SOURCE: aeroTelesis, Inc.

April 19, 2006 08:55 ET

aeroTelesis Issues Annual Shareholders' Letter

LOS ANGELES, CA -- (MARKET WIRE) -- April 19, 2006 -- aeroTelesis™, Inc. (OTC BB: AOTL) issued their annual Shareholders' Letter.

Dear Shareholders,

I have been recently named as the new Chairman and Chief Executive Officer of aeroTelesis. I am very excited about continuing to work with the Company in my new role. There are several key milestones that we have achieved and have planned for the remainder of this year. I am pleased to provide you with a brief update on the Company's developments, strategy and outlook for 2006.

I believe that the strength in any organization is based on having a solid foundation in the following key areas:

--  Strategy. "The art of devising or employing plans toward a goal." Our
    strategy is to join forces with major satellite operators by providing
    innovative USM related products and services. Our goal is to generate
    significant contracts with these satellite operators that will ultimately
    increase our shareholders' value.
    
--  Market Opportunity. We believe we have a sizeable market opportunity
    in the $100 billion satellite industry in which we are striving to create
    meaningful solutions with USM bandwidth expansion abilities that have
    significant economic ramifications for our current and future satellite
    partners.
    
--  Business Model. There are always innovative products, solutions,
    applications that are created by highly intellectual, driven and skilled
    people, but we believe there are a limited number of true "business models"
    that exist in the global marketplace. Our business model reflects a simple
    but powerful strategy that is in parallel with a few companies that have
    been extremely successful in their respective markets.
    
--  Management. Execution, execution, execution... This requires our
    ability to continue to recruit talented people with expertise in various
    areas of management that will be accountable for their business "silos." We
    have identified a few qualified people with stellar academic and
    professional track records that we hope to add to our team in the 2nd
    quarter.
    
--  Sustainable Competitive Advantages. We believe that our technology
    development partner, Photron Technologies, Ltd., has developed a technology
    that is significantly superior to what exists in the marketplace.
    
--  Intrinsic Value. A key term and challenging definition that has been
    frequently used by Warren Buffet, arguably the world's most successful
    investor, is intrinsic value. Simply put, Wall Street is comprised of
    investors and intermediaries who are all seeking to understand the
    intrinsic value of companies, the holy grail for those seeking to make
    money in the stock market. Our goal is to bring clarity to our intrinsic
    value that we do not believe has been well understood by the market, hence
    the recent precipitation of our stock price.
    
Strategy

We have streamlined and focused our business model to align it with others in the satellite industry value chain including satellite operators, system integrators, application developers and equipment manufacturers. Our strategy is to offer our exclusively licensed USM™ technology to satellite partners that would provide them with a powerful tool that significantly enhances their bandwidth capacity. One of our 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 10 times or more. We believe USM will enable satellite operators to provide significantly more data, voice and video content to their clients given their current bandwidth capacity.

The Company intends to join forces with major satellite operators in some form of partnership whereby we provide the USM technology capability and support and the satellite operators provide the transponders, sales, marketing, distribution, installation and customer support for its clients.

Industry Trends and Key Drivers

The satellite industry is comprised of satellite operators, service providers, manufacturers and equipment manufacturers that generated over $100 billion in annual revenues in 2005, according to the Satellite Industry Association. The vital resource in satellite communications is spectrum or "bandwidth." The members of the satellite industry face several challenges including: overcapacity, competition with terrestrial "giants," inherently higher infrastructure costs and the limited life of satellites. Satellites are critical infrastructure that provide key services that many of us take for granted in our every day lives. A few examples of this include:

Flow of Information

--  Newsgathering -- First choice for live coverage, providing high-
    bandwidth video links from remote locations to capture "breaking news."
    
--  USA Program Delivery -- National broadcasts from four major television
    networks and more than 180 cable channels are relayed to over 10,000 local
    cable systems via satellite.
    
Satellite is the preferred choice of communications
--  We believe that satellites are the only viable option for rural
    America, China, Philippines, Indonesia and many other regions that are not
    properly covered by fiber-optic-based networks. (Satellite Industry
    Association)
    
--  Government, Military and Homeland Security are highly dependent on
    Commercial SATCOM for its communications and applications. Over 80% of the
    Federal agencies rely on satellites for communications.
    
Growth Opportunities

The possibilities are theoretically endless, but some of these services will become a reality in the near future. We have identified several growth areas for satellite-based products and services that are or will be offered by satellite-based companies. We are developing relationships with satellite companies where USM may be a viable solution for them to bring the following products and services to their clients.

--  HDTV (High Definition Television). The FCC has mandated that
    television makers, satellite and cable providers, television networks and
    others transition to High Definition Television from Analog in a series of
    deadlines they have set starting in 2007.
    
--  Satellite Infrastructure. With the use of USM, satellite companies can
    be more competitive with their fiber-optic competitors for delivery of
    data, voice and video-related content.
    
--  Government and Military Communications. We believe there are numerous
    opportunities in this sector as the government and military require cutting-
    edge solutions for satellite-based communications.
    
--  Satellite Radio. The number of retail subscribers to satellite radio
    in the US has grown significantly since its inception in 2001. Currently
    there are 10.5 million satellite radio subscribers between XM Satellite
    Radio and Sirius Satellite Radio. According to Jupiter Research, the US
    digital satellite radio market will grow to 55 million units by 2010.
    
--  Satellite-Based High Speed Internet. Although satellite-based high
    speed Internet has been commercially available for a number of years, it
    has not been economically viable to provide such a service to the average
    consumer. We are evaluating various possibilities with internet satellite
    providers who are working towards solutions to make this economically
    feasible.
    
--  Satellite Mobile Devices. The government has been using satellite-
    based mobile devices for well over 40 years. We intend to work with
    innovative companies that will provide a solution for satellite-based
    mobile phones that are economically viable for commercial use.
    
--  Navigation -- GPS. Navigation systems are widely being used by the
    government, commercial businesses and consumers. Most automobiles offer a
    navigation system option today. Each new generation of navigation
    technology provides a greater level of detail.
    
USM Solutions

We are working more closely with our USM technology development partner, Photron Technologies, Ltd., to address the needs of the satellite industry. Our primary goal is to jointly develop products and services that satellite operators, system integrators, service providers and users are demanding.

Photron is in the process of transitioning its USM-based FPGA board into an USM-based ASIC chip. Upon the completion of the USM-based ASIC chip, several products are anticipated to be made utilizing these chips. The initial products that Photron has indicated it will be providing to our satellite partners include:

--  Satellite Modems
    
--  Digital Video Broadcast Modulators
    
--  Satellite Demodulators
    
--  Satellite Television Set-Top Box
    
Revenue Model

Upon the implementation of USM in existing satellite networks, aeroTelesis intends to generate revenue from its partnerships with satellite operators. We anticipate that this will be in the form of "revenue sharing" or receiving a portion of the satellite operators' subscriber revenue.

Management Team

We have recently added two key members to our management team, both of whom I have a great deal of admiration for and have personally worked with for a number of years.

Cerena S. Han recently joined as our Director of Corporate Development. Cerena has an accomplished academic and professional background working with investment funds and on many strategic development projects. Cerena will be involved in numerous areas of our business as we continue to press forward with executing our strategy. As a developmental stage company, this is a key role to have filled. I am confident that she will excel in this challenging position.

Ivy Shim joined aeroTelesis as the Director of Korea. Ivy has had a very successful and extensive 20-year career in the semiconductor industry. Ivy will be an integral part of our team as he heads up the efforts working closely with Photron, our technology partner, to develop products for our clients. His first key task will be assisting and guiding us on the development of an ASIC chip to be used in various products for our satellite partners.

USM Technology Update

Our technology development partner, Photron Technologies Ltd. (www.photron.com.sg), has been making significant strides in developing its core technology, Ultra Spectral Modulation (USM). They have completed a working prototype in the form of the first USM hardware circuit board using Field Programmable Gate Array (FPGA) Chips with the assistance of its chip development partner, AccelChip (www.accelchip.com), recently acquired by Xilinx (www.xilinx.com). Photron has informed us that they will have the real time language (RTL) for USM completed within the 2nd quarter of 2006 at which time we can prepare for the demonstration of USM. According to Photron, we should have a USM demonstration for our partners and prospective satellite partners beginning this summer. We are very pleased with the significant milestones that Photron has been able to achieve thus far and are eagerly anticipating the USM demonstration to the satellite community.

Partnership with Mabuhay Satellite Corporation (MSC)

As you are aware, we have had a partnership with Mabuhay Satellite Corporation (www.mabuhaysat.com) since 2004. We have had several discussions with them and we recently visited them in Manila to discuss a more formal relationship. In addition, we were given a detailed tour of one of their facilities to see how and where USM would be implemented. We will continue to work closely with Mabuhay and expect to perform the USM demonstration with them sometime in the 2nd quarter of 2006.

Research Coverage

We are pleased to report that Vista Partners (www.vistap.com) initiated coverage on the Company on January 3, 2006. In addition to their initiation report, they will provide three quarterly updates for the remainder of this year. A copy of this report and updates can be downloaded from their website.

Financing

We announced last year that we received a financing commitment from Cornell Capital Partners LLP (www.cornellcapital.com) for $103 million of debt and equity financing. Since then, we have received $3.5 million of convertible debt financing and will be working towards utilizing the $100 million Standby Equity Distribution Agreement (SEDA) based on the guidelines that we given to us under the terms of the agreement.

Key Objectives for 2006

In conclusion, we have several key objectives that we would like to achieve this year.

--  USM demonstrations to satellite companies
    
--  Formalizing our partnership with Mabuhay in a more comprehensive
    Memorandum of Understanding
    
--  Making key additions to our Board of Directors, Advisory Board and
    most importantly our management team
    
--  Identifying and securing additional satellite partners
    
--  Securing the North American USM license from Photron Technologies,
    Ltd.
    
--  Increasing market and investor awareness
    
I hope this letter provides you with a clearer picture of our vision for aeroTelesis as well as illustrates some of the possibilities of what USM can do to meet the objectives of our satellite partners. The roadmap for USM and its subsequent ASIC chipsets are becoming more transparent to us as we work with very talented people with significant expertise in the satellite, semiconductor and communications industries.

There are several challenges ahead of us, but this is an extremely exciting time for aeroTelesis. We are deeply committed to achieving several of these milestones in 2006. I want to personally thank you for your past, current and future support.



Sincerely,

Milton Hahn
Chairman and
Chief Executive Officer


About aeroTelesis, Inc.

aeroTelesis is an emerging technology-driven service provider that will enable satellite companies to maximize their bandwidth utilization. aeroTelesis' technology partner, Photron Technologies Ltd. (Photron), is the developer of a proprietary technology platform called Ultra Spectral Modulation (USM™). USM is a proprietary modulation technique that significantly increases spectral efficiency in satellite-based applications. aeroTelesis has the exclusive license from Photron 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 on a global basis. aeroTelesis is a Delaware corporation and is currently trading on the OTCBB under the symbol AOTL. For further information go to www.aerotelesis.com.

Forward-Looking Statements

This press release contains forward-looking statements made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements include, but are not limited to, the Company's growth strategy, future milestones and projected operations. Forward-looking statements are inherently subject to uncertainties and other factors, which could cause actual results to differ materially from the forward-looking statements. These factors and uncertainties include: the Company's reliance on Photron's ability to develop and commercialize its USM(™) technology; expand its operations to meet anticipated demand; the ability of the Company's technology to achieve anticipated benefits for its customers; ability to secure operating licenses in host countries; anticipated growth of the Company's target markets, unanticipated delays in manufacturing or shipments to customers; and its ability to achieve anticipated sales and profits. The Company refers interested parties to its most recent Annual Report on form 10KSB and its other SEC filings for a description of additional uncertainties and risk factors that may affect forward-looking statements. Forward-looking statements are based on information presently available to senior management and the Company has not assumed any duty to update its forward-looking statements.

Contact Information

  • Contact:

    aeroTelesis, Inc.
    Cerena S. Han
    310-235-1727
    Email Contact