UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549




**FORM
      10-QSB**




(Mark
                One)x
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
              for
                the quarterly period ended September 30, 2006o
            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 x 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 x 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 September 30, 2006Common
                stock, $0.00008 par value
            
            90,616,181




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










1


**TABLE
      OF CONTENTS**







**PAGE**PART
                I: FINANCIAL INFORMATION
            3ITEM
                1. FINANCIAL STATEMENTS
            3BALANCE
                SHEETS AS OF SEPTEMBER 30, 2006 (UNAUDITED) AND MARCH 31,
                2006
            3STATEMENTS
                OF OPERATIONS
            4STATEMENTS
                OF CASH FLOWS
            5NOTES
                TO FINANCIAL STATEMENTS
            6ITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION
            11ITEM
                3. CONTROLS AND PROCEDURES.
            13PART
                II: OTHER INFORMATION
            14ITEM
                1. LEGAL PROCEEDINGS
            14ITEM
                2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS
            14ITEM
                3. DEFAULTS UPON SENIOR SECURITIES
            14ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            14ITEM
                5. OTHER INFORMATION
            14ITEM
                6. EXHIBITS AND REPORTS ON FORM 8-K
            14SIGNATURES
            17


2


**PART
      I: FINANCIAL INFORMATION**





**Item
      1. Financial Statements**


**AEROTELESIS,
        INC.** **A
        DEVELOPMENT STAGE ENTERPRISE**
 **BALANCE
        SHEETS**
  **ASSETS****September
                  30**
              
              **March
                  31****2006**
              
              **2006****(Unaudited)**Current
                  AssetsCash
              
              $
              -
              
              $
              67,823Other
                  Receivable
              
              
              54
              
              
              -Prepaid
                  Expenses
              
              
              100,000
              
              
              -Prepaid
                  Insurance
              
              
              -
              
              
              28,493Total
                  Current Assets
              
              
              100,054
              
              
              96,316Fixed
                  Assets:Equipment
                  under Capital Lease
              
              
              30,832
              
              
              30,832Furniture
                  & Fixtures
              
              
              120,022
              
              
              120,022Accumulated
                  Depreciation
              
              
              (61,945
              )
              
              (46,859
              )88,909
              
              
              103,995Total
                  Fixed AssetsOther
                  Assets:Deposits
              
              
              26,784
              
              
              26,784Licenses,
                  net
              
              
              2,698,781
              
              
              2,698,781Total
                  Other Assets
              
              
              2,725,565
              
              
              2,725,565Total
                  Assets
              
              $
              2,914,528
              
              $
              2,925,876**LIABILITIES**Current
                  LiabilitiesAccounts
                  Payable and Accrued Expenses
              
              $
              830,674
              
              $
              312,677Cash
                  Overdraft
              
              
              242
              
              
              -Notes
                  Payable - Current
              
              
              201,194
              
              
              21,360Capital
                  Lease Payable - Current
              
              
              9,273
              
              
              12,330Total
                  Current Liabilities
              
              
              1,041,383
              
              
              346,367Long-Term
                  LiabilitiesConvertible
                  Debenture
              
              
              3,405,000
              
              
              3,556,665Loan
                  Costs, net of accumulated amortization
              
              
              (2,144,594
              )
              
              (2,633,726
              )Notes
                  Payable - Non-Current
              
              
              -
              
              
              -Capital
                  Lease Payable - Non-Current
              
              
              31,493
              
              
              34,647Total
                  Long-Term Liabilities
              
              
              1,291,899
              
              
              957,586Total
                  Liabilities
              
              
              2,333,282
              
              
              1,303,953Commitments
                  and Contingencies**STOCKHOLDERS'
                  EQUITY**Preferred
                  Stock
              
              
              -
              
              
              -2,000,000
                    authorized shares, par value $.001
                  no
                    shares issued and outstandingCommon
                  Stock
              
              
              7,249
              
              
              7,072200,000,000
                    authorized, par value $.00008
                  90,616,181
                    and 88,397,794 shares issued and outstandingAdditional
                  Paid-in-Capital
              
              
              11,356,810
              
              
              10,876,239Deficit
                  accumulated during the development stage
              
              
              (10,782,813
              )
              
              (9,261,388
              )Total
                  Stockholders' Equity
              
              
              581,246
              
              
              1,621,923Total
                  Liabilities and Stockholders' Equity
              
              $
              2,914,528
              
              $
              2,925,876








*See
        accompanying notes.*


3


**AEROTELESIS,
        INC.**
 **A
        DEVELOPMENT STAGE ENTERPRISE**
 **STATEMENTS
        OF OPERATIONS**
 **(UNAUDITED)**




**Cumulative****During
                the****Three
                Months Ended**
            
            **Six
                Months Ended**
            
            **Development****September
                30**
            
            **September
                30**
            
            **Stage****2006**
            
            **2005**
            
            **2006**
            
            **2005**
            
            **Through
                9/30/06****Revenues:**Revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            8,600
            
            $
            478,090Total
                Revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            8,600
            
            $
            478,090**Expenses:**Cost
                of Revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            17,349Options/Warrants
                Expense - Non Cash
            
            
            92,463
            
            
            (121,345
            )
            
            193,746
            
            
            357,230
            
            
            1,956,554Non
                Cash Consulting Fees
            
            
            20,000
            
            
            -
            
            
            20,000
            
            
            -
            
            
            1,365,900Research
                & Development
            
            
            -
            
            
            550,000
            
            
            28,000
            
            
            550,000
            
            
            1,288,000Legal
                & Professional Fees
            
            
            58,608
            
            
            634,574
            
            
            181,254
            
            
            810,675
            
            
            1,907,442Payroll
                Expenses
            
            
            37,400
            
            
            73,934
            
            
            89,554
            
            
            100,532
            
            
            577,813Travel
            
            
            176
            
            
            38,428
            
            
            5,871
            
            
            40,070
            
            
            455,184Operating
                Expenses
            
            
            11,767
            
            
            22,557
            
            
            33,606
            
            
            48,466
            
            
            385,501Rent
            
            
            19,941
            
            
            31,225
            
            
            42,281
            
            
            64,685
            
            
            333,368Consulting
                Fees
            
            
            100,000
            
            
            -
            
            
            199,503
            
            
            -
            
            
            447,946Depreciation
                Expense
            
            
            7,543
            
            
            7,492
            
            
            15,085
            
            
            14,827
            
            
            61,943Insurance
            
            
            12,271
            
            
            -
            
            
            26,494
            
            
            -
            
            
            57,826Total
                Expenses
            
            
            360,169
            
            
            1,236,865
            
            
            835,394
            
            
            1,986,485
            
            
            8,854,826Net
                Loss from Operations
            
            $
            (360,169
            )
            $
            (1,236,865
            )
            $
            (835,394
            )
            $
            (1,977,885
            )
            $
            (8,376,736
            )**Other
                Income (Expenses):**Reimbursement
                of Expenses
            
            $
            (40,000
            )
            $
            -
            
            $
            (10,000
            )
            $
            -
            
            $
            (10,000
            )Amortization
                of Loan Costs
            
            
            (244,566
            )
            
            -
            
            
            (489,132
            )
            
            -
            
            
            (1,822,418
            )Interest
                Expense
            
            
            (94,962
            )
            
            (263,923
            )
            
            (186,900
            )
            
            (268,443
            )
            
            (374,945
            )Other
                Income (Expenses)
            
            
            2
            
            
            2,185
            
            
            2
            
            
            2,813
            
            
            (198,714
            )Total
                Other Income (Expenses)
            
            
            (379,526
            )
            
            (261,738
            )
            
            (686,030
            )
            
            (265,630
            )
            
            (2,406,077
            )Loss
                Before Income Tax Expense
            
            
            (739,695
            )
            
            (1,498,603
            )
            
            (1,521,424
            )
            
            (2,243,515
            )
            
            (10,782,813
            )**Provision
                for Income Taxes:**Provision
                for Income Taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                Loss
            
            $
            (739,695
            )
            $
            (1,498,603
            )
            $
            (1,521,424
            )
            $
            (2,243,515
            )
            $
            (10,782,813
            )Basic
                and Diluted Loss Per Common Share
            
            
            (0.01
            )
            
            (0.02
            )
            
            (0.02
            )
            
            (0.03
            )Weighted
                Average number of Common Shares
            
            
            90,382,841
            
            
            84,779,711
            
            
            89,690,870
            
            
            84,292,711used
                in per share calculations






See accompanying notes.


4


**AEROTELESIS,
      INC.**


**A
      DEVELOPMENT STAGE ENTERPRISE**


**STATEMENTS
      OF CASH FLOWS**


**(UNAUDITED)**




**Cumulative****Six
                Months Ended**
            
            **During
                the****September
                30**
            
            **September
                30**
            
            **Development****2006**
            
            **2005**
            
            **Stage**Cash
                Flows from Operating Activities:Net
                Loss
            
            $
            (1,521,424
            )
            $
            (2,243,515
            )
            $
            (10,782,813
            )Adjustment
                to reconcile net income(loss) to net cashprovided
                by (used in) operating activitiesDepreciation
            
            
            15,085
            
            
            14,827
            
            
            61,944Shares
                for Services
            
            
            20,000
            
            
            467,567
            
            
            1,802,957Options
                for Services
            
            
            193,746
            
            
            357,230
            
            
            1,956,554Amortization
                of Loan Cost
            
            
            489,132
            
            
            -
            
            
            1,822,418Other
                Non-Cash Expenses
            
            
            -
            
            
            233,750
            
            
            182,754Changes
                in operating assets and liabilities:Receivables
            
            
            (54
            )
            
            (6,865
            )
            
            53,946Deposits
            
            
            -
            
            
            (162
            )
            
            (26,784
            )Prepaid
                Insurance
            
            
            28,492
            
            
            -
            
            
            18,095Related
                Party Payable
            
            
            -
            
            
            (8,600
            )
            
            8,600Accounts
                Payable and Accrued Expenses
            
            
            521,336
            
            
            (38,575
            )
            
            851,387Net
                Cash Used In Operating Activities
            
            $
            (253,687
            )
            $
            (1,224,343
            )
            $
            (4,050,942
            )Cash
                Flows from Investing Activities:Capital
                Expenditures
            
            
            -
            
            
            (7,938
            )
            
            (89,436
            )Licenses
            
            
            -
            
            
            -
            
            
            (67,613
            )Net
                Cash Used in Investing Activities
            
            $
            -
            
            $
            (7,938
            )
            $
            (157,049
            )Cash
                Flows from Financing Activities:Common
                Stock
            
            
            -
            
            
            53,050
            
            
            96,040Convertible
                Debenture
            
            
            -
            
            
            1,257,300
            
            
            2,900,758Note
                Payable
            
            
            (7,870
            )
            
            (4,543
            )
            
            20,306Capital
                Leases Paid
            
            
            (6,211
            )
            
            -
            
            
            (19,361
            )Revolving
                Line of Credit Advance
            
            
            199,703
            
            
            141,986
            
            
            1,326,637Revolving
                Line of Credit Payments
            
            
            -
            
            
            (136,500
            )
            
            (136,500
            )Note
                Payable Directors
            
            
            -
            
            
            -
            
            
            19,869Stock
                Subscrition Receivable
            
            
            -
            
            
            7,500
            
            
            -Net
                Cash Provided from Financing Activities
            
            $
            185,622
            
            $
            1,318,793
            
            $
            4,207,749Net
                Increase (Decrease) in Cash
            
            $
            (68,065
            )
            $
            86,512
            
            $
            (242
            )Cash
                Balance, Begin Period
            
            
            67,823
            
            
            1,913
            
            
            -Cash
                Balance, End Period
            
            $
            (242
            )
            $
            88,425
            
            $
            (242
            )Supplemental
                Disclosures:Cash
                Paid for interest
            
            $
            9,337
            
            $
            2,011
            
            $
            127,036Cash
                Paid for income taxes
            
            $
            -
            
            $
            -
            
            $
            -Non-Cash
                Transaction:Stock
                Issued for Services
            
            $
            120,000
            
            $
            467,567
            
            $
            1,802,957Stock
                Issued for Debt
            
            $
            -
            
            $
            -
            
            $
            1,092,139Accounts
                Payable
            
            $
            15,336
            
            $
            -
            
            $
            72,877Stock
                Issued as fees to raise capital
            
            $
            -
            
            $
            -
            
            $
            1,400,000Long
                Term Debt Used to Acquire Equipment
            
            $
            -
            
            $
            50,680
            
            $
            61,418Stock
                Issued for Convertible Debt
            
            $
            151,666
            
            $
            -
            
            $
            151,666







*See
        accompanying notes.*


5







**AEROTELESIS,
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2006**


**(UNAUDITED)**





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





**General**





The
      unaudited interim financial statements of aeroTelesis, Inc. (the “Company”) as
      of September 30, 2006 for the three and six months ended September 30, 2006
      and
      2005, included herein have been prepared in accordance with the instructions
      for
      Form 10-QSB under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), and Article 10 of Regulation S-X under the Securities Act of 1933, as
      amended. The March 31, 2006 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 September
      30, 2006, and the results of its operations for the three and six months ended
      September 30, 2006 and 2005 and the developmental period, and its cash flows
      for
      the three and six months ended September 30, 2006 and 2005 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, 2006 and related notes included in the Company's Annual Report on Form
      10-KSB filed with the Securities and Exchange Commission (the
“SEC”).





**Organization**





The
      Company was incorporated in Delaware on August 26, 1968 and until 1989 was
      involved in a number of different businesses. Those operations were ultimately
      unsuccessful and terminated. The Company was inactive and dormant from 1989
      through 2000. During this period, the Company did not have revenues, operating
      profits or any identifiable assets attributable to any industry segment. In
      2000, the Company began limited operations and began seeking opportunities
      to
      act as a consultant to companies interested in establishing telecom businesses
      in the Asia-Pacific region.




In
      October 2003, the Company acquired all issued and outstanding shares of
      Aerotelesis Philippines, Inc. (“ ATP ”),
      a
      British Virgin Islands company, in exchange for the issuance of 75,000,000
      shares of the Company’s common stock to the sole **** shareholder
      of ATP, Nations Mobile Networks Ltd. (“ Nations ”),
      formerly known as Aerotelesis Ltd. (“ ATL ”).
      As a
      result of this transaction, ATP became a wholly-owned subsidiary of the Company.
      Nations holds 53,872,445 shares (59.5%) of the 90,616,181 fully diluted
      outstanding shares of common stock of the Company as of September 30,
      2006.







In
      addition to ATP, the Company has two other subsidiaries: Aerotelesis IP
      Networks, Inc. and Aerotelesis Satellite Networks Inc., both Delaware
      corporations.




**Going
      Concern**




The
      accompanying financial statements have been prepared on a going concern basis
      of
      accounting which contemplates continuity of operations, realization of assets,
      liabilities, and commitments in the normal course of business. The accompanying
      financial statements do not reflect any adjustments that might result if the
      Company is unable to continue as a going concern. We have a working capital
      deficit with no revenues anticipated for the near term. Management believes
      we
      will need to raise capital in order to operate over the next 12 months. As
      shown
      in the accompanying financial statements, we also 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, in order to raise sufficient capital 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.







(continued)


6





**AEROTELESIS,
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2006**


**(UNAUDITED)**





**NOTE
      1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





**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 59.5% of the
      common shares of the Company, and are 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.





**Stock-Based
      Compensation**





The
      Company adopted the provisions of Statement of Financial Accounting Standards
      (“SFAS”) No. 123 (R), “Share-Based Payment” during the quarter ended June
      30, 2006. Please refer to Note 3.





**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 90,616,181 common shares issued and outstanding and no preferred shares
      issued and outstanding as of September 30, 2006.





During
      the quarter ended September 30, 2006, the Company issued the following shares
      of
      its common stock:





•
            On
                September 14, 2006, a total of 250,250 shares of stock were issued
                to
                Cornell Capital pursuant to the convertible debenture agreement at
                80% of
                the lowest daily VWAP (Volume Weight Average Price) of the common
                stock
                during the five trading days prior to the conversion date. No cash
                was
                received and the convertible debenture liability was
                reduced.


•
            On
                July 28, 2006, a total of 960,000 shares of common stock were issued
                for
                consulting services. The shares were recorded at $120,000 for services
                over a twelve month period. Two months were recorded as non-cash
                consulting fees and the balance was recorded as Prepaid
                Expenses.


•
            On
                September 8, 2006 a total of 150,000 shares of common stock were
                issued to
                an attorney for his outstanding payable in the amount of
                $15,336.


(continued)


7


**AEROTELESIS,
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2006**


**(UNAUDITED)**





**NOTE
      3: STOCK-BASED COMPENSATION**




During
      the quarter ended June 30, 2006, the Company adopted the provisions of
      Statement of Financial Accounting Standards (“SFAS”) No. 123 (R),
“Share-Based Payment.” Prior to the adoption of SFAS 123(R), the Company
      accounted 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. Compensation cost, if any, was 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 allowed an entity to continue to measure compensation for those plans using
      the intrinsic value method of accounting prescribed by APB Opinion No. 25.




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, the following table illustrated how stock-based
      compensation costs would have impacted our net income and earnings per common
      share for the quarter ended September 30, 2005:


Three
                  Months EndedSeptember
                  30, 2005UnauditedNet
                  Income (Loss) as Reported
              
              $
              (1,498,608
              )Deduct:
                  Stock Based Compensation Costs, Net of Taxes Under SFAS
                  123
              
              
              (221,426
              )Pro
                  Forma Net Income Loss
              
              $
              (1,720,029
              )Basic,
                  as Reported
              
              $
              (0.02
              )Basic,
                  Pro Forma
              
              $
              (0.02
              )Diluted,
                  as Reported
              
              $
              (0.02
              )Diluted,
                  Pro Forma
              
              $
              (0.02
              )




There
      were no options issued during the quarter ended September 30, 2006.





(continued)














8


**AEROTELESIS,
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2006**


**(UNAUDITED)**





**NOTE
      4: LONG TERM DEBT**





On
      July
      12, 2006, 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 balance of the note as of September 30, 2006 is $201,194 with $5,073
      in
      accrued interest.





**NOTE
      5: CONVERTIBLE DEBT**





On
      May
      10, 2005, the Company entered into a Securities Purchase Agreement with Cornell
      Capital Partners, LP and Highgate House Funds, Ltd., pursuant to which they
      committed to purchase $3,000,000 of convertible debentures from the Company.





On
      February 8, 2006, the Company entered into an Amended and Restated Securities
      Purchase Agreement with Cornell Capital Partners, LP whereby the Company agreed
      to amend and restate the secured convertible debentures the Company previously
      issued to Cornell Capital Partners, LP and Highgate House Funds, Ltd. on May
      10,
      2005. Prior to entering into the Securities Purchase Agreement, the Company
      issued secured convertible debentures to Cornell Capital Partners, LP and
      Highgate House Funds, Ltd. in the principal aggregate amount equal to $3,000,000
      of which $1,500,000 was funded on July 25, 2005 and $1,500,000 was funded on
      October 27, 2005. On February 8, 2006, Highgate House Funds, Ltd. assigned
      all
      of its interests in its debentures to Cornell Capital Partners, LP. Pursuant
      to
      the Securities Purchase Agreement, dated February 8, 2006, Cornell Capital
      Partners, LP provided the Company an additional $500,000 in secured convertible
      debentures which was funded on February 8, 2006. 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 debentures are secured by substantially
      all
      of the Company’s assets. Cornell Capital Partners, LP has the ability to
      foreclose on our assets if an event of default occurs pursuant to the underlying
      documents and is not remedied by the Company or waived by Cornell Capital
      Partners, LP. The secured convertible debentures have a 36-month term and accrue
      annual interest of 10%. The secured convertible debentures may be redeemed
      by
      the Company at any time, in whole or in part. The Company 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 five trading days immediately
      proceeding the conversion date.





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





The
      following table summarizes the warrants outstanding and exercisable at September
      30, 2006.




Number
                of Warrants Outstanding
            
            Exercise
                Price
            
            Maturity
                Date300,000
            
            
            3.00
            
            
            7/27/10150,000
            
            
            4.00
            
            
            7/27/10500,000
            
            
            1.00
            
            
            2/07/11700,000
            
            
            0.75
            
            
            2/07/111,000,000
            
            
            0.50
            
            
            2/07/11TOTAL
            
            
            2,650,000




The
      Company received $1,500,000 at closing on July 25, 2005. On October 27, 2005,
      the Company received a second tranche in the amount of $1,500,000. On
      February 7, 2006, the Company received a third tranche in the amount of
      $500,000.




(continued)













9








**AEROTELESIS,
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2006**


**(UNAUDITED)**





**NOTE
      5: CONVERTIBLE DEBT (CONTINUED)**







The
      warrants were valued at $1,231,606 and the conversion feature was valued at
      $2,120,773 both of which were recorded as a part of the debt issue cost as
      a reduction of the liability and amortized over the 36 months. A total of
      $551,197 was paid for commissions and expenses and shown as a reduction of
      the
      debt and is being amortized over 36 months or the length of the debt. A total
      of
      $244,566 has been amortized for the quarter ended September 30,
      2006.




On
      September 14, 2006, a total of 250,250 shares of common stock were issued to
      Cornell Capital Partners, LP. The 250,250 shares of common stock were issued
      at
      a 20% discount to the lowest weighted average price of our common stock for
      the
      five trading days immediately proceeding the conversion date. The convertible
      debenture liability was reduced by $25,000, from $3,430,000 to $3,405,000.
      Interest in the amount of $ 86,597 has been charged to interest expense during
      the quarter ended September 30, 2006.




**NOTE
      6: LEGAL PROCEEDINGS**





On
      January 13, 2005, the Company filed suit in Los Angeles County against its
      former CEO and Director, Jagan Narayanan, alleging breach of contract, fraud,
      breach of fiduciary duty and seeking equitable relief in the form of a
      declaratory judgment that the Company owes him no salary or any stock options.
      On February 18, 2005, Mr. Narayanan filed a counter-lawsuit against the Company
      in Alameda County, in Northern California. Mr. Narayanan’s case seeks damages
      and penalties for unpaid wages in an amount of $70,000 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 Country (where the defendant lives). The case was subsequently
      transferred to Alameda Country (Alameda County Case is No. HG05-199556). 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 claims against Mr. Narayanan. As of September 30, 2006, the Company
      continues its litigation with Jagan Narayanan. There have been no material
      developments for the quarter ended September 30, 2006.




***Neil
        Sloane v. aeroTelesis (f/k/a Pacific Realm, Inc.) and William H.B.
        Chan.*** (Los Angeles Superior Court, County of Orange, Case No. BC337219)
  In
        July
        of 2005, Plaintiff Neil Sloane filed suit against us seeking damages of $135,000
        and seeking an action for declaratory and injunctive relief, conversion,
        conspiracy and negligence against us and William H.B. Chan.   The
        parties settled on March 9, 2006 in Century City, California, which settlement
        was expensed by the Company for the fiscal year ended March 31, 2006.  On
        August 14, 2006, Plaintiff obtained a judgment against the Company in connection
        with the Company’s non-performance of certain conditions of the Settlement
        Agreement, entered into on March 9, 2006.  Pursuant to the terms of the
        Stipulation for Judgment granted to Plaintiff, the court awarded Plaintiff
        a
        judgment of $95,000 and ordered the turn-over of certain collateral held
        in the
        possession of defendant’s counsel.




10




**Item
      2. Management’s Discussion and Analysis or Plan of
      Operations**







**Overview**




aeroTelesis
      Inc. (“ aeroTelesis ”
or
      “ Company ”)
      is an
      emerging technology-driven service provider that will potentially enable
      satellite and wireless companies to maximize their bandwidth utilization.
      aeroTelesis’ technology partner, PhotronTM Technologies Ltd. (“ PhotronTM ”)
      is the
      developer of a proprietary technology platform called Ultra Spectral
      Modulation (“ USM TM ”). USM TM is
      a
      proprietary modulation technique that increases spectral efficiency in satellite
      and wireless applications. aeroTelesis has the exclusive license from PhotronTM
to distribute USM-related products and services. Upon the completion of the
      development of USM, aeroTelesis intends to offer USM-related products and
      services to major satellite operators, system integrators and wireless service
      providers on a global basis.




aeroTelesis
      is a Delaware corporation and is currently trading on the OTCBB under the symbol
      AOTL.




**Organizational
      History**




The
      Company was incorporated in Delaware on August 26, 1968 and until 1989 was
      involved in a number of different businesses. Those operations were ultimately
      unsuccessful and terminated. The Company was inactive and dormant from 1989
      through 2000. During this period, the Company did not have revenues, operating
      profits or any identifiable assets attributable to any industry segment. In
      2000, the Company began limited operations and began seeking opportunities
      to
      act as a consultant to companies interested in establishing telecom businesses
      in the Asia-Pacific region.




In
      October 2003, the Company acquired all issued and outstanding shares of
      Aerotelesis Philippines, Inc. (“ ATP ”),
      a
      British Virgin Islands company, in exchange for the issuance of 75,000,000
      shares of the Company’s common stock to the sole **** shareholder
      of ATP, Nations Mobile Networks Ltd. (“ Nations ”),
      formerly known as Aerotelesis Ltd. (“ ATL ”).
      As a
      result of this transaction, ATP became a wholly-owned subsidiary of the Company.
      Nations holds approximately 59.5% of the fully diluted outstanding shares of
      common stock of the Company.




In
      addition to ATP, the Company has two other subsidiaries: Aerotelesis IP
      Networks, Inc. and Aerotelesis Satellite Networks Inc., both Delaware
      corporations.




**Business
      Strategy**




At
      the
      present time, aeroTelesis has streamlined and focused its business model to
      align it with others in the satellite industry value chain, including satellite
      operators, system integrators, application developers and equipment
      manufacturers. Our initial strategy is to offer their exclusively licensed
      USM TM technology
      to satellite partners, providing them with a tool that enhances its bandwidth
      capacity. One of our main goals is to provide major satellite operators an
      ability to lower their ongoing capital expenditures by increasing the
      utilization of their current bandwidth by a factor of 25 times or
      more.




We
      intend
      to attempt to join forces with major satellite operators in some form of
      partnership whereby we provide the USM TM technology
      capability and support and the satellite operators provide the satellite
      capacity, sales, marketing, distribution, installation and customer support
      for
      our clients.




We
      renewed our revolving line of credit of $1,000,000 from Nations Mobile on July
      12, 2006. We believe that additional sources of financing will come from private
      placements of common stock.






**Results
      of Operations For The Three and Six Months Ended September 30, 2006 Compared
      To
      The Three and Six Months Ended September 30, 2005**




***Revenues***




For
      the
      quarter ended September 30, 2006, we had no revenues compared to no revenues
      for
      the quarter ended September 30, 2005. For the six months ended September 30,
      2006, we had no revenues compared to $8,600 in revenues for the six months
      ended
      September 30, 2005. Our lack of revenues for the three and six months ended
      September 30, 2006 is due to the discontinuation of consulting services and
      our
      focus on the development of USM with our licensor, PhotronTM.


11









***Expenses***




Our
      expenses for the quarter ended September 30, 2006 consisted of non-cash
      options/warrants expense of $92,463, non-cash consulting fees of $20,000, legal
      and professional fees of $58,608, payroll expenses of $37,400, travel expenses
      of $176, operating expenses of $11,767, rent expense of $19,941, consulting
      fees
      of $100,000, depreciation expense of $7,543, insurance expense of $12,271,
      reimbursement of expenses of $40,000, amortization of loan costs of $244,566
      and
      interest expense of $94,962. The decrease in expenses of 50.6% for the quarter
      ended September 30, 2006 as compared to the expenses for the quarter ended
      September 30, 2005 is primarily due to decreases in research and development
      expenses and legal and professional fees.




We
      had
      total expenses of $1,521,424 for the six months ended September 30, 2006
      compared to total expenses of $2,243,515 for the six months ended September
      30,
      2005. The decrease in expenses of $722,091 is primarily due to the decreases
      in
      non-cash options/warrants expense, research and development expenses and legal
      and professional fees.




***Net
      Loss***




We
      realized a net loss of $739,695 from operations for the three month period
      ended
      September 30, 2006 compared to a net loss of $1,498,603 for the three month
      period ended September 30, 2005. The decrease in net loss of 50.6% for the
      three
      month period ended September 30, 2006 was due to the decrease in expenses
      described above. The net loss per share for the three month period ended
      September 30, 2006 was $0.01 per share compared to a net loss per share of
      $0.02
      for the three month period ended September 30, 2005.




We
      realized a net loss of $1,521,424 from operations for the six month period
      ended
      September 30, 2006 compared to a net loss of $2,243,515 for the six month period
      ended September 30, 2005. The decrease in net loss of 32.2% for the six month
      period ended September 30, 2006 was due to the decrease in expenses described
      above. The net loss per share for the six month period ended September 30,
      2006
      was $0.02 per share compared to a net loss per share of $0.03 for the six month
      period ended September 30, 2005.




**Liquidity
      And Capital Resources**




As
      of
      September 30, 2006, we had negative working capital of $941,329 consisting
      of
      $100,054 in current assets and $1,041,383 in current liabilities.




Our
      assets as of September 30, 2006 were $2,914,528 compared to total assets of
      $2,925,876 as of March 31, 2006. The difference is primarily due to the increase
      in accumulated depreciation, decrease in cash, increase in prepaid expenses,
      and
      decrease in prepaid insurance. As of September 30, 2006, our current assets
      were
      comprised of $54 of other receivables, and $100,000 of prepaid expenses. Our
      assets, in addition to our current assets, consisted of fixed assets of
      approximately $88,909, net of depreciation, deposits of $26,784 and net licenses
      of $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 PhotronTM to utilize and deploy
      USM-based products and systems for satellite communication services 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 as of September 30, 2006 were $2,333,282 compared to liabilities
      as
      of March 31, 2006 of $1,303,953. This increase of total liabilities of
      $1,029,329 from the prior fiscal year ended March 31, 2006 is primarily due
      to
      an increase in accounts payable and accrued expenses of $517,997 and an increase
      in notes payable of $179,834.




Total
      shareholders’ deficit accumulated in the development stage increased to
      $10,782,813 as of September 30, 2006 from $9,261,388 as of March 31, 2006.
      The
      increase in deficit of $1,521,425 is due to the net loss of $1,521,425 for
      the
      six month period ended September 30, 2006.




On
      February 8, 2006, we entered into a Securities Purchase Agreement with Cornell
      Capital Partners, LP whereby we agreed to amend and restate the secured
      convertible debentures we previously issued to Cornell Capital Partners, LP
      and
      Highgate House Funds, Ltd. Prior to entering into the Securities Purchase
      Agreement, we issued secured convertible debentures to Cornell Capital Partners,
      LP and Highgate House Funds, Ltd. in the principal aggregate amount equal to
      $3,000,000 which was funded on July 25, 2005. On February 8, 2006, Highgate
      House Funds, Ltd. assigned all of its interests in its debentures to Cornell
      Capital Partners, LP. Pursuant to the Securities Purchase Agreement, dated
      February 8, 2006, Cornell Capital Partners, LP provided us an additional
      $500,000 in secured convertible debentures which was funded on February 8,
      2006.
      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 debenture is secured
      by substantially all our assets. Cornell Capital Partners, LP has the ability
      to
      foreclose on our assets if an event of default occurs pursuant to the underlying
      documents and is not remedied by us or waived by Cornell Capital Partners,
      LP.  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 five trading days immediately proceeding the conversion date.


12




On
      September 14, 2006, a total of 250,250 shares of stock were issued to Cornell
      Capital pursuant to the Securities Purchase Agreement at a 20% discount to
      the
      lowest daily VWAP (Volume Weight Average Price) of the common stock during
      the 5
      trading days prior to the conversion date. No cash was received and the
      convertible debenture liability was reduced.







**Going
      Concern**




The
      accompanying financial statements have been prepared on a going concern basis
      of
      accounting which contemplates continuity of operations, realization of assets,
      liabilities, and commitments in the normal course of business. The accompanying
      financial statements do not reflect any adjustments that might result if the
      Company is unable to continue as a going concern. We have
      a working capital deficit with no revenues anticipated for the near term.
      Management believes we will need to raise approximately $2,000,000 in order
      to
      operate over the next 12 months. As shown in the accompanying financial
      statements, we also 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, in order to raise sufficient capital 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.




**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.





**Item
      3. Controls and Procedures**





**(a)**  **Evaluation
      of Disclosure Controls and Procedures:**





The
      Company’s Principal Executive Officer and Principal Accounting Officer, after
      evaluating the effectiveness of the Company’s disclosure controls and procedures
      (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
      the
      end of the period covered by this Report, have concluded that as of such date,
      the Company’s disclosure controls and procedures were adequate and effective to
      ensure that material information relating to the Company that is required to
      be
      disclosed by the Company in reports that it files or submits under the Exchange
      Act, is recorded, processed, summarized and reported within the time periods
      specified in the SEC rules and accumulated and communicated to the Company’s
      management, including its Principal Executive Officer and Principal Accounting
      and Financial Officer, to allow timely decisions regarding required
      disclosure.





**(b)**  **Changes
      in Internal Controls:**




In
      connection with the evaluation of the Company’s internal controls during the
      Company’s last fiscal quarter, the Company’s Principal Executive Officer and
      Principal Accounting Officer have 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.









13


**PART
      II**


**OTHER
      INFORMATION**


**Item
      1. Legal Proceedings**





On
      January 13, 2005, the Company filed suit in Los Angeles County against its
      former CEO and Director, Jagan Narayanan, alleging breach of contract, fraud,
      breach of fiduciary duty and seeking equitable relief in the form of a
      declaratory judgment that the Company owes him no salary or any stock options.
      On February 18, 2005, Mr. Narayanan filed a counter-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 Country (where
      the defendant lives) so the Company’s case has been transferred there. 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 claims against Mr. Narayanan. As of September 30, 2006, the Company
      continues its litigation with Jagan Narayanan. There have been no material
      developments for the period ended September 30, 2006.




***Neil
        Sloane v. aeroTelesis (f/k/a Pacific Realm, Inc.) and William H.B.
        Chan.*** (Los Angeles Superior Court, County of Orange, Case No. BC337219)
  In
        July
        of 2005, Plaintiff Neil Sloane filed suit against us seeking damages of $135,000
        and seeking an action for declaratory and injunctive relief, conversion,
        conspiracy and negligence against us and William H.B. Chan.   The
        parties settled on March 9, 2006 in Century City, California, which settlement
        was expensed by the Company for the fiscal year ended March 31, 2006.  On
        August 14, 2006, Plaintiff obtained a judgment against the Company in connection
        with the Company’s non-performance of certain conditions of the Settlement
        Agreement, entered into on March 9, 2006.  Pursuant to the terms of the
        Stipulation for Judgment granted to Plaintiff, the court awarded Plaintiff
        a
        judgment of $95,000 and ordered the turn-over of certain collateral held
        in the
        possession of defendant’s counsel.




**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**




On
      February 8, 2006, we entered into a Securities Purchase Agreement with Cornell
      Capital Partners, LP whereby we agreed to amend and restate the secured
      convertible debentures we previously issued to Cornell Capital Partners, LP
      and
      Highgate House Funds, Ltd. Prior to entering into the Securities Purchase
      Agreement, we issued secured convertible debentures to Cornell Capital Partners,
      LP and Highgate House Funds in the principal aggregate amount equal to
      $3,000,000 of which $1,500,000 was funded on July 25, 2005 and $1,500,000 on
      October 27, 2005. On February 8, 2006, Highgate House Funds assigned all of
      its
      interests in its debentures to Cornell Capital Partners, LP. Pursuant to the
      Securities Purchase Agreement, dated February 8, 2006, Cornell Capital Partners,
      LP provided us an additional $500,000 in secured convertible debentures which
      was funded on February 8, 2006. 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 debenture is secured by substantially all our assets. Cornell
      Capital Partners, LP has the ability to foreclose on our assets if an event
      of
      default occurs pursuant to the underlying documents and is not remedied by
      us or
      waived by Cornell Capital Partners, LP. 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 five trading
      days immediately proceeding the conversion date.




On
      September 14, 2006, a total of 250,250 shares of stock were issued to Cornell
      Capital Partners, LP pursuant to the Securities Purchase Agreement, at a 20%
      discount to the lowest daily VWAP (Volume Weight Average Price) of the common
      stock during the 5 trading days prior to the conversion date. No cash was
      received and the convertible debenture liability was reduced.





**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.**




**(a)**  **The
      following exhibits are filed as part of this filing:**




**Exhibit
                No**
            **Description**
            
            **Location**3.1
            Certificate
                of Incorporation of aeroTelesis, Inc.
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on November 15,
                2005





14


**Exhibit
                No**
            **Description**
            
            **Location**


3.2
            Amended
                By-Laws of aeroTelesis, Inc.
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on November 15,
                200510.1
            Amended
                and Restated Secured Convertible Debenture dated as of February 8,
                2006
                issued to Cornell Capital Partners, LP
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.2
            Amended
                and Restated Secured Convertible Debenture dated as of February 8,
                2006
                issued to Cornell Capital Partners, LP
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.3
            Secured
                Convertible Debenture dated as of July 25, 2005 issued to Cornell
                Capital
                Partners, LP
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.4
            Amended
                and Restated Securities Purchase Agreement dated as of February 8,
                2006
                between the Company and Cornell Capital Partners, LP
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.5
            Amended
                and Restated Security Agreement dated as of February 8, 2006 between
                the
                Company and Cornell Capital Partners, LP
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.6
            Amended
                and Restated Pledge and Escrow Agreement dated February 8, 2006 among
                the
                Company, Cornell Capital Partners, LP and David Gonzalez,
                Esq.
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.7
            Subsidiary
                Security Agreement dated as of February 8, 2006 between AeroTelesis
                Philippines, Inc. and Cornell Capital Partners, LP
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.8
            Subsidiary
                Security Agreement dated as of February 8, 2006 between AeroTelesis
                Satellite Networks, Inc. and Cornell Capital Partners, LP
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.9
            Subsidiary
                Security Agreement dated as of February 8, 2006 between AeroTelesis
                IP
                Networks, Inc. and Cornell Capital Partners, LP
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.10
            Assignment
                Agreement dated as of February 8, 2006 between Cornell Capital Partners,
                LP and Highgate House Funds, Ltd.
            
            Filed
                as an exhibit to the Company’s Form 10-QSB filed on February 21,
                200610.11
            Warrant
                issued to Nutmeg Group, LLC
            
            Filed
                as an exhibit to the Company’s Form SB-2 filed on March 15,
                200631.1
            Certification
                by Chief Executive Officer pursuant to 15 U.S.C. Section 7241, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith31.2
            Certification
                by Chief Financial Officer pursuant to 15 U.S.C. Section 7241, as
                adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith32.1
            Certification
                by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted
                pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
            
            Provided
                herewith





15


**Exhibit
                No**
            **Description**
            
            **Location**


32.2
            Certification
                by Chief 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


16









**SIGNATURES**







Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, the
      Registrant has duly caused this Report to be signed in its behalf by the
      undersigned, thereunto duly authorized.




AEROTELESIS,
              INCNovember 20,
                2006
            By:
            */s/
                Milton Hahn*Milton
                HahnChief
                Executive OfficerNovember
                20, 2006
            By:
            */s/
                Joseph Gutierrez*Joseph
                GutierrezPresident,
                Chief Financial Officer and PrincipalAccounting
                Officer
















17