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, 2007o
            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.)




13428
      Maxella Ave., Unit 322, Marina del Rey, CA 90292


(Address
      of Principal Executive Offices)





(310)
      980-3480


(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, 2007Common
                stock, $0.00008 par value
            154,913,829




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







**TABLE
      OF CONTENTS**





**PAGE**PART
                I: FINANCIAL INFORMATION
            3ITEM
                1. FINANCIAL STATEMENTS
            3BALANCE
                SHEETS AS OF SEPTEMBER 30, 2007 (UNAUDITED) AND MARCH 31,
                2007
            3STATEMENTS
                OF OPERATIONS
            4STATEMENTS
                OF CASH FLOWS
            5NOTES
                TO FINANCIAL STATEMENTS
            6ITEM
                2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATION
            10ITEM
                3. CONTROLS AND PROCEDURES.
            12PART
                II: OTHER INFORMATION
            13ITEM
                1. LEGAL PROCEEDINGS
            13ITEM
                2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS
            13ITEM
                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
            15SIGNATURES
            17




2





**PART
      I: FINANCIAL INFORMATION**





**Item
      1. Financial Statements**





**AEROTELESIS,
      INC.**


**A
      DEVELOPMENT STAGE ENTERPRISE**


**BALANCE
      SHEETS**




**ASSETS****Sept
                  30**
              
              **March
                  31****2007**
              
              **2007****(Unaudited)**Current
                  AssetsCash
              
              $
              6
              
              $
              -Total
                  Current Assets
              
              
              6
              
              
              -Fixed
                  Assets:Furniture
                  & Fixtures
              
              
              122,029
              
              
              126,029Accumulated
                  Depreciation
              
              
              (73,337
              )
              
              (61,887
              )Total
                  Fixed Assets
              
              
              48,692
              
              
              64,142Total
                  Assets
              
              $
              48,698
              
              $
              64,142**LIABILITIES**Current
                  LiabilitiesCash
                  Overdraft
              
              $
              -
              
              $
              34Accounts
                  Payable and Accrued Expenses
              
              
              827,690
              
              
              734,362Accrued
                  Interest Payable
              
              
              565,495
              
              
              370,818Accrued
                  Legal Judgment
              
              
              2,954,212
              
              
              -Deposits
                  on Common Stock Issuances
              
              
              557,500
              
              
              508,000Revolving
                  Line of Credit - Related Party
              
              
              239,710
              
              
              211,410Convertible
                  Debenture
              
              
              3,064,400
              
              
              3,156,000Loan
                  Costs, net of accumulated amortization
              
              
              -
              
              
              (1,758,159
              )Capital
                  Lease Payable
              
              
              39,508
              
              
              39,508Total
                  Current Liabilities
              
              
              8,248,515
              
              
              3,261,973Total
                  Liabilities
              
              
              8,248,515
              
              
              3,261,973Commitments
                  and Contingencies, Note 6**STOCKHOLDERS'
                  EQUITY**Preferred
                  Stock
                2,000,000
                    authorized, par value $.001
                  no
                    shares issued and outstanding
              
              
              -
              
              
              -Common
                  Stock
                  200,000,000
                    authorized, par value $.00008
                  154,913,829
                    and 116,019,394 shares issued and
                  outstanding
              
              
              12,393
              
              
              9,282Additional
                  Paid-in-Capital
              
              
              11,723,661
              
              
              11,635,171Deficit
                  accumulated during the development stage
              
              
              (19,935,871
              )
              
              (14,842,284
              )Total
                  Stockholders' Equity
              
              
              (8,199,817
              )
              
              (3,197,831
              )Total
                  Liabilities and Stockholders' Equity
              
              $
              48,698
              
              $
              64,142




*See
      accompanying notes*


3





**AEROTELESIS,
      INC.**


**A
      DEVELOPMENT STAGE ENTERPRISE**


**STATEMENTS
      OF OPERATIONS**


**(UNAUDITED)**




**Cumulative****During
                  the****Development****Three
                    Months**Ended
              
              **Six
                            Months Ended**
              
              **Stage****Sept
                  30**
              
              **Sept
                  30**
              
              **Sept
                  30**
              
              **Sept
                  30**
              
              **Through****2007**
              
              **2006**
              
              **2007**
              
              **2006**
              
              **9/30/07****Revenues:**Revenues
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              478,090Total
                  Revenues
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              478,090**Expenses:**Cost
                  of Revenues
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              17,349Impairment
                  loss on Licenses
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,698,781Options/Warrants
                  Expense - Non Cash
              
              
              -
              
              
              92,463
              
              
              -
              
              
              193,746
              
              
              2,059,949Non
                  Cash Consulting Fees
              
              
              -
              
              
              20,000
              
              
              -
              
              
              20,000
              
              
              1,393,900Research
                  & Development
              
              
              -
              
              
              -
              
              
              24,800
              
              
              28,000
              
              
              1,632,800Legal
                  & Professional Fees
              
              
              37,802
              
              
              58,608
              
              
              55,717
              
              
              181,254
              
              
              1,928,402Legal
                  Judgment Expense
              
              
              2,954,212
              
              
              -
              
              
              2,954,212
              
              
              -
              
              
              2,954,212Payroll
                  Expenses
              
              
              30,000
              
              
              37,400
              
              
              75,000
              
              
              89,554
              
              
              729,227Travel
              
              
              606
              
              
              176
              
              
              606
              
              
              5,871
              
              
              455,790Operating
                  Expenses
              
              
              2,388
              
              
              11,767
              
              
              8,052
              
              
              33,606
              
              
              510,308Rent
              
              
              3,000
              
              
              19,941
              
              
              6,000
              
              
              42,281
              
              
              385,165Consulting
                  Fees
              
              
              -
              
              
              100,000
              
              
              -
              
              
              199,503
              
              
              572,946Depreciation
                  Expense
              
              
              6,527
              
              
              7,543
              
              
              12,828
              
              
              15,085
              
              
              89,442Insurance
              
              
              -
              
              
              12,271
              
              
              -
              
              
              26,494
              
              
              57,222Total
                  Expenses
              
              
              3,034,535
              
              
              360,169
              
              
              3,137,215
              
              
              835,394
              
              
              15,485,493Net
                  Loss from Operations
              
              $
              (3,034,535
              )
              $
              (360,169
              )
              $
              (3,137,215
              )
              $
              (835,394
              )
              $
              (15,007,403
              )**Other
                  Expenses:**Amortization
                  of Loan Costs
              
              $
              -
              
              $
              244,566
              
              $
              1,758,159
              
              $
              489,132
              
              $
              3,967,012Interest
                  Expense
              
              
              105,669
              
              
              94,962
              
              
              195,591
              
              
              186,900
              
              
              740,025Other
                  Expenses
              
              
              -
              
              
              39,998
              
              
              2,622
              
              
              9,998
              
              
              221,431Total
                  Other Expenses
              
              
              105,669
              
              
              379,526
              
              
              1,956,372
              
              
              686,030
              
              
              4,928,468Loss
                  Before Income Tax Expense
              
              
              (3,140,204
              )
              
              (739,695
              )
              
              (5,093,587
              )
              
              (1,521,424
              )
              
              (19,935,871
              )**Provision
                  for Income Taxes:**Provision
                  for Income Taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  Loss
              
              $
              (3,140,204
              )
              $
              (739,695
              )
              $
              (5,093,587
              )
              $
              (1,521,424
              )
              $
              (19,935,871
              )Basic
                  and Diluted Loss Per Common Share
              
              
              (0.02
              )
              
              (0.01
              )
              
              (0.04
              )
              
              (0.02
              )Weighted
                  Average number of Common Shares
                  used
                    in per share calculations
              
              
              130,362,376
              
              
              90,382,841
              
              
              123,491,518
              
              
              89,690,870





*See
      accompanying notes.*


4





**AEROTELESIS,
      INC.**


**A
      DEVELOPMENT STAGE ENTERPRISE**


**STATEMENTS
      OF CASH FLOWS**


**(UNAUDITED)**


**Cumulative****Six
                  Months Ended**
              
              **During
                  the****Ended
                  Sept 30**
              
              **Ended
                  Sept 30**
              
              **Development****2007**
              
              **2006**
              
              **Stage**Cash
                  Flows from Operating Activities:Net
                  Loss
              
              $
              (5,093,587
              )
              $
              (1,521,424
              )
              $
              (19,935,871
              )Adjustment
                  to reconcile net income(loss) to net cash
                  used
                    in operating activities:Depreciation
              
              
              12,828
              
              
              15,085
              
              
              89,443Shares
                  for Services
              
              
              -
              
              
              20,000
              
              
              1,846,293Options
                  for Services
              
              
              -
              
              
              193,746
              
              
              2,059,949Amortization
                  of Loan Cost
              
              
              1,758,159
              
              
              489,132
              
              
              3,967,012Loss
                  on Disposal of Property and Equipment
              
              
              2,622
              
              
              -
              
              
              12,719Impairment
                  Loss on Licenses
              
              
              -
              
              
              -
              
              
              2,698,781Other
                  Non-Cash Expenses
              
              
              -
              
              
              -
              
              
              182,754Changes
                  in operating assets and liabilities:Receivables
              
              
              -
              
              
              (54
              )
              
              54,000Deposits
              
              
              -
              
              
              -
              
              
              -Prepaid
                  Insurance
              
              
              -
              
              
              28,492
              
              
              18,106Related
                  Party Payable
              
              
              -
              
              
              -
              
              
              8,600Accounts
                  Payable and Accrued Expenses
              
              
              93,328
              
              
              521,336
              
              
              863,996Accrued
                  Interest Payable
              
              
              194,678
              
              
              -
              
              
              565,496Accrued
                  Legal Judgment
              
              
              2,954,212
              
              
              -
              
              
              2,954,212Net
                  Cash Used In Operating Activities
              
              $
              (77,760
              )
              $
              (253,687
              )
              $
              (4,614,510
              )Cash
                  Flows from Investing Activities:Capital
                  Expenditures
              
              
              -
              
              
              -
              
              
              (89,436
              )Licenses
              
              
              -
              
              
              -
              
              
              (86,556
              )Net
                  Cash Used in Investing Activities
              
              $
              -
              
              $
              -
              
              $
              (175,992
              )Cash
                  Flows from Financing Activities:Common
                  Stock
              
              
              49,500
              
              
              -
              
              
              653,540Convertible
                  Debenture
              
              
              -
              
              
              -
              
              
              2,900,758Note
                  Payable
              
              
              -
              
              
              (7,870
              )
              
              28,176Cash
                  Overdraft
              
              
              (34
              )
              
              -
              
              
              -Capital
                  Leases Payments
              
              
              -
              
              
              (6,211
              )
              
              (20,619
              )Revolving
                  Line of Credit, Related Party, Advances
              
              
              28,300
              
              
              199,703
              
              
              1,404,729Revolving
                  Line of Credit , Related Party, Repayments
              
              
              -
              
              
              -
              
              
              (176,076
              )Net
                  Cash Provided from Financing Activities
              
              $
              77,766
              
              $
              185,622
              
              $
              4,790,508Net
                  Increase (Decrease) in Cash
              
              $
              6
              
              $
              (68,065
              )
              $
              6Cash
                  Balance, Begin Period
              
              
              -
              
              
              67,823
              
              
              -Cash
                  Balance, End Period
              
              $
              6
              
              $
              (242
              )
              $
              6Supplemental
                  Disclosures:Cash
                  Paid for interest
              
              $
              -
              
              $
              9,337
              
              $
              116,361Cash
                  Paid for income taxes
              
              $
              -
              
              $
              -
              
              $
              -Non-Cash
                  Transaction:Stock
                  Issued for Services
              
              $
              -
              
              $
              120,000
              
              $
              1,846,293Stock
                  Issued for Debt
              
              $
              91,600
              
              $
              151,666
              
              $
              1,584,404Accounts
                  Payable
              
              $
              -
              
              $
              15,336
              
              $
              57,541Stock
                  Issued as fees to raise capital
              
              $
              -
              
              $
              -
              
              $
              1,400,000Long
                  Term Debt Used to Acquire Equipment
              
              $
              -
              
              $
              -
              
              $
              61,418




*See
      accompanying notes*




5










**AEROTELESIS,
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





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





**General**





The
      unaudited interim financial statements of aeroTelesis, Inc. (the “Company”) as
      of September 30, 2007 and for the three and six months ended September 30,
      2007
      and 2006, 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, 2007 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, 2007, and the results of its operations for the three and
      six
      months ended September 30, 2007 and 2006 and the developmental period, and
      its
      cash flows for the six months ended September 30, 2007 and 2006 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, 2007 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 22,893,945 shares (14.78%) of the 154,913,829 fully diluted
      outstanding shares of common stock of the Company as of September 30,
      2007.




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, 2007**


**(UNAUDITED)**





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





**Stock-Based
      Compensation**





The
      Company adopted the provisions of Statement of Financial Accounting Standards
      (“SFAS”) No. 123 (R), “Share-Based Payment” during the year ended March 31,
      2007. Please refer to Note 3.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and disclosure on
      contingent assets and liabilities at the date of the financial statements,
      and
      the reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





**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.





**Recent
      Accounting Pronouncements**





In
      September 2006, the FASB issued FAS 157, “Fair Value Measurements.” This
      standard defines fair value, establishes a framework for measuring fair value
      in
      generally accepted accounting principles, and expands disclosures about fair
      value measurements.  This statement is effective for financial
      statements issued for fiscal years beginning after November 15, 2007. The
      Company does not anticipate that the adoption of this accounting pronouncement
      will have a material effect on its financial statements.





In
      September 2006, the SEC released Staff Accounting Bulletin No. 108, “Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements" (SAB 108). SAB 108 provides interpretive
      guidance on the SEC's views regarding the process of quantifying materiality
      of
      financial statement misstatements. SAB 108 is effective for fiscal years ending
      after November 15, 2006. The Company does not anticipate that the adoption
      of
      this accounting pronouncement will have a material effect on its financial
      statements.





In
      February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
      Financial Assets and Financial Liabilities - Including an amendment of FASB
      Statement No. 115 ("SFAS 159").  SFAS 159 provides companies with an
      option to report selected financial assets and liabilities at fair
      value.  SFAS 159's objective is to reduce both complexity in
      accounting for financial instruments and the volatility in earnings caused
      by
      measuring related assets and liabilities differently.  SFAS 159 is
      effective as of the beginning of an entity's first fiscal year beginning after
      November 15, 2007.   The Company does not anticipate that the
      adoption of this accounting pronouncement will have a material effect on its
      financial statements .




**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 154,913,829 common shares issued and outstanding and no preferred shares
      issued and outstanding as of September 30, 2007.





During
      the quarter ended September 30, 2007, the Company issued the following shares
      of
      its common stock:




•
            37,876,471
                shares of common 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.




(continued)




7




**AEROTELESIS,
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**




**NOTE
      3: STOCK-BASED COMPENSATION**




During
      the year ended March 31, 2007, 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.




There
      were no options issued during the quarter ended September 30, 2007. At September
      30, 2007, there was 1,230,000 options outstanding and fully vested. These
      options have an exercise price of $1.00 and a weighted-average remaining
      contractual life of 0.08 years.




**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, 2007 is $239,710 with $20,644 in
      accrued interest. This loan agreement was not renewed, and the Company is in
      default.





**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.





On
      June
      20, 2007, Cornell Capital Partners, LP served the Company with a notice of
      default for not keeping the registration statement current with the United
      States Securities and Exchange Commission. This filing would have allowed
      Cornell to keep on converting their convertible debentures.





In
      connection with the Securities Purchase Agreement, the Company issued Cornell
      Capital Partners, LP five warrants, each of which is exercisable for a period
      of
      one year.




(continued)




8




**AEROTELESIS,
      INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


**SEPTEMBER
      30, 2007**


**(UNAUDITED)**





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





The
      following table summarizes the warrants outstanding and exercisable at September
      30, 2007.




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
      8, 2006, the Company received a third tranche in the amount of
      $500,000.




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 to be 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.




During
      the quarter ended September 30, 2007, a total of 37,876,471 shares of common
      stock were issued to Cornell Capital Partners, LP. The 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 preceeding the conversion date.
      The
      convertible debenture liability was reduced by $74,600, from $3,139,000 to
      $3,064,400. Interest in the amount of $190,534 has been charged to interest
      expense during the quarter ended September 30, 2007.




On
      June 20, 2007 Cornell Capital Partners, LP served the Company with a notice
      of
      default for not keeping the Registration Statement current with the United
      States Securities and Exchange Commission. As a result, the remaining balance
      of
      the loan costs of $1,758,159 was expensed during the quarter ended June 30,
      2007.




**NOTE
      6: COMMITMENTS AND CONTINGENCIES**





**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 19, 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 had engaged legal counsel to represent it in these matters and had
      intended to vigorously defend itself against Mr. Narayanan’s allegations and to
      pursue its claims against Mr. Narayanan. However, on trial day 9-28-07, the
      Company was not represented by counsel because of non-payment of legal fees,
      and
      as a result, Mr. Narayanan, by default, won a $3 million judgment against the
      Company.





**Deposits
      on Common Stock Issuances**





The
      Company has received $557,500 from investors as deposits on common stock
      issuances. The shares were not issued as of September 30, 2007, and the Company
      will need to request and be granted an increase in the number of authorized
      shares in order to fulfill this obligation.




**NOTE
      7 - SUBSEQUENT EVENTS**




In
      October 2007, the Company issued the remaining 38,372,959 authorized common
      shares to Cornell Capital Partners, LP, which reduced the convertible debenture
      liability by $33,200. These issuances, in addition to the 6,713,212 common
      shares that were pledged to Cornell Capital Partners, LP in July 2005 in
      connection with the convertible debt, extinguished the amount of authorized
      shares the Company has available to issue.




9





**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 14.78% 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
      are
      negotiating our revolving line of credit of $1,000,000 from Nations Mobile.
      We
      believe that additional sources of financing will come from private placements
      of common stock. There is no assurance that we will be successful in raising
      additional funds.




**Results
      of Operations For The Three and Six Months Ended September 30, 2007 Compared
      To
      The Three and Six Months Ended September 30, 2006**




***Revenues***




For
      the
      quarter ended September 30, 2007, we had no revenues compared to no revenues
      for
      the quarter ended September 30, 2006. For the six months ended September 30,
      2007, we had no revenues compared to no revenues for the six months ended
      September 30, 2006. Our lack of revenues for the three and six months ended
      September 30, 2007 is due to the discontinuation of consulting services and
      our
      focus on the development of USM with our licensor, PhotronTM.





10







***Expenses***




Our
      expenses for the quarter ended September 30, 2007 consisted of legal judgment
      expense of $2,954,212, legal and professional fees of $37,802, payroll expenses
      of $30,000, operating expenses of $2,388, rent expense of $3,000, depreciation
      expense of $6,527, interest expense of $105,669, and other expenses of $606.
      The
      increase in expenses of $2,400,509 or 325% for the quarter ended September
      30,
      2007 as compared to the expenses for the quarter ended September 30, 2006 is
      primarily due to the legal judgment of just under $3,000,000 that was entered
      into in September 2007, combined with decreases in non-cash options/warrants
      expenses, legal and professional fees, consulting fees, insurance, rent,
      operating expenses, payroll, and amortization of loan costs, all of which were
      expensed at June 30,02007 due to the default notice received from Cornell
      Capital Partners, LP.





We
      had
      total expenses of $5,093,587 for the six months ended September 30, 2007
      compared to total expenses of $1,521,424 for the six months ended September
      30,
      2006. The increase in expenses of $ 3,572,163 or 235% is primarily due to the
      September 2007 legal judgment of $2,954,212 and an increase in the amortization
      of loan costs, combined with decreases in non-cash option/warrants expense,
      legal and professional fees, and consulting fees.




***Net
      Loss***




We
      realized a net loss of $3,140,204 for the quarter ended September 30, 2007
      compared to a net loss of $739,695 for the quarter ended September 30, 2006.
      The
      decrease in net loss of 325% for the quarter ended September 30, 2007 was due
      to
      the increase in expenses described above. The net loss per share for the quarter
      ended September 30, 2007 was $0.02 per share compared to a net loss per share
      of
      $0.01 for the quarter ended September 30, 2006.





We
      realized a net loss of $5,093,587 for the six months ended September 30, 2007
      compared to a net loss of $1,521,424 for the six months ended September 30,
      2006. The increase in net loss of 235% for the six months ended September 30,
      2007 was due to the increase in expenses described above. The net loss per
      share
      for the six months ended September 30, 2007 was $0.04 per share compared to
      a
      net loss per share of $0.02 for the six months ended September 30,
      2006.





**Liquidity
      And Capital Resources**




As
      of
      September 30, 2007, we had negative working capital of $8,248,509 consisting
      of
      $6 in current assets and $8,248,515 in current liabilities.




Total
      assets as of September 30, 2007 were $48,698 compared to total assets of $64,142
      as of March 31, 2007. The difference is primarily due to the increase in
      accumulated depreciation. As of September 30, 2007, our assets consisted of
      fixed assets of $48,692, net of accumulated depreciation.




Total
      liabilities as of September 30, 2007 were $8,248,515 compared to total
      liabilities as of March 31, 2007 of $3,261,973. This increase of total
      liabilities of $4,986,542 from March 31, 2007 is due to an increase in accrued
      legal judgment of $2,954,212, related party payable of $28,300, accrued interest
      of $ 194,677, accounts payable of $93,328, deposits for future common stock
      issuances of $ 49,500, combined with a decrease in the convertible debenture
      of
      $91,600, and a decrease in the loan costs, net of accumulated amortization
      of
      $1,758,159.




Total
      shareholders’ deficit accumulated in the development stage increased to
      $19,935,871 as of September 30, 2007 from $14,842,284 as of March 31, 2007.
      The
      increase in deficit of $5,093,587 is due to the net loss of $5,093,587 for
      the
      six months ended September 30, 2007.




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.
  On June 20,2007, Cornell Capital Partners, LP served the Company with a
      notice of default for not keeping the Registration Statement current with the
      United States Securities and Exchange Commission. 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.




11





During
      the quarter ended September 30, 2007, a total of 37,876,471 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 by $91,600.





**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 $1,000,000 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.





12








**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 had engaged legal counsel to represent it in these matters and had
      intended to vigorously defend itself against Mr. Narayanan’s allegations and to
      pursue its claims against Mr. Narayanan. However, on trial day 9-28-07, the
      Company was not represented by counsel because of non-payment of legal fees,
      and
      as a result, Mr. Narayanan, by default, won a $3 million judgment against the
      Company.




***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 William H.B. Chan and the Company. 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. At September 30, 2007, $95,000 remains
      payable.





**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
      October 11, 2006, a total of 294,118 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
      November 3, 2006, a total of 4,207,921 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
      November 30, 2006, a total of 4,074,074 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
      January 16, 2007, a total of 4,069,767 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
      February 8, 2007, a total of 4,285,714 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




13






On
      February 26, 2007, a total of 4,285,714 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
      March
      12, 2007, a total of 4,761,905 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
      May
      15, 2007, a total of 1,017,964 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
      August
      1, 2007, a total of 5,750,000 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
      August
      9, 2007, a total of 5,892,857 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
      August
      22, 2007, a total of 6,176,471 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
      September 5, 2007, a total of 6,000,000 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
      September 14, 2007, a total of 6,857,143 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
      September 25, 2007, a total of 7,200,000 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




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




None.





**Item
      4. Submission of Matters to a Vote of Security Holders.**




None.





**Item
      5. Other Information.**




None.





14







**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,
                20053.2
            
            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,
                2006




15







**Exhibit
                No**
            
            **Description**
            
            **Location**10.11
            
            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
                herewith32.2
            
            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
                16, 2007
            By:
            */s/ Joseph Gutierrez*Joseph
                GutierrezPresident,
                Chief Financial Officer and Principal
              Accounting
                Officer





17