Aether Holdings, Inc. has entered into a definitive agreement to acquire The Athlete’s Foot. The acquisition includes The Athlete’s Foot brand along with the global retail franchise operation.

This transaction follows the Company’s June 2006 acquisition of UCC Capital Corp. (“UCC”), which provided Aether with a platform from which to begin implementing a new intellectual property (“IP”) strategy focused on brand acquisition and management.

Aether intends to start doing business as NexCen Brands, Inc., which is more indicative of the Company’s new business focus.

“The Athlete’s Foot(R) is a retail brand that is recognized by consumers worldwide,” said Robert W. DLoren, Aether’s President and Chief Executive Officer. “This franchise system will provide us not only with a historical and growing revenue stream, but also a flexible distribution channel for additional consumer brands that we plan to acquire in the future.” Mr. DLoren continued, “This is an exciting first step for Aether toward building a large and diverse portfolio of consumer brands and franchise-related assets.”

Robert J. Corliss, President and Chief Executive Officer of The Athlete’s Foot, will continue with Aether after the closing as President and CEO of Aether’s retail franchise division, NexCen Franchise Brands, Inc. He stated, “Our long-standing relationship with Bob DLoren and UCC has served The Athlete’s Foot well over the past several years.” Mr. Corliss noted further, “We clearly envision successfully working together with Aether to expand and further enhance The Athlete’s Foot(R) brand globally.”

Aether will pay $51.5 million at closing through a combination of cash and the issuance of Aether common stock, less any assumed debt. Aether also agreed to an earn-out arrangement that will entitle the seller to receive up to an additional $8.5 million of cash and stock (in the same proportion as the initial consideration), if The Athlete’s Foot’s financial results for the year ended December 31, 2006 meet certain specified targets. Aether has also agreed to enter into employment arrangements with certain key executives of The Athlete’s Foot(R), including Mr. Corliss. The transaction is expected to close before the end of 2006.

The Company also announced that in light of the attractive prospects of The Athlete’s Foot(R) acquisition, the robust pipeline for additional brand and franchise acquisitions, the board’s support for the potential of the IP strategy, the performance of the IP business management team, and the greater growth prospects in the IP business than the mortgage-backed securities (“MBS”) business, its board of directors has decided that it is in the best interests of Aether and its stockholders to exit the MBS business and devote Aether’s assets and resources to its IP business.

Because a sale of the MBS business may be considered a “sale of all or substantially all” of Aether’s assets under Section 271 of the Delaware General Corporation Law (the “DGCL”), Aether intends to seek shareholder approval to sell its remaining MBS portfolio and redeploy those assets into its IP business at its 2006 annual meeting. Aether intends to file a proxy statement for the annual meeting with the SEC within the next two weeks and anticipates that the annual meeting will be held early in the fourth quarter.