UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

      For the quarterly period ended December 31, 2004

                        or

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
      SECURITIES EXCHANGE ACT OF 1934
      For the transition period from N/A to N/A

                         Commission File Number: 0-5014

                                AEROTELESIS, INC.
                 (Name of Small Business Issuer in its charter)

Delaware                                                  95-2554669
--------                                                  ----------
(State or other jurisdiction of                           (IRS Employer
 incorporation or organization)                           Identification Number)

             1554 S Sepulveda Blvd. Suite 118, Los Angeles, CA 90025
               (Address of principal executive offices)(Zip Code)

Issuer's telephone number: (310) 235-1727

Indicate by check mark if the registrant  (1) has filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days. [X] Yes [_] 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 Section 12, 13 or 15(d) of the Exchange Act after the  distribution  of
securities under a plan confirmed by a court.  [_] Yes [_] No

                APPLICABLE ONLY TO CORPORATE ISSUERS

State number of shares  outstanding  of each of the  issuer's  classes of common
equity, as of the latest practicable date:

      Class                                    Outstanding at December 31, 2004
Common Stock, $.00008                                  83,363,556 shares
    par value                                          -----------------
                                                    Outstanding Securities

Transitional Small Business Disclosure Format (check one): Yes [_]  No [X]

<PAGE>

AEROTELESIS, INC.

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

BASIS OF PRESENTATION

The accompanying unaudited financial statements are presented in accordance with
generally accepted accounting  principles for interim financial  information and
the  instructions to Form 10-QSB and Item 310 under subpart A of Regulation S-B.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
The  accompanying  statements  should be read in  conjunction  with the  audited
financial  statements  for the year  ended  March 31,  2004.  In the  opinion of
management,  all  adjustments  (consisting  only of normal  occurring  accruals)
considered  necessary in order to make the financial  statements not misleading,
have been  included.  Operating  results for the three months ended December 31,
2004 are not necessarily indicative of results that may be expected for the year
ending March 31, 2005.  The  financial  statements  are presented on the accrual
basis.

<TABLE>
<CAPTION>
                               AEROTELESIS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                                 BALANCE SHEETS
                                   (UNAUDITED)

                                                                              DECEMBER 31      MARCH 31
                                                                                 2004            2004
                                                                              -----------     -----------
                                  A S S E T S

<S>                                                                           <C>             <C>
Current Assets:
Cash                                                                          $     1,997     $    10,687
Accounts Receivable                                                                 3,535              --
Inventory                                                                           4,383              --
Prepaid Expenses                                                                       --           1,463
                                                                              -----------     -----------
           Total Current Assets                                                     9,915          12,150

Fixed Assets:
Furniture & Equipment, net                                                         66,749          37,239

Other Assets:
Deposit                                                                            18,468          17,832
License, net                                                                    2,631,311       2,698,781
                                                                              -----------     -----------
           Total Other Assets                                                   2,649,779       2,716,613
                                                                              -----------     -----------
           Total Assets                                                       $ 2,726,443     $ 2,766,002
                                                                              ===========     ===========

         L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y

Current Liabilities
Accounts Payable and Accrued Expenses                                         $   166,016     $    61,283
                                                                              -----------     -----------
           Total Current Liabilities                                              166,016          61,283

Commitments and Contigencies                                                           --              --

Stockholders' Equity
Preferred Stock,  $.0001 par value,  2,000,000 shares                                  --              --
       authorized;  none issued and outstanding
Common stock,  $.00008 par value,  200,000,000 shares                               6,231           6,065
       authorized; 83,363,556 and 81,288,688 shares issued and
       outstanding
Additional paid-in capital                                                      3,760,433       3,280,338
Accumulated deficit during the development stage                               (1,206,237)       (581,684)
                                                                              -----------     -----------
           Total Stockholders' Equity                                           2,560,427       2,704,719
                                                                              -----------     -----------
           Total Liabilities and Stockholders'  Equity                        $ 2,726,443     $ 2,766,002
                                                                              ===========     ===========
</TABLE>

                See accompanying notes to Financial Statements.


                                       2
<PAGE>


<TABLE>
<CAPTION>
                               AEROTELESIS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                     Three Months Ended                 Nine Months Ended         CUMULATIVE
                                                December 31      December 31       December 31    December 31     DURING THE
                                              ---------------------------------------------------------------     DEVELOPMENT
                                                    2004             2003            2004             2003           STAGE
                                              ------------     ------------     ------------     ------------     ------------
<S>                                                <C>               <C>             <C>               <C>             <C>
Revenues:                                               --               --               --               --
      Revenue                                 $     93,301     $     30,000     $    319,846     $     90,000     $    379,846
                                              ------------     ------------     ------------     ------------     ------------
         Total revenues                             93,301           30,000          319,846           90,000          379,846

Operating Expenses:
      Cost of Revenues                               7,763               --           13,645               --            13645
      Legal & Professional Fees                    143,616           26,120          416,997           92,741          685,596
      Impairment Loss                               67,470           67,470           67,470
      Rent                                          29,005               --           87,192               --          143,314
      Salaries                                      86,268               --          205,926               --          444,317
      Travel                                         1,609               --           52,415               --           60,121
      General and Administrative                    30,817           12,920          100,754           22,839          185,265
                                              ------------     ------------     ------------     ------------     ------------
                                                   366,548           39,040          944,399          115,580        1,586,083
                                              ------------     ------------     ------------     ------------     ------------
         Income (Loss) from operations            (273,247)          (9,040)        (624,553)         (25,580)      (1,206,237)
                                              ------------     ------------     ------------     ------------     ------------
Provision for Income Taxes:
      Income Tax Benefit (Expense)                      --               --               --               --               --

         Net Income (Loss)                    $   (273,247)    $     (9,040)    $   (624,553)    $    (25,580)    $ (1,206,237)
                                              ============     ============     ============     ============     ============
Loss per common share:
         From operations                      $      (0.00)    $      (0.00)    $      (0.01)    $      (0.00)    $      (0.01)
                                              ------------     ------------     ------------     ------------     ------------
Weighted average common shares outstanding      83,202,962       80,474,826       81,350,676       42,974,526       80,508,159
                                              ============     ============     ============     ============     ============
</TABLE>

                See accompanying notes to Financial Statements.

                                       3
<PAGE>

<TABLE>
<CAPTION>
                                                                                              Deficit
                                                                                             Accumulated
                                                         Preferred      Common               During the
                                 Common     Preferred     $0.0001      $0.00008   Paid-In    Development  Accumulated  Stockholders'
                                 Shares       Shares     Par Value    Par Value   Capital      Stage        Deficit      Equity
                              ----------   ----------   ----------   ----------  ---------   -----------  -----------  -------------
<S>                           <C>                <C>       <C>            <C>     <C>         <C>           <C>          <C>
Balance, April 1, 2002         5,474,826           --           --          438     973,017                   (979,515)#     (6,060)
                              ----------   ----------   ----------   ----------  ----------   ----------    ----------   ----------
Net Income                                                                                                      82,946       82,946
                              ----------   ----------   ----------   ----------  ----------   ----------    ----------   ----------
Balance, March 31, 2003        5,474,826           --           --          438     973,017                   (896,569)#     76,886
                              ----------   ----------   ----------   ----------  ----------   ----------    ----------   ----------
Prior capital replaced by                                                  (438)                               (16,102)     (16,540)
aeroTelesis Philippines
capital under reverse
takeover accounting

Transferred to Additional                                                          (912,671)                   912,671           --
Paid in Capital

Current capital replaced by   75,000,000                                  6,000   1,606,225                               1,612,225
aeroTelesis Philippines
capital upon consolidation
under reverse
takeover accounting

March 1, 2004
Stock Issued for
License Agreements               200,000                                     16     999,984                               1,000,000

March 31, 2004
Stock Issued for Debt            613,832                                     49     613,783                                 613,832

Net Loss                                                                                        (581,684)           --     (581,684)
                              ----------   ----------   ----------   ----------  ----------   ----------    ----------   ----------
Balance, March 31, 2004       81,288,658                                  6,065   3,280,338     (581,684)           --    2,704,719
                              ==========   ==========   ==========   ==========  ==========   ==========    ==========   ==========

June 16, 2004
 Stock Dividend                1,626,369                                    130        (130)          --

 June 30, 2004
 Stock Issued for Debt           187,113                                     15     187,098                                 187,113

July 12, 2004
 Stock Issued for Services         2,168                                      0      10,000           --                     10,000

 Sept 20, 2004
Stock Issued for Services          6,000                                      0      30,000                                  30,000

 Sept 30, 2004
 Stock Issued for Debt            89,016                                      6      89,010                                  89,016

 December 31, 2004
  Stock Issued for Debt          164,232                                     15     164,116                                 164,132

 Net Loss                                                                                       (624,553)                  (624,553)
                              ----------   ----------   ----------   ----------  ----------   ----------    ----------   ----------
 Balance, December 31, 2004   83,363,556                                  6,232   3,760,432   (1,206,237)           --    2,560,427
                              ==========   ==========   ==========   ==========  ==========   ==========    ==========   ==========
</TABLE>

                                       4
<PAGE>
<TABLE>
<CAPTION>
                               AEROTELESIS, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                 Nine Months Ended            Cumulative
                                          December 31         December 31     During the
                                          -------------------------------     Development
                                             2004             2003               Stage
                                          -----------      -----------        -----------
<S>                                       <C>              <C>                <C>
Cash Flows from Operating Activities:
Net Income                                $  (624,553)     $   (25,580)       $(1,206,237)

        Stock Issued for Services              40,000               --             40,000
        Impairment Loss                        67,470           67,470
        Depreciation                           17,525               --             19,215
Adjustments to Reconcile net loss to
  net cash provided by (used in)
  operating activities:
        Changes in operating assets
         and liabilities:

        Accounts Receivable                    (3,535)          28,500             50,465
        Inventory                              (4,383)          (4,383)
        Accounts Payable                      104,733           35,491            153,977
        Prepaid Expenses                        1,463           18,105
        Deposit                                  (636)          (8,850)           (18,468)

                                          -----------      -----------        -----------
Net Cash provided by (used in)
  Operating Activities                    $  (401,916)     $    29,561        $  (879,856)

Cash Flows from Investing Activities:
        Licenses                              (76,458)         (86,286)
        Fixed Assets                          (47,035)              --            (86,234)
                                          -----------      -----------        -----------
Net Cash provided by (used in)
  Investing Activities                    $   (47,035)     $   (76,458)       $  (172,520)

Cash Flows from Financing Activities:
        Debt Converted to Common Stock        440,261          101,000          1,054,093
                                          -----------      -----------        -----------
Net Cash provided by (used in)
  Financing Activities                    $   440,261      $   101,000        $ 1,054,093

Net Increase (Decrease) in cash and
  cash equivalents                             (8,690)          54,103              1,717

Cash at beginning of period               $    10,687      $    12,989        $       280
                                          ===========      ===========        ===========

Cash at end of period                     $     1,997      $    67,092        $     1,997
                                          ===========      ===========        ===========

Supplemental disclosure:
        Total interest paid               $        --      $        --        $        --
                                          ===========      ===========        ===========
        Stock Issued for Services         $    40,000      $        --        $    40,000
                                          ===========      ===========        ===========
</TABLE>


                See accompanying notes to Financial Statements.


                                       5
<PAGE>


                                AeroTelesis, Inc.
                          Notes to Financial Statements
                                December 31, 2004

NOTE 1- BASIS OF PRESENTATION

GENERAL
The consolidated  unaudited  interim  financial  statements of the Company as of
December 31, 2004 and for the three and nine months ended  December 31, 2004 and
2003, 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,
2004 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, 2004 and March 31, 2004, and the results of their operations for
the three and nine months ended December 31, 2004 and 2003, and their cash flows
for the three months ended December 31, 2004 and 2003.

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, 2004 and related  notes  included in the  Company's  Form 10-KSB
filed with the Securities and Exchange Commission

ORGANIZATION
AeroTelesis,  Inc. ("the Company") 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  83,363,556  common  shares  issued  and  outstanding  and no
preferred  shares issued and  outstanding  as of December 31, 2004.  The Company
filed an  amendment  of its  Certificate  of  Incorporation  with  the  State of
Delaware to increase the authorized  shares from  20,000,000  authorized  common
shares to 200,000,000  authorized shares and to change its par value from $.0001
to $.00008 in March 2003.  Also, on September 12, 2003,  the Company  approved a
one-to-two  forward  stock split of the common stock shares.  Additionally,  the
Company,   on  October  22,  2003,   filed  an  amendment  to  the  Articles  of
Incorporation  with the State of  Delaware  to change the name of the Company to
AeroTelesis, Inc.

BASIS OF PREPARATION AND PRESENTATION:

The accompanying consolidated 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 consolidated 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


                                       6
<PAGE>

                                AeroTelesis, Inc.
                         Notes to Financial Statements
                                December 31, 2004

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

BASIS OF PREPARATION AND PRESENTATION (CON'T)

issuance of stock by the Company accompanied by a recapitalization

As required under reverse takeover accounting, these financial statements have
been issued under the name of the Company and reflect the share capital
structure of ATP. However, they reflect the financial statements of ATP and
account for the Acquisition as an acquisition of the Company by ATP.

The consolidated financial statements therefore include:

      (a)   a  consolidated  balance sheet  prepared from the unaudited  balance
            sheets of the  Company  and ATP at  December  31, 2004 and March 31,
            2004.

      (b)   consolidated  statements  of  operations,  cash flows and changes in
            shareholders'   equity   (deficit)   prepared   from  the  unaudited
            statements of  operations,  cash flows and changes in  shareholders'
            equity  (deficit) of the Company for the three and nine months ended
            December 31, 2004 and the three and nine months  ended  December 31,
            2003 for ATP. The results of  operations  and cash flows  changes in
            shareholders'  equity  (deficit) of the Company and ATP are included
            commencing October 3, 2003, the date of the Acquisition.

ACCOUNTING METHOD

The Company's  financial  statements  are prepared  using the accrual  method of
accounting. Revenues are recognized when consulting engagements have been earned
and completed and expenses when incurred on the related consulting  engagements.
Since the  consulting  engagements  are usually less than one year,  the Company
recognizes its revenues when the engagements are completed.  This method is used
because the typical  contract  is  completed  in six months or less and does not
contain a refund provision in the contract. An engagement is considered complete
when all costs except  significant items have been incurred.  Revenues from time
contracts are recognized currently as the work is performed.  Losses on contract
are recognized by expenses the actual expenses on the completed job.

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.


                                       7
<PAGE>

                                AeroTelesis, Inc.
                         Notes to Financial Statements
                                December 31, 2004

NOTE 2 - COMMON STOCK

The company has a total of  200,000,000  authorized  common shares and 2,000,000
preferred  shares  with a par value of  $.00008  per  share and with  83,183,129
common  shares  issued  and  outstanding  and no  preferred  shares  issued  and
outstanding as of December 31, 2004.

The Company issued a stock  dividend  effect June 16, 2004. A total of 1,610,174
shares were  issued.  The shares were  recorded at par value since the  retained
earnings is at a deficit.

On December 31, 2004, the Company agreed to issue 164,232 shares of common stock
to Nations Mobile Network Ltd.  ("Nations").  to convert the outstanding balance
of the  advances for the quarter  ended  December 31, 2004 on the line of credit
along with accrued interest to equity.

NOTE 3 - LONG TERM DEBT

On September 25, 2003,  the Company  entered into a loan  agreement with 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 vaule 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 $1.00 per share. These warrants were valued using the Black
Scholes  option  pricing model;  the relative fair value was  insigificant  when
granted. On December 31, 2004, the Company issued 164,232 shares of common stock
for the outstanding principle and accrued interest for the quarter ended..

NOTE 4 - COMMITMENT AND CONTINGENCIES

The Company has not recognized any commitments or contingencies at this time.

                 [THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]



Item 2. Management's Discussion and Analysis or Plan of Operation

      Except for disclosures that report the Company's  historical results,  the
statements  set forth in this  section are  forward-looking  statements.  Actual
results  may differ  materially  from  those  projected  in the  forward-looking
statements.  Additional  information  concerning  factors  that may cause actual
results to differ materially from those in the forward-looking statements are in
the Company's annual report on Form 10-KSB for the year ended March 31, 2004 and
in the Company's  other  filings with the  Securities  and Exchange  Commission.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements,  which  speak only as of the date  hereof.  The  Company  assumes no
obligation to update any  forward-looking  statements or comments on the reasons
why actual results may differ there from.

Results of Operations

      The Company  realized a net loss of  ($273,247)  from  operations  for the
three month  period ended  December 31, 2004  compared to a net loss of ($9,040)
for the three month period ended  December 31, 2003.  The  difference in results
for  this  three  month  period  as  compared  to the  prior  year is due to the
Company's  increased  operating  expenses for the quarter  compared to the prior
year as well as an  impairment  loss of  approximately  $67,500 that the Company
recorded  for the quarter.  For the three month period ended  December 31, 2004,
the Company had revenue of  approximately  $93,301,  composed of consulting  and
equipment  sales  income  compared  to $30,000 in  revenues  for the three month
period  ended  December  31,  2003.  The net loss per share for the three  month
period  ended  December  31,  2004 was nil per share  compared to a net loss per
share of nil for the three month period ended December 31, 2003.

      The Company had costs and expenses of approximately $367,000 for the three
month  period  ended  December  31,  2004  compared  to costs  and  expenses  of
approximately  $39,000 for the three month period ended  December 31, 2003.  The
Company's expenses consist of legal and professional fees,  including consulting
fees, of approximately  $144,000, rent of approximately $29,000, salary expenses
of approximately  $86,000,  travel expenses of approximately $1,600, general and
administrative  expenses  of  approximately  $31,000,  and cost of  revenues  of
approximately $7,800.

The Company realized a net loss of ($624,553) from operations for the nine month
period ended  December 31, 2004 compared to a net loss of ($25,580) for the nine
month period ended  December 31, 2003. For the nine month periods ended December
31,  2004  and  2003,   the  Company  had   revenues  of  $319,846  and  $90,000
respectively,  composed of equipment sales and consulting  income.  The net loss
per share for the nine month period ended December 31, 2004 was ($.01)  compared
to a net loss of nil for the nine month period ended December 31, 2003.


                                       8
<PAGE>

The Company had costs and expenses of approximately  $945,000 for the nine month
period ended  December 31, 2004 compared to costs and expenses of  approximately
$116,000  for the nine month  period ended  December  31,  2003.  The  Company's
expenses consist of legal and professional  fees and general and  administrative
expenses. The increase in expenses is due to the increased costs of operating as
the Company's revenues have increased along with increased professional expenses
due to the  Company's  resumption  of periodic  reporting  under the  Securities
Exchange Act of 1934.  The Company has also incurred  expenses in setting up its
operations, including salaries and rent expenses.

      The  Company's  assets at December  31, 2004 were  $2,726,443  compared to
assets of  $2,766,002  at March 31, 2004.  The  difference is due to the Company
recording an impairment in connection with the license it acquired in connection
with USM(TM) technology. At December 31, 2004, the Company's current assets were
comprised of cash of approximately  $2,000,  accounts  receivable of $3,500, and
$4,400 in  inventory,  compared to cash of  approximately  $11,000 and $1,463 in
prepaid  expenses at March 31, 2004. The Company's  fixed assets at December 31,
2004 are furniture and equipment of approximately  $67,000.  The Company's Other
Assets  are a deposit  of  $18,468  and a license  of  approximately  $2,631,000
compared to fixed assets at March 31, 2004 that included furniture and equipment
of approximately  37,000 and Other Assets that included a deposit of $17,832 and
a license of approximately $2,700,000.

      The  Company's   liabilities  at  December  31,  2004  were  approximately
$166,000,  comprised of accounts  payable and accrued  expenses.  The  Company's
liabilities  at March 31,  2004 were  approximately  $61,000.  The  increase  in
liabilities is due to the Company's increased operating expenses.

      Total shareholders'  (deficit) increased from ($581,684) at March 31, 2004
to ($1,206,237) at December 31, 2004.

Liquidity and Capital Resources

      As of December  31,  2004,  the Company had  negative  working  capital of
approximately  ($156,000)  consisting of approximately $10,000 in current assets
and $166,000 in current liabilities. The Company had negative working capital of
approximately  ($49,000)  at March 31,  2004  consisting  of  current  assets of
approximately $12,000 and $61,000 in current liabilities. The Company has a line
of credit of $1,000,000 available to it to pay its operating and other expenses.
As a result,  the Company  believes that it has adequate working capital for its
current  operations.  However,  the  Company  may  seek  additional  sources  of
financing,  including  seeking to raise capital,  to fund its operations for the
fiscal year. The Company also intends to identify,  locate and acquire operating
companies with a positive cash flow during the next calendar year.

      In connection  with its line of credit,  the Company issued 164,232 shares
of its common stock during the quarter  ended  December 31, 2004 to its majority
shareholder,  Nations Mobile Networks,  Inc., representing the conversion of the
debt outstanding to Nations as of December 31, 2004 into shares of the Company's
common stock.

Effect of Inflation


                                       9
<PAGE>

      The Company's  results of  operations  have not been affected by inflation
and  management  does not expect  inflation to have a significant  effect on its
operations in the future.

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.

ITEM 3. CONTROLS AND PROCEDURES

Based on the evaluation of the Company's  disclosure  controls and procedures by
Mr. Joseph Gutierrez,  president and chief accounting officer of the Company, as
of a date  within 90 days of the  filing  date of this  quarterly  report,  such
officer has concluded that the Company's  disclosure controls and procedures are
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
forms.

There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their  evaluation,  including any corrective  actions with regard to significant
deficiencies and material weaknesses.


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<PAGE>

                            PART II OTHER INFORMATION

Items 1, 2, 3, 4 and 5 are Inapplicable

Item No. 6 - Exhibits and Reports on Form 8-K

(a) A report on Form 8-K was  filed on  December  6,  2004 and was  subsequently
amended on December 21, 2004 and December 22, 2004.  These were the only reports
on Form 8-K filed during the three months ended December 31, 2004.

(b) Exhibits

None.

                                   SIGNATURES

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

                                       AEROTELESIS, INC.

                                        By/s/ Joseph Gutierrez
                                       Joseph Gutierrez, President, CFO


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