM
                  3. CONTROLS AND PROCEDURES.
              11PART II OTHER INFORMATION
              12ITEM
                  1. LEGAL PROCEEDINGS.
              12ITEM
                  2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
                  PROCEEDS.
              12ITEM
                  3. DEFAULTS UPON SENIOR SECURITIES.
              12ITEM
                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
              12ITEM
                  5. OTHER INFORMATION.
              12ITEM
                  6. EXHIBITS AND REPORTS ON FORM 8-K.
              12SIGNATURES
              14
  1


**PART
      I**









**FINANCIAL
      INFORMATION**




**ITEM
      1. FINANCIAL STATEMENTS**




**aeroTelesis,
                  Inc.****(A
                  Development Stage Enterprise)****Balance
                  Sheets****December
                  31**
              
              **March
                  31****2005**
              
              **2005**(Unaudited)**ASSETS**Current
                  Assets:Cash
              
              $
              197,024
              
              $
              1,913Accounts
                  Receivable
              
              
              -
              
              
              3,535Related
                  Party Receivable
              
              
              25,000Other
                  Current Assets
              
              
              72,397
              
              
              -Total
                  Current Assets
              
              
              294,421
              
              
              5,448Fixed
                  Assets:Furniture
                  & Equipment, net
              
              
              111,936
              
              
              75,637Other
                  Assets:Deposit
              
              
              245,100
              
              
              18,153Deferred
                  Offering Costs
              
              
              1,400,000
              
              
              -License
              
              
              2,698,781
              
              
              2,698,781Total
                  Other Assets
              
              
              4,343,881
              
              
              2,716,934Total
                  Assets
              
              $
              4,750,238
              
              $
              2,798,019**LIABILITIES
                  AND STOCKHOLDERS' EQUITY**Current
                  LiabilitiesAccounts
                  Payable and Accrued Liabilities
              
              $
              240,574
              
              $
              281,319Related
                  Party Payable
              
              
              -
              
              
              8,600Convertible
                  Debenture
              
              
              3,000,000
              
              
              -Beneficial
                  Conversion, net of amortization
              
              
              (1,185,277
              )
              
              -Notes
                  Payable
              
              
              27,419Current
                  Portion - Long Term Debt
              
              
              11,841
              
              
              3,046Total
                  Current Liabilities
              
              
              2,094,557
              
              
              292,965Long-Term
                  LiabilitiesLong
                  Term Debt, Net of Current Portion
              
              
              38,101
              
              
              3,594Total
                  Liabilities
              
              
              2,132,658
              
              
              296,559Commitments
                  and Contigencies
              
              
              -
              
              
              -Stockholders'
                  EquityPreferred
                  Stock, $.001 par value, 2,000,000 shares
              
              
              -
              
              
              -authorized;
                  none issued and outstandingCommon
                  stock, $.00008 par value, 200,000,000 shares
              
              
              7,072
              
              
              6,675authorized;
                  88,397,794 and 83,437,701 shares issued andoutstandingAdditional
                  paid-in capital
              
              
              10,664,053
              
              
              4,144,559Stock
                  Subscription Receivable
              
              
              (24,500
              )
              
              (7,500
              )Accumulated
                  deficit during the development stage
              
              
              (8,029,045
              )
              
              (1,642,274
              )Total
                  Stockholders' Equity
              
              
              2,617,580
              
              
              2,501,460Total
                  Liabilities and Stockholders' Equity
              
              $
              4,750,238
              
              $
              2,798,019


See
      accompanying note to Financial Statements





2


**aeroTelesis,
                  Inc.****(A
                  Development Stage Enterprise)****Statements
                  of Operations****(Unaudited)**CummulativeLossThree
                  Months Ended
              
              
              
              Nine
                  Months Ended
              
              
              
              During
                  theDecember
                  31
              
              December
                  31
              
              December
                  31
              
              December
                  31
              
              Development2005
              
              2004
              
              2005
              
              2004
              
              StageRevenues:Revenue
              
              $
              -
              
              $
              93,301
              
              $
              8,600
              
              $
              319,846
              
              $
              478,090Total
                  revenues
              
              
              -
              
              
              93,301
              
              
              8,600
              
              
              319,846
              
              
              478,090Operating
                  Expenses:Cost
                  of Revenues
              
              
              -
              
              
              7,763
              
              
              -
              
              
              13,645
              
              
              17,349Legal
                  & Professional Fees
              
              
              595,138
              
              
              143,616
              
              
              1,405,813
              
              
              416,997
              
              
              2,566,793Depreciation
              
              
              7,492
              
              
              -
              
              
              22,319
              
              
              -
              
              
              38,917Research
                  & Development
              
              
              460,297
              
              
              
              
              
              1,010,297
              
              
              
              
              
              1,010,297Rent
              
              
              31,325
              
              
              29,005
              
              
              96,010
              
              
              87,192
              
              
              275,316Options
                  Expense
              
              
              1,349,467
              
              
              -
              
              
              1,706,697
              
              
              -
              
              
              1,706,697Salaries
              
              
              1,076,825
              
              
              86,268
              
              
              1,177,357
              
              
              205,926
              
              
              1,422,673Interest
              
              
              545,601
              
              
              -
              
              
              814,044
              
              
              -
              
              
              825,179Travel
              
              
              47,144
              
              
              1,609
              
              
              87,214
              
              
              52,415
              
              
              399,229General
                  and Administrative
              
              
              30,717
              
              
              98,287
              
              
              79,183
              
              
              168,224
              
              
              248,2484,144,006
              
              
              366,548
              
              
              6,398,934
              
              
              944,399
              
              
              8,510,698Income
                  (Loss) from operations
              
              
              (4,144,006
              )
              
              (273,247
              )
              
              (6,390,334
              )
              
              (624,553
              )
              
              (8,032,608
              )Other
                  Income (Expenses)Other
                  Income
              
              
              751
              
              
              -
              
              
              3,564
              
              
              -
              
              
              3,564Provision
                  for Income Taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  Income (Loss)
              
              $
              (4,143,255
              )
              $
              (273,247
              )
              $
              (6,386,770
              )
              $
              (624,553
              )
              $
              (8,029,044
              )Loss
                  per common share
              
              $
              (0.05
              )
              $
              (0.00
              )
              $
              (0.07
              )
              $
              (0.01
              )Weighted
                  average common shares outstanding
              
              
              87,514,461
              
              
              83,202,962
              
              
              85,468,912
              
              
              81,350,676


See
      accompanying note to Financial
      Statements


3





**aeroTelesis,
                Inc.****(A
                Development Stage Enterprise)****Statements
                of Cash Flows****(Unaudited)**CummulativeLossNine
                Months Ended
            
            
            
            During
                theDecember
                31
            
            December
                31
            
            Development2005
            
            2004
            
            StageCash
                Flows from Operating Activities:Net
                Loss
            
            $
            (6,386,770
            )
            $
            (624,553
            )
            $
            (8,029,044
            )Adjustments
                to Reconcile net loss to net cashprovided
                by (used in) operating activities:Depreciation
            
            
            22,319
            
            
            17,525
            
            
            38,917Stock
                Issued for Services
            
            
            1,621,320
            
            
            40,000
            
            
            1,598,918Value
                of Options Issued for Services
            
            
            1,706,697
            
            
            -
            
            
            2,063,221Other
                Non-Cash Expenses
            
            
            754,996
            
            
            67,470
            
            
            961,858Changes
                in operating assets and liabilities:Accounts
                Payable and Accrued Expenses
            
            
            94,875
            
            
            104,733
            
            
            403,613Receivables
            
            
            3,535
            
            
            (3,535
            )
            
            55,000Inventory
            
            
            -
            
            
            (4,383
            )
            
            -Related
                Party Payable
            
            
            (8,600
            )
            
            -
            
            
            -Related
                Party Receivable
            
            
            (25,000
            )
            
            
            
            
            (25,000
            )Other
                Current Assets
            
            
            (44,978
            )
            
            1,463
            
            
            (26,873
            )Deposit
            
            
            (26,949
            )
            
            (636
            )
            
            (45,102
            )Net
                Cash used in Operating Activities
            
            $
            (2,288,555
            )
            $
            (401,916
            )
            $
            (3,004,492
            )Cash
                Flows from Investing Activities:Capital
                Expenditures
            
            
            (58,618
            )
            
            (47,035
            )
            
            (113,977
            )Licenses
            
            
            -
            
            
            -
            
            
            (86,556
            )Net
                Cash used in Investing Activities
            
            $
            (58,618
            )
            $
            (47,035
            )
            $
            (200,533
            )Cash
                Flows from Financing Activities:Common
                Stock Issued for Cash
            
            
            53,050
            
            
            440,261
            
            
            63,548Stock
                Subscription Receivable
            
            
            7,500
            
            
            -
            
            
            7,500Long
                Term Debt Repayment
            
            
            (43,302
            )
            
            -
            
            
            (44,610
            )Convertible
                Debenture
            
            
            3,000,000
            
            
            -
            
            
            3,000,000Convertible
                Debt Issue Costs
            
            
            (480,450
            )
            
            -
            
            
            (480,450
            )Revolving
                Line of Credit Payments
            
            
            (136,500
            )
            
            
            
            
            (136,500
            )Revolving
                Line of Credit Advance
            
            
            141,986
            
            
            -
            
            
            992,563Net
                Cash provided by Financing Activities
            
            $
            2,542,284
            
            $
            440,261
            
            $
            3,402,051Net
                Increase (Decrease) in cash and cash equivalents
            
            
            195,111
            
            
            (8,690
            )
            
            197,026Cash
                at beginning of period
            
            $
            1,913
            
            $
            10,687
            
            $
            -Cash
                at end of period
            
            $
            197,024
            
            $
            1,997
            
            $
            197,026Supplemental
                disclosure:Total
                interest paid
            
            $
            42,100
            
            $
            -
            
            $
            47,368Total
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            -Non-Cash
                Transactions:Stock
                Issued for Services
            
            $
            1,621,320
            
            $
            40,000
            
            $
            1,889,665Stock
                Issued for Debt
            
            $
            -
            
            $
            -
            
            $
            1,092,139Long-term
                Debt used to acquire Equipment
            
            $
            50,680
            
            $
            -
            
            $
            50,680Deposits
            
            $
            200,000
            
            
            
            
            $
            200,000Deferred
                Offering Finance Costs
            
            $
            1,400,000
            
            
            
            
            $
            1,400,000Accounts
                Payable
            
            $
            57,541
            
            
            
            
            $
            57,541Beneficial
                Conversion
            
            $
            1,416,783
            
            
            
            
            $
            1,416,783




See
      accompanying note to Financial
      Statements





4


**a** **eroTelesis,
      Inc.**


**Notes
      to Financial Statements**


**December
      31, 2005**


**(Unaudited)**








**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**




**Basis
      Of Presentation**




**General**




The
      unaudited interim financial statements of aeroTelesis, Inc. (the “Company”) as
      of December 31, 2005 and for the three and nine months ended December 31, 2005
      and 2004, included herein have been prepared in accordance with the instructions
      for Form 10QSB under the Securities Exchange Act of 1934, as amended, and
      Article 10 of Regulation S-X under the Securities Act of 1933, as amended.
      The
      March 31, 2005 Consolidated Balance Sheet was derived from audited financial
      statements, but does not include all disclosures required by generally accepted
      accounting principles. Certain information and note disclosures normally
      included in financial statements prepared in accordance with generally accepted
      accounting principles have been condensed or omitted pursuant to such rules
      and
      regulations relating to interim consolidated financial statements.




In
      the
      opinion of management, the accompanying unaudited interim financial statements
      reflect all adjustments, consisting only of normal recurring adjustments,
      necessary to present fairly the financial position of the Company at December
      31, 2005, and the results of its operations for the three and nine months ended
      December 31, 2005 and 2004 and the developmental period, and its cash flows
      for
      the nine months ended December 31, 2005 and 2004 and during the developmental
      period.




The
      results of operations for such periods are not necessarily indicative of results
      expected for the full year or for any future period. These financial statements
      should be read in conjunction with the audited financial statements as of March
      31, 2005 and related notes included in the Company’s Form 10-KSB filed with the
      Securities and Exchange Commission.




**Organization**




AeroTelesis,
      Inc. was incorporated under the laws of the State of Delaware in 1968 for the
      purpose to promote and carry on any lawful business for which a corporation
      may
      be incorporated under the laws of the State of Delaware. The company has a
      total
      of 200,000,000 authorized common shares with a par value of $.00008 and
      2,000,000 preferred shares with a par value of $.001 per share and with
      88,397,794 common shares issued and outstanding and no preferred shares issued
      and outstanding as of December 31, 2005.




**Basis
      Of Preparation And Presentation** ****




The
      accompanying financial statements have been prepared to reflect the legal
      acquisition on October 2, 2003 of aeroTelesis Philippines Inc (“ATP”) by
      aeroTelesis Inc., formerly Pacific Realm Inc. (“Company”) (the “Acquisition”).
      The financial statements of the Company give effect to the Acquisition under
      which the shareholders of ATP exchanged all of their common shares of ATP for
      common shares of the Company.




Notwithstanding
      its legal form, the Acquisition has been accounted for as a reverse takeover,
      as
      the former shareholders of ATP own in aggregate approximately 90% of the common
      shares of the Company, and so are now the majority shareholders of the Company.
      Also, as the Company was a company with nominal net non-monetary assets, the
      Acquisition has been accounted for as an issuance of stock by the Company
      accompanied by a recapitalization


1





**a** **eroTelesis,
      Inc.**


**Notes
      to Financial Statements**


**December
      31, 2005**


**(Unaudited)**








**NOTE
      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CON** **’T)**




**Basis
      Of Preparation And Presentation (Con** **’t)**




**Accounting
      Method**




The
      Company’s financial statements are prepared using generally accepted accounting
      principles (United States). Revenues are recognized when consulting engagements
      have been earned and completed and expenses when incurred on the related
      consulting engagements.




**Earnings
      Per Common Share**




The
      Company adopted Financial Accounting Standards (SFAS) No. 128, “Earnings Per
      Share,” which simplifies the computation of earnings per share requiring the
      restatement of all prior periods. Basic earnings per share are computed on
      the
      basis of the weighted average number of common shares outstanding during each
      year.




Diluted
      earnings per share are computed on the basis of the weighted average number
      of
      common shares and dilutive securities outstanding. Dilutive securities having
      an
      anti-dilutive effect on diluted earnings per share are excluded from the
      calculation.




**NOTE
      2 - COMMON STOCK**




The
      company has a total of 200,000,000 authorized common shares, with a par value
      of
      $0.00008 and 2,000,000 preferred shares with a par value of $.001 per share
      and
      with 88,397,794 common shares issued and outstanding and no preferred shares
      issued and outstanding as of December 31, 2005.




During
      the quarter ended December 31, 2005, the Company issued the following shares
      of
      its common stock:




1)
      In
      November of 2005, a total of 2,650,000 shares of stock were issued pursuant
      to
      the exercise of options granted under the 2003 Stock Option Plan. Upon the
      exercise of the options the Company forgave the exercise price of the option
      totaling $1,404,500 which has been charged against operations.




2)
      A
      total of 35,000 shares of stock were issued to a related party and has been
      recorded as a subscription receivable from a related party.




2





**a** **eroTelesis,
      Inc.**


**Notes
      to Financial Statements**


**December
      31, 2005**


**(Unaudited)**








**NOTE
      2 -** **COMMON
      STOCK (CON’T)**




On
      April
      29, 2005, the Company granted 900,000 stock options at an exercise price of
      $2.00, to various employees, consultants and advisors. One half of the options
      vest on March 31, 2006 and the balance vests on March 31, 2007. On September
      30,
      2005, the Company agreed to cancel the 900,000 of the $2.00 options and to
      immediately vest the remaining 250,000 options which were granted on October
      18,
      2003. None of the options cancelled were vested.




The
      options that were issued to consultants and advisors were valued at $1,706,697
      as of December 31, 2005 using the Black-Scholes valuation method and included
      as
      an expense to the statement of operations based on the vesting schedule.




The
      option shares were not included in the computation since they would be
      anti-dilutive.




**NOTE
      3 - STOCK-BASED COMPENSATION**




The
      Company accounts for stock-based compensation to employees using the intrinsic
      value method prescribed in APB Opinion No. 25, “Accounting for Stock Issued to
      Employees” and related interpretations. Compensations cost, if any, is measured
      as the excess of the fair value of the Company’s stock at the date of grant over
      the amount an employee must pay to acquire the stock. Statement of Financial
      Accounting Standards (“SFAS”) 123, Accounting for Stock-Based Compensation,
      amended by SFAS 148, Accounting For Stock-Based Compensation - Transition and
      Disclosure, established accounting and disclosure requirements using a fair
      value based method of accounting for stock-based employee compensation; however,
      it allows an entity to continue to measure compensation for those plans using
      the intrinsic value method of accounting prescribed by APB Opinion No. 25.
      The
      Company has elected to continue to measure compensation under the APB Opinion
      No. 25, and has adopted the disclosure requirements of SFAS No. 123 and SFAS
      No.
      148.




On
      April
      29, 2005, the Company granted 1,080,000 stock options, at an exercise price
      of
      $1.00, to various employees, consultants and advisors. The options vest as
      follows:












Number
                of Shares
            
            Vesting
                Date80,000
            
            June
                1, 2005300,000
            
            January
                1, 2006100,000
            
            March
                31, 200625,000
            
            June
                1, 2006275,000
            
            January
                1, 20071,080,000




3





**a** **eroTelesis,
      Inc.**


**Notes
      to Financial Statements**


**December
      31, 2005**


**(Unaudited)**







**NOTE
      3 - Stock-Based Compensation** **(con’t)**




If
      the
      fair value of the stock options granted to employees during a fiscal year had
      been recognized as compensation expense on straight-line basis over the vesting
      period of the grants, stock-based compensation costs would have impacted our
      net
      income and earnings per common share for the fiscal periods as
      follows:




Three
                Months Ended
              December
                31,
            
            Nine
                Months Ended
              December
                31,2005
            
            2004
            
            2005
            
            2004(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Net
                Income (Loss) as Reported
            
            $
            (4,143,255
            )
            $
            (273,247
            )
            $
            (6,386,770
            )
            $
            (624,553
            )Deduct:
                Stock Based CompensationCosts,
                Net of Taxes Under SFAS 123
            
            
            (669,000
            )
            
            (49,914
            )
            
            (1,376,568
            )
            
            (149,742
            )Pro
                Forma Net Income (Loss)
            
            $
            (4,812,255
            )
            $
            (238,268
            )
            $
            (7,763,338
            )
            $
            (774,295
            )Per
                Share Information:Basic,
                as Reported
            
            $
            (0.05
            )
            $
            (0.00
            )
            $
            (0.07
            )
            $
            (0.00
            )Basic,
                Pro Forma
            
            $
            (0.05
            )
            $
            (0.00
            )
            $
            (0.09
            )
            $
            (0.00
            )Diluted,
                as Reported
            
            $
            (0.05
            )
            $
            (0.00
            )
            $
            (0.07
            )
            $
            (0.00
            )Diluted,
                Pro Forma
            
            $
            (0.05
            )
            $
            (0.00
            )
            $
            (0.09
            )
            $
            (0.00
            )


The
      fair
      value of the stock-based awards was estimated using the Black-Scholes model
      with
      the following weighted average assumptions for fiscal periods:




Three
                Ended December 31
            
            Six
                Months Ended December 312005
            
            2004
            
            2005
            
            2004(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Estimated
                Fair Value
            
            $
            1.03
            
            $
            1.02
            
            $
            1.03
            
            $
            1.02Expected
                Life (Years)
            
            
            2.96
            
            
            2.96
            
            
            2.96
            
            
            2.91Risk
                Free Interest Rate
            
            
            3.82
            %
            
            3.82
            %
            
            3.82
            %
            
            4.08
            %Volatility
            
            
            108
            %
            
            108
            %
            
            108
            %
            
            208
            %Dividend
                Yield
            
            
            --
            %
            
            --
            %
            
            --
            %
            
            --
            %







**NOTE** **4
      - LONG TERM DEBT**




On
      October 1, 2004, the Company renewed a loan agreement the Company’s majority
      stockholder with Nations Mobile Networks, LTD. (“Nations”) for a line of credit
      up to $1,000,000 for a period of twelve months as a working capital loan. The
      loan agreement contained an interest provision of 7% to be accrued quarterly.
      The Company issued warrants (at fair value on the commitment date) to Nations
      for 1,000,000 shares to be used to convert the debt to common stock at the
      rate
      of $3.25 per share. The $3.25 per share represent the fair value of the shares
      at the date of the loan commitment.




4






**a** **eroTelesis,
      Inc.**


**Notes
      to Financial Statements**


**December
      31, 2005**


**(Unaudited)**







**NOTE** **4
      - LONG TERM DEBT (CON’T)**




In
      May of
      2005 the Company entered into a capital lease for a copier. The payments are
      $1,204 including sales tax per month for a period of 60 months with a fair
      market buyout at the end of the lease term. The copies has been capitalized
      at
      $50,680 and be depreciated over the term of the lease.




**NOTE** **5
      - CONVERTIBLE DEBT**




On
      May
      10, 2005, the Company entered into a bridge debenture agreement, whereby an
      investor committed to purchase $3,000,000 of convertible debentures from the
      Company. The agreement included various terms, including the
      following:




·
            $1,500,000
                disbursed at closing




·
            $1,500,000
                disbursed immediately prior to the Company filing a registration
                statement




·
            10%
                Interest rate




·
            12
                Month maturity




·
            Secured
                by all assets of the Company




·
            Fixed
                conversion price equal to 75% of the volume weighted average price
                on the
                closing day




·
            30%
                Warrant coverage at an exercise price of $3.00, 20% warrant coverage
                at an
                exercise price of $4.00




The
      Company received the initial amount at closing on July 25, 2005. The Company
      received the second amount of funding of the bridge debenture agreement on
      October 27, 2005 in the amount of $1,500,000.




The
      beneficial conversion of the debenture was computed as $755,036.




The
      warrants were valued at $651,000 and recorded as a part of the debt issue cost
      as a reduction of the liability and to be amortized over the 12 months. A total
      of $491,197 was paid for commissions and shown as a reduction of the debt and
      is
      being amortized over 12 months or the length of the debt. A total of $712,015
      has been amortized for the period ended December 31, 2005.




The
      convertible debenture are convertible into shares of the Company’s common stock
      at 75% of the asking price in the OTCBB on the date of conversion. Interest
      in
      the amount of $95,753 has been charged to interest expense during the quarter
      ended December 31, 2005.




5


**a** **eroTelesis,
      Inc.**


**Notes
      to Financial Statements**


**December
      31, 2005**


**(Unaudited)**







**NOTE** **6
      - COMMITMENT AND CONTINGENCIES**




The
      Company filed suit in Los Angeles County against its former CEO and Director,
      Jagan Narayanan, on January 13, 2005, alleging breach of contract, fraud, breach
      if fiduciary duty and seeking equitable relief in the form of a declaratory
      judgment that the Company owes him no salary or any stock options. The Los
      Angeles County case was Case No. AC084087, filed in Los Angeles Superior Court
      in Santa Monica, California.




Mr.
      Narayanan has filed a lawsuit against the Company in Alameda County, in Northern
      California. Mr. Narayanan’s case seeks damages and penalties for unpaid wages
      and seeks specific performance for the sale of shares pursuant to a stock
      option. Consolidation of the matters was sought and the court ruled in late
      May,
      2005 that venue was proper in Alameda County (where the defendant lives) so
      the
      Company’s case has been transferred there. The Alameda County Case is No.
      HG05-199556 and was filed on February 19, 2005. The cases are now at the
      discovery stage.




The
      Company has engaged legal counsel to represent it in these matters and intends
      to vigorously defend itself against Mr. Narayanan’s allegations and to pursue
      its claim against Mr. Narayanan.




The
      Company entered into an Agreement of Settlement and Mutual and General Release
      with Koko Polosajian a former consultant with the Company. The Company agreed
      to
      issue 300,000 options and pay Mr. Polosajian a finder’s fee of $200,000 payable
      $50,000 within ten days of the execution of the Agreement, $50,000 no later
      than
      March 1, 2006, and $100,000 no later than July 1, 2006.




**NOTE
      7 - SUBSEQUENT EVENTS**




In
      January 2006, the Company reached an agreement to convert the conversion rate
      to
      a “floating rate” at the time of conversion and to extend the time to convert to
      three years rather than one year.




In
      February 2006, the Company received an additional amount of funding from the
      investor in the amount of $500,000.






6


**PART
      I**




**FINANCIAL
      INFORMATION**






**Item
      2. Management’s Discussion And Analysis Or Plan Of
      Operation.**




**Overview**




aeroTelesis
      is a start-up, technology-driven communications company dedicated to offering
      our customers voice, data and video services. Our targeted application markets
      include fixed and mobile wireless broadband, and satellite
      communications.




Our
      core
      wireless technology platform is a modulation technique known as Ultra Spectral
      Modulation(TM) (USM) which we license from Photron Technologies, Ltd under
      certain license agreements. USM is a technology that we believe increases
      frequency bandwidth efficiency for wireless applications (such as wireless
      local
      loop, cellular, satellite, and others) to produce what we believe will be faster
      data transmission rates and higher data capacity while requiring less frequency
      spectrum allocation in comparison to other traditional wireless technologies
      in
      the market today. We believe the implementation of this USM technology has
      far
      reaching implications for the wireless communications industry. We believe
      USM
      holds the promise to deliver quality broadband-like services through more narrow
      frequency channels than conventional wireless technologies. Through the
      frequency efficiency provided by USM, we believe we will be able to reduce
      the
      cost of deployment for wireless networks and, therefore, allow us to price
      services at more cost competitive rates for USM users. We believe these cost
      advantages should enable us to capture a share of customers, especially in
      developing countries where we believe there are lower penetration rates for
      communication services. Currently, Photron is developing a chipset which will
      be
      used in the commercialization of products which utilize USM technology. Photron
      intends to complete the chip set by the end of 2006. Once Photron has a chipset,
      we will begin producing products for sale to customers using that chipset.




*To
      date, we have not received any revenues from any USM technology and we currently
      have no other sources of revenues.* If
      Photron is unable to develop a chipset, we may not have a product to
      sell.




In
      the
      future, we will attempt to implement both satellite and terrestrial-based
      wireless broadband services, using USM technology upon its commercialization.
      It
      is anticipated that the chipset development process will be completed by the
      end
      of 2006. In contrast to traditional wireless technologies that we believe rely
      on conventional modulation methods and broad frequency spectrum requirements,
      we
      believe USM represents an original and fundamental shift in modulation
      technology which can create a new breed of next generation
      networks.




Formerly
      known as Pacific Realm, Inc., aeroTelesis was incorporated in Delaware on August
      26, 1968 as Continental Convalescent Centers, Inc. and was involved in the
      health care industry. We subsequently changed our name to Century Convalescent
      Centers, Inc., National Health Services, Inc., Carex International, Inc. and
      Medica USA, Inc. On July 6, 1984, we changed our name to “Pacific Realm,
      Inc.” when we entered into the gold mining business. Those operations were
      ultimately unsuccessful and terminated. We were inactive and dormant from 1989
      through 2000. During this period, we did not have revenues, operating profits
      or
      any identifiable assets attributable to any industry segment. In 2000, we began
      limited operations and began seeking opportunities to act as a consultant to
      companies interested in establishing telecom businesses in the Asia-Pacific
      region as well as in Latin America and other less-developed areas of the
      world.




In
      October 2003, we acquired all issued and outstanding shares of Aerotelesis
      Philippines, Inc., a British Virgin Islands company, in exchange for the
      issuance of 75,000,000 shares of our common stock to the sole shareholder of
      AeroTelesis Philippines, Inc., Nations Mobile Networks Ltd., formerly known
      as
      Aerotelesis Ltd. As a result of this transaction, AeroTelesis Philippines,
      Inc.
      is our wholly-owned subsidiary and Nations now holds approximately 91.86% of
      the
      fully diluted outstanding shares of our common stock.




In
      addition to AeroTelesis Philippines, Inc., we have two other subsidiaries:
      Aerotelesis IP Networks, Inc. and Aerotelesis Satellite Networks Inc., both
      are
      Delaware corporations. These subsidiaries do not have any
      operations.




7


**Going
      Concern**




As
      noted
      above, we have a working capital deficit with no revenues anticipated for the
      near term. Management believes we will need to raise approximately $ 1,200,000.
      in order to operate in the next 12 months. As shown in the accompanying
      financial statements, we have incurred significant losses since inception.
      Our
      continuation as a going concern is dependent upon our ability to generate
      sufficient cash flow to meet our obligations on a timely basis and ultimately
      to
      attain profitability. We have limited capital with which to pursue our business
      plan. There can be no assurance that our future operations will be significant
      and profitable, or that we will have sufficient resources to meet our
      objectives. We may pursue either debt or equity financing or a combination
      of
      both, or order to raise sufficient capital on order to meet our financial
      requirements over the next twelve months and to fund our business plan. There
      is
      no assurance that we will be successful in raising additional funds. Our ability
      to generate revenues depends in part on the ability of Photron to develop a
      marketable product and on our ability to sell such product in sufficient
      numbers. Photron has developed only a working prototype and our business model
      is unproven. If Photron is unable to develop a chipset or goes out of business
      before it does and we are unable to obtain additional financing, we may be
      unable to continue as a going concern. In addition, our rights to sell chipsets
      developed by Photron depend on the enforceability of our license with Photron
      and the validity of its patents. Further, our ability to exclusively market
      products based on the technology covered by the Photron license depends on
      our
      ability to enforce the intellectual property rights granted under the Photron
      license, which may require significant expense and could be uncertain.




**Results
      Of Operations For The Three and Nine Months Ended December 31, 2005 Compared
      To
      The Three and Nine Months Ended December 31, 2004**




**Revenues**




For
      the
      three months ended December 31, 2005, we had no revenues compared to revenues
      of
      $93,301 for three months ended December 31, 2004. For the nine months ended
      December 31, 2005, we had revenues of $8,600 compared to revenues of $319,846
      for the nine months ended December 31, 2004. Our lack of revenues for the three
      months ended December 31, 2005 and our insubstantial revenues for the nine
      months ended December 31, 2005 is due to the expiration of our
      telecommunications consulting agreement and our focus on the development of
      a
      wireless technology platform by our licensor, Photron Technologies, Ltd.




**Expenses**




We
      had
      expenses of $4,144,006 for the three months ended December 31, 2005 compared
      to
      expenses of $366,548 for the three months ended December 31, 2004. This is
      an
      increase in expenses by $3,777,458. The increase in expenses from the prior
      year
      is primarily due to:




·
            an
                increase in our legal and professional fees by $451,522 primarily
                associated with option related expense of
                397,500;




·
            an
                increase in our research and development expenses by $460,297 related
                to
                USM wireless technology; and




·
            an
                increase in our interest expenses of $ 545,601 primarily due to the
                amortized amount of the beneficial conversion cost related to the
                issuance
                of convertible debentures.




We
      had
      expenses of $6,398,934 for the nine month period ended December 31, 2005
      compared to expenses of $944,399 for the nine month period ended December 31,
      2004. This is an increase in expenses by $5,454,535. The increase in expenses
      from the prior year is primarily due to our increased expenses during the three
      months ended December 31, 2005 as described above.




**Net
      Loss**




We
      realized a net loss of $(4,143,255) from operations for the three month period
      ended December 31, 2005 compared to a net loss of $(273,247) for the three
      month
      period ended December 31, 2004. The increase in net loss for the three month
      period ended December 31, 2005 was due to the lack of revenues for the three
      month period ended December 31, 2005 and the increase in expenses described
      above. The net loss per share for the three month period ended December 31,
      2005
      was $(0.05) per share compared to a net loss per share of $(0) for the three
      month period ended December 31, 2004.




We
      realized a net loss of $(6,386,770) from operations for the nine month period
      ended December 31, 2005 compared to a net loss of $(624,553) for the nine month
      period ended December 31, 2004. The increase in net loss for the nine month
      period ended December 31, 2005 was due to the lack of revenues for the three
      month period ended December 31, 2005 and insignificant revenues for the first
      three months of the nine months ended December 31, 2005 and the increase in
      expenses described above. The net loss per share for the nine month period
      ended
      December 31, 2005 was $(0.07) per share compared to a net loss per share of
      $(.01) for the nine month period ended December 31, 2004.




8


**Liquidity
      And Capital Resources**




As
      of
      December 31, 2005, we had negative working capital of $(1,800,136) consisting
      of
      $294,421 in current assets and $2,094,557 current liabilities.




Our
      assets December 31, 2005 were $4,750,238 compared to total assets of $2,798,019
      at March 31, 2005. The difference is due to the increase in cash due to
      convertible debt financing with Cornell Capital Partners capitalization of
      $1,400,000 in deferred offering costs, an increase in our deposits by $226,347.
      At December 31, 2005, our current assets were comprised of cash of approximately
      $197,024. Our assets, in addition to our current assets, consisted of furniture
      and fixtures of approximately $111,936, net of depreciation, deposits of
      approximately $245,100 and net licenses of approximately $2,698,781, which
      consists of three licenses listed under Other Assets. The three licenses are
      the
      AeroTelesis Philippines Inc. license for approximately $1,700,000 and two
      licenses from Photron Technologies Ltd. to utilize and deploy USM-based products
      and systems for satellite communication services and wireless telephony service
      in the Philippines. We paid $500,000 in 2004 for each Photron license,
      respectively. The two Photron licenses are treated as having a useful life
      of
      ten years based upon the agreements we have with Photron which are for ten
      years
      with renewal provisions that are not automatic. The useful life of the
      AeroTelesis Philippines, Inc. license has been set at 15 years which is the
      term
      of years remaining on the franchise held by our local partner in the
      Philippines.




Our
      total
      liabilities at December 31, 2005 were $2,132,658 compared to liabilities at
      March 31, 2005 of $296,559. This is an increase of total liabilities of
      $1,836,099. The increase in liabilities from the prior year is primarily due
      to
      an increase in net liability related to the issuance of the convertible
      debentures in the amount of $3,000,000 and discounts of $1,185,277.




Total
      shareholders’ deficit accumulated in the development stage increased from
      $1,642,274 at March 31, 2005 to $8,029,045 at December 31, 2005. The increase
      in
      deficit of $6,386,771 is due primarily to the net loss of $6,386,771 incurred
      for the nine month period ended December 31, 2005.




On
        October 18, 2005, we issued 35,000 shares of our common stock at $1.00 per
        share
        price as a loan to Nations Mobile Networks, Ltd.


9






On
      November 17, 2005, we granted options to employees and consultants to purchase
      2,650,000 shares of our stock at $.53 per share (which vested immediately).
      In
      addition, we granted options to an employee and a consultant to purchase 200,000
      shares of our common stock at $1.00 per share (which vests 100,000 shares on
      January 6, 2006 and 100,000 shares on January 6, 2007). The fair value of the
      1,400,000 options granted to consultants ($916,000) has been included in options
      expense during the three months ended December 31, 2005.




On
      November 17, 2005, we allowed the exercise of the 2,650,000 options and forgave
      the exercise price of the option ($1,404,500) which has been included ($397,500)
      in legal and professional fees and ($1,007,000) in salaries during the three
      months ended December 31, 2005.




On
        February 8, 2006, we entered into a Securities Purchase Agreement with Cornell
        Capital Partners and Highgate House Funds, Ltd. whereby we agreed to amend
        and
        restate the secured convertible debentures we previously issued to Cornell
        Capital Partners and Highgate House Funds, Ltd. Under the Securities Purchase
        Agreement, the parties agreed to issue to Cornell Capital Partners and Highgate
        House Funds, Ltd. secured convertible debentures in the principal amount
        of
        $3,500,000. Prior to entering into the Securities Purchase Agreement, we
        issued
        secured convertible debentures to Cornell Capital Partners and Highgate House
        Funds in the principal aggregate amount equal to $3,000,000 which was funded
        on
        July 25, 2005. Pursuant to the Securities Purchase Agreement, Cornell
        Capital Partners provided us an additional $500,000 in secured convertible
        debentures. The $3,000,000 in secured convertible debentures and the additional
        $500,000 in secured convertible debentures were consolidated into new secured
        convertible debentures along with the accrued and unpaid interest. The secured
        convertible debentures have a 36-month term and accrue annual interest of
        10%.
        The secured convertible debentures may be redeemed by us at any time, in
        whole
        or in part. We will pay a redemption premium of 20% of the amount redeemed
        in
        addition to the principle amount being redeemed plus interest. The secured
        convertible debentures are convertible at the holder’s option at a conversion
        price equal to 80% of the lowest volume weighted average price of our common
        stock for the 5 trading days immediately proceeding the conversion date.
        The
        debenture is secured by substantially all our assets.


In
        connection with the Securities Purchase Agreement we issued Cornell Capital
        Partners three warrants, each of which is exercisable for a period of five
        years. The first warrant allows Cornell Capital Partners to purchase 500,000
        shares of our common stock at an exercise price of $1.00. The second warrant
        allows Cornell Capital Partners to purchase 700,000 shares of our common
        stock
        at an exercise price of $0.75. The third warrant allows Cornell Capital Partners
        to purchase 1,000,000 shares of our common stock at an exercise price of
        $0.50.


**Off-Balance
      Sheet Arrangements**




We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures or capital resources that are material to investors.




**New
      Accounting Pronouncements**




In
      April
      2002, the FASB approved for issuance Statements of Financial Accounting
      Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of
      SFAS 13, and Technical Corrections” (“SFAS 145”). SFAS 145 rescinds previous
      accounting guidance, which required all gains and losses from extinguishment
      of
      debt be classified as an extraordinary item. Under SFAS 145 classification
      of
      debt extinguishment depends on the facts and circumstances of the transaction.
      SFAS 145 is effective for fiscal years beginning after May 15, 2002 and is
      not
      expected to have a material effect on the Company’s financial position or
      results of its operations.




In
      July
      2002, the FASB issued Statements of Financial Accounting Standards No. 146,
      “Accounting for Costs Associated with Exit or Disposal Activities”(SFAS 146).
      SFAS 146 requires companies to recognize costs associated with exit or disposal
      activities when they are incurred rather than at the date of a commitment to
      an
      exit or disposal plan. Examples of costs covered by SFAS 146 include lease
      termination costs and certain employee severance costs that are associated
      with
      a restructuring, discontinued operation, plant closing, or other exit or
      disposal activity. SFAS 146 is to be applied prospectively to exit or disposal
      activities initiated after December 31, 2002. The adoption of SFAS 146 is not
      expected to have a material effect on the Company’s financial position or
      results of its operations.




In
      December 2002, the FASB issued Statements of Financial Accounting Standards
      No.
      148 “Accounting for Stock-Based Compensation—Transition and Disclosure—an
      amendment of FASB Statement No. 123.” This Statement amends FASB Statement No.
      123, Accounting for Stock-Based Compensation, to provide alternative methods
      of
      transition for a voluntary change to the fair value based method of accounting
      for stock-based employee compensation. In addition, this Statement amends the
      disclosure requirements of Statement 123 to require prominent disclosures in
      both annual and interim financial statements about the method of accounting
      for
      stock-based employee compensation and the effect of the method used on reported
      results. The adoption of SFAS 148 is not expected to have a material effect
      on
      the Company’s financial position or results of its operations.




10


**Item
      3. Controls and Procedures.**




(a)
      Mr.
      Joseph Gutierrez, President and Principal Accounting Officer of the Company,
      after evaluating the effectiveness of the Company’s disclosure controls and
      procedures as of the end of the period covered of this quarterly report, has
      concluded that as of such date the Company’s disclosure controls and procedures
      are adequate and effective in ensuring that information required to be disclosed
      by the Company in the reports that it files or submits under the Securities
      and
      Exchange Act of 1934, as amended, is recorded, processed, summarized and
      reported, within the time period specified by the Securities and Exchange
      Commission’s rules and accumulated and communicated to the Company’s management,
      including it’s President and principal accounting officer to allow timely
      decisions regarding timely disclosure.




(b)
      In
      connection with the evaluation of the Company’s internal controls during it’s
      last fiscal quarter, the Company’s President and Principal Accounting Officer
      has determined that there are no changes to the Company’s internal controls over
      financial reporting that have materially affected or are reasonably likely
      to
      materially effect the Company’s internal controls over financial reporting.




11


**PART
      II**









**Item
      1. Legal Proceedings.**




***aeroTelesis
      vs. Jagan Narayanan.*** ** The
      Company filed suit in Los Angeles County against its former CEO and Director,
      Jagan Narayanan, on January 13, 2005, alleging breach of contract, fraud,
      breach if fiduciary duty and seeking equitable relief in the form of a
      declaratory judgment that the Company owes him no salary or any stock options.
      The Los Angeles County case was Case No. AC084087, filed in Los Angeles Superior
      Court in Santa Monica, California.




Mr.
      Narayanan has filed a lawsuit against the Company in Alameda County, in Northern
      California. Mr. Narayanan’s case seeks damages and penalties of $70,000 for
      unpaid wages and seeks specific performance for the sale of shares pursuant
      to a
      stock option. Consolidation of the matters was sought and the court ruled in
      late May 2005 that venue was proper in Alameda County (where the defendant
      lives) so the Company’s case has been transferred there. The Alameda County Case
      is No. HG05-199556 and was filed on February 19, 2005. Trial in this matter
      has
      not yet been scheduled.




***Neil
      Sloane v. aeroTelsis and William H.B. Chan.*** ** Los
      Angeles Superior Court Case No. BC337219. Plaintiff Neil Sloane is seeking
      damages of $135,000 and has alleged causes of action for declaratory and
      injunctive relief, conversion, conspiracy and negligence against AeroTelsis,
      Inc., and William H.B. Chan, contending that aeroTelsis, Inc., has refused
      to
      acknowledge Plaintiffs alleged ownership of 60,000 shares of stock in the
      Company and that William H.B. Chan has converted Plaintiff’s 60,000 shares to
      Chan’s personal possession for his personal benefit. aeroTelesis, Inc., has
      denied any wrongdoing. Trial in this mater is scheduled for April 24,
      2006.




**Item
      2. Unregistered Sales Of Equity Securities And Use Of
      Proceeds.**




A
      total
      of 35,000 shares of stock was issued at a cash price of $1.00 per share for
      a
      total of $35,000 as a loan to Nations Mobile Networks, Ltd.




**Item
      3. Defaults Upon Senior Securities.**




None.




**Item
      4. Submission Of Matters To A Vote Of Security Holders.**




None.




**Item
      5. Other Information.**




None.




**Item
      6. Exhibits And Reports On Form 8-K.**




**a)
      Exhibits**




**Exhibit
                  No.**
              
              **Description**4.1
              
              Amended
                  and Restated Investor Registration Rights Agreement dated as of
                  February
                  8, 2006 between the Company and Cornell Capital Partners,
                  LP
              
              Provided
                  herewith4.2
              
              Warrant
                  dated as of February 8, 2006 issued to Cornell Capital Partners,
                  LP
              
              Provided
                  herewith4.3
              
              Warrant
                  dated as of February 8, 2006 issued to Cornell Capital Partners,
                  LP
              
              Provided
                  herewith4.4
              
              Warrant
                  dated as of February 8, 2006 issued to Cornell Capital Partners,
                  LP
              
              Provided
                  herewith4.5
              
              Amended
                  and Restated Secured Convertible Debenture dated as of February
                  8, 2006
                  issued to Cornell Capital Partners, LP
              
              Provided
                  herewith4.6
              
              Amended
                  and Restated Secured Convertible Debenture dated as of February
                  8, 2006
                  issued to Cornell Capital Partners, LP
              
              Provided
                  herewith4.7
              
              Secured
                  Convertible Debenture dated as of July 25, 2005 issued to Cornell
                  Capital
                  Partners, LP
              
              Provided
                  herewith10.1
              
              Amended
                  and Restated Securities Purchase Agreement dated as of February
                  8, 2006
                  between the Company and Cornell Capital Partners, LP
              
              Provided
                  herewith10.2
              
              Amended
                  and Restated Security Agreement dated as of February 8, 2006 between
                  the
                  Company and Cornell Capital Partners, LP
              
              Provided
                  herewith10.4
              
              Amended
                  and Restated Pledge and Escrow Agreement dated February 8, 2006
                  among the
                  Company, Cornell Capital Partners, LP and David Gonzalez, Esq.
              
              Provided
                  herewith10.5
              
              Subsidiary
                  Security Agreement dated as of February 8, 2006 between AeroTelesis
                  Phillipines, Inc. and Cornell Capital Partners, LP
              
              Provided
                  herewith10.6
              
              Subsidiary
                  Security Agreement dated as of February 8, 2006 between AeroTelesis
                  Satellite Networks, Inc. and Cornell Capital Partners, LP
              
              Provided
                  herewith10.7
              
              Subsidiary
                  Security Agreement dated as of February 8, 2006 between AeroTelesis
                  IP
                  Networks, Inc. and Cornell Capital Partners, LP
              
              Provided
                  herewith10.8
              
              Assignment
                  Agreement dated as of February 8, 2006 between Cornell Capital
                  Partners,
                  LP and Highgate House Funds, Ltd.
              
              Provided
                  herewith31.1
              
              Certification
                  of Principal Executive and Financial Officer pursuant to Rule 13a-14
                  and
                  15d-14 under the Securities Exchange Act of 1934, as
                  amended.
              
              Provided
                  herewith31.2
              
              Certification
                  of Principal Executive and Financial Officer pursuant to 18 U.S.C.
                  Section
                  1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                  of
                  2002.
              
              Provided
                  herewith






**b)
      Reports on Form 8-K**




None.






12


**SIGNATURES**




Pursuant  to
      the
      requirements of the Exchange Act, the registrant caused this report to be signed
      on its behalf by the undersigned,
      thereunto duly authorized.




AEROTELESIS,
              INC.February
              21, 2006
            
            /s/
              Joseph
              GutierrezJoseph
              GutierrezPresident
                and
                Chief Financial Officer
              (Principal Executive and Financial
                Officer)









|**Exhibit
              No.** |  | **Description**                                                                                                                                                                                                             |  |                                
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------
|4.1                           |  | Amended
              and Restated Investor Registration Rights Agreement dated as of February
              8, 2006 between the Company and Cornell Capital Partners,
              LP                                     |  | Provided
              herewith
|4.2                           |  | Warrant
              dated as of February 8, 2006 issued to Cornell Capital Partners, LP                                                                                                                                   |  | Provided
              herewith
|4.3                           |  | Warrant
              dated as of February 8, 2006 issued to Cornell Capital Partners, LP                                                                                                                                   |  | Provided
              herewith
|4.4                           |  | Warrant
              dated as of February 8, 2006 issued to Cornell Capital Partners, LP                                                                                                                                   |  | Provided
              herewith
|4.5                           |  | Amended
              and Restated Secured Convertible Debenture dated as of February 8,
              2006
              issued to Cornell Capital Partners, LP                                                            |  | Provided
              herewith
|4.6                           |  | Amended
              and Restated Secured Convertible Debenture dated as of February 8,
              2006
              issued to Cornell Capital Partners, LP                                                            |  | Provided
              herewith
|4.7                           |  | Secured
              Convertible Debenture dated as of July 25, 2005 issued to Cornell Capital
              Partners, LP                                                                                                  |  | Provided
              herewith
|10.1                          |  | Amended
              and Restated Securities Purchase Agreement dated as of February 8,
              2006
              between the Company and Cornell Capital Partners, LP                                              |  | Provided
              herewith
|10.2                          |  | Amended
              and Restated Security Agreement dated as of February 8, 2006 between
              the
              Company and Cornell Capital Partners, LP                                                         |  | Provided
              herewith
|10.4                          |  | Amended
              and Restated Pledge and Escrow Agreement dated February 8, 2006 among
              the
              Company, Cornell Capital Partners, LP and David Gonzalez, Esq.                                  |  | Provided
              herewith
|10.5                          |  | Subsidiary
              Security Agreement dated as of February 8, 2006 between AeroTelesis
              Phillipines, Inc. and Cornell Capital Partners, LP                                                               |  | Provided
              herewith
|10.6                          |  | Subsidiary
              Security Agreement dated as of February 8, 2006 between AeroTelesis
              Satellite Networks, Inc. and Cornell Capital Partners, LP                                                        |  | Provided
              herewith
|10.7                          |  | Subsidiary
              Security Agreement dated as of February 8, 2006 between AeroTelesis
              IP
              Networks, Inc. and Cornell Capital Partners, LP                                                 |  | Provided
              herewith
|10.8                          |  | Assignment
              Agreement dated as of February 8, 2006 between Cornell Capital Partners,
              LP and Highgate House Funds, Ltd.                                                                           |  | Provided
              herewith
|31.1                          |  | Certification
              of Principal Executive and Financial Officer pursuant to Rule 13a-14
              and
              15d-14 under the Securities Exchange Act of 1934, as
              amended.                |  | Provided
              herewith
|31.2                          |  | Certification
              of Principal Executive and Financial Officer pursuant to 18 U.S.C.
              Section
              1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
              2002. |  | Provided
              herewith