**UNITED
      STATES**
 **SECURITIES
      AND EXCHANGE COMMISSION**
 **Washington,
      DC 20549**
  **FORM
      10-QSB**
 (Mark
      One)
 **þ******
            **Quarterly
                Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934**
  For
      the
      quarterly period ended June 30, 2006.
  **o**
            **Transition
                Report pursuant to 13 or 15(d) of the Securities Exchange Act of
                1934**
  For
      the
      transition period  to
  Commission
      File Number 000-51995
  **TELANETIX,
      INC.**
 (Exact
      name of small business issuer as specified in its charter)
  **Delaware**
            
            **77-0622733**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (IRS
                Employer Identification No.)**6197
                Cornerstone Court E, Suite 108**
              **San
                Diego, California 92121**(Address
                of principal executive offices)**(858) 362-2250**
              (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 such filing requirements for the past 90 days YES þ  NO o
  Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act.): YES o NO þ
  On
      August
      10, 2006, the registrant had outstanding 14,454,667 shares of Common Stock,
      which is the registrant's only class of common equity.
 
 Transitional
      Small Business Disclosure Format (Check one): Yes o No þ
  -1-
  **PART
                I — FINANCIAL INFORMATION**ITEM
                1.
            FINANCIAL
                STATEMENTS
            3ITEM
                2.
            MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATIONS
            11ITEM
                3.
            CONTROLS
                AND PROCEDURES
            15**PART
                II — OTHER INFORMATION**ITEM
                1.
            LEGAL
                PROCEEDINGS
            16ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS
            16ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            16ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS
            16ITEM
                5.
            OTHER
                INFORMATION
            16ITEM
                6.
            EXHIBITS
            16
  -2-
  **PART
      I - FINANCIAL INFORMATION**
 **ITEM 1.
                FINANCIAL STATEMENTS****TELANETIX,
                INC. AND SUBSIDIARY****(A
                Development Stage Company)****(Formerly
                AER Ventures, Inc.)****Consolidated
                Balance Sheets****June
                30, 2006**
            
            
            **December
                31, 2005****(Unaudited)**
            
            
            **(Audited)**AssetsCurrent
                Assets:Cash
            
            $
            435,114
            
            $
            47,906Accounts
                receivable, less allowancefor
                doubtful accounts of $-0- and $-0-
            
            
            48,057
            
            
            49,305Prepaid
                expenses
            
            
            50,148
            
            
            271Total
                current assets
            
            
            533,319
            
            
            97,482Property
                and equipment:Furniture
                and fixtures
            
            
            30,008
            
            
            27,681Computers
                and conference equipment
            
            
            402,309
            
            
            373,278432,317
            
            
            400,959Less:
                accumulated depreciation
            
            
            (298,574
            )
            
            (248,653
            )133,743
            
            
            152,306Deposits
            
            
            15,632
            
            
            18,432Total
                assets
            
            $
            682,694
            
            $
            268,220Liabilities
                and Stockholders' DeficitCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            62,394
            
            $
            167,110Accrued
                salaries and wages
            
            
            108,209
            
            
            136,672Accrued
                payroll taxes
            
            
            10,907
            
            
            10,455Accrued
                vacation
            
            
            83,249
            
            
            72,014Customer
                deposit
            
            
            100,000
            
            
            -Accrued
                interest, stockholder
            
            
            98,273
            
            
            59,593Notes
                payable, stockholder
            
            
            1,300,000
            
            
            1,331,700Total
                current liabilities
            
            
            1,763,032
            
            
            1,777,544Deferred
                compensation
            
            
            963,384
            
            
            963,384Stockholders'
                DeficitPreferred
                stock, no par value,
 10,000,000
                share authorized,none
                issued and outstanding
            
            
            -
            
            
            -Common
                stock, $.0001 par value,200,000,000
                shares authorized,14,454,667
                and 13,482,001 sharesissued and outstanding as ofJune 30, 2006 and December 31, 2005,respectively
            
            
            1,445
            
            
            1,348Additional
                paid in capital
            
            
            6,323,307
            
            
            4,410,321Warrants
            
            
            10,000
            
            
            10,000Deficit
                accumulated during thedevelopment
                stage
            
            
            (8,378,474
            )
            
            (6,894,377
            )Total
                stockholders' deficit
            
            
            (2,043,722
            )
            
            (2,472,708
            )Total
                liabilities and stockholders' deficit
            
            $
            682,694
            
            $
            268,220The
                accompanying notes are an integral part of the consolidated financial
                statements.
  -3-
  **TELANETIX,
                INC. AND SUBSIDIARY****(A
                Development Stage Company)****(Formerly
                AER Ventures, Inc.)****CONSOLIDATED
                STATEMENTS OF OPERATIONS****For
                the period****November
                20, 2002****For
                the three**
            
            **For
                the three**
            
            **For
                the six**
            
            **For
                the six**
            
            **(Inception)****months
                ended**
            
            **months
                ended**
            
            **months
                ended**
            
            **months
                ended**
            
            **through****June
                30, 2006**
            
            **June
                30, 2005**
            
            **June
                30, 2006**
            
            **June
                30, 2005**
            
            **June
                30, 2006****(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**
            
            **(Unaudited)**Net
                sales:Product
            
            $
            16,938
            
            $
            21,707
            
            $
            16,938
            
            $
            21,707
            
            $
            87,659Services
            
            
            31,500
            
            
            -
            
            
            59,000
            
            
            -
            
            
            91,62548,438
            
            
            21,707
            
            
            75,938
            
            
            21,707
            
            
            179,284Cost
                of sales:Product
            
            
            16,192
            
            
            7,477
            
            
            16,192
            
            
            7,477
            
            
            42,047Services
            
            
            19,788
            
            
            -
            
            
            39,731
            
            
            -
            
            
            72,41635,980
            
            
            7,477
            
            
            55,923
            
            
            7,477
            
            
            114,463Gross
                profit
            
            
            12,458
            
            
            14,230
            
            
            20,015
            
            
            14,230
            
            
            64,821Operating
                expenses:Payroll
                and related benefits
            
            
            631,836
            
            
            252,833
            
            
            900,566
            
            
            456,986
            
            
            4,958,588Research
                and development
            
            
            -
            
            
            2,100
            
            
            -
            
            
            5,450
            
            
            201,961Consulting
                and subcontract
            
            
            130,159
            
            
            36,031
            
            
            215,299
            
            
            360,045
            
            
            914,133Travel
                and entertainment
            
            
            35,319
            
            
            43,889
            
            
            80,643
            
            
            46,904
            
            
            457,045Professional
                fees
            
            
            13,283
            
            
            40,065
            
            
            45,075
            
            
            43,321
            
            
            346,499Trade
                shows
            
            
            -
            
            
            22,724
            
            
            -
            
            
            22,724
            
            
            28,264Rent
            
            
            27,267
            
            
            24,103
            
            
            49,002
            
            
            41,653
            
            
            402,352Utilities
            
            
            2,592
            
            
            2,333
            
            
            4,405
            
            
            4,112
            
            
            37,701Telephone
                and internet
            
            
            5,734
            
            
            31,972
            
            
            18,744
            
            
            50,301
            
            
            303,572Depreciation
            
            
            30,507
            
            
            22,749
            
            
            57,535
            
            
            42,502
            
            
            313,116Other
            
            
            58,842
            
            
            15,273
            
            
            93,892
            
            
            21,994
            
            
            376,505Total
                operating expenses
            
            
            935,539
            
            
            494,072
            
            
            1,465,161
            
            
            1,095,992
            
            
            8,339,736Operating
                loss
            
            
            (923,081
            )
            
            (479,842
            )
            
            (1,445,146
            )
            
            (1,081,762
            )
            
            (8,274,915
            )Other
                income (expense)Gain
                (loss) on disposalof
                fixed assets
            
            
            2,193
            
            
            (7,629
            )
            
            (1,960
            )
            
            (5,694
            )
            
            (6,406
            )Interest
                income
            
            
            1,896
            
            
            247
            
            
            2,550
            
            
            489
            
            
            11,238Interest
                expense
            
            
            (20,308
            )
            
            (16,307
            )
            
            (39,541
            )
            
            (20,324
            )
            
            (102,791
            )Total
                other income (expense)
            
            
            (16,219
            )
            
            (23,689
            )
            
            (38,951
            )
            
            (25,529
            )
            
            (97,959
            )Loss
                before income taxes
            
            
            (939,300
            )
            
            (503,531
            )
            
            (1,484,097
            )
            
            (1,107,291
            )
            
            (8,372,874
            )Provision
                for income taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            5,600Net
                loss
            
            $
            (939,300
            )
            $
            (503,531
            )
            $
            (1,484,097
            )
            $
            (1,107,291
            )
            $
            (8,378,474
            )Net
                loss per share - basic and diluted
            
            $
            (0.07
            )
            $
            (0.10
            )
            $
            (0.11
            )
            $
            (0.21
            )
            $
            (1.23
            )Weighted
                average shares outstanding -basic
                and diluted
            
            
            14,433,568
            
            
            5,248,000
            
            
            14,113,535
            
            
            5,248,000
            
            
            6,798,530
 The
                accompanying notes are an integral part of the consolidated financial
                statements.
  -4-
  **TELANETIX,
                INC. AND SUBSIDIARY****(A
                Development Stage Company)****(Formerly
                AER Ventures, Inc.)****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****FOR
                THE PERIOD NOVEMBER 20, 2002 (INCEPTION)****THROUGH
                JUNE 30, 2006**For
                the periodNovember
                20, 2002For
                the six months
            
            For
                the six months
            
            (Inception)ended
            
            ended
            
            ThroughJune
                30, 2006
            
            June
                30, 2005
            
            June
                30, 2006Cash
                flows from operating activities:Net
                loss
            
            $
            (1,484,097
            )
            $
            (1,107,291
            )
            $
            (8,378,474
            )Adjustments
                to net loss to cashprovided
                by operating activities:Depreciation
            
            
            57,535
            
            
            42,502
            
            
            313,116Amortization
                of stock based compensation
            
            
            454,083
            
            
            -
            
            
            530,250Common
                stock issued for services
            
            
            -
            
            
            -
            
            
            120,000Company
                expenses paid directly by shareholders
            
            
            -
            
            
            -
            
            
            6,802Loss
                on disposal of fixed assets
            
            
            1,960
            
            
            5,694
            
            
            6,406Changes
                in assets and liabilitiesAccounts
                receivable
            
            
            1,248
            
            
            (16,806
            )
            
            (48,057
            )Prepaid
                expenses and deposits
            
            
            (47,077
            )
            
            (39,107
            )
            
            (65,780
            )Accounts
                payable and accrued expenses
            
            
            (104,716
            )
            
            (22,188
            )
            
            62,394Accrued
                salaries and wages
            
            
            (28,463
            )
            
            97,735
            
            
            108,209Accrued
                payroll taxes
            
            
            452
            
            
            -
            
            
            10,907Accrued
                vacation
            
            
            11,235
            
            
            25,130
            
            
            83,249Customer
                deposit
            
            
            100,000
            
            
            (4,901
            )
            
            100,000Accrued
                interest, stockholder
            
            
            38,680
            
            
            17,449
            
            
            98,273Deferred
                compensation
            
            
            -
            
            
            -
            
            
            963,384Net
                cash used by operating activities
            
            
            (999,160
            )
            
            (1,001,783
            )
            
            (6,089,321
            )Cash
                flows from investing activities:Purchase
                of property and equipment
            
            
            (54,199
            )
            
            (53,233
            )
            
            (482,494
            )Proceeds
                from disposal of fixed assets
            
            
            13,267
            
            
            1,795
            
            
            29,229Net
                cash used by investing activities
            
            
            (40,932
            )
            
            (51,438
            )
            
            (453,265
            )Cash
                flows from financing activities:Proceeds
                from notes payable issued to shareholders
            
            
            -
            
            
            1,300,000
            
            
            1,411,111Issuance
                of common stock
            
            
            1,459,000
            
            
            -
            
            
            5,699,400Payment
                of notes payable issued to a shareholder
            
            
            (31,700
            )
            
            (111,111
            )
            
            (142,811
            )Issuance
                of warrants
            
            
            -
            
            
            -
            
            
            10,000Net
                cash provided by financing activities
            
            
            1,427,300
            
            
            1,188,889
            
            
            6,977,700Net
                increase (decrease) in cash
            
            
            387,208
            
            
            135,668
            
            
            435,114Cash
                at beginning of the period
            
            
            47,906
            
            
            4,409
            
            
            -Cash
                at end of the period
            
            $
            435,114
            
            $
            140,077
            
            $
            435,114Interest
                paid
            
            $
            -
            
            $
            -
            
            $
            3,657Income
                taxes paid
            
            $
            -
            
            $
            -
            
            $
            3,200Liabilities
                assumed in acquisition of subsidiary
            
            $
            -
            
            $
            -
            
            $
            31,700The
                accompanying notes are an integral part of the consolidated financial
                statements.
  -5-
  TELANETIX,
      INC. AND SUBSIDIARY
 (A
      Development Stage Company)
 (Formerly
      AER Ventures, Inc.)
  NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS
  1.
            Summary
                of Business and Significant Accounting Policies
  a.
            Summary
                of Business
 
 The
      Company was initially incorporated as AER Ventures, Inc. as a Nevada
      corporation. On August 15, 2005, the Company entered into an Exchange Agreement
      (" ***Exchange
      Agreement*** ")
      with
      Telanetix, Inc., a California corporation (" ***Telanetix-California*** "),
      a
      company in the business of developing and selling advanced technology and
      services for remote digital conferencing, and certain stockholders of
      Telanetix-California. In connection with the Exchange, Telanetix-California
      became a subsidiary of the Company and the former stockholders of
      Telanetix-California obtained a controlling interest in the Company’s common
      stock. The Exchange was accounted for as a reverse merger.
 
 Effective
      March 2006, the Company effected a reincorporation from Nevada to Delaware
      and
      changed is name from "AER Ventures, Inc." to "Telanetix, Inc."
 
 The
      Company is considered a "Development Stage Company" as defined by Statement
      of
      Financial Accounting Standards No. 7.
 
 b.
            Basis
                of Presentation
  The
      accompanying unaudited condensed interim consolidated financial statements
      have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States of America for interim financial information and with the
      instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly,
      they do not include all of the information and footnotes required by accounting
      principles generally accepted in the United States of America for complete
      financial statements. These condensed consolidated financial statements
      should be read in conjunction with the consolidated financial statements and
      notes for the years ended December 31, 2005, and 2004.
  The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the amounts reported in the financial statements and accompanying
      notes. Actual results could differ from those estimates. In the
      opinion of management, all adjustments (consisting solely of normal recurring
      adjustments) considered necessary for a fair presentation have been
      included. Operating results for the three months and the six months ended
      June 30, 2006 are not necessarily indicative of the results that may be
      expected for the full fiscal year ending December 31, 2006.
  The
      Company reported a net loss of $1,484,097 for the six month period ended
      June 30, 2006. The net loss from date of inception, November 20, 2002
      to June 30, 2006, totaled $8,378,474. These losses raise substantial doubt
      about the Company’s ability to continue as a going concern.
  Continued
      operations will depend on whether the Company is able to raise additional funds
      through various potential sources, such as equity and debt financing. Such
      additional funds may not become available on acceptable terms, and there can
      be
      no assurance that any additional funding that the Company obtains will be
      sufficient to meet its needs in the long term. Through June 30, 2006, a
      significant portion of the Company’s financing has been through private sales of
      securities. The Company will continue to fund operations from cash on hand
      and through the sources of capital previously described. The Company can give
      no
      assurance that any additional capital that it is able to obtain will be
      sufficient to meet future needs.
  At
      June
      30, 2006, the Company does not have sufficient cash to fund operations at the
      current level through December 31, 2006. If cash reserves are not
      sufficient to sustain operations during that period, management plans to raise
      additional capital by selling shares of capital stock or other securities.
      There
      can be no assurance that such capital will be available on favorable terms
      or at
      all. The Company will need additional financing thereafter until it can achieve
      profitability, if ever.
 
 The
      financial statements do not include any adjustments to reflect the possible
      future effects on the recoverability and classification of assets or the amounts
      and classification of liabilities that may result from the possible inability
      of
      the Company to continue as a going concern.
 
 c.
            Principles
                of Consolidation
 
 The
      consolidated financial statements contain the accounts of the Company and its
      wholly-owned subsidiary Telanetix-California. All significant intercompany
      balances and transactions have been eliminated.
  -6-
  d.
            Cash
                Flows
 
 For
      purposes of the statement of cash flows, the Company considers all highly liquid
      investments purchased with a maturity of three months or less to be cash or
      cash
      equivalents.
  e.
            Accounts
                Receivable
 
 Accounts
      receivable is recorded net of an allowance for expected losses. The allowance
      is
      estimated from historical performance and projections of trends.
  f.
            Property
                and Equipment
 
 Property
      and equipment are stated at cost less accumulated depreciation. Depreciation
      is
      provided using straight-line methods based on estimated useful lives of three
      to
      seven years. Major replacements which extend the useful lives of equipment
      are
      capitalized and depreciated over the remaining useful life. Normal maintenance
      and repair items are charged to expenses as incurred.
  g.
            Income
                Taxes
 
 The
      Company accounts for income taxes under the provisions of Statement of Financial
      Accounting Standards No. 109 - Accounting for Income Taxes, which provides
      for an asset and liability approach in accounting for income taxes. Under this
      approach, deferred tax assets and liabilities are recognized based on
      anticipated future tax consequences, using currently enacted tax laws,
      attributable to differences between financial statement carrying amounts of
      assets and liabilities and their respective tax bases.
  h.
            Advertising
                and Promotions
 
 The
      Company expenses all advertising and promotion costs as incurred.
  i.
            Shipping
                and Handling Costs
 
 Shipping
      and handling costs include costs associated with delivery of video conferencing
      equipment from the Company’s sole location to each customer’s designated
      location. The Company’s policy is to classify shipping and handling costs as
      part of cost of goods sold in the statements of operations.
  j.
            Basic
                and Diluted Net Loss Per Share
 
 Net
      loss
      per share is calculated in accordance with the Statement of Financial Accounting
      Standards No. 128 (SFAS 128). Basic net loss per share is based upon the
      weighted average number of common shares outstanding. Diluted net loss per
      share
      is based on the assumption that all potential dilutive stock options and
      warrants were converted or exercised. The calculation of diluted net loss per
      share excludes potential common stock equivalents if the effect is
      anti-dilutive. The Company’s weighted average common shares outstanding for
      basic and dilutive were the same since the effect of common stock equivalents
      was anti-dilutive.
 
 The
      Company has the following dilutive stock options and warrants as of June 30,
      2006 and June 30, 2005 which were excluded from the calculation since the effect
      is anti-dilutive.
 
 **June
                30,****2006**
            
            **2005**Stock
                Options
            
            3,351,512
            
            3,471,512Warrants
            
            300,000
            
            -Total
            
            3,651,512
            
            3,471,512
 
 k.
            Revenue
                Recognition
 
 Revenue
      is recognized on the accrual basis of accounting when earned. The Company’s
      primary business generates revenue from selling video conferencing equipment
      and
      servicing the systems. Revenue is recognized only after the systems have been
      installed at the customer’s location and after services have been provided to
      customers and collection of the sale is reasonably assured.
  l.
            Stock
                Based Compensation
  -7-
  
 Prior
      to
      and including the fiscal year ended December 31, 2005, the Company elected
      to
      use the intrinsic value based method and to disclose the pro forma effect of
      using the fair value based method to account for its stock-based compensation.
      As a result of the recent adoption by the Financial Accounting Standards Board
      of SFAS No. 123 (revised 2004) "Share-Based Payment," or SFAS
      No. 123(R), the Company is now required, beginning in the quarter ending
      March 31, 2006, to apply the fair value method as prescribed in SFAS
      No. 123(R) which requires all share-based payments to employees, including
      grants of employee stock options, to be recognized in the income statement
      based
      on their fair values.
  m.
            Use
                of Estimates
  The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures. Accordingly, actual results
      could differ from those estimates.
  n.
            Fair
                Value of Financial Instruments
  The
      amounts reported for cash, accounts receivable, accounts payable, and other
      financial instruments, none of which are held for trading purposes, are
      considered to approximate fair values based upon comparable market information
      available at the respective balance sheet date.
  o.
            Concentration
                of Risks
  The
      Company transacts its business with primarily one financial institution. From
      time to time the amount on deposit in this institution may exceed the $100,000
      federally insured limit. The balances are maintained in demand accounts to
      minimize risk.
  2.
            Notes
                Payable, Stockholders
 
 Stockholder
      notes payable consist of the following at June 30, 2006 and December 31,
      2005.
  **June 30,**
              **2006**
            
            **December 31,**
              **2005**Note
                payable to a stockholder of the Company, the note is unsecured, due
                on
                demand and non-interest bearing.
            
            $
            -
            
            $
            31,700Note
                payable to Mainas Development Corporation, owned by an individual
                who is a
                stockholder of the Company, interest is being charged at 6%, the
                note is
                unsecured and due on demand.
            
            
            1,300,000
            
            
            1,300,000$
            1,300,000
            
            $
            1,331,700
  3.
            Deferred
                Compensation
  On
      August 12, 2005, five of the Company’s key employees entered into deferred
      compensation agreements for unpaid salaries from 2003 and 2004. The agreements
      stipulate that the unpaid salaries will be deferred until 2007 and 2008 with
      50%
      of the individual’s deferred compensation paid in each of those years. At June
      30, 2006 and December 31, 2005, $963,384 of unpaid salaries are recorded as
      deferred compensation and reported as a long-term liability in the accompanying
      financial statements.
  4.
            Income
                Taxes
  The
      Company has had no taxable income under Federal or State tax laws. As of
      December 31, 2005, the Company had loss carryforwards totaling $4.3 million
      that
      may be offset against future federal income taxes. If not used, the
      carryforwards will expire between 2021 and 2024. Due to the Company incurring
      large net operating losses, a valuation allowance has been provided to reduce
      the deferred tax assets from the net operating losses to zero. Therefore, no
      tax
      benefits are recognized in the accompanying statement of
      operations.
 
 5.
            Warrants
  In
      July
      2005, the Company sold warrants to two individuals for a total of $10,000.
      The
      agreements allow each of the individuals to purchase up to 150,000 shares each
      of the Company’s common stock. The warrant to purchase the first 100,000
      shares may be exercised at $1.80 per share and expire, if not exercised, on
      June 30, 2008 and the warrant to purchase up to 50,000 additional
      shares may be exercised at $1.25 per share and expire, if not exercised, on
      March 31, 2008. The warrants outstanding at June 30,
      2006 are exercisable for a total of 300,000 shares of  the
      Company’s common stock .
  -8-
  
 6.
            Lease
                Commitment
  The
      Company leases its office space under a long-term operating lease. Rent expense
      for the six months ended June 30, 2006 and 2005 was $49,002 and $41,653,
      respectively. Rent expense for the three months ended June 30, 2006 and 2005
      was
      $27,267 and $24,103, respectively.
 
 The
      following is a schedule of future non-cancelable minimum rental payments
      required under operating leases that have initial or remaining lease terms
      in
      excess of one year at June 30, 2006.
  July
                2006 to June 2007
            
            $
            83,708July
                2007 to June 2008
            
            
            86,260July
                2008 to August 2008
            
            
            14,780$
            184,748
  7.
            Stock
                Based Compensation
  On
      August 15, 2005, in connection with the Exchange Agreement discussed in
      Note 1, the Company adopted the AER Ventures, Inc. 2005 Equity Incentive Plan
      (the " ***2005
      Plan*** ").
      Under
      the terms of the Exchange Agreement, all outstanding options under
      Telanetix-California's 2001 Equity Incentive Plan were cancelled and new
      options were issued and granted with similar terms under the 2005
      Plan.
 
 The
      compensation cost that has been charged against income for the 2005 Plan was
      $454,083 and $-0- for the six months ended June 30, 2006 and 2005, respectively.
      The compensation cost that has been charged against income for the 2005 Plan
      was
      $420,083 and $-0- for the three months ended June 30, 2006 and 2005,
      respectively. During the three months ended June 30, 2006, the Company
      accelerated vesting on options to purchase 466,667 shares of common stock held
      by Richard M. Ono, our Chief Operating Officer and Chief Financial Officer,
      resulting in a non-cash salary expense of $413,333 during the three months
      and
      six months ended June 30, 2006.
 
 The
      total
      income tax benefit recognized in the statements of operations for share-based
      compensation arrangements was $-0- for the six months ended June 30, 2006 and
      2005 due to a valuation allowance to reduce deferred tax assets. See Note
      4.
 
 The
      2005
      Plan, permits the grant of share options and shares to its employees for up
      to
      5 million shares of common stock. The Company believes that such awards
      better align the interests of its employees with those of its shareholders.
      Option awards are generally granted with an exercise price that is at least
      equal to the fair market price of the Company’s stock at the date of grant;
      those option awards generally vest based on three years of continuous service
      and have ten year contractual terms.
  The
      fair
      value of each option award is estimated on the date of grant using the Black
      Scholes option valuation model that uses the assumptions noted in the following
      table. Because the Black Scholes option valuation model incorporates ranges
      of
      assumptions for inputs, those ranges are disclosed. Expected volatilities are
      based on implied volatilities from traded options on the Company’s stock,
      historical volatility of the Company’s stock, and other factors. The Company
      uses historical data to estimate option exercise and employee termination within
      the valuation model. The expected term of options granted is derived from
      estimates and represents the period of time that options granted are expected
      to
      be outstanding. The risk-free rate for periods within the contractual life
      of
      the option is based on the U.S. Treasury yield curve in effect at the time
      of
      grant.
  **2005**
            
            **2004**Expected
                volatility
            
            .1%
            
            .1%Weighted-average
                volatility
            
            .1%
            
            .1%Expected
                dividends
            
            0%
            
            0%Expected
                terms (in years)
            
            5-8
            
            5-8Risk-free
                rate
            
            3.5%-6%
            
            2.1%-3.4%
 
 A
      summary
      of option activity under the 2005 Plan from January 1, 2005 through June 30,
      2006, and changes during the periods then ended is presented
      below:
  -9-
  
 **Options**
            
            **Shares**
            
            
            **Weighted-**
              **Average**
              **Exercise**
              **Price**
            
            **Weighted-**
              **Average**
              **Remaining**
              **Contractual**
              **Term**
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at January 1, 2005
            
            2,851,512
            
            
            $
            .20Granted
            
            1,500,000
            
            
            
            .41Exercised
            
            (480,000
            )Forfeited
                or expired
            
            (220,000
            )Outstanding
                at December 31, 2005
            
            3,651,512
            
            
            $
            .17
            
            7.6
            
            $
            620,000Granted
            
            -0-Exercised
            
            (
                -0-
            )Forfeited
                or expired
            
            (300,000
            )Outstanding
                at June 30, 2006
            
            3,351,512
            
            
            $
            .18
            
            7.0
            
            $
            600,000Exercisable
                at June 30, 2006
            
            2,996,512
            
            
            $
            .18
            
            7.0
            
            
            530,250
  The
      weighted-average grant-date fair value of options granted during the years
      2005
      and 2004 was $.41 and $-0-, respectively. The total intrinsic value of options
      exercised during the years ended December 31, 2005 and 2004 was $120,000
      and $-0-, respectively.
 
 A
      summary
      of the status of the Company’s non-vested options as of June 30, 2006, and
      changes during the year ended December 31, 2005 and the six months ended
      June 30, 2006 is presented below:
  **Nonvested
                Options**
            
            **Shares**
            
            
            **Weighted-Average**
              **Grant-Date**
              **Fair
                Value**Nonvested
                at January 1, 2005
            
            2,182,712
            
            
            $
            -0-Granted
            
            1,500,000
            
            
            
            .41Vested
            
            (2,229,725
            )
            
            
            .03Forfeited
            
            (220,000
            )
            
            
            -0-Nonvested
                at December 31, 2005
            
            1,232,987
            
            
            $
            .44Granted
            
            -0-
            
            
            
            -0-Vested
            
            (708,193
            )
            
            
            .64Forfeited
            
            (169,794
            )
            
            
            -0-Nonvested
                at June 30, 2006
            
            355,000
            
            
            
            .20
  As
      of
      June 30, 2006, there was $69,750 of total unrecognized compensation cost
      related to nonvested share-based compensation arrangements granted under the
      2005 Plan. That cost is expected to be recognized over a weighted-average period
      of 2.25 years. The total fair value of shares vested during the six months
      ended
      June 30, 2006 and 2005 was $454,083 and $-0-, respectively. The total fair
      value
      of shares vested during the three months ended June  30, 2006 and 2005 was
      $420,083 and $-0-, respectively.
  -10-
 **ITEM 2.**
            **MANAGEMENT'S
                DISCUSSION AND ANALYSIS OR************PLAN
                OF OPERATIONS**
  **FORWARD
      LOOKING STATEMENTS**
  *This
      quarterly report on Form 10-QSB includes "forward-looking statements" within
      the
      meaning of the "safe-harbor" provisions of the Private Securities Litigation
      Reform Act of 1995. Such statements are based on management’s current
      expectations and are subject to a number of factors and uncertainties that
      could
      cause actual results to differ materially from those described in the
      forward-looking statements. All statements other than historical facts included
      in this report, including without limitation, statements under "Plan of
      Operation", regarding our financial position, business strategy, and plans
      and
      objectives of management for the future operations, are forward-looking
      statements. Although we believe that the expectations reflected in such
      forward-looking statements are reasonable, we can give no assurance that such
      expectations will prove to have been correct. Important factors that could
      cause
      actual results to differ materially from the Company’s expectations include, but
      are not limited to, those items discussed under the heading "Risk Factors"
      below. The discussion and analysis of our plan of operation should be read
      in
      conjunction with the financial statements and the related notes in our filing
      on
      Form 10-KSB for the year ended December 31, 2005.*
  **OVERVIEW**
  We
      develop and market high end video conferencing solutions that enable users
      to
      more effectively communicate across geographic boundaries. Our video
      conferencing solutions utilize high speed internet technology to allow users
      to
      interact in a fully immersive real-time video conferencing environment that
      integrates audio, video, and data from multiple locations. Our Digital Presence TM technology delivers full size, face-to-face images of real-time video, audio,
      and data in high quality resolution at 30 frames per second. Our solutions
      are
      based on next generation standards. We have developed our own high resolution
      video compression and decompression algorithms implementing advanced MPEG-4
      compression on a Linux platform. We also take advantage of decentralized IP
      multicasting in lieu of legacy conferencing bridges. Our solutions are designed
      to be simple to use, and allow customers to set up a conference with an
      intuitive touch screen interface.
  We
      have
      been a development stage company and are now making the transition to
      operations. During 2005 we completed development of our initial video
      conferencing solution and commenced initial product sales. Our revenues are
      principally derived from the sale of videoconferencing products and services.
      Our product sales are related to our video conferencing solutions, and include
      computers, monitors, speakers, cameras and microphones and related hardware
      devices. Service revenue is derived from the provision of network connectivity
      and related services. Generally, services are offered under the terms of one
      year agreements, which call for payment on a monthly basis.
 
 At
      the
      beginning of 2006 our primary business objectives were to secure working capital
      to fund operations and to develop channel sales relationships with audio video
      resellers and systems integrators. During the six month period ended June 30,
      2006, we raised $1,459,000 from a private placement of common stock at $1.50
      per
      share. We also established our initial distributor relationships, focusing
      on
      partnerships with a very limited number of resellers or channel partners, each
      of which will be responsible for all the business in an exclusive territory.
      In
      connection with those relationships we have established five demonstration
      centers across the country. A substantial portion of our business efforts for
      the balance of 2006 will be devoted to establishing customer sales through
      those
      channels.
 
 During
      the three months ended June 30, 2006, we accelerated vesting on options to
      purchase 466,667 shares of common stock held by Richard M. Ono, our Chief
      Operating Officer and Chief Financial Officer. This one-time transaction
      resulted in a non-cash salary expense of $413,333 during the quarter. We also
      determined to close our Hollywood Bridge office, which we used primarily as
      a
      sale and demonstration center. Our development of regional distribution centers
      and channel sales partners allows us to meet our demonstration needs while
      reducing our direct overhead.
 
 **CRITICAL
      ACCOUNTING POLICIES AND ESTIMATES**
  Our
      discussion and analysis of our financial condition and results of operations
      is
      based on our consolidated financial statements. We have identified the
      accounting policies that we believe require application of management’s most
      subjective judgments, often requiring the need to make estimates about the
      effect of matters that are inherently uncertain and may change in subsequent
      periods. Our actual results may differ substantially from these estimates under
      different assumptions or conditions. Our significant accounting policies are
      described in more detail in the notes to consolidated financial statements
      included elsewhere in this filing. We believe that the following accounting
      policies require the application of significant judgments and
      estimates.
 
 *Revenue
      Recognition*
 
 Revenue
      is recognized on the accrual basis of accounting when earned. The Company’s
      primary business generates revenue from selling video conferencing equipment
      and
      servicing the systems. Revenue is recognized only after the systems have been
      installed at the customer’s location and after services have been provided to
      customers and collection of the sale is reasonably assured.
 
 *Stock
      Based Compensation*
 
 Prior
      to
      and including the fiscal year ended December 31, 2005, the Company elected
      to
      use the intrinsic value based method and to disclose the pro forma effect of
      using the fair value based method to account for its stock-based compensation.
      As a result of the recent adoption by the Financial Accounting Standards Board
      of SFAS No. 123 (revised 2004) "Share-Based Payment," or SFAS
      No. 123(R), the
  -11-
  Company
      is now required, beginning in the quarter ending March 31, 2006, to apply
      the fair value method as prescribed in SFAS No. 123(R) which requires all
      share-based payments to employees, including grants of employee stock options,
      to be recognized in the income statement based on their fair
      values.
  *Use
      of Estimates*
 
 The
      preparation of financial statements in conformity with generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect certain reported amounts and disclosures. Accordingly, actual results
      could differ from those estimates.
 
 **RESULTS
      OF OPERATIONS**
 
 **Net
      Sales**
 
 Net
      sales
      for the three months ended June 30, 2006 were $48,438 as compared $21,707 for
      the three months ended June 30, 2005, an increase of $26,731 (123%).  Net
      sales for the six months ended June 30, 2006 were $75,938 as compared to $21,707
      for the six months ended June 30, 2005, and increase of $54,231 (250%). Our
      sales for both periods in 2006 represent equipment sales to our channel
      partners, as well as our monthly billings to our channel partners for network
      service access. We did not introduce our video conferencing solutions for sale
      until the second quarter of 2005, when we had product sales to one of our
      channel partners.
 
 We
      are
      devoting a significant portion of our management resources and efforts to the
      establishment of our Channel Partner network and establishing sales of our
      video conferencing products and services. While we anticipate that sales volume
      will increase as a result of these efforts, we are selling our video
      conferencing solutions through a new and continually emerging network of sales
      channels. Furthermore, our sales often require several customer meetings and
      demonstrations. Consequently, sales cycles, closure rates, and the timing and
      amount of future revenues are necessarily difficult to predict. We anticipate
      revenues will be inconsistent for at least the next twelve months.
 
 **Cost
      of Sales**
 
 Cost
      of
      sales for the three months ended June 30, 2006 were $35,980, or 74% of net
      sales, as compared $7,477, or 34% of net sales, for the three months ended
      June
      30, 2005. Cost of sales for the six months ended June 30, 2006 were $55,923,
      or
      74% of net sales, as compared to $7,477, or 34% of net sales, for the six month
      period ended June 30, 2005. Cost of sales for products consists primarily of
      equipment costs, and is variable based on the prevailing market rates for these
      items. Cost of sales for services consists primarily of charges from third
      party
      network providers.
 
 **Gross
      Profit**
 
 Our
      net
      sales and corresponding gross profit are substantially dependent on the sales
      prices and discounts offered to channel partners and customers on hardware
      sales, and our product mix. We may offer price breaks to channel partners or
      customers while we attempt to expand our market presence.
 
 **Operating
      Expenses**
 
 Operating
      expenses for the three months ended June 30, 2006 were $935,539 as compared
      to
      $494,702 for the three months ended June 30, 2005. During the three months
      ended
      June 30, 2006, we incurred a non-cash salary expense of $413,333 related to
      the
      accelerated vesting of stock options held by Richard M. Ono, our Chief Operating
      Officer and Chief Financial Officer.
 
 This
      increase in operating expenses is primarily the result of the non cash salary
      expense. In addition, consulting and subcontractor expenses increased during
      this period by $94,128 because we are using more technical consultants as we
      attempt to expand our market presence and improve our products and services.
      Other expenses include non-capitalized hardware and software purchases,
      marketing expenses, insurance expense and office related expenses and these
      expenses increased $43,569 as a result of our increased business activity.
      These
      increases were offset by decreases in payroll and related benefits by $34,330;
      and telephone and internet expense by $26,238 primarily as the result of the
      closure of our Hollywood Bridge Office. In addition we decreased expenses for
      professional fees by $26,782and trade shows expense by $22,724.
 
 Operating
      expenses for the six months ended June 30, 2006 were $1,465,161 as compared
      to
      $1,095,992 for the six months ended June 30, 2005. The increase in operating
      expenses is attributable to the non-cash salary expense associated with the
      acceleration of Mr. Ono’s stock options, along with increases for other expenses
      of $71,898, travel and entertainment by $33,739 and payroll and related benefits
      by $30,247. These increases were offset by decreased expenses for consultants
      and subcontractors by $144,746; telephone and internet by $31,557, and trade
      shows by $22,724.
 
 **Interest
      Expense**
  -12-
  Interest
      expense for the three months ended June 30, 2006 was $20,308 as compared to
      $16,307 for the three months ended June 30, 2005, an increase of $4,001 or
      25%.
      Interest expense for the six months ended June 30, 2006 was $39,541 as compared
      to $20,324 for the six months ended June 30, 2005, an increase of $19,217 or
      95%.
 
 The
      increase in interest expense as compared to the comparable periods last year
      is
      attributable to interest accruing on our 6% promissory notes that were issued
      in
      a private placement transaction in the second quarter of 2005.
 
 **Net
      Loss**
 
 Net
      loss
      for the three months ended June 30, 2006 was $939,300 as compared to a net
      loss
      of $503,531 for the three months ended June 30, 2005, an increase of $435,769
      or
      87%. Net loss for the six months ended June 30, 2006 was $1,484,097 as compared
      to a net loss of $1,107,291 for the six months ended June 30, 2005, an increase
      of $376,806 or 34%. Net loss increased during the 2006 periods as a result
      of
      the factors described above.
 
 We
      expect
      to continue to incur net losses for at least the next twelve months as we
      attempt to build our business. With the exception of the non-cash salary expense
      for the second quarter, discussed above, we currently intend to maintain our
      operating expenses consistent with current levels, and hope to increase net
      sales. Any decrease in net losses in the next twelve months will depend upon
      our
      ability to increase net sales and correspondingly gross profit.
 
 **LIQUIDITY
      AND CAPITAL RESOURCES**
  As
      of
      June 30, 2006, we had $435,114 of cash on hand and a working capital deficit
      of
      $1,229,713. At December 31, 2005, we had cash on hand of $47,906 and a working
      capital deficit of $1,680,062.
 
 Cash
      used
      in operations for the six month period ended June 30, 2006 was $999,160. This
      was primarily the result of a net loss of $1,484,097 offset by amortization
      of
      stock based compensation of $454,083, a decrease in accrued salaries and wages
      of $104,716, and the receipt of a customer deposit of $100,000. We anticipate
      that our operations will continue to use cash during the next twelve
      months.
 
 Cash
      used
      by investment activities was $40,932 for the six month period ended June 30,
      2006, which is comprised of purchases of fixed assets totaling $54,199 and
      proceeds from the sale of fixed assets totaling $13,267.
 
 Cash
      provided by financing activities was $1,427,300 for the six month period ended
      June 30, 2006. We sold 972,666 shares of Common Stock in a private placement
      transaction during the period for total proceeds of $1,459,000. We also paid
      off
      a note payable to shareholder of $31,700 during the period. Substantially all
      of
      our cash to date has been derived from our financing activities and we expect
      a
      continuation of this trend for the next twelve months.
 
 We
      expect
      our current cash on hand at June 30, 2006 and anticipated revenues will be
      sufficient to fund our operations only until the third quarter of 2006. We
      will
      have to raise additional capital from the sale of debt or equity securities
      in
      order to finance our operations during the next twelve months. There are no
      commitments or arrangements for other financings in place at this time. There
      is
      no assurance that we will be able to raise additional funds. If we cannot,
      we
      will be forced to curtail our operations or possibly be forced to evaluate
      a
      sale or liquidation of our assets. Even if we are successful in raising
      additional funds, there is no assurance regarding the terms of any additional
      investment. Any future financing may involve substantial dilution to existing
      investors.
  As
      reported in the Report of Independent Registered Public Accounting Firm on
      our
      December 31, 2005 financial statements, we have incurred losses from
      inception and have yet to establish profitable operations. These factors, among
      others, raise substantial doubt about our ability to continue as a going
      concern.
 
 **RISK
      FACTORS**
  *In
      addition to the other information in this report, you should carefully consider
      the risks described below before investing in our publicly-traded securities.
      The risks described below are not the only ones facing us. Our business is
      also
      subject to the risks that affect many other companies, such as competition,
      technological obsolescence, labor relations, general economic conditions and
      geopolitical changes. Additional risks not currently known to us or that we
      currently believe are immaterial also may impair our business operations and
      our
      liquidity.*
  ***Risks
      Related To Our Financial Condition:***
  ***We
      have a limited operating history and we are currently in an early stage of
      operations. We have experienced significant expenditures related to funding
      our
      initial development, and we are currently carrying a net operating loss. If
      our
      business model is not successful, or we***
  -13-
  ****** ***are
      unable to generate sufficient revenue to offset our start-up expenditures,
      we
      may not become profitable, and the value of your investment may
      decline.***
  We
      have a
      limited operating history from which to evaluate our business and prospects.
      We
      have generated aggregate net sales of $179,284 from our inception to June 30,
      2006. For the six month period ended June 30, 2006, we had a net loss
      of $1,484,097 and we had a cumulative net loss of $8,378,474 for the period
      since inception at November 20, 2002 to June 30, 2006. We cannot assure you
      that
      our future operations will be implemented successfully or that we will
      ever be profitable. We have yet to establish significant customer demand
      for our products and may not for a significant period of time, if
      ever, which may result in our inability to continue our operations. If we
      are unable to sustain our operations, we will be forced to cease operations
      entirely. Furthermore, we are experiencing the initial costs and uncertainties
      of development stage companies, including additional expenditures, unforeseen
      costs and difficulties, complications, and delays, all of which must be resolved
      and/or paid without the benefit of a predictable revenue stream. We cannot
      be
      sure that we will be successful in meeting these challenges and addressing
      these
      risks and uncertainties. If we are unable to do so, our business will not be
      successful.
  ***To
      satisfy our capital requirements, we will seek to raise funds in the public
      or
      private capital markets, which may not be given on terms favorable to us, or
      we
      may not be able to raise funds at all. In the event that we receive funds on
      undesirable terms, or are unable to receive additional funds, we may not be
      able
      to fund our operations and will not be able to continue as a going concern.
      The
      additional funding may have terms which will dilute the value of your
      investment.***
  Our
      ability to raise additional funds in the public or private markets will be
      adversely affected if the results of our business operations are not favorable.
      We may seek additional funding through the sale of debt or equity securities.
      We
      cannot assure you that any such funding will be available to us, or if
      available, that it will be available on terms favorable to us. If adequate
      funds
      are not available, we may not be able to continue our operations or implement
      our planned additional research and development activities. As a result, we
      may
      be required to discontinue our operations or curtail our planned sales and
      research and development plans, thereby reducing or eliminating the value of
      our
      equity. If we are successful in obtaining additional funds, the terms of the
      financing may have the effect of diluting your interest in our
      Company.
  ***Our
      auditors have expressed substantial doubt regarding our ability to continue
      as a
      going concern. If we are unable to continue as a going concern, we may be
      required to substantially revise our business plan or cease
      operations.***
  As
      of the
      date of our most recent audit, which included the fiscal years ended December
      31, 2005 and December 31, 2004, we had not generated sufficient revenues to
      meet
      our cash flow needs. As a result, our auditors have expressed substantial doubt
      about our ability to continue as a going concern. Although we have begun to
      generate revenue, we are still operating at a net loss, and expect to continue
      to incur losses for a period of time. We do not have
      any established source of equity or debt financing. We cannot assure
      you that we will be able to obtain sufficient funds or that we will become
      self-funding. If we cannot continue as a going concern, we may need to
      substantially revise our business plan or cease operations, which may reduce
      or
      negate the value of your investment.
  ***Risks
      Related To Our Business:***
  ***We
      face competition from much larger and well-established
      companies.***
  We
      face
      competition in the video conferencing industry from much larger and
      well-established companies, including Polycom, Inc., and Tandberg, and new
      entrants such as Hewlett-Packard. These companies have substantial financial
      resources and production, marketing, engineering and other capabilities with
      which to develop, manufacture, market and sell their products. In addition,
      other established or new companies may develop or market products competitive
      with our video conferencing system.
  ***Lower
      than expected market acceptance of our video conferencing system and price
      competition would negatively impact our business.***
  We
      have
      yet to establish significant customer acceptance of our products. If the market
      does not accept our products or services, our ability to achieve any level
      of
      profitability would be harmed. Our profitability could also be negatively
      affected in the future as a result of competitive price pressures in the sale
      of
      video conferencing systems, which could cause us to reduce the prices for our
      system. Any such reduction could have an adverse impact on our product margins
      and profitability.
  ***The
      sales cycle for our video conferencing system can be long and
      unpredictable.***
  As
      with
      the sale of any technology to new users, the time from introduction to sale
      of our system can take months as end-users educate themselves on the benefits
      of
      our video conferencing system. Our quarterly revenues and operating results
      depend upon the timing of channel partner orders received during a given quarter
      and the shipment and recognition of resulting revenue during each quarter,
      each
      of which is extremely difficult to forecast. In addition, orders from our
      channel partners are based on the level of demand from end-user customers.
      Any
      decline or uncertainty in end-user demand could significantly negatively impact
      end-user orders, which could in turn negatively affect orders from our channel
      partners in any given quarter.
  ***We
      face risks related to our dependence on channel partners to sell our
      products.***
  We
      have
      invested a significant amount of time and resources selecting, educating and
      training our channel partners on the installation, use and benefits of our
      video
      conferencing system. We will need to continue to devote significant resources
      to
      educate and train our channel partners about the benefits of our product. Our
      channel partners carry videoconferencing products of our competitors from whom
      they derive significant revenues, and although we have received a commitment
      of
      minimum sales levels, our channel partners will be selling our competitor’s
      products as well as our products. These sales may be to customers who would
      otherwise purchase the Company’s videoconferencing system and result in reduced
      sales and profits for the Company.
  Our
      agreements with our channel partners are only for one year, and we cannot be
      certain as to future order levels from our channel partners or renewal of such
      agreements. In the event that any of our channel partners does not
      renew its agreement, we will lose that distribution channel and will need
      to identify and secure another source. If we were unable to timely find a
      replacement channel partner or alternative distribution source it would
      materially harm our results of operations.
 -14-
 **ITEM 3.**
            **CONTROLS
                AND
                PROCEDURES**
  **DISCLOSURE
      CONTROLS AND PROCEDURES**
  Disclosure
      controls and procedures are controls and other procedures that are designed
      to
      ensure that the information required to be disclosed by a company in the reports
      that it files or submits under the Securities Exchange Act of 1934, as amended
      (the " ***Exchange
      Act*** ")
      is
      recorded, processed, summarized and reported, within the time periods specified
      in the SEC’s rules and forms. Disclosure controls and procedures include,
      without limitation, controls and procedures designed to ensure that information
      required to be disclosed in the reports that a company files or submits under
      the Exchange Act is accumulated and communicated to the Company’s management,
      including its Principal Executive Officer and Principal Financial Officer,
      as
      appropriate to allow timely decisions regarding required
      disclosure.
  We
      maintain disclosure controls and procedures designed to ensure that material
      information related to our Company is recorded, processed, summarized and
      reported within the time periods specified in the SEC rules and
      forms.
  Under
      the
      supervision of our Chief Executive Officer and our Chief Financial Officer,
      we
      evaluated the effectiveness of the design and operation of our disclosure
      controls and procedures as of the end of the period covered by this report.
      Based upon that evaluation, our Chief Executive Officer and Chief Financial
      Officer concluded that as of June 30, 2006, the design and operation of such
      disclosure controls and procedures were effective.
  **CHANGES
      IN INTERNAL CONTROLS OVER FINANCIAL REPORTING**
  During
      the most recent fiscal quarter, we did not experience any changes to our
      internal control over financial reporting (as defined in Rules 13a-15(f) and
      15d-15(f) of the Exchange Act) that has materially affected, or is likely to
      materially affect, our internal control over financial reporting.
  **LIMITATIONS
      ON DISCLOSURE CONTROLS AND PROCEDURES**
  Our
      management, including our Chief Executive Officer and Chief Financial Officer,
      does not expect that our disclosure controls or internal controls over financial
      reporting will prevent all errors or all instances of fraud. A control system,
      no matter how well designed and operated, can provide only reasonable, not
      absolute, assurance that the control system’s objectives will be met. Further,
      the design of a control system must reflect the fact that there are resource
      constraints, and the benefits of controls must be considered relative to their
      costs. Because of the inherent limitations in all control systems, no evaluation
      of controls can provide absolute assurance that all control issues and instances
      of fraud, if any, within our Company have been detected. These inherent
      limitations include the realities that judgments in decision-making can be
      faulty, and that breakdowns can occur because of simple error or mistake.
      Controls can also be circumvented by the individual acts of some persons, by
      collusion of two or more people, or by management override of the controls.
      Because of the small size of our current operations, supervision of financial
      controls is concentrated in a few individuals and we have limited opportunity
      to
      segregate duties or implement checks and balances. The design of any system
      of
      controls is based in part upon certain assumptions about the likelihood of
      future events, and any design may not succeed in achieving its stated goals
      under all potential future conditions. Over time, controls may become inadequate
      because of changes in conditions or deterioration in the degree of compliance
      with policies or procedures. Because of the inherent limitation of a
      cost-effective control system, misstatements due to error or fraud may occur
      and
      not be detected.
  -15-
 **PART
      II- OTHER INFORMATION**
  **ITEM 1.**
            **LEGAL
                PROCEEDINGS**
  In
      the
      course of our business, we may become involved in various legal proceedings
      seeking monetary damages and other relief. The amount of the ultimate liability,
      if any, from such claims cannot be determined. However, in the opinion of our
      management, there are no legal claims currently pending or threatened against
      us
      that would be likely to have a material adverse effect on our financial
      position, results of operations or cash flows.
  **ITEM 2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS**
 
 In
      May
      and June 2006, we sold 35,000 shares of our common stock at price of $1.50
      per
      share to two individuals, each of whom was an accredited investor in a
      private placement transaction. The proceeds to the Company from these sales
      were
      $52,500. This transaction was exempt from registration pursuant to
      Section 4(2) of the Securities Act. This transaction was not conducted
      in connection with a public offering, and no public solicitation or
      advertisement was made or relied upon by any investors in connection with this
      offering.
  **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**
  **Exhibit**
              **Number**
            
            **Description**31.1
            
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                200231.2
            
            Certification
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                200232.1
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 200232.2
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002
  -16-
  **SIGNATURES**
  In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.
 
 TELANETIX,
      INC.
 Dated:
      August 11, 2006
 By: /s/
      Richard M. Ono
 Mr.
      Richard M. Ono
 Chief
      Financial Officer
   -17-