UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

     (Mark One)

     [X]  Annual report under Section 13 or 15(d) of the Securities Exchange
          Act of 1934

     For  the fiscal year ended JUNE 30, 2006

     [ ]  Transition report under Section 13 or 15(d) of the Securities
          Exchange Act of 1934

     For the transition period from _________ to _________

     Commission File No. 0-25703

                                GTC TELECOM CORP.
             (Exact Name of Registrant as Specified in Its Charter)

            NEVADA                                              88-0318246
(State or Other Jurisdiction of                               (IRS Employer
Incorporation or Organization)                            Identification Number)


            3151 AIRWAY AVE., SUITE P-3. COSTA MESA, CALIFORNIA 92626
              (Address of Principal Executive Offices) (Zip Code)

                                 (714) 549-7700
                (Issuer's Telephone Number, Including Area Code)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                     (None)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                         Common Stock, par value $0.001
                                (Title of Class)

     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    X       No
          -----         -----

     Check  if  there is no disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-B  is  not  contained  in this form, and no disclosure will be
contained,  to  the  best  of  registrant's  knowledge,  in  definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or  any  amendment  to  this  Form  10-KSB.  [X]

     Indicate  by  check  mark  whether  the  registrant  is a shell company (as
defined  in  Rule  12b-2  of  the  Exchange  Act)

     Yes            No    X
          -----         -----

     State issuer's revenues for its most recent fiscal year. $6,676,100

     State  the  aggregate  market  value of voting and non-voting common equity
held  by  non-affiliates  computed by reference to the price at which the common
equity  was  sold, or the average bid and asked prices of such common equity, as
of  a  specified  date  within the past 60 days. (See definition of affiliate in
rule  12b-2  of  the  Exchange  Act.)  $1,073,679

     State  the  number of shares outstanding of each of the issuer's classes of
common  equity,  as  of  the  latest  practicable  date.  30,269,740

                      DOCUMENTS INCORPORATED BY REFERENCE

     If  the following documents are incorporated by reference, briefly describe
them  and  identify  the  part of the form 10-KSB (e.g., Part I, Part II, etc. )
into  which  the  document  is  incorporated:  (1) any annual report to security
holders;  (2)  any  proxy or information statement; and (3) any prospectus filed
pursuant to rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The  listed  documents  should  be clearly described for identification purposes
(e.g.,  annual  report  to  security  holders for fiscal year ended December 24,
1990).

None.

     Transitional Small Business Disclosure Format (check one):

     Yes            No    X
          -----         -----


                                        1
<PAGE>
<TABLE>
<CAPTION>
                                       TABLE OF CONTENTS

                                             PART I

<S>      <C>
Item 1   Description of Business.

Item 2   Description of Property.

Item 3   Legal Proceedings.

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

                                             PART II

Item 5   Market for Common Equity and Related Stockholder Matters.

Item 6   Management's Discussion and Analysis or Plan of Operation.

Item 7   Financial Statements.

Item 8   Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

Item 8A  Controls and Procedures.

Item 8B  Other Information.

                                             PART III

Item 9   Directors and Executive Officers of the Registrant.

Item 10  Executive Compensation.

Item 11  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
         Matters.

Item 12  Certain Relationships and Related Transactions.

Item 13  Exhibits.

Item 14  Principal Accountant Fees and Services.
</TABLE>


                                        2
<PAGE>
                                     PART I

ITEM  1  -  DESCRIPTION  OF  BUSINESS

Overview

     We are a provider of various services including, telecommunication services
such as wireless and long distance telephone services, Internet related
services, and business process outsourcing ("BPO") services. We were organized
as a Nevada Corporation on May 17, 1994 and are currently based in Costa Mesa,
California. Our common stock trades on the NASDAQ's OTC Bulletin Board under the
symbol "GTCC."

     Our services consist of the following:

Telecommunications Related Services

     Long Distance Telephone Service

     We are currently licensed in every state (except Alaska) and the District
of Columbia to provide long distance telecommunications services. We primarily
service small and medium sized businesses and residential customers throughout
the United States and have positioned ourselves to be a low-cost provider in the
marketplace. To date, we have operated as a switchless (1), nonfacilities-based
reseller of long distance services. By committing to purchase large usage
volumes from national carriers such as Sprint, pursuant to contract tariffs (2),
we have been able to procure substantial discounts and offer low-cost,
high-quality long distance services to our customers at rates at or below
current standard industry levels.

     We provide long distance telephone service under a variety of plans. These
include outbound service, inbound toll-free 800 service and calling card
service. We do not currently offer local telephone service. Our long distance
services are billed directly by us on a monthly basis.

     Wireless Telephone Service

     We also provide wireless telephone service through our parent company under
the name GTC Wireless, and through our majority-owned subsidiary Shine Wireless,
Inc. ("Shine Wireless"). We offer a variety of plans for our wireless service
and offer the same plans under both GTC Wireless and Shine Wireless. These
services are available to both consumer and business users and are both serviced
through the same third party provider. Our wireless telephone services are
billed using the same methods as those used for billing our long distance
telecommunication services. Our wireless telephone services are provided
pursuant to contracts with third-party providers, who remain competitors with
us. By contracting with third-party providers to purchase large quantities of
usage volumes, we are able to secure significant discounts, allowing us to offer
these services to our end-users at rates equal to or less than our competitors.

     GTC Wireless' services are offered directly by us and GTC Wireless. We
acquire new customers for GTC Wireless through telemarketing, Internet
advertising, and marketing to our long distance customers. Shine Wireless'
services are offered by Shine Wireless and are sold through a network of
independent sales agents. Based on the different methods used to acquire new
customers for GTC Wireless and Shine Wireless we do not believe these two
services will directly compete for customers.

Internet Related Services

     We also operate as an Internet Service Provider, offering dial-up access at
speeds up to 56kps. This service is available to both consumer and business
users. Our Internet related services are billed using the same methods as those
used for billing our telecommunication services. Our Internet related services
are provided pursuant to contracts with third-party providers, who remain
competitors with us. By contracting with third-party providers to purchase large
quantities of usage volumes, we are able to secure significant discounts, which
then allows us to offer these services to our end-users at

------------------------
(1)  Switchless resellers of long distance services do not utilize any of their
     own lines, or switching equipment.
(2)  Contract tariffs are services and rates based on contracts negotiated with
     individual customers, but also available to all customers.


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<PAGE>
rates equal to or less than our competitors.

Business Process Outsourcing Services

     In 2002 we began exploring various options to reduce our labor and overhead
costs as well as explore new markets. We determined that by developing a call
center and Information Technology ("IT") development center in India, we could
take advantage of India's highly skilled but vastly lower labor and operating
costs thereby allowing for the reduction of a significant portion of our
operating overhead. Despite significant start-up costs associated with the
development of our outsourcing subsidiary, we believe that these operations will
result in significant savings for us. Additionally, our outsourcing operations
were designed to provide additional revenue opportunities for us in the Business
Process Outsourcing Services market (see below). Our domestic outsourcing
operations are conducted through our majority owned subsidiary, Perfexa
Solutions, Inc., which we call Perfexa-U.S. Perfexa-U.S.'s subsidiary, Perfexa
Solutions Private Limited, a corporation formed under the laws of the Republic
of India ("Perfexa-India") manages and operates our call center and IT
development center in New Delhi, India. We will collectively refer to both
Perfexa-U.S. and Perfexa-India as Perfexa in this Annual Report.

     Our Perfexa operations provide inbound, as well as outbound call center
management solutions, IT management solutions and business operations management
solutions. Perfexa's solution is to capitalize on India's highly educated,
English speaking workforce and utilize the inherent cost and labor availability
advantages within India to dramatically improve the cost and quality of the
customer care experience. Future plans are to expand into other low cost
countries as business develops.

     Perfexa currently provides customer service for our approximately 59,000
telecommunication and Internet users. Perfexa's IT group currently develops IT
solutions for our customer care needs and the integration of our customer care
system with those of Perfexa's New Delhi Center. Perfexa has recently begun
offering its services to third parties and plans to focus on marketing its
outsourced call center services to U.S. based companies. Perfexa's IT group will
work initially to ensure the integration of Perfexa's systems with those of
Perfexa's clients. Subsequently, the IT group will develop customized software
solutions for third parties.

Marketing

     We market our products and services using various strategies including
Independent Affiliates, telemarketing, Internet advertising, and "word of mouth"
free advertising. In September 2006, through Shine Wireless, we launched a
direct sales marketing program of independent distributors. Shine Wireless
authorizes and trains the independent distributors to resell Shine Wireless'
services to residential and small business customers, and allows the individual
distributors to build up their own "downline" sales force of other independent
distributors. Once an independent distributor has signed up a customer on one or
more of Shine Wireless's services/products, the customer becomes a Shine
Wireless customer. Shine Wireless takes over the servicing and billing of the
customers as well as the collection of monies owed by the customers for their
use of the Shine Wireless services/products. Shine Wireless pays each
independent distributor a commission on the usage monies collected from those
retail customers who are directly sourced by that distributor. Shine Wireless
also pays override commissions to each independent distributor on the monies
collected from those customers sourced by the distributor's downline. In
addition, Shine Wireless pays sales quota bonuses to independent distributors
for assisting other distributors to obtain certain minimum quotas of service.
Shine Wireless does not pay any monies to independent distributors simply for
recruiting other distributors into Shine Wireless's direct sales marketing
program. Shine Wireless generally maintains communications with its independent
distributors through (1) Shine Wireless's proprietary communications systems,
(2) Shine Wireless's internal personnel dedicated to the support of the
independent distributors, and (3) Shine Wireless's network of senior independent
distributors. This program has been designed to bring Shine Wireless new retail
customers even if little or no growth occurs in the marketing program revenues.

We believe we are in compliance with all State and Federal regulations governing
direct sales marketing companies. Changes in existing policies or regulations in
any state or by the Federal Trade Commission ("FTC") could materially adversely
affect our financial condition or results of operations, particularly if those
policies make it more difficult for us to attract new independent distributors,
or otherwise increase the cost and regulatory burdens of marketing and providing
service. There can be no assurance that the regulatory authorities in one or
more states or the FTC will not take action having an adverse effect on our
business or financial condition or results of operations.


                                        4
<PAGE>
Competition

Telecommunication Services

     The wireless and long distance telecommunications industry is highly
competitive and affected by the introduction of new services by, and the market
activities of, major industry participants, including AT&T Corp., Sprint,
Verizon, and other national and regional carriers. Competition in the
telecommunications business is based upon pricing, customer service, billing
services and perceived quality. We compete against various national and regional
carriers that are composed of both facilities-based providers (those that carry
wireless and long distance traffic on their own equipment) and switchless
resellers (those that resale long distance carried by facilities-based
providers) offering essentially the same services as us. Several of our
competitors are substantially larger and have greater financial, technical and
marketing resources. We believe that we are able to compete with these
competitors by providing high quality service at the lowest price possible.

     We believe that the pricing strategies and cost structures of the major
carriers have resulted historically in their charging higher rates to the
residential and small-to-medium sized business customer. Smaller customers
typically are not able to make the volume commitments necessary to negotiate
reduced rates under individualized contracts. By committing to large volumes of
traffic, we guarantee traffic to the major carrier while relieving the major
carrier of the administrative burden of qualifying and servicing large numbers
of small-to-medium-sized accounts. To be successful, we believe that we must
have lower overhead costs and be able to efficiently market the wireless and
long distance product, process orders, verify credit and provide customer
service to a large number of accounts. Although we believe we have human and
technical resources to pursue our strategy and compete effectively in this
competitive environment, our success will depend upon our continued ability to
profitably provide high quality, high value services at prices generally
competitive with, or lower than, those charged by our competitors. There can be
no assurances that we will be able to compete successfully in these markets.

     Our long distance traffic is currently carried by Sprint Communications,
Inc. which provides our underlying long distance network. Sprint remains a
competitor of ours for the provisioning of telecommunications services. Our
wireless services, for both GTC Wireless and Shine Wireless, are provided
through an agreement with an independent third party provider.

     The Telecommunications Act of 1996 is intended to introduce more
competition to U.S. telecommunications markets. The legislation opens the local
services market by requiring local exchange companies to permit interconnection
to their networks and establishing, among other things, their obligations with
respect to access, resale, number portability, dialing parity, access to
rights-of-way and mutual compensation. The legislation also codifies local
exchange carriers' equal access and nondiscrimination obligations and preempts
most inconsistent state regulation. The legislation also contains special
provisions that eliminate restrictions on the Regional Bell Operating Companies
("RBOCs") providing long distance services, which means that we face competition
for providing long distance services from well capitalized, well known companies
that prior to this time could not compete in long distance service.

Internet Related Services

     The market for Internet-based online services is intensely competitive and
rapidly changing. Since the advent of commercial services on the Internet, the
number of Internet Service Providers and online services competing for users'
attention and spending has proliferated because of, among other reasons, the
absence of substantial barriers to entry, and we expect that competition will
continue to intensify. Many of our current and potential competitors such as
Earthlink, Yahoo, AOL, and Microsoft Network have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources. These competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements and to devote greater resources to the development, promotion and
sale of their products and services than us.

     We believe that our Internet Related Services are marketed at competitive
rates and provide quality and services comparable to our competitors.

Business Process Outsourcing Services


                                        5
<PAGE>
     IT Outsourcing. The IT Outsourcing market remains highly competitive with
many companies providing business process outsourcing ("BPO") services. Major
competitors in the BPO market are Electronic Data Systems Corporation (EDS),
Accenture Ltd., Affiliated Computer Services, Convergys, Hewitt, and IBM Global
Services. Offshore IT service companies are also contributing to the aggressive
market. According to Information Week, the demand for IT services is not slowing
and the trend is reflective with Indian companies' hiring. Information Week went
on to say that between July and September 2005, Tata Consulting Services
increased its staff by nearly 12% to more than 53,000, while Infosys
Technologies grew its staff 15% to more than 46,000.

     Perfexa's ability to obtain business is dependent upon its ability to offer
better strategic concepts and technical solutions, better value, a quicker
response, or a combination of these factors. Many of these competitors have a
more substantial amount of resources and therefore have the greater ability to
obtain client contracts where large asset purchases or investments are required.
In order to sustain competitive prices, Perfexa must operate with efficient and
minimal overhead while building a stable client base. India provides the
infrastructure to leverage low cost IT solutions.

     Call Center Outsourcing. Convergys is a leading provider of outsourced
services within the billing services and software segment as well as the call
center services segment. The company handles more than one million customer
contacts daily through its 28,000 workstations and manages customer interactions
that range from initial product information requests, account activation and
product sales to service renewal, billing inquiries and complaint resolution.
Additional competitors include Exult, NCO Group, ProBusiness, SITEL Corporation,
Synhrgy, Teletech Holdings, Inc, West Corporation, and Peopleclick.

     Pricing strategies and cost structures of these major players are generally
built on labor rates, technical and operation capabilities, and industry and
process knowledge. The required competency is optimization of the business
process at hand, and pricing models may be based on cost plus incentives, fixed
fee, or per transaction. Perfexa's initial revenues will be derived from the
areas of call center and administrative outsourcing services. Critical
competitive factors include the ability to measure the quality of job
performance and pricing and obtain a solid understanding of clients' specific
job requirements through consultative assessments.

     Value-added services is one of the key advantages that Perfexa expects to
have. By leveraging a highly educated and cost-effective team in India, this
advantage is expected to reduce customers' business operating costs by 40% to
50% lower than onshore outsourcing providers. To be successful, Perfexa will
offer a distinct value proposition to the client---significant savings by
converting fixed employee costs to flexible, variable costs while avoiding large
capital expenditures required to implement and maintain call center
technologies. The challenge that Perfexa may face is whether they will be able
to provide high quality service at a cost savings while at the same time be both
profitable and lower-priced than their competitors. There can be no assurances
that Perfexa will be able to compete successfully in these markets.

Customer Attrition

     We believe that a high level of customer attrition is a characteristic of
the domestic residential long distance, wireless, and Internet related
industries. Attrition is attributable to a variety of factors, including the
termination of customers by us for non-payment and the initiatives of existing
and new competitors as they engage in, among other things, national advertising
campaigns, telemarketing programs and the issuance of cash or other forms of
incentives. Such attrition could have a material adverse effect upon our future
results of operations and financial conditions.

Dependence on Key Customers

     We are not dependent on any single customer for a significant portion of
our annual sales. Our customer base changes on a continuous basis, as new
customers are added or old customers removed.

Major Suppliers

     We do not own our own long distance network and currently depend upon
Sprint Communications Company L.P. to provide for the transmission of phone
calls by our customers and to provide the call detail records upon which we base
our customer's billings. Our contract with Sprint expired August 31, 2006. We
are currently in discussions with Sprint to negotiate a new contract. While we
negotiate a new contract with Sprint, the terms and pricing of our service
remain the same as the expired contract. Sprint may terminate the agreement upon
30 days written notice and then only in the event that we are in material breach
of the agreement. However, in cases of nonpayment, Sprint may elect to
immediately


                                        6
<PAGE>
terminate the Agreement.

   The termination of our contract with Sprint, the loss of telecommunications
services provided by Sprint, or a reduction in the quality of service we receive
from Sprint would materially harm our business. In addition, the accurate and
prompt billing of our customers is dependent upon the timeliness and accuracy of
call detail records provided to us by Sprint. Our business would be harmed if
Sprint's call detail records are inaccurate or are not timely delivered.

     In the event that the services provided by Sprint to us were discontinued,
we believe that we would be able to identify alternate suppliers that would be
able to provide us with sufficient levels of services at terms similar to those
of Sprint. Although we have the right to switch our current customers to an
alternate underlying carrier, our customers have the right to discontinue their
service with us at any time. Accordingly, the termination or non-renewal of our
contract tariffs with Sprint or the loss of telecommunications services from
Sprint may adversely effect our business.

     We do not have our own wireless telephone network. We currently provide our
wireless services, for both GTC Wireless and Shine Wireless, pursuant to an
agreement with a third party company for the provisioning of our wireless
service. We are not obligated to any monthly minimums under this agreement.
Although we believe that our relationship with our third-party provider is
strong and should remain so with continued contract compliance, the termination
of our contract with our underlying provider, the loss of wireless services
provided by this company, or a reduction in the quality of service we receive
from this company could have an adverse effect on our wireless operations. In
the event that our underlying provider was to discontinue its service to us, we
believe, based upon discussions that we have had with other wireless service
providers, that we could negotiate and obtain contracts with wireless service
providers at comparable rates.

     We do not have our own Internet Network. Currently, we provide our Internet
Service Provider Access services pursuant to an agreement with a third party
company for the provisioning of our Internet Service Provider Access service. We
are not obligated to any monthly minimums under this agreement. Although we
believe that our relationship with our third-party provider is strong and should
remain so with continued contract compliance, the termination of our contract
with our underlying provider, the loss of Internet services provided by this
company, or a reduction in the quality of service we receive from this company
could have an adverse effect on our internet operations. In the event that our
underlying provider was to discontinue its service to us, we believe, based upon
discussions that we have had with other Internet service providers, that we
could negotiate and obtain contracts with Internet service providers at
comparable rates.

Regulation

     The provisioning of our communications services is subject to extensive
government regulation. Federal law regulates interstate and international
telecommunications, while states have jurisdiction over telecommunications that
originate and terminate within the same state. Changes in existing policies or
regulations in any state or by the FCC could materially adversely affect our
financial condition or results of operations, particularly if those policies
make it more difficult for us to obtain service from Sprint or other long
distance companies at competitive rates, or otherwise increase the cost and
regulatory burdens of marketing and providing service. There can be no assurance
that the regulatory authorities in one or more states or the FCC will not take
action having an adverse effect on our business or financial condition or
results of operations.

Federal

     We are classified by the FCC as a nondominant carrier. After the prior
reclassification of AT&T as nondominant, only the local exchange carriers are
classified as dominant carriers among domestic carriers. The FCC generally does
not exercise direct oversight over charges for service of nondominant carriers,
although it has the statutory power to do so. Nondominant carriers are required
by statute to offer interstate services under rates, terms, and conditions that
are just, reasonable and not unreasonably discriminatory. The FCC has the
jurisdiction to act upon complaints filed by third parties, or brought on the
FCC's own motion, against any common carrier, including nondominant carriers,
for failure to comply with its statutory obligations. Nondominant carriers are
required to publish and make available service agreements listing their rates,
terms and conditions of service. The FCC also has the authority to impose more
stringent regulatory requirements on us and change our regulatory classification
from nondominant to dominant. In the current regulatory atmosphere, we believe,
however, that the FCC is unlikely to do so.


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<PAGE>
     The FCC imposes only minimal reporting requirements on nondominant
resellers, although we are subject to certain reporting, accounting and
record-keeping obligations.

     At present, the FCC exercises its regulatory authority to set rates
primarily with respect to the rates of dominant carriers, and it has
increasingly relaxed its control in this area. Even when AT&T was classified as
a dominant carrier, the FCC most recently employed a "price cap" system, which
essentially exempted most of AT&T's services, including virtually all of its
commercial and 800 services, from traditional rate of return regulation because
the FCC believes that these services were subject to adequate competition.

State

     We are subject to varying levels of regulation in the states in which we
currently provide local toll or intrastate telecommunications services. The vast
majority of the states require us to apply for certification to provide local
toll or intrastate telecommunications services, or at least to register or to be
found exempt from regulation, before commencing such service. The vast majority
of states also require us to file and maintain detailed tariffs listing our
rates for local toll and intrastate service. Many states also impose various
reporting requirements and/or require prior approval for transfers of control of
certified carriers, corporate reorganizations, acquisitions of
telecommunications operations, assignments of carrier assets, including
subscriber bases, carrier stock offerings and incurrence by carriers of
significant debt obligations. Certificates of authority can generally be
conditioned, modified, canceled, terminated or revoked by state regulatory
authorities for failure to comply with state law and the rules, regulations and
policies of the state regulatory authorities. Fines and other penalties,
including the return of all monies received for intrastate traffic from
residents of a state, may be imposed for such violations. In certain states,
prior regulatory approval may be required for acquisitions of telecommunications
operations.

     As we expand our efforts to provide wireless and long distance services, we
will have to remain attentive to relevant federal and state regulations. FCC
rules prohibit switching (also commonly known as "Slamming") of a consumer's
service provider without the consumer's consent and specify how that consent can
be obtained. Most states have consumer protection laws that further define the
framework within which our marketing activities must be conducted. We intend to
comply fully with all laws and regulations, and the constraints of federal and
state restrictions could impact the success of direct marketing efforts.

     We are not currently subject to any State or Federal regulation with
respect to our Internet related services. However, there can be no assurances
that we will not be subject to such regulations in the future. We are not aware
of any pending legislation that would have a material adverse effect on our
operations.

     Our domestic BPO operations are not currently subject to any State or
Federal regulations. However, our Perfexa-India operations are regulated by the
policies of the Indian government. Indian law regulates call center activities
requiring the registration of call centers with the Indian Department of
Telecommunications. Our Perfexa-India subsidiary has obtained all required
permits and licenses to operate its call center. Pursuant to such licenses,
however, we must notify and obtain permission from the Indian DOT prior to
expansion of our call center. Additionally, in times of war, the Indian
government may have the power to appropriate Perfexa-India's facilities.

Patents, Trademarks, Licenses

     We have registered service marks for our Perfexa Solutions business.
However, we do not depend upon any other patents or trademarks to conduct our
business.  We are required to hold licenses with the Federal Communication
Commission for the operation of our telecommunication services.  We are also
required to hold licenses in the states in which we provide intrastate long
distance services.  Currently, we are licensed in every state (except Alaska)
and the District of Columbia to provide intrastate services and hold licenses in
fourteen states to provide local service.  Our federal and state
telecommunication licenses are of indefinite length and will remain effective so
long as we comply with all Federal and State regulations.

Cost of Compliance with Environmental Regulations

     We currently have no costs associated with compliance with environmental
regulations.  However, there can be no assurances that we will not incur such
costs in the future.


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<PAGE>
Number of Employees

     As of June 30, 2006, we employed 23 people on a full time basis in the
United States and our subsidiary employs 140 people on a full time basis in
India. Independent distributors are not employees and are not included in this
headcount.


                                        9
<PAGE>
                                  RISK FACTORS

OUR COMPANY IS SUBJECT TO VARIOUS RISKS WHICH MAY MATERIALLY HARM OUR BUSINESS,
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.  YOU SHOULD CAREFULLY CONSIDER
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS
FILING BEFORE DECIDING TO PURCHASE OUR COMMON STOCK.  THESE ARE NOT THE ONLY
RISKS AND UNCERTAINTIES THAT WE FACE.  IF ANY OF THESE RISKS OR UNCERTAINTIES
ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE
MATERIALLY HARMED.  IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD
DECLINE AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT.

     WE CURRENTLY DO NOT HAVE SUFFICIENT CASH FLOW FROM OPERATIONS TO MEET ALL
OF OUR MONTHLY OPERATING REQUIREMENTS. We do not have sufficient cash flow from
operations to meet all of our monthly operating expenses, service our
outstanding debts, or to fund our contingent liabilities. Over the past year, we
have relied upon short-term financings to meet our cash requirements. Currently,
we have short-term debt of approximately $3,221,000. We will need to either
restructure this debt on more favorable terms, increase revenues in order to
meet these obligations, or acquire alternative financing.

     WE MAY NOT HAVE SUFFICIENT CASH TO REPAY OUR DEBT OBLIGATIONS. In fiscal
2005, we restructured approximately $7.7 million in accrued liabilities
consisting of notes payable, accrued interest and other outstanding accounts
payable, into new short and long term debt (see below) that resulted in the
elimination of approximately $6.9 million in accrued liabilities. Consequently,
beginning in September 2005, we were required to begin making monthly principal
and interest payments on these new obligations. To date, we have either paid or
have been given a deferral on payments due under this note. Unless we are able
to increase our revenues and increase our cash collections, we may not have
sufficient cash flow to fully support daily operations and service our debt
obligations and will need to increase revenues and customers, decrease bad debt,
or acquire alternate financing.

     WE ARE DEPENDENT ON A LIMITED NUMBER OF SUPPLIERS WHICH ARE REQUIRED FOR US
TO PROVIDE OUR SERVICES. We do not own our own long distance network and
therefore currently depend primarily upon Sprint Communications LP to provide
for the transmission of long distance phone calls by our customers and to
provide the call detail records upon which we base our customer's billings. We
also rely upon our wireless service supplier to provide the underlying networks
for the provisioning of our wireless service. Additionally, our Internet
services are provided pursuant to an agreements with an outside company.
Although we believe that our relations with these companies are strong and
should remain so with continued compliance with the terms of the contracts with
these entities, the termination of our contracts with these companies, the loss
of services provided by them, or a reduction in the quality of service we
receive from them would likely harm our business. For additional details, please
see Major Suppliers below.

     COMPETITION IN OUR MARKETS IS VERY INTENSE AND WE MAY NOT BE ABLE TO
COMPETE. The wireless and long distance telecommunications industry is highly
competitive and affected by the introduction of new services by, and the market
activities of, major industry participants, including AT&T Corp., Sprint
Corporation, Verizon, and other national and regional local and interexchange
carriers. Competition in the wireless and long distance business is based upon
pricing, customer service, billing services and perceived quality. We compete
against various national and regional carriers that are composed of both
facilities-based providers (those that carry traffic on their own equipment) and
switchless resellers (those that resell local and long distance carried by
facilities-based providers) offering essentially the same services as we do.
Several of our competitors are substantially larger and have greater financial,
technical and marketing resources. Although we believe that we have the human
and technical resources to pursue our strategy and compete effectively in this
competitive environment, our success will depend upon our continued ability to
profitably provide high quality, high value services at prices generally
competitive with, or lower than, those charged by our competitors.

     We expect to encounter continued competition from major domestic and
international communications companies. In addition, we may be subject to
additional competition due to the enactment of the Telecommunications Act of
1996, the development of new technologies and increased availability of domestic
and international transmission capacity. A continuing trend toward business
combinations and alliances in the telecommunications industry may create
significant new competitors, which may have financial, personnel and other
resources significantly greater than ours. Other potential competitors include
cable television companies, wireless telephone companies, electric utilities,
microwave carriers and private networks of large end users.

     The telecommunications industry is in a period of rapid technological
evolution, marked by the introduction of


                                       10
<PAGE>
new product and service offerings and increasing transmission capacity for
services similar to those provided by us. We cannot predict which of many
possible future product and service offerings will be important to maintain our
competitive position or what expenditures will be required to develop and
provide such products and services.

     The market for Internet-based online services is intensely competitive and
rapidly changing. Since the advent of commercial services on the Internet, the
number of Internet Service Providers and online services competing for users'
attention and spending has proliferated because of, among other reasons, the
absence of substantial barriers to entry, and we expect that competition will
continue to intensify. Many of our current and potential competitors such as
Earthlink, Yahoo, AOL, UUNET, and Microsoft Network have longer operating
histories, larger customer bases, greater brand recognition and significantly
greater financial, marketing and other resources. These competitors may be able
to respond more quickly to new or emerging technologies and changes in customer
requirements and to devote greater resources to the development, promotion and
sale of their products and services than we are.

     AS OUR CUSTOMERS ARE FREE TO CHANGE THEIR TELECOMMUNICATION PROVIDER, OUR
REVENUES MAY DECREASE AT ANY TIME. The vast majority of our customers are not
obligated to purchase any minimum usage amount and can discontinue service,
without penalty, at any time. Therefore, we cannot know if our customers will
continue to buy their wireless or long distance telephone service through us. A
high level of customer attrition is inherent in the wireless and long distance
industry, and our revenues are affected by such attrition. Attrition is
attributable to a variety of factors, including termination of customers by us
for nonpayment and the initiatives of existing and new competitors as they
engage in, among other things, national advertising campaigns, telemarketing
programs and the issuance of cash or other forms of incentives.

     In the event that a significant portion of our customers decide to purchase
service from another provider, we do not know if we would be able to replace our
customer base from other sources. Loss of a significant portion of our customers
would result in a corresponding reduction in our revenues.

     WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION THAT MAY BE CHANGED IN
WAYS THAT HURT OUR BUSINESS. We are subject to regulation by the FCC, the FTC,
and by various state public service and public utility commissions as a
nondominant provider of long distance services. We are required to file tariffs
for interstate and international service with the FCC, which tariffs are
presumed lawful and become effective on one day's notice. We are also required
to file tariffs or obtain approval for intrastate service provided in most of
the states in which we market local toll or long distance services. By engaging
in direct marketing to end users, we will be subject to applicable regulatory
standards for marketing activities and the increased FTC and state attention to
certain marketing practices may become more significant to us. Additionally,
certain marketing practices, including the methods and means to convert a
customer's telephone service from one carrier to another, have recently been
subject to increased regulatory review at both the federal and state levels.
This increased regulatory review could impede our possible future acquisition of
new business from other resellers. Our marketing activities mandate compliance
with applicable state and federal regulations. We are unable to predict the
effect of such increased regulatory review.

     YOU MAY BE UNABLE TO EFFECTIVELY EVALUATE THE BUSINESS OF OUR PERFEXA
SUBSIDIARY BECAUSE PERFEXA'S OUTSOURCED CALL CENTER AND INFORMATION TECHNOLOGY
SERVICE BUSINESS HAS EXISTED FOR ONLY A SHORT PERIOD OF TIME. Perfexa-U.S. was
originally incorporated on October 3, 2000 as GTC Wireless, Inc. and was
inactive until September 13, 2002 when it changed its name to Perfexa Solutions,
Inc. Perfexa-U.S. owns 96% of the issued and outstanding capital stock of
Perfexa Solutions Pvt. Ltd., a corporation formed under the laws of the Republic
of India. Perfexa develops and markets offshore outsourced call center solutions
and information technology services to small and medium size companies and does
not have an established operating history. Accordingly, you can evaluate
Perfexa's business, and therefore its future prospects, based only its very
limited operating history. In addition, you must consider Perfexa's prospects in
light of the risks, expenses, and difficulties frequently encountered in the
establishment of a new business in a rapidly evolving market.

     PERFEXA WILL BE SUBJECT TO CERTAIN INHERENT RISKS ASSOCIATED WITH THE
REPUBLIC OF INDIA. Perfexa's operating subsidiary, Perfexa Solutions Pvt. Ltd.,
is incorporated in the Republic of India, and substantially all of Perfexa's
assets and employees are located in India. Consequently, Perfexa's financial
performance will be affected by political, social and economic developments
affecting India, Government of India policies, including taxation and foreign
investment policies, government currency exchange control, as well as changes in
exchange rates and interest rates.

     Regional conflicts in South Asia could adversely affect the Indian economy,
disrupt Perfexa's operations and


                                       11
<PAGE>
cause its business to suffer. South Asia has from time to time experienced
instances of civil unrest and hostilities among neighboring countries, including
between India and Pakistan. India's relations with neighboring Pakistan, each a
nuclear power, are tense. In April 1999, India and Pakistan each conducted
long-range missile tests. Since May 1999, military confrontations between India
and Pakistan have occurred in the disputed Himalayan region of Kashmir. India's
relations with neighboring China are also tense. Events of this nature in the
future could influence the Indian economy and have a material adverse effect on
Perfexa's business. The potential for such hostilities has recently increased as
a result of terrorist attacks in the U.S. and the recent attack on the Indian
Parliament has increased tensions between India and Pakistan. Events of this
nature in the future could influence the Indian economy and could have a
material adverse effect on Perfexa's operations and on the market for Perfexa's
services.

     Political instability or changes in the government in India could delay the
liberalization of the Indian economy and adversely affect economic conditions in
India generally, which could impact Perfexa's financial results and prospects.
Since 1991, successive Indian governments have pursued policies of economic
liberalization, including significantly relaxing restrictions on the private
sector. Nevertheless, the role of the Indian central and state governments in
the Indian economy as producers, consumers and regulators has remained
significant. The Government of India has changed several times over the past
decade. The current Government of India, formed in 2004, has announced policies
and taken initiatives that support the continued economic liberalization
policies that have been pursued by previous governments. There can be no
assurances that that these liberalization policies will continue in the future.
The rate of economic liberalization could change, and specific laws and policies
affecting technology companies, foreign investment, currency exchange and other
matters affecting investment in its securities could change as well. A
significant change in India's economic liberalization and deregulation policies
could adversely affect business and economic conditions in India generally and
Perfexa's business in particular.

     PERFEXA'S BUSINESS IS SUBJECT TO FLUCTUATIONS IN FOREIGN CURRENCIES.
Perfexa's business is subject to fluctuations in the value of the Indian Rupee
against the U.S. dollar due to Perfexa's Indian subsidiary. Operational costs
including labor, equipment, and facilities leases could fluctuate depending on
the value of the Rupee vis-a-vis the U.S. dollar. With the recent decline in the
value of the dollar in relation to the Rupee, we have experienced a
corresponding increase in our operating costs. In the future, Perfexa may also
sell its products and services in other currencies which would make the
management of currency fluctuations more difficult.

     OUR STOCK PRICE MAY FLUCTUATE WHICH COULD RESULT IN SUBSTANTIAL LOSSES FOR
INVESTORS. The market price for our common stock may fluctuate significantly in
response to a number of factors, some of which are beyond our control. These
factors include:

          -    Quarterly variations in operating results;
          -    Changes in financial estimates by securities analysts;
          -    Announcements by us or our competitors of new products,
               significant contracts, acquisitions or strategic relationships;
          -    Publicity about our company, management, products or our
               competitors;
          -    Additions or departures of key personnel;
          -    Any future sales of our common stock or other securities; and
          -    Stock market price and volume fluctuations of publicly traded
               companies.

     These and other external factors have caused and may continue to cause the
market price and demand for our common stock to fluctuate substantially, which
may limit or prevent investors from readily selling their shares of common stock
and may otherwise negatively affect the liquidity of our common stock.

     In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
securities. If securities class action litigation is brought against us it could
result in substantial costs and a diversion of our management's attention and
resources, which could hurt our business.

     CERTAIN SHARES OF OUR COMMON STOCK ARE RESTRICTED FROM IMMEDIATE RESALE.
THE LAPSE OF THOSE RESTRICTIONS, COUPLED WITH THE SALE OF THE RELATED SHARES IN
THE MARKET, OR THE MARKET'S EXPECTATION OF SUCH SALES, COULD RESULT IN AN
IMMEDIATE AND SUBSTANTIAL DECLINE IN THE MARKET PRICE OF OUR COMMON STOCK. A
substantial number of our shares of common stock are restricted from immediate
resale in the public market. The sale or resale of those shares in the public


                                       12
<PAGE>
market, or the market's expectation of such sales, may result in an immediate
and substantial decline in the market price of our shares. Such a decline will
adversely affect our investors, and make it more difficult for us to raise
additional funds through equity offerings in the future.

     BECAUSE WE ARE SUBJECT TO THE "PENNY STOCK" RULES, THE LEVEL OF TRADING
ACTIVITY IN OUR STOCK MAY BE REDUCED. Our common stock may be deemed to be
"penny stock" as that term is defined in Rule 3a51-1 promulgated under the
Securities Exchange Act of 1934. Penny stocks are stock:

     -    With a price of less than $5.00 per share;
     -    That are not traded on a "recognized" national exchange;
     -    Whose prices are not quoted on the Nasdaq automated quotation system
          (Nasdaq listed stock must still have a price of not less than $5.00
          per share); or
     -    In issuers with net tangible assets less than $2.0 million (if the
          issuer has been in continuous operation for at least three years) or
          $5.0 million (if in continuous operation for less than three years),
          or with average revenues of less than $6.0 million for the last three
          years.

     Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks. Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor. These requirements may
reduce the potential market for our common stock by reducing the number of
potential investors. This may make it more difficult for investors in our common
stock to resell shares to third parties or to otherwise dispose of them. This
could cause our stock price to decline.

     YOU MAY INCUR DILUTION IN THE FUTURE. We may require additional funds to
support our working capital requirements or for other purposes, and will seek to
raise additional funds through public or private equity financing. Also, we may
acquire other companies or finance strategic alliances by issuing equity. Any
capital raising transaction may result in additional dilution to our
shareholders.

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

     We have made forward-looking statements in this Annual Report, including
the sections entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," that are based on our
management's beliefs and assumptions and on information currently available to
our management. Forward-looking statements include the information concerning
our possible or assumed future results of operations, business strategies,
financing plans, competitive position, industry environment, potential growth
opportunities, the effects of future regulation and the effects of competition.
Forward-looking statements include all statements that are not historical facts
and can be identified by the use of forward-looking terminology such as the
words "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar
expressions. These statements are only predictions and involve known and unknown
risks and uncertainties, including the risks outlined under "Risk Factors" and
elsewhere in this Annual Report.

     Although we believe that the expectations reflected in our forward-looking
statements are reasonable, we cannot guarantee future results, events, levels of
activity, performance or achievement. We are not under any duty to update any of
the forward-looking statements after the date of this Annual Report to conform
these statements to actual results, unless required by law.

IN  ADDITION  TO THE FOREGOING RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS THAT
ARE NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. SHAREHOLDERS SHOULD KEEP IN
MIND  THAT  OTHER  IMPORTANT  RISKS  COULD  ARISE.

Available  Information

     We file annual reports on Form 10-KSB, quarterly reports on Form 10-QSB,
current reports on Form 8-K and proxy and information statements and amendments
to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the
Securities Exchange Act of 1934, as amended. The public may read and copy these
materials at the SEC's Public Reference Room at 450 Fifth Street, NW,
Washington, D.C. 20549. The public may obtain information on the operation of
the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a website (http://www.sec.gov) that


                                       13
<PAGE>
contains reports, proxy and information statements and other information
regarding us and other companies that file materials with the SEC
electronically. You may also obtain copies of reports filed with the SEC, free
of charge, on our website at www.gtctelecom.com. Our headquarters are located at
3151 Airway Ave., Suite P-3, Costa Mesa, CA 92626. Our phone number at that
address is (714) 549-7700 and our e-mail address is info@gtctelecom.com.


                                       14
<PAGE>
ITEM  2.  DESCRIPTION  OF  PROPERTY

     We lease a total of 5,137 square feet of office space for our headquarters
and domestic customer service operations in Costa Mesa, California at a monthly
rental rate of $10,440 pursuant to a one-year lease agreement ending February
28, 2007.

     Effective October 1, 2002 and renewed in January 2006, Perfexa-India is
leasing approximately 15,422 square feet of office space in Gurgaon, India, a
suburb of New Delhi, at a monthly rate of Rs. 629,218 (approximately $13,700)
per month. This facility serves as Perfexa-India's call center, IT development
center, and administrative offices. The lease is for a term of three years with
an option to renew for an additional three year term with an increase in the
rental rate of 20%. Effective October 1, 2002 and renewed in January 2006,
Perfexa-India also entered into a maintenance agreement for their New Delhi
facility. Pursuant to the terms of the agreement, the monthly fee will be
calculated based on the actual costs of maintenance (including electricity and
water) plus a 20% mark-up. Perfexa believes that the monthly maintenance fee
should be Rs. 96,316 (approximately $2,100) and are in the process of
negotiating this amount (see Item 6. Management Discussion and Analysis of
Operations-Perfexa Solutions for contingent liability).

ITEM  3.  LEGAL  PROCEEDINGS

     In the ordinary course of business, we may be, from time-to-time, involved
in various pending or threatened legal actions. The litigation process is
inherently uncertain and it is possible that the resolution of such matters
might have a material adverse effect upon our financial condition and/or results
of operations. However, in the opinion of our management, matters currently
pending or threatened against us are not expected to have a material adverse
effect on our financial position or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of security holders during the quarter
ended June 30, 2006.


                                       15
<PAGE>
                                     PART II

ITEM  5.  MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER  MATTERS

MARKET  INFORMATION

     Our common stock is currently quoted on the OTC Bulletin Board of the
National Association of Securities Dealers, Inc. ("OTCBB") under the symbol
"GTCC." Our common stock is only traded on a limited or sporadic basis and
should not be deemed to constitute an established public trading market. There
is no assurance that there will be liquidity in the common stock.

     The following table sets forth the high and low bid information for each
quarter during the prior two fiscal years, as provided by The NASDAQ Stock
Market, Inc. The information reflects prices between dealers, and does not
include retail markup, markdown, or commission, and may not represent actual
transactions.

<TABLE>
<CAPTION>
                                                     High    Low
                                                     -----  -----
<S>                                                  <C>    <C>
          FISCAL YEAR ENDED JUNE 30, 2005:
          First Quarter                              $0.08  $0.03
          Second Quarter                             $0.16  $0.03
          Third Quarter                              $0.23  $0.07
          Fourth Quarter                             $0.20  $0.15

          FISCAL YEAR ENDED JUNE 30, 2006:
          First Quarter                              $0.16  $0.10
          Second Quarter                             $0.13  $0.07
          Third Quarter                              $0.17  $0.08
          Fourth Quarter                             $0.10  $0.08

          FISCAL YEAR ENDED JUNE 30, 2007:
          First Quarter                              $0.09  $0.04
          Second Quarter (through October 11, 2006)  $0.05  $0.04
</TABLE>

HOLDERS

     The number of beneficial holders of record of our common stock as of the
close of business on June 30, 2006 was 411. Many of the shares of our common
stock are held in "street name" and consequently reflect numerous additional
beneficial owners.

DIVIDENDS

     To date, we have declared no cash dividends on our common stock, and we do
not expect to pay cash dividends in the next term. We intend to retain future
earnings, if any, to provide funds for operation of our business.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

     See  Item  11,  below.

RECENT SALES OF UNREGISTERED SECURITIES

     On May 16, 2006, we entered into an additional subscription agreement with
SCG Capital, LLC consisting of $117,647 principal amount in convertible notes,
and warrants to purchase shares of our common stock. Pursuant to the terms of
the subscription Agreement, we issued the following unregistered securities: (i)
$117,647 principal amount of our convertible promissory notes (the "Note" or
"Notes"); (ii) two shares of our common stock for each dollar of Note principal;
and (iii) six Class A warrants for each dollar of Note principal to purchase
shares of our common stock at an exercise price equal to $0.22 per share,
exercisable for a period of four years. The Notes bear simple interest of twelve
(12%) per annum and may be converted into shares of our common stock pursuant to
the terms of the Note. In addition, the


                                       16
<PAGE>
note was issued at a fifteen percent (15%) original issue discount, resulting in
gross proceeds of $100,000 to us. The issuance was an isolated transaction not
involving a public offering conducted without general solicitation to
"accredited investors" pursuant to Rule 506 and Section 4(2) of the Securities
Act of 1933.

ITEM  6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERATION

     The following discussion contains certain forward-looking statements that
are subject to business and economic risks and uncertainties, and our actual
results could differ materially from those forward-looking statements. The
following discussion regarding our financial statements should be read in
conjunction with the financial statements and notes thereto.

GENERAL OVERVIEW

     Our principal line of business is to provide wireless and long distance
telephone and value-added services for small and medium-sized businesses and
residential customers throughout the United States. Our strategy has been to
build a subscriber base without committing capital or management resources to
construct our own network and transmission facilities. This strategy has allowed
us to add customers without being limited by capacity, geographic coverage, or
configuration of any particular network that we might have developed.

     During fiscal year ended June 30, 2006, we experienced significant bad debt
and reduced margins on the local telephone product. As a result, we have exited
the local telephone market. There were no significant expenses in relation to
exiting this line of business. We anticipate that this move will increase our
cash flows from operating activities.

     We also provide a number of Internet related services such as Internet
access via Dial-Up. Our services are marketed nationwide, through sales
affiliates, affinity groups, independent sales agents and telemarketing.

     Our revenues consist of revenues from the sale of telecommunications,
Internet, and BPO services. Telecommunication revenues are generated primarily
from monthly recurring charges for wireless service and when customers make
wireless and long distance telephone calls from their business or residential
telephones. Internet related services are typically billed at a flat rate and
are billed in advance. Revenues are recognized in the period earned. BPO
services revenues are billed each month based on a client contract that provides
for either a dedicated or per minute rate as the services are rendered.

     Cost of sales consists of telecommunications service costs and the costs of
providing Internet access, and BPO services. Wireless and long distance
telecommunications service costs are based on our customers' wireless and long
distance usage. We pay our carriers based on the type of call, time of call,
duration of call, the terminating telephone number, and terms of our contract in
effect at the time of the call. BPO service cost of sales consists of labor and
its related support costs directly associated with a service contract. General
and administrative expenses consist of the cost of customer acquisition
(including costs paid for third-party verification), customer service, billing,
cost of information systems and personnel required to support our operations and
growth.

     Depending on the extent of our future growth, we may experience significant
strain on our management, personnel, and information systems. We will need to
implement and improve operational, financial, and management information
systems. In addition, we are implementing new information systems that will
provide better record keeping, customer service and billing. However, there can
be no assurance that our management resources or information systems will be
sufficient to manage any future growth in our business, and the failure to do so
could have a material adverse effect on our business, results of operations and
financial condition.

RESULTS OF OPERATIONS OF THE COMPANY

FISCAL YEAR ENDED JUNE 30, 2006 COMPARED TO FISCAL YEAR ENDED JUNE 30, 2005


                                       17
<PAGE>
<TABLE>
<CAPTION>
                                 Year Ended       Year Ended    Percentage
                                June 30, 2006   June 30, 2005     Change
<S>                            <C>              <C>             <C>

          Revenue              $    6,676,100   $    9,022,850        26.0%
          Cost of Sales             2,944,102        4,064,939        27.6%
          Operating Expenses        5,151,855        6,473,018        20.4%
          Interest Expense          1,941,181        1,122,756
                               ---------------  --------------
          Net Income (Loss)    $   (3,284,394)  $    3,697,674
                               ===============  ==============
</TABLE>

     REVENUES - Revenues decreased by $2,346,750 or 26.0% to $6,676,100 for the
year ended June 30, 2006 from $9,022,850 for the year ended June 30, 2005. The
decrease was due primarily to a decrease in telecommunications revenues of
$2,460,232 and a decrease in Internet revenues of $210,327, offset partially by
the increase in BPO revenues of $323,809. As of June 30, 2006, we had
approximately 57,600 telecommunications customers and 1,660 internet customers,
with usage of long distance services of approximately 76,930,000 minutes for the
year ended June 30, 2006 as compared with approximately 89,000
telecommunications customers and 3,300 internet customers, with usage of long
distance services of approximately 106,045,000 minutes for the year ended June
30, 2005.

     We believe that the reduction in minutes are a result of several recent
competitive pressures including: the increase in the number of low-priced long
distance calling plans currently available, the expansion of bundled local/long
distance services offered by Local Exchange Carriers and/or Competitive Local
Exchange Carriers, and the migration of traditional long distance usage to
cellular long distance and internet usage. In addition, the difficulties we
recently experienced as a result of our change in underlying providers in July
2004 may have contributed to this reduction in minutes. In an effort to increase
revenue, we have stepped up our outbound telemarketing campaigns.

     Additionally, we are continuing to focus on developing third party revenue
for our Perfexa subsidiary. During the year ended June 30, 2004, we began
widespread marketing of our BPO services to third parties and have begun
securing client contracts for these services. Perfexa generated third-party
revenues of $504,118 and $180,309 for the year ended June 30, 2006 and 2005,
respectively.

     COST OF SALES - Cost of sales decreased by $1,120,837 or 27.6% to
$2,944,102 for the year ended June 30, 2006 from $4,064,939 for the year ended
June 30, 2005. The decrease was primarily due to the decrease in carrier costs
associated with decreased telecommunications service revenues of $1,122,288,
offset partially by the increase in carrier costs associated with the increase
in our cost of providing telecommunications service of $107,695 for the year
ended June 30, 2005. In addition, for the year ended June 30, 2006, the costs
associated with Internet services decreased $69,570 and the costs associated
with BPO services increased $178,716. As a percentage of revenue, cost of sales
decreased to 44.1% from 45.1%, resulting in a gross margin of 55.9% as compared
to 54.9% for the years ended June 30, 2006 and 2005, respectively.

     Perfexa incurred third-party cost of sales of $298,416 and $119,700 for the
year ended June 30, 2006 and 2005, respectively.

     OPERATING EXPENSES - Operating expenses decreased by $1,321,163 or 20.4% to
$5,151,855 for the year ended June 30, 2006 from $6,473,018 for the year ended
June 30, 2005 primarily due to our reduction in revenues.

     Operating expenses, individually net of Perfexa related costs, for the year
ended June 30, 2006 were comprised primarily of $667,664 in payroll and related
expenses paid to employees; billing related costs of $528,786; rent of $139,350;
bad debt of $345,447; depreciation expense of $57,245; and $1,281,549 of other
operating expenses, primarily sales commissions, internal telephone usage,
consulting services, costs of third party verification for newly acquired
customers, internet support costs and audit and legal costs.

     Perfexa related operating expenses for the year ended June 30, 2006 were
comprised primarily of $1,452,391 in payroll and related expenses paid to
employees; rent of $253,026; depreciation expense of $226,117; and $200,280 of
other operating expenses, primarily corporate expense allocations, office
maintenance and supplies.


                                       18
<PAGE>
     Operating expenses, individually net of Perfexa related costs, for the year
ended June 30, 2005 were comprised primarily of $923,195 in payroll and related
expenses paid to employees; billing related costs of $658,771; rent of $154,010;
bad debt of $717,233; depreciation expense of $108,983; amortization of
previously issued options to employees valued at $110,249; and $1,430,477 of
other operating expenses, primarily sales commissions, internal telephone usage,
consulting services, costs of third party verification for newly acquired
customers, internet support costs and audit and legal costs.

     Perfexa related operating expenses for the year ended June 30, 2005 were
comprised primarily of $1,373,835 in payroll and related expenses paid to
employees; rent of $251,136; depreciation expense of $194,484; and $550,645 of
other operating expenses, primarily office maintenance and supplies.

     INTEREST EXPENSE - Net interest expense increased by $818,425 to $1,941,181
for the year ended June 30, 2006 from $1,122,756 for the year ended June 30,
2005. The increase was primarily due to debt discounts being amortized to
interest expense totaling $1,477,795 during the fiscal year ended June 30, 2006
compared to $60,458 during the same period in fiscal year 2005.

     GAIN ON EXTINGUISHMENT OF DEBT - Gain on extinguishment of debt in the
fiscal year ended June 30, 2005 was $6,301,935 due to a one-time credit of
$6,934,411 resulting from our settlement with MCI, offset partially by one-time
charges of $632,476 resulting from the restructuring of a note payable. There
was no corresponding gain on extinguishment of debt during the fiscal year ended
June 30, 2006.

     NET INCOME - Net loss was $3,284,394, or $(0.11) loss per common share for
the year ended June 30, 2006, from a net income of $3,697,674, or $0.16 per
common share, for the year ended June 30, 2005, a change of $6,982,068,
primarily as a result of changes in interest expense and gain on extinguishment
of debt (see above).

     ASSETS AND LIABILITIES - Assets decreased by $652,877 to $978,272 at June
30, 2006 from $1,631,149 at June 30, 2005. The decrease was due to net decreases
in accounts receivables of $439,688, prepaid expenses of $31,398, property and
equipment of $268,403, and other assets of $1,559, net of increases in deposits
of $10,000, and cash of $78,171. Liabilities increased by $1,805,580 to
$5,734,151 at June 30, 2006 from $3,928,571 at June 30, 2005. The increase was
due to increases in notes payable of $1,368,597, accounts payable and accrued
expenses of $208,841, accrued payroll and payroll related liabilities of
$198,203, and deferred income of $40,320, net of obligations under capital lease
of $10,381 primarily due to purchase of equipment associated with the decrease
in telecommunications service costs, Internet service provider access fees and
customer service operations as a result of the decrease in customers.

     STOCKHOLDERS' DEFICIT - Stockholders' deficit increased by $2,495,454 to
$4,792,876 at June 30, 2006 from $2,297,422 at June 30, 2005. The decrease was
attributable to a net loss of $3,284,394 for the year ended June 30, 2006, and a
cumulative translation adjustment of $40,078, net of an increase due to the fair
market value of stock issued pursuant to notes payable of $802,000, the fair
market value of stock issued for services of $22,313, and the fair market value
of stock issued in connection with notes payable of $4,705.

LIQUIDITY AND CAPITAL RESOURCES

     GENERAL -We do not have sufficient cash flow from operations to meet all of
our monthly operating expenses, service our outstanding debts, or to fund our
contingent liabilities. Over the past year, we have relied upon short-term
financings to meet our cash requirements. Currently, we have short-term debt of
approximately $3,200,000. We will need to either restructure this debt on more
favorable terms, increase revenues in order to meet these obligations, or
acquire alternative financing.

     CASH FLOWS FROM OPERATING ACTIVITIES - Net cash used in operating
activities of $531,840 in fiscal year 2006 was primarily due to a net loss of
$3,284,394, change in fair value of derivative of $30,000, and minority interest
of $56,318; offset partially by changes in operating assets and liabilities,
principally decreases in accounts receivable and other current assets of
$77,545, accounts payable and accrued expenses of $348,841, accrued payroll and
related taxes of $198,203, and deferred income of $40,320; the fair market value
of stock issued in connection with a note payable of $4,705; depreciation and
amortization expense of $283,362; the increase in bad debt expense related to
accounts receivable of $345,447, the amortization of debt discount of
$1,477,795, the fair market value of stock issued for services of $22,313, and
the loss on sale of equipment of $10,341.


                                       19
<PAGE>
     During the fiscal year ended June 30, 2006, we experienced significant bad
debt and reduced margins on the local telephone product. As a result, we have
exited the local telephone market. There were no significant expenses in
relation to exiting this line of business. We anticipate that this will increase
our cash flows from operating activities.

     CASH FLOWS FROM INVESTING ACTIVITIES - Net cash used in investing
activities of $19,065 in fiscal year 2006 funded purchases of property and
equipment.

     CASH FLOWS FROM FINANCING ACTIVITIES - Net cash provided by financing
activities of $604,862 in fiscal year 2006 was primarily due to net borrowings
on notes payable of $976,323, and the proceeds from the issuance of stock of
subsidiary totaling $93,315, offset partially by principal repayments on notes
payable of $424,395, and principal repayments under capital lease obligations of
$10,381.

     OUTSTANDING DEBT OBLIGATIONS AND RECENT DEBT RESTRUCTURINGS - On August 22,
2006, we borrowed $50,000 from an unrelated third party, for working capital
purposes. The note provides that we will repay a total of $60,000 by making
eight weekly payments of $7,500 beginning the week of September 18, 2006. As of
the date of this report, we have made all payments as required by this note.

     On May 9, 2006, we borrowed $100,000, bearing no interest, from an
unrelated third party, for working capital purposes. The note provides that we
will repay $25,000 on May 19, 2006, $25,000 on May 26, 2006, and the balance of
$50,000 on August 5, 2006. We are currently in discussions with the noteholder
to restructure the remaining payments. As of the date of this filing, there is
$75,000 outstanding under the note.

     In March 2006, we converted $140,000 of a payable due to a third party into
a term note payable. The note provides that we will make monthly payments of
$6,500, including interest at a rate of 9.1%, until repaid. As of the date of
this report, we have made all payments as required by this note.

     In May and July 2005, we entered into subscription agreements, as amended,
with certain third party investors for the sale of convertible notes, $2,000,000
principal amount along with shares of our common stock and warrants, resulting
in gross proceeds of $1.7 million, less offering costs of $141,825. The notes
accrue simple interest of 12% per annum and may be converted into shares of our
common stock. In May 2006, we entered into an additional subscription agreement
with a member from the same investor group for principal of $117,647. This
borrowing has terms that are substantially the same as those described above.
Currently, we in default under the terms of some of these convertible notes.
Under these notes in default, as a result of our default, the holder has the
option to make all sums of principal and interest then remaining unpaid under
the note and all other amounts payable thereunder immediately due and payable by
us. For the notes that we are currently in default, the holders have orally
agreed to defer payments due under those notes while we attempt to renegotiate
the repayment terms of the notes with the holder. However, in exchange for
agreeing to defer these payments, two of the holders will require that all
amounts in arrears will bear interest at 18%, in accordance with the terms of
the note.

     On June 7, 2005, we borrowed $20,000, bearing no interest, from one of our
employees for working capital purposes. The borrowing was repaid on July 22,
2005.

     In May 2005, we restructured $927,524 in amounts due on a past due note
payable and corresponding accrued interest and penalties into a new long term
note payable, principal amount $1,200,000. The new note accrues simple interest
in the amount of 12% per annum. We are obligated to pay accrued interest
monthly, but then only if, after deducting all then current obligations, we at
that time have at least $300,000 in available cash.

     On June 8, 2004, we borrowed $50,000 for working capital purposes from an
unrelated third party. The note was originally to be repaid plus interest of
$7,500 on September 7, 2004. In November 2005, we restructured the note. Under
the revised terms, we are required to make weekly payments of $1,000 plus simple
interest of 10% until all principal and accrued interest is repaid. As of the
date of this report, there is approximately $16,000 outstanding under the note.

     On December 9, 2003, we borrowed $200,000 for working capital purposes from
an unrelated third party. The note was to be repaid plus interest of $21,333 on
April 8, 2004. On May 17, 2004, the note, as amended, was extended to July 19,
2004. On July 1, 2005, we agreed to resolve all outstanding amounts owed under
the note via the payment of $30,000 plus bi-weekly payments of $8,000. The
outstanding principal and accrued interest, which, at the time of the July


                                       20
<PAGE>
1, 2005 agreement totaled $167,000 will accrue simple interest at the rate of
10% per annum until fully repaid. The borrowing was repaid on May 4, 2006.

     On October 2, 2002, we borrowed $100,000 for working capital purposes from
an unrelated third party. In November 2005, we restructured the note. Under the
revised terms, we are required to make weekly payments of $1,000 until the
outstanding balance is repaid. As of the date of this filing, there is $1,000
outstanding under the note.

     From time to time we borrow funds from our Chief Executive Officer ("CEO"),
Paul Sandhu, for working capital purposes. Amounts accrue no interest and are
payable on demand. On April 15, 2004, the Company borrowed $12,000 from our CEO.
As of June 30, 2006, we have repaid this borrowing.

     We maintain a revolving line of credit of $45,000 to finance the purchase
of computer equipment. The revolving line of credit provides for us to make
monthly payments of $669, including interest at a rate of approximately 14.9%.
The total outstanding balance on the revolving line of credit was $25,412 and is
included in notes payable in the accompanying consolidated balance sheet at June
30, 2006. As of the date of this report, we have made all payments as required
in the revolving line of credit.

     EQUITY FINANCING - In January 2006, we entered into a one year agreement
with an outside consultant for investor and public relations services. Pursuant
to the agreement, we agreed to issue to the investor relations company 350,000
shares of our restricted common stock valued at $44,625 (based on the fair
market value on the date of grant) according to the following schedule: i)
150,000 shares upon the signing of the agreement, ii) 100,000 shares on the date
six months after the date of the agreement, and iii) 100,000 on the date one
year after the date of the agreement. The value of the stock, subject to
adjustments required by EITF Issue No. 96-18, "Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services," will be amortized and recorded as investor
relations expense under selling, general, and administrative expenses over the
12 months of the agreement.

     In November 2005, we issued 58,824 shares to attorneys in exchange for
legal services provided to the Company valued at approximately $4,705 (based on
the fair market value on the date of grant).

     During fiscal year 2006, we issued 2,058,824 shares of our restricted
common stock in connection with the issuance of convertible debt.

     INTERCOMPANY ACTIVITIES - Since inception, Perfexa-U.S. and its Indian
subsidiary Perfexa-India have relied upon us for funding and for administrative
services required in the development of their business plan. Perfexa is
obligated to reimburse us for such advances and their share of such expenses. As
of June 30, 2006, we have advanced Perfexa-U.S. $6,997,843 in cash and
equipment, of which $661,504 was for the purchase of equipment and $6,336,339
for operating expenses. In addition, we have allocated $2,080,503 of shared
administrative expenses to Perfexa-U.S. Cash and equipment advances accrue
interest of 10% per annum and are due upon demand. Shared administrative
expenses accrue no interest and are also due upon demand. Such amounts have been
eliminated in consolidation.

     Pursuant to a Master Services Agreement between Perfexa-US and us, Perfexa
provides call center and IT development services to us on a cost plus 5% basis.
As of June 30, 2006, Perfexa-U.S. has billed us $4,208,623 for such services.
Such amount has been eliminated in consolidation.

     As of June 30, 2006, Perfexa-U.S. owes us $4,435,033, net of $434,690
repaid by Perfexa-U.S. from funds raised and $4,208,623 in amounts billed for
services rendered. Such amount has been eliminated in consolidation.

PERFEXA SOLUTIONS

     In November 2005, our foreign subsidiary, Perfexa Solutions Private Limited
("Perfexa India"), completed a private offering of 530,000 shares of its common
stock to third-party investors at the price of 2 Rupees per share, resulting in
gross proceeds of $24,315.

     In September 2005, Perfexa India, initiated a private offering of its
common stock to third-party investors at a price of 12 Rupees per share. 250,000
shares were sold, resulting in gross proceeds of $69,000.


                                       21
<PAGE>
     CONTINGENT LIABILITY -Office Maintenance - Perfexa India is in dispute with
its landlord contending that the contractual amount for maintenance services is
excessive to the actual amount the landlord incurred for these services. Per the
building maintenance agreement, the landlord is required to supply audited
financial statements to support the amounts charged for maintenance services. To
date, the landlord has not provided this support. The difference between what we
have been billed and what we have paid and recorded amounts to approximately
$75,000. We believe that it is more likely than not that we will not have to pay
this additional amount, so we have not included this liability in the
accompanying consolidated financial statements.

SHINE  WIRELESS

     On August 28, 2006, Shine Wireless initiated a private placement offering
of 1,000,000 shares of Shine Wireless's restricted common stock at a price of
$1.00 per share. Subsequent to June 30, 2006, Shine Wireless has sold 50,000
shares pursuant to this offering, resulting in cash of $44,000, net of offering
costs of $6,000, which was transferred to us as partial repayment of accrued
advances. The offering is being conducted without general solicitation or
advertising and offered only to "accredited" investors pursuant to Rule 506 of
Regulation D of the Securities Act of 1933.

CAPITAL EXPENDITURES

     We expect to purchase approximately $100,000 of additional equipment on top
of the purchases already made in connection with the expansion of our business.
In addition, as previously discussed, we expanded our operations into the
Republic of India through our Perfexa subsidiary. We expect to continue funding
this expansion with an additional $100,000 to Perfexa primarily for leasehold
improvements, equipment (computer and telephone), furniture and fixtures, and
deposits. Because we presently do not have the capital for such expenditures, we
will have to raise these funds. (See Financing in this section).

OFF-BALANCE SHEET ARRANGEMENTS

     We do not currently have any off-balance sheet arrangements.

SUBSIDIARIES

     We have formed four subsidiaries, of which two are active (see below), that
offer different products and services. They are managed separately because each
business requires different technology and/or marketing strategies.

     The four subsidiaries are: CallingPlanet.com, Inc., ecallingcards.com,
Inc., Shine Wireless, Inc. (formerly Curbside Communications, Inc.), and Perfexa
Solutions, Inc.

     CallingPlanet.com, Inc. was set up to offer international calling using a
PC to phone connection. It is currently inactive. ecallingcards.com, Inc. offers
prepaid calling cards purchased over the internet. It is currently inactive.
Shine Wireless, Inc., is inactive and offers telecommunications and Internet
related needs through direct sales marketing. Perfexa Solutions, Inc., is
inactive and offers business process outsourcing services.

GOING CONCERN

     Our independent registered public accounting firm has stated in their
report included in this Form 10-KSB, that we have incurred operating losses in
the last two years, and have a significant stockholders' deficit. These
conditions, among others, raise substantial doubt about our ability to continue
as a going concern.

INFLATION

     We believe that inflation has not had a material effect on our results of
operations.

CRITICAL ACCOUNTING POLICIES

     The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires us to make judgments, assumptions and estimates that affect the
amounts


                                       22
<PAGE>
reported in our consolidated financial statements and the accompanying notes.
The amounts of assets and liabilities reported on our balance sheet and the
amounts of revenues and expenses reported for each of our fiscal periods are
affected by estimates and assumptions, which are used for, but not limited to,
the accounting for revenue recognition, accounts receivable, doubtful accounts,
deferred tax asset valuation allowances, and valuation of securities, options,
and warrants issued. Actual results could differ from these estimates. The
following critical accounting policies are significantly affected by judgments,
assumptions and estimates used in the preparation of the financial statements:

     USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Significant estimates made by us are, among others,
provisions for losses on accounts receivable, realizability of long-lived
assets, estimates for deferred income tax asset valuations, and valuation
estimates for securities, options, and warrants issued.

     REVENUE AND RELATED COST RECOGNITION - We recognize revenue during the
month in which services or products are delivered, as follows:

     TELECOMMUNICATIONS RELATED SERVICES

     Our telecommunications service revenues are generated primarily when
     customers make wireless and long distance telephone calls from their
     business or residential telephones for wireless or long distance service,
     and monthly recurring charges for wireless service.

     Telecommunication services cost of sales consists of the cost of wireless
     and long distance service provided by our carriers based on usage.

     INTERNET RELATED SERVICES

     Internet service revenues consist of monthly fees charged to subscribers
     for Internet access and are recognized in the period service access is
     provided. Internet service cost of sales consists of the cost of providing
     Internet access.

     BPO SERVICES

     BPO service revenues consist of amounts billed each month based on a client
     contract that provides for either a dedicated or per minute rate as the
     services are rendered. BPO service cost of sales consists of labor and its
     related support costs directly associated with a service contract.

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101 ("SAB 101"), "Revenue Recognition," which outlines the
basic criteria that must be met to recognize revenue and provide guidance for
presentation of revenue and for disclosure related to revenue recognition
policies in financial statements filed with the Securities and Exchange
Commission. SAB 101 was later superseded by SAB 104. We believe our revenue
recognition policies conform to SAB 104.

     STOCK-BASED COMPENSATION - We account for stock-based compensation issued
to employees using the intrinsic value based method as prescribed by Accounting
Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees." Under the intrinsic value based method, compensation is the excess,
if any, of the fair value of the stock at the grant date or other measurement
date over the amount an employee must pay to acquire the stock. Compensation, if
any, is recognized over the applicable service period, which is usually the
vesting period.

     SFAS No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation" if
fully adopted, changes the method of accounting for employee stock-based
compensation plans to the fair value based method. For stock options and
warrants, fair value is determined using an option pricing model that takes into
account the stock price at the grant date, the exercise price, the expected life
of the option or warrant and the annual rate of quarterly dividends.
Compensation expense, if any, is recognized over the applicable service period,
which is usually the vesting period.


                                       23
<PAGE>
     SFAS No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation -
Transition and Disclosure, an amendment of FASB Statement No. 123," was issued
in December 2002 and is effective for fiscal years ending after December 15,
2002. SFAS 148 provides alternative methods of transition for a voluntary change
to the fair value method of accounting for stock-based employee compensation. In
addition, this Statement amends the disclosure requirements of SFAS 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results.

     The adoption of the accounting methodology of SFAS 123 is optional and we
have elected to continue accounting for stock-based compensation issued to
employees using APB 25; however, pro forma disclosures, as if we adopted the
cost recognition requirements under SFAS 123, are required to be presented.

     In December 2004, the FASB issued SFAS No. 123-R, "Share-Based Payment,"
which requires that the compensation cost relating to share-based payment
transactions (including the cost of all employee stock options) be recognized in
the financial statements. That cost will be measured based on the estimated fair
value of the equity or liability instruments issued. SFAS No. 123-R covers a
wide range of share-based compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans. SFAS No.123-R replaces SFAS No. 123, "Accounting
for Stock-Based Compensation," and supersedes Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." As
originally issued, SFAS No. 123 established as preferable a fair-value-based
method of accounting for share-based payment transactions with employees.
However, that pronouncement permitted entities to continue applying the
intrinsic-value model of APB Opinion 25, provided that the financial statements
disclosed the pro forma net income or loss based on the preferable fair-value
method.

     Small Business Issuers are required to apply SFAS No. 123-R in the first
annual reporting period that begins after December 15, 2005. Thus, our
consolidated financial statements will reflect an expense for (a) all
share-based compensation arrangements granted after July 1, 2006 and for any
such arrangements that are modified, cancelled, or repurchased after that date,
and (b) the portion of previous share-based awards for which the requisite
service has not been rendered as of that date, based on the grant-date estimated
fair value.

     TRANSLATION OF FOREIGN CURRENCIES - We use the U.S. dollar as our
functional and reporting currency while our foreign subsidiary uses the Indian
Rupee as its functional currency. Assets and liabilities of foreign subsidiaries
are translated into U.S. dollars at year-end exchange rates, and revenues and
expenses are translated at average rates prevailing during the year or other
period presented. In accordance with SFAS No. 52, "Foreign Currency
Translation", net exchange gains or losses resulting from such translation are
excluded from net loss, but are included in comprehensive loss and accumulated
in a separate component of stockholders' deficit.

ITEM  7.   FINANCIAL  STATEMENTS

     The consolidated financial statements and supplementary financial
information which are required to be filed under this item are presented under
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 10-KSB in
this document, and are incorporated herein by reference.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     There have been no disagreements between Squar, Milner, Miranda &
Williamson, LLP and Management of the type required to be reported under this
Item 8 since the date of their engagement.

ITEM 8A.  CONTROLS AND PROCEDURES

     Under the supervision and the participation of our management, including
our Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the
Exchange Act as of a date (the "Evaluation Date") within 90 days prior to filing
the Company's June 30, 2006 Form 10-KSB. Based upon on that evaluation, our CEO
and CFO concluded that, as of June 30, 2006, our disclosure controls and
procedures were effective in timely alerting


                                       24
<PAGE>
management to the material information relating to us (or our consolidated
subsidiaries) required to be included in our periodic filings with the SEC.

CHANGES IN CONTROLS AND PROCEDURES

     There were no significant changes made in our internal controls over
financial reporting during the quarter ended June 30, 2006 that have materially
affected or are reasonably likely to materially affect these controls. Thus, no
corrective actions with regard to significant deficiencies or material
weaknesses were necessary.

LIMITATIONS ON THE EFFECTIVENESS OF INTERNAL CONTROL

     Our Management, including the CEO, does not expect that our disclosure
controls and procedures or our internal control over financial reporting will
necessarily prevent all fraud and material errors. An internal control system,
no matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are 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 on all internal control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within the 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.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, and/or by management override of
the control. The design of any system of internal control is also based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, controls may become inadequate
because of changes in circumstances, and/or the degree of compliance with the
policies and procedures may deteriorate. Because of the inherent limitations in
a cost effective internal control system, financial reporting misstatements due
to error or fraud may occur and not be detected on a timely basis.

ITEM 8B.  OTHER INFORMATION

     None


                                       25
<PAGE>
                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

     The following table sets forth the names and ages of our current directors
and executive officers, the principal offices and positions held by each person
and the date such person became a director or executive officer. Our executive
officers are appointed annually by the Board of Directors. The directors serve
one-year terms until their successors are elected. The executive officers serve
terms of one year or until their death, resignation or removal by the Board of
Directors. There are no family relationships between any of the directors and
executive officers. In addition, there was no arrangement or understanding
between any executive officer and any other person pursuant to which any person
was selected as an executive officer.

     Our directors and executive officers are as follows:

<TABLE>
<CAPTION>
     Name             Age   Position(s)
     ----             ---   -----------
<S>                   <C>  <C>
     Paul Sandhu       45  Chief Executive Officer and Chairman of the Board

     Eric Clemons      35  Director, President, Secretary and Treasurer

     Gerald DeCiccio   49  Director and Chief Financial Officer
</TABLE>

     PAUL SANDHU is currently our Chief Executive Officer and Chairman of our
Board of Directors. Mr. Sandhu has been with us since our inception. Mr. Sandhu
has over fourteen (14) years experience with start-up and emerging growth
companies. Mr. Sandhu was Co-Founder, President and Co-Owner of Maximum Security
("Maximum"), a Security and surveillance company he started in 1992. While at
Maximum, Mr. Sandhu actively managed a staff of over 200 employees. In 1997 Mr.
Sandhu sold the business to his partner. Mr. Sandhu graduated from the
University of Punjab in India with a degree in Engineering.

     ERIC CLEMONS is currently our President and a member of our Board of
Directors. Mr. Clemons has been with us since our inception. Mr. Clemons has
over twelve (12) years experience with sales and marketing organizations. Mr.
Clemons most recently was Vice President of Marketing for Intelligent Electronic
Communications managing a staff of 50 employees.

     GERALD DECICCIO joined us in January 1999 as Chief Financial Officer and is
currently a member of our Board of Directors. Mr. DeCiccio has over twenty years
experience in the financial and accounting field. Prior to joining us, Mr.
DeCiccio was the Vice President of Finance and Administration for National
Telephone & Communications, Inc., ("NT&C") a $150 million inter-exchange carrier
and provider of communications products and services. While at NT&C, Mr.
DeCiccio managed NT&C's finance, accounting, human resources and legal
departments. Between 1995 and 1997, Mr. DeCiccio was the Corporate Controller
for Newport Corporation, a $140 million multi-national manufacturer /
distributor of laser and optics products. Prior to that, Mr. DeCiccio was the
Director of Audit and Quality Systems for Sunrise Medical, Inc., a $750 million
multi-national manufacturer / distributor of health care products. From 1980 to
1984, Mr. DeCiccio was a Supervising Senior Accountant for Ernst and Young. Mr.
DeCiccio received his Bachelor of Science in Accounting from Loma Linda
University, and his Masters of Science in Finance and Systems Technology from
the University of Southern California. Mr. DeCiccio is a Certified Public
Accountant in the State of California.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers and persons who own more than ten percent of a registered
class of our equity securities to file with the SEC initial reports of ownership
and reports of changes in ownership of our common stock and other equity
securities. Officers, directors and greater than ten percent shareholders are
required by SEC regulations to furnish us with copies of all Section 16(a) forms
they file. To our knowledge, based solely on the review of copies of such
reports furnished to us during the year ended June 30, 2006, all Section 16(a)
filing requirements applicable to our officers, directors and greater than ten
percent shareholders were complied.


                                       26
<PAGE>
Family Relationships

     There are no family relationships between or among the above directors,
executive officers or persons nominated or charged by us to become directors or
executive officers.

Involvement in Legal Proceedings

     To the best of our knowledge, during the past five years, none of the
following occurred with respect to a present or former director or executive
officer of the Company: (1) any bankruptcy petition filed by or against any
business of which such person was a general partner or executive officer either
at the time of the bankruptcy or within two years prior to that time; (2) any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor offenses); (3) being
subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated, of any court of any competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; and (4) being found
by a court of competent jurisdiction (in a civil action), the SEC or the
Commodities Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed, suspended
or vacated.

Audit Committee Financial Expert

     On March 3, 2004, due to the resignation of our independent board member
serving as the Committee's independent financial expert, we have temporarily
disbanded the Audit Committee and the full Board of Directors serves in lieu of
such committee. Currently, Mr. DeCiccio qualifies as a financial expert. Mr.
DeCiccio also serves as our Chief Financial Officer and is therefore not
considered an independent director.

Code of Ethics

     On January 4, 2004, we adopted a Code of Ethics for our principal executive
officers and senior management. The Code is designed to deter wrongdoing and
promote honest and ethical conduct; full and fair disclosure in reports and
documents submitted to the SEC; compliance with applicable governmental laws,
rules and regulations; and the prompt internal reporting of violations of the
code to appropriate persons by our senior management. A copy of our Code of
Ethics is attached to this report as Exhibit 14. Additionally, a copy is posted
on our website located at www.gtctelecom.com. Any person may obtain a copy of
                          ------------------
our Code of Ethics, without charge, by writing to Legal Department, GTC Telecom,
3151 Airway Ave., Suite P-3, Costa Mesa, CA 92627; Attn Code of Ethics Request.


                                       27
<PAGE>
ITEM 10.  EXECUTIVE COMPENSATION

     The Summary Compensation Table below shows certain compensation information
for services rendered in all capacities for the fiscal years ended June 30,
2006, 2005, and 2004. Other than as set forth herein, no executive officer's
salary and bonus exceeded $100,000 in any of the applicable years. The following
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted and certain other compensation, if any, whether paid or
deferred.

<TABLE>
<CAPTION>
                                          SUMMARY COMPENSATION TABLE

                         ANNUAL  COMPENSATION                         LONG  TERM  COMPENSATION
                         --------------------                       ---------------------------
                                                                    AWARDS              PAYOUTS
                                                                    ---------------------------
                                                 OTHER      RESTRICTED   SECURITIES                  ALL
NAME AND                                        ANNUAL         STOCK     UNDERLYING     LTIP        OTHER
PRINCIPAL                  SALARY    BONUS   COMPENSATION     AWARDS       OPTIONS    PAYOUTS   COMPENSATION
POSITION           YEAR     ($)       ($)         ($)           ($)       SARS (#)      ($)          ($)
-------------------------------------------------------------------------------------------------------------
<S>               <C>     <C>       <C>      <C>            <C>          <C>          <C>       <C>
Paul Sandhu        2006    126,517      -0-            -0-          -0-          -0-       -0-            -0-
(CEO)             (6/30)

                   2005    169,400      -0-            -0-          -0-      925,000       -0-            -0-
                  (6/30)

                   2004    184,800      -0-         5,0001          -0-          -0-       -0-         7,1082
                  (6/30)
-------------------------------------------------------------------------------------------------------------
Eric Clemons       2006    149,301   10,000            -0-          -0-          -0-       -0-            -0-
(President)       (6/30)

                   2005    160,233      -0-            -0-          -0-      600,000       -0-            -0-
                  (6/30)

                   2004    167,200      -0-            -0-          -0-          -0-       -0-            -0-
                  (6/30)
-------------------------------------------------------------------------------------------------------------
Gerald DeCiccio    2006    108,443      -0-            -0-          -0-          -0-       -0-            -0-
(CFO)             (6/30)

                   2005    145,200      -0-            -0-          -0-      400,000       -0-            -0-
                  (6/30)

                   2004    158,400      -0-            -0-          -0-          -0-       -0-            -0-
                  (6/30)
-------------------------------------------------------------------------------------------------------------
</TABLE>

(1)  Amounts paid on deferred salary from prior years
(2)  Amounts paid for vacation


                                       28
<PAGE>
<TABLE>
<CAPTION>
                                    OPTION/SAR GRANTS IN LAST FISCAL YEAR
                                             (INDIVIDUAL GRANTS)

                                               PERCENT OF TOTAL
                   NUMBER OF SECURITIES     OPTIONS/SAR'S GRANTED
                        UNDERLYING          TO EMPLOYEES IN FISCAL  EXERCISE OF BASE PRICE
NAME             OPTIONS/SAR'S GRANTED (#)           YEAR                   ($/SH)           EXPIRATION DATE
------------------------------------------------------------------------------------------------------------
<S>              <C>                        <C>                     <C>                      <C>
Paul Sandhu                             --                      --                       --               --

------------------------------------------------------------------------------------------------------------
Eric Clemons                            --                      --                       --               --

------------------------------------------------------------------------------------------------------------
Gerald DeCiccio                         --                      --                       --               --

------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                            AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
                                       AND FY-END OPTION/SAR VALUES

                                                      NUMBER OF UNEXERCISED      VALUE OF UNEXERCISED IN
                                                      SECURITIES UNDERLYING       THE-MONEY OPTION/SARS
                 SHARES ACQUIRED ON      VALUE      OPTIONS/SARS AT FY-END (#)        AT FY-END ($)
NAME                EXERCISE (#)      REALIZED ($)  EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE
---------------------------------------------------------------------------------------------------------
<S>              <C>                  <C>           <C>                         <C>
Paul Sandhu                        0      n/a                899,000 / 591,000                       0 / 0
Eric Clemons                       0      n/a                721,000 / 394,000                       0 / 0
Gerald DeCiccio                    0      n/a                498,000 / 272,000                       0 / 0
</TABLE>

EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS

     On December 1, 1998, we entered into an Employment Agreement with S. Paul
Sandhu, our Chief Executive Officer. The Agreement was approved by our Board of
Directors. On September 6, 2001, the Compensation Committee of the Board agreed
to revise the Agreement increasing Mr. Sandhu's salary to $184,800. The
Agreement continues for an indefinite term but may be canceled at any time by
either Mr. Sandhu or us. However, if we terminate the Agreement without cause,
as defined in the Agreement, we shall be obligated to pay Mr. Sandhu 25% of his
then annual salary as severance.

     On December 1, 1998, we entered into an Employment Agreement with Eric
Clemons, our President. The Agreement was approved by our Board of Directors. On
September 6, 2001, the Compensation Committee of the Board agreed to revise the
Agreement increasing Mr. Clemon's salary to $167,200. The Agreement continues
for an indefinite term but may be canceled at any time by either Mr. Clemons or
us. However, if we terminate the Agreement without cause, as defined in the
Agreement, we shall be obligated to pay Mr. Clemons 25% of his then annual
salary as severance.

     On December 1, 1998, we entered into an Employment Agreement with Gerald
DeCiccio, our Chief Financial Officer. The Agreement was approved by our Board
of Directors. On September 6, 2001, the Compensation Committee of the Board
agreed to revise the Agreement increasing Mr. DeCiccio's salary to $158,400. The
Agreement continues for an indefinite term but may be canceled at any time by
either Mr. DeCiccio or us. However, if we terminate the Agreement without cause,
as defined in the Agreement, we shall be obligated to pay Mr. DeCiccio 25% of
his annual salary as severance.

COMPENSATION  OF  DIRECTORS

     Our current directors do not receive compensation for their services as our
directors.


                                       29
<PAGE>
ITEM  11.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT

     The following table sets forth, as of October 11, 2006, certain information
with respect to the equity securities owned of record or beneficially by:

          -    each of our Officers and Directors;
          -    each person who owns beneficially more than 5% of each class of
               our equity securities; and
          -    all Directors and Executive Officers as a group.

<TABLE>
<CAPTION>
                                                        COMMON STOCK  PERCENT OF(1)
TITLE OF CLASS   NAME AND ADDRESS OF BENEFICIAL OWNER   OUTSTANDING    OUTSTANDING
--------------  --------------------------------------  ------------  -------------
<S>             <C>                                     <C>           <C>
Common Stock    Paul Sandhu(2)                             3,993,715         13.19%
                3151 Airway Avenue, Suite P-3
                Costa Mesa, CA 92626.

Common Stock    Eric Clemons(3)                            1,031,552          3.41%
                3151 Airway Avenue, Suite P-3
                Costa Mesa, CA 92626.

Common Stock    Gerald A. DeCiccio(4)                        520,500          1.72%
                3151 Airway Avenue, Suite P-3
                Costa Mesa, CA 92626.

Common Stock    Reet Trust(5)                              2,000,000          6.61%
                21520 Yorba Linda, Suite 6227
                Yorba Linda, CA 92887%

Common Stock    Rapaport Family Trust                      3,595,000         11.88
                584 Via Almar
Common Stock    Palos Verde Peninsula, CA 90275

Common Stock    All Directors and Officers as a Group      5,545,767         18.32%
                (3 Persons in total)
</TABLE>

______________________________________
(1)  Percentage of outstanding shares is based on 30,269,740 shares of common
stock outstanding as of the date of this prospectus plus shares underlying
options exercisable within 60 days for that particular holder.

(2)  Includes 899,000 options to acquire shares of our common stock in
accordance with Mr. Sandhu's director compensation agreement and our employee
benefit plan.  Does not include an aggregate of 591,000 unvested options to
acquire shares of our common stock granted in accordance with our employee
benefit plan.

(3)  Includes 721,000 options to acquire shares of our common stock in
accordance with Mr. Clemons' director compensation agreement and our employee
benefit plan.  Does not include an aggregate of 394,000 unvested options to
acquire shares of our common stock in accordance with our employee benefit plan.

(4)  Includes an aggregate of 498,000 options to acquire shares of our common
stock in accordance with Mr. DeCiccio's employment and director compensation
agreements and our employee benefit plan.  Does not include an aggregate of
272,000 unvested options to acquire shares of our common stock in accordance
with our employee benefit plan.

(5)  The trustee of the Reet Trust is Teg Sandhu, father of S. Paul Sandhu.
However, S. Paul Sandhu disclaims any beneficial ownership to the shares held by
the Reet Trust.

     We believe that the beneficial owners of securities listed above, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. Shares of stock subject to options or warrants currently
exercisable, or exercisable within 60 days, are deemed outstanding for purposes
of computing the percentage of the person holding such options or warrants, but
are not deemed outstanding for purposes of computing the percentage of any other
person.


                                       30
<PAGE>
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

<TABLE>
<CAPTION>
SECURITIES  AUTHORIZED  FOR  ISSUANCE  UNDER  EQUITY  COMPENSATION  PLANS

                                          EQUITY COMPENSATION PLANS AS OF JUNE 30, 2006

                                           (a)                         (b)                               (c)
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                 NUMBER OF SECURITIES
                                   NUMBER OF SECURITIES          WEIGHTED-AVERAGE      REMAINING AVAILABLE FOR FUTURE ISSUANCE
                              TO BE ISSUED UPON EXERCISE OF     EXERCISE PRICE OF          UNDER EQUITY COMPENSATION PLANS
                                   OUTSTANDING OPTIONS,        OUTSTANDING OPTIONS,   (EXCLUDING SECURITIES REFLECTED IN COLUMN
                                   WARRANTS AND RIGHTS         WARRANTS AND RIGHTS                       (A))
PLAN CATEGORY                              (#)                         ($)                               (#)
--------------------------------------------------------------------------------------------------------------------------------
<S>                           <C>                             <C>                     <C>

Equity compensation plans                       3,812,000(1)  $                 0.26                                1833,000(2)
approved by security holders
--------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans                      13,010,000     $                 0.22                                       0
not approved by security
holders
--------------------------------------------------------------------------------------------------------------------------------
Total                                          16,822,000     $                 0.23                               1,833,000
</TABLE>

(1)  consists of 645,000 options issued under the 1999 Stock Option Plan and
     3,167,000 options issued under the 2001 Stock Incentive Plan
(2)  does not include any ungranted options under the 1999 Omnibus Stock Option
     Plan as this plan was terminated.

1999  STOCK  OPTION  PLAN

     On September 20, 1999, our Board of Directors ("Board") approved the GTC
Telecom Corp. Omnibus Stock Option Plan (the "1999 Plan"), effective October 1,
1999. The 1999 Plan was approved and ratified by the shareholders on December
13, 1999 at our 1999 annual shareholder's meeting. Under the terms of the 1999
Plan, the Board has the sole authority to determine which of the eligible
persons shall receive options, the number of shares which may be issued upon
exercise of an option, and other terms and conditions of the options granted
under the 1999 Plan to the extent they don't conflict with the terms of the 1999
Plan.

     Upon implementation of our 2001 Stock Incentive Plan (as described below),
we closed the 1999 Plan. As of the date of this report, a total of 645,000
options, previously issued to employees, exercisable at a weighted average of
$0.91 per share remain outstanding.

2001  STOCK  INCENTIVE  PLAN

     On October 17, 2001, our Board approved the GTC Telecom Corp. 2001 Stock
Incentive Plan (the "SIP Plan"), effective January 1, 2002. The SIP Plan was
approved and ratified by the shareholders on December 13, 2001 at our 2001
annual shareholder's meeting. The SIP Plan provides for the grant of various
types of equity-based incentives including stock options, stock appreciation
rights ("SARs"), restricted stock, and cash and stock bonuses, on a current or
deferred basis, collectively "Awards." We may settle Awards in cash or shares of
the Company's Common Stock ("Shares").

     The maximum number of Shares that may be issued under the SIP Plan is
5,000,000 shares of our Common Stock. The Internal Revenue Code requires a fixed
limit on the number of Shares that may be covered by options and SARs granted to
any one individual in any one calendar year and a fixed limit on the number of
Shares that may be covered by all Awards granted to any one individual in any
one calendar year. These limits are each 1,000,000 shares.

     The SIP Plan may be administered by the Board or by a committee appointed
by the Board. Currently the SIP Plan is administered by the full Board of
Directors. Subject to the express terms of the SIP Plan, the SIP Plan
administrator will have broad power to administer, construe, and interpret the
SIP Plan.

     Awards may be issued for services rendered or to be rendered. Shares also
may be issued for any lawful consideration, including cash, other securities or
rights. The administrator may authorize loans from us to participants (except to
our executive officers) in the amount necessary for participants to pay the
withholding taxes due in connection with the exercise or vesting of Awards. All
of our directors, officers, consultants, and employees and our subsidiaries are


                                       31
<PAGE>
eligible for Award grants. Only persons actually selected by the administrator
will be granted Awards.

     On December 21, 2004, our Board granted, pursuant to the SIP Plan,
Incentive Stock Options (as defined by the SIP Plan), to purchase an aggregate
of 1,375,000 shares of our common stock at an exercise price of $0.10 per share
(the fair market value of our common stock on the day of grant), to certain of
our employees. In addition, on December 21, 2004, our Board granted to the
Company's CEO, pursuant to the SIP Plan, options to purchase 925,000 shares of
our common stock at an exercise price equal to 110% of the fair market value on
the date of grant ($0.11 per share). The options vest equally over a period of
five years from the date of grant and are exercisable through December 2013. No
options were granted under the SIP Plan during the year ended June 30, 2006.

NON-PLAN  ISSUANCES

     None.

ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     As of June 30, 2006, we have net advances to Eric Clemons, our President,
of $60,306. The advances accrue interest at 10% (no interest income has been
recorded as of June 30, 2006) and are due on demand. We have classified the note
receivable as an increase to stockholders' deficit in the accompanying
consolidated balance sheet at June 30, 2006. There have been no additional
advances since June 2001.

     In February, 2003, Perfexa-U.S. entered into a Master Services Agreement
with us whereby Perfexa-U.S. agreed to provide call center outsourcing and
Information Technology systems development for us. Pursuant to the terms of the
Agreement, we have agreed to reimburse Perfexa-U.S. for such services on a cost
plus 5% basis. Work on this agreement commenced May 1, 2003 upon completion of
the Perfexa call center.

     Since inception, Perfexa-U.S. and their Indian subsidiary Perfexa-India has
relied upon us for funding and for administrative services required in the
development of their business plan. Perfexa is obligated to reimburse us for
such advances and their share of such expenses. As of June 30, 2006, we have
advanced Perfexa-U.S. $6,997,843 in cash and equipment, of which $661,504 was
for the purchase of equipment and $6,336,339 for operating expenses. In
addition, we have allocated $2,080,503 of shared administrative expenses to
Perfexa-U.S. Cash and equipment advances accrue interest of 10% per annum and
are due upon demand. Shared administrative expenses accrue no interest and are
also due upon demand. See Part II, Item 6 Management's Discussion and Analysis,
Financing further details.

     Pursuant to a Master Services Agreement between Perfexa-US and us, Perfexa
provides call center and IT development services to us on a cost plus 5% basis.
As of June 30, 2006, Perfexa-U.S. has billed us $4,208,623 for such services.

     As of June 30, 2006, Perfexa-U.S. owes GTC $4,435,033 net of $434,690
repaid by Perfexa-U.S. from funds raised and $4,208,623 in amounts billed for
services rendered.

     See Item 11. Executive Compensation for transactions relating to issuances
of options to Officers and Directors from our stock option plans.


                                       32
<PAGE>
<TABLE>
<CAPTION>
ITEM 13.     EXHIBITS

INDEX  TO  FINANCIAL  STATEMENTS
                                                                                  Page
                                                                                  ----
<S>                                                                               <C>
Report of Independent Registered Public Accounting Firm                           F-1

Consolidated balance sheet at June 30, 2006                                       F-2

Consolidated statements of operations and comprehensive loss for the years ended
June 30, 2006 and 2005                                                            F-3

Consolidated statements of stockholders' deficit for the years ended
June 30, 2006 and 2005                                                            F-4

Consolidated statements of cash flows for the years ended
June 30, 2006 and 2005                                                            F-5

Notes to consolidated financial statements                                        F-7
</TABLE>

All other schedules are omitted as the required information is not present or is
not  present  in  amounts  sufficient  to require submission of the schedule, or
because  the  information  required  is  included in the financial statements or
notes  thereto.

INDEX  TO  EXHIBITS

We  undertake  to  furnish to any shareholder so requesting a copy of any of the
following  exhibits upon payment to us of the reasonable costs incurred by us in
furnishing  any  such  exhibit.

<TABLE>
<CAPTION>
Exhibit No.  Description
<S>          <C>

3.1*         Amendment to Articles of Incorporation filed with the Nevada Secretary of
             State on June 21, 2005 increasing the authorized shares of common stock
             from 50,000,000 to 100,000,000 (incorporated by reference to Exhibit 3.1 in
             the Company's Registration Statement on Form SB-2 filed on July 19, 2005).

3.2*         Restated Articles of Incorporation filed with the Nevada Secretary of State on
             January 4, 2001 (incorporated by reference to Exhibit 3.1 in the Company's
             2000 Proxy Statement filed on November 15, 2000).

3.3*         Restated Bylaws of GTC Telecom Corp. adopted on September 20, 1999
             (incorporated by reference  to
             Exhibit 3.5 in the Company's Annual Report on Form 10-KSB for the year
             ended June 30, 1999 filed on October 13, 1999).

4.1*         Form of 12% Convertible Promissory Note issued pursuant to Subscription
             Agreement dated May 23, 2005 (incorporated by reference to Exhibit 4.1 in
             the Company's Registration Statement on Form SB-2 filed on July 19, 2005).

4.2*         Form of Class A Warrant -- Exhibit A1 to Subscription Agreement dated May
             23, 2005 (incorporated by   reference to Exhibit 10.1.1 of the Company's
             Form 8-K filed on May 24, 2005).

4.3*         Form of Class B Warrant -- Exhibit A2 to Subscription Agreement dated May
             23, 2005 (incorporated by   reference to Exhibit 10.1.2 of the Company's
             Form 8-K filed on May 24, 2005).

10.1*        Subscription Agreement by and between GTC Telecom Corp. and Bumper
             Fund, LP dated July 11, 2005  (incorporated by reference to Exhibit 10.1 of
             the Company's Form 8-K filed on July 15, 2005).

10.2*        Amendment Agreement by and between GTC Telecom Corp. and Alpha


                                       33
<PAGE>
             Capital Alpha Capital Aktiengesellschaft, Dcofi Master LDC, SCG Capital,
             LLC, Silver Oak Investments, Inc., and Ellis International Ltd. dated June 28,
             2005 (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K
             filed on July 11, 2005).

10.3*        Subscription Agreement by and between GTC Telecom Corp. and Alpha
             Capital Alpha Capital Aktiengesellschaft, Dcofi Master LDC, SCG Capital,
             LLC, Silver Oak Investments, Inc., and Ellis International Ltd. dated May 23,
             2005 (incorporated by reference to Exhibit 10.1 of the Company's Form 8-K
             filed on May 23, 2005).

             10.3.1*  Escrow Agreement -- Exhibit B to Subscription Agreement dated
                      May 23, 2005 (incorporated by reference to Exhibit 10.1.3
                      of the Company's Form 8- K filed on May 23, 2005).

             10.3.2*  Security Agreement by GTC Telecom Corp. -- Exhibit C1 to Subscription
                      Agreement dated May 23, 2005 (incorporated by reference to
                      Exhibit 10.1.4 of the Company's Form 8-K filed on May 23, 2005).

             10.3.3*  Collateral Agent Agreement -- Exhibit D to Subscription Agreement
                      dated May 23, 2005. (incorporated by reference to Exhibit 10.1.5
                      of the Company's Form 8-K filed on May 23, 2005).

10.4*        Lease dated March 1, 2005 by and between the Company and Southern
             California Sunbelt Developers, Inc. for Suite P-3, Costa Mesa, CA 92626
             (incorporated by reference to Exhibit 10.1 of the Company's Form 10-QSB
             filed on May 16, 2005).

10.5*        Lease dated March 1, 2005 by and between the Company and Southern
             California Sunbelt Developers, Inc. for Suite K-103, Costa Mesa, CA 92626
             (incorporated by reference to Exhibit 10.2 of the Company's Form 10-QSB
             filed on May 16, 2005).

10.6*        Addendum No. 1 to Subscription Agreement dated May 12, 2005 by and
             between the Company and the Rapaport Family Trust (incorporated by
             reference to Exhibit 10.1.5 of the Company's Form 8-K filed on May 23,
             2005).

10.7*        Subscription Agreement dated May 13, 2005 by and between the Company
             and the Rapaport Family Trust (incorporated by reference to Exhibit 10.3 of
             the Company's Form 10-QSB filed on May 16, 2005).

10.8*        Wholesale Solutions Switched Services Agreement by and between the
             Company and Sprint Communications Company L.P. dated July 26, 2002
             (incorporated by reference to Exhibit 10.9 of the Company's Form 10-KSB
             filed on September 28, 2004).

10.9*        Employment Agreement by and between GTC Telecom Corp., a Nevada
             corporation and Eric Clemons, dated December 1, 1998 (incorporated by
             reference to Exhibit 10.6 in the Company's Form 10 SB/A filed April 2,
             1999).

10.10*       Employment Agreement by and between GTC Telecom Corp., a Nevada
             corporation and Jerry DeCiccio, dated December 1, 1998 (incorporated by
             reference to Exhibit 10.7 in the Company's Form 10 SB/A filed April 2,
             1999).

10.11*       Employment Agreement by and between GTC Telecom Corp., a Nevada
             corporation and Paul Sandhu, dated December 1, 1998 (incorporated by
             reference to Exhibit 10.8 in the Company's Form 10 SB/A filed April 2,
             1999).

14*          Code of Ethics (incorporated by reference to Exhibit 14 in the Company's
             Annual Report on Form 10-KSB for the year ended June 30, 2004 filed on
             August 8, 2004).

21           Subsidiaries of the Registrant.


                                       34
<PAGE>
23           Consent of Registered Public Accounting Firm

31.1         Rule 13a-14(a) Certification of Chief Executive Officer

31.2         Rule 13a-14(a) Certification of Chief Financial Officer

32.1         Section 1350 Certification of Chief Executive Officer

32.2         Section 1350 Certification of Chief Financial Officer
</TABLE>


------------------------------
*  Previously  filed  and  incorporated  by  reference  as  indicted.

ITEM  14.  PRINCIPAL  ACCOUNTANT  FEES  AND  SERVICES

     For the fiscal year ended June 30, 2006, our fees for professional services
rendered  by  our Independent Registered Public Accounting Firm were as follows:

     (a)  Audit  Fees:  Aggregate fees billed for professional services rendered
     for  the  audit  of  our  fiscal  year  2005  annual consolidated financial
     statements  and  review  of  the  consolidated  financial statements in our
     reports  on  Form  10-QSB:  $66,018.

     (b)  Audit  Related  Fees:  $41,132.

     (c)  Tax  Fees:  $31,500.

     (d)  All  Other  Fees: The aggregate fees billed for all other professional
     services provided to us (other than the services described above under (a),
     (b),  and  (c))  for  the  fiscal  year  ended  June  30,  2006:  None.

Our  Board  of  Directors  serving  as  our  Audit  Committee has considered and
determined  that  the  services  rendered  by  the Independent Registered Public
Accounting  Firm  with  respect  to  the  foregoing  fees  are  compatible  with
maintaining  our  independence  and all services were pre-approved by the Board.


                                       35
<PAGE>
                                   SIGNATURES

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934,  the  registrant  has duly caused this report to be signed on its
behalf  by  the  undersigned,  thereunto  duly  authorized.


Dated  October  13,  2006

                                GTC TELECOM CORP.
                                -----------------
                                  (Registrant)

By:  /s/  PAUL  SANDHU
     -----------------
          PAUL  SANDHU
Chief Executive Officer and Director

By:  /s/  ERIC  CLEMONS
     ------------------
          ERIC  CLEMONS
President and Director

By:  /s/  GERALD  DECICCIO
     ---------------------
          GERALD  DECICCIO
Chief Financial Officer and Director and
Principal Accounting Officer


                                       36
<PAGE>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
GTC Telecom Corp.

We have audited the accompanying consolidated balance sheet of GTC Telecom Corp.
and  subsidiaries  (collectively,  the  "Company")  as of June 30, 2006, and the
related  consolidated  statements  of  operations,  and  comprehensive  loss,
stockholders'  deficit  and  cash  flows  for  each of the years in the two-year
period ended June 30, 2006. These financial statements are the responsibility of
the  Company's  management. Our responsibility is to express an opinion on these
financial  statements  based  on  our  audits.

We  conducted  our audits in accordance with the standards of the Public Company
Accounting  Oversight  Board  (United  States).  Those standards require that we
plan  and  perform  the  audits to obtain reasonable assurance about whether the
financial  statements  are  free  of  material  misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial statement presentation.  We believe that our
audits  provide  a  reasonable  basis  for  our  opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all  material respects, the consolidated financial position of GTC Telecom Corp.
and  subsidiaries  as  of  June  30,  2006,  and the consolidated results of its
operations and its cash flows for each of the years in the two-year period ended
June  30,  2006,  in conformity with accounting principles generally accepted in
the  United  States  of  America.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue as a going concern.  As disclosed in Note 1, the Company
has incurred losses in the last several years, has a negative working capital of
approximately  $4,900,000,  an accumulated deficit of approximately $16,600,000,
and a stockholders' deficit of approximately $4,800,000 at June 30, 2006.  These
factors,  among  others,  raise substantial doubt about the Company's ability to
continue  as a going concern.  Management's plans in regard to these matters are
described  in  Note 1.  The consolidated financial statements do not include any
adjustments  that  may  result  from  the  outcome  of  this  uncertainty.


/s/ SQUAR, MILNER, MIRANDA & WILLIAMSON, LLP



Newport Beach, California
October 12, 2006


                                     F-1
<PAGE>
<TABLE>
<CAPTION>
                         GTC TELECOM CORP. AND SUBSIDIARIES
                             CONSOLIDATED BALANCE SHEET

                                                                         June 30,
                                                                           2006
                                                                       -------------
<S>                                                                    <C>
ASSETS
  Cash                                                                 $     78,671
  Accounts receivable, net of allowance for doubtful accounts of
   approximately $7,000                                                     407,832
  Deposits                                                                   30,822
  Prepaid expenses                                                           46,406
                                                                       -------------
    Total current assets                                                    563,731

Property and equipment, net                                                 339,894
Other assets                                                                 74,647
                                                                       -------------

    Total assets                                                       $    978,272
                                                                       =============

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
  Accounts payable and accrued expenses                                $  2,483,346
  Accrued payroll and related taxes                                         432,063
  Obligation under capital leases                                             9,895
  Notes payable, net of discounts totaling $744,478                       2,519,819
  Deferred income                                                            44,880
                                                                       -------------
    Total current liabilities                                             5,490,003
                                                                       -------------

Long-term liabilities:
  Obligation under capital leases, net of current portion                    11,258
  Notes payable, net of current portion and discounts totaling $3,915       232,890
                                                                       -------------

    Total liabilities                                                     5,734,151
                                                                       -------------

Commitments and contingencies

Minority interest in consolidated subsidiaries                               36,997

Stockholders' deficit:
  Preferred stock, $0.001 par value; 10,000,000 shares authorized;
    none issued and outstanding                                                  --
  Common stock, $0.001 par value; 100,000,000 shares authorized;
    30,069,740 shares issued and outstanding                                 30,070
  Additional paid-in-capital                                             11,667,909
  Note receivable officer                                                   (60,306)
  Accumulated deficit                                                   (16,565,293)
  Accumulated other comprehensive loss                                      134,744
                                                                       -------------
    Total stockholders' deficit                                          (4,792,876)
                                                                       -------------

    Total liabilities and stockholders' deficit                        $    978,272
                                                                       =============
</TABLE>

          See accompanying notes to consolidated financial statements


                                     F-2
<PAGE>
<TABLE>
<CAPTION>
                                GTC TELECOM CORP. AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                  AND COMPREHENSIVE INCOME/(LOSS)

                                                                           Years Ended June 30,
                                                                        --------------------------
                                                                            2006          2005
                                                                        --------------------------
<S>                                                                     <C>           <C>
Revenues:
  Telecommunications                                                    $ 5,797,762   $ 8,257,994
  Internet services                                                         374,220       584,547
  BPO services                                                              504,118       180,309
                                                                        --------------------------
    Total revenues                                                        6,676,100     9,022,850
                                                                        --------------------------

Cost of sales:
  Telecommunications                                                      2,537,078     3,767,061
  Internet services                                                         108,608       178,178
  BPO services                                                              298,416       119,700
                                                                        --------------------------
    Total cost of sales                                                   2,944,102     4,064,939
                                                                        --------------------------

Gross profit                                                              3,731,998     4,957,911

Operating expenses
  Payroll and related                                                     2,120,055     2,297,030
  Selling, general, and administrative                                    3,031,800     4,175,988
                                                                        --------------------------
    Total operating expenses                                              5,151,855     6,473,018
                                                                        --------------------------

Operating loss                                                           (1,419,857)   (1,515,107)

Interest expense, net (including amortization of debt discounts)         (1,941,181)   (1,122,756)
Other income                                                                 30,000            --
Gain on extinguishment of debt                                                   --     6,301,935
                                                                        --------------------------

Income (loss) before provision for income taxes and minority interest    (3,331,038)    3,664,072

Provision for income taxes                                                    9,674         9,216
                                                                        --------------------------

Income (loss) before minority interest                                   (3,340,712)    3,654,856

Minority interest in loss of consolidated subsidiaries, net of taxes         56,318        42,818
                                                                        --------------------------

Net income (loss) available to common shareholders                       (3,284,394)    3,697,674

Foreign currency translation adjustment                                      40,078       162,829
                                                                        --------------------------

Comprehensive income (loss)                                             $(3,244,316)  $ 3,860,503
                                                                        ==========================

Net income (loss) available to common stockholders per common share:
  Basic                                                                 $     (0.11)  $      0.16
                                                                        ==========================
  Diluted                                                               $     (0.11)  $      0.15
                                                                        ==========================

Weighted average common shares outstanding:
  Basic                                                                  29,498,483    23,320,094
                                                                        ==========================
  Diluted                                                                29,498,483    24,322,594
                                                                        ==========================
</TABLE>

          See accompanying notes to consolidated financial statements


                                     F-3
<PAGE>
<TABLE>
<CAPTION>
                                              GTC TELECOM CORP. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                                          FOR THE YEARS ENDED JUNE 30, 2006 AND 2005

                                                                                                  Accumulated
                                        Common Stock      Additional      Note                        Other           Total
                                        ------------        Paid-in    Receivable   Accumulated   Comprehensive   Stockholders'
                                     Shares      Amount     Capital      Officer      Deficit     Income (Loss)     Deficit
                                   -----------  --------  ------------  ---------  -------------  --------------  ------------
<S>                                <C>          <C>       <C>           <C>        <C>            <C>             <C>
BALANCE AT JUNE 30, 2004           22,106,622    22,107     9,208,778    (60,306)   (16,978,573)         11,993    (7,796,001)

Estimated fair market value of
  stock and warrants issued in
  connection with notes payable     4,896,470     4,896     1,485,931         --             --              --     1,490,827
Cancellation of previously issued
  stock                              (201,000)     (201)      (22,799)        --             --              --       (23,000)
Estimated fair market value of
  vested options granted to
  employees for compensation               --        --       110,249         --             --              --       110,249
Issuance of restricted common
  stock                             1,000,000     1,000        59,000         --             --              --        60,000
Net income                                 --        --            --         --      3,697,674              --     3,697,674
Cumulative foreign currency
  translation adjustment                   --        --            --         --             --         162,829       162,829
                                   -------------------------------------------------------------------------------------------

BALANCE AT JUNE 30, 2005           27,802,092    27,802    10,841,159    (60,306)   (13,280,899)        174,822    (2,297,422)
                                   -------------------------------------------------------------------------------------------

Estimated fair market value of
  stock and warrants issued in
  connection with notes payable     2,058,824     2,059       799,942         --             --              --       802,001
Estimated fair market value of
  stock issued for legal services      58,824        59         4,646         --             --              --         4,705
Estimated fair market value of
  stock issued for services           150,000       150        22,162         --             --              --        22,312
Net loss                                   --        --            --         --     (3,284,394)             --    (3,284,394)
Cumulative foreign currency
  translation adjustment                   --        --            --         --             --         (40,078)      (40,078)
                                   -------------------------------------------------------------------------------------------

BALANCE AT JUNE 30, 2006           30,069,740   $30,070   $11,667,909   $(60,306)  $(16,565,293)  $     134,744   $(4,792,876)
                                   ===========================================================================================
</TABLE>

          See accompanying notes to consolidated financial statements


                                     F-4
<PAGE>
<TABLE>
<CAPTION>
                             GTC TELECOM CORP. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                    Years Ended June 30,
                                                                 ---------------------------
                                                                      2006          2005
                                                                 ---------------------------
<S>                                                               <C>           <C>
Cash Flows From Operating Activities:
Net income (loss)                                                 $(3,284,394)  $ 3,697,674
Adjustments to reconcile net income (loss) to net cash provided
by/(used in) operating activities:
  Bad debt expense                                                    345,447       724,514
  Depreciation and amortization                                       283,362       303,467
  Amortization of debt discount                                     1,477,795        76,458
  Estimated fair market value of stock
    issued in connection with notes payable                             4,705        20,827
  Minority interest in loss of consolidated subsidiaries              (56,318)      (42,818)
  Estimated fair market value of stock issued for services             22,313            --
  Change in fair value of derivative                                  (30,000)           --
  Loss on sale of equipment                                            10,341            --
  Estimated fair market value of options granted
    to employees for compensation                                          --       110,249
  Gain on extinguishment of debt                                           --    (6,301,935)
  Changes in operating assets and liabilities:
    Accounts receivable and other current assets                       77,545      (892,273)
    Accounts payable and accrued expenses                             348,841     2,335,314
    Accrued payroll and related taxes                                 198,203        22,863
    Deferred income                                                    40,320            --
                                                                 ---------------------------

Net cash provided by/(used in) operating activities                  (561,840)       54,340
                                                                 ---------------------------

Cash Flows From Investing Activities:
Purchases of property and equipment                                   (19,065)     (224,732)
                                                                 ---------------------------

Net cash used in investing activities                                 (19,065)     (224,732)
                                                                 ---------------------------

Cash Flows From Financing Activities:
Principal repayments on notes payable                                (424,395)     (871,632)
Principal borrowings on notes payable, net of fees of
  $1,477,795 and $1,196,777, respectively                             976,323       945,000
Proceeds from issuance of stock                                            --        60,000
Proceeds from issuance of stock of subsidiary                          93,315            --
Principal payments under capital lease obligations                    (10,381)      (13,398)
Cancellation of previously issued stock                                    --       (23,000)
                                                                 ---------------------------

Net cash provided by financing activities                             634,862        96,970
                                                                 ---------------------------

Effect of exchange rate on cash                                        24,214           350
                                                                 ---------------------------

Net increase/(decrease) in cash                                        78,171       (73,072)

Cash at beginning of year                                                 500        73,572
                                                                 ---------------------------

Cash at end of year                                               $    78,671   $       500
                                                                 ===========================
</TABLE>

          See accompanying notes to consolidated financial statements


                                     F-5
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (CONTINUED)

Supplemental disclosure of cash flow information:

<TABLE>
<CAPTION>
                                                                   Years  Ended  June  30,
                                                                   -----------------------
                                                                       2006        2005
                                                                   -----------------------
<S>                                                                <C>          <C>
  Cash paid during the year for:
    Interest                                                       $    15,347  $   11,214
</TABLE>

Non-cash  investing  and  financing  activities:

In March 2006, the Company converted $140,000 of accounts payable into a term
note.

During  the  year  ended  June  30, 2006, the Company issued 2,058,824 shares of
restricted  common  stock  in  connection with to the issuance of a note payable
with  a  principal  amount  of  $1,029,412.

During the fiscal year ended June 30, 2006, the Company financed the purchase of
equipment totaling $30,874 with notes payable.

During the fiscal year ended June 30, 2005, the Company financed the purchase of
equipment  totaling  $66,561  with  notes  payable to long-term status.

During the year ended June 30, 2005, the Company converted a $725,000 short term
note  and  accrued  interest  of $202,524 into a long term note with a principal
amount  of  $1,200,000.  In  addition,  the  Company  issued 2,400,000 shares of
restricted  common  stock  pursuant  to  the  conversion  of  the  note payable.

During  the  year  ended  June  30, 2005, the Company issued 2,176,470 shares of
restricted  common  stock  pursuant  to  the  issuance  of a note payable with a
principal  amount  of  $1,088,235.

During  the  year  ended June 30, 2005, the Company converted $67,000 of accrued
interest  into  a  short  term  note.


See  accompanying  notes  to  consolidated  financial  statements for additional
non-cash  investing  and  financing  activities.



    The accompanying notes are an integral part of these consolidated financial
                                   statements.


          See accompanying notes to consolidated financial statements


                                     F-6
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

NOTE  1  ORGANIZATION  AND  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

GTC  -  GTC  Telecom  Corp.  and  subsidiaries  (the "Company" or "GTC") provide
various  services including, telecommunication services, which includes wireless
and  long  distance  telephone,  Internet  related  services  including Internet
service provider access, and business process outsourcing ("BPO") services.  GTC
Telecom  Corp.  was  organized  as  a  Nevada Corporation on May 17, 1994 and is
currently  based  in  Costa  Mesa,  California.  The  Company  is  quoted on the
Over-The-Counter  Bulletin  Board  under  the  symbol  "GTCC".

The  Company  has  four  subsidiaries, of which two are active (see below), that
offer different products and services.  They are managed separately because each
business  requires  different  technology  and/or  marketing  strategies.

The  four  subsidiaries  are:  CallingPlanet.com, Inc., ecallingcards.com, Inc.,
Shine  Wireless,  Inc.  (formerly  Curbside  Communications,  Inc.), and Perfexa
Solutions,  Inc.

CallingPlanet.com,  Inc. was set up to offer international calling using a PC to
phone connection.  It is currently inactive.  ecallingcards.com, Inc. was set up
to  offer  prepaid  calling  cards purchased over the internet.  It is currently
inactive.  Shine  Wireless,  Inc.,  is  active and offers telecommunications and
Internet  related  needs  service  through  direct  sales  marketing.  Perfexa
Solutions,  Inc.,  is  active  and offers business process outsourcing services.

PERFEXA  -  Perfexa  Solutions,  Inc.  ("Perfexa" or "Perfexa-U.S."), a majority
owned  subsidiary  of  the  Company, currently provides customer service for the
Company's  telecommunication  and  Internet  users.  Perfexa's  Information
Technology  ("IT") group currently develops IT solutions for GTC's customer care
needs  and the integration of GTC's customer care system with those of Perfexa's
New  Delhi  Center.  Additionally,  Perfexa offers outsourced call center and IT
development  services  to  third  parties.

GOING  CONCERN  -  The  accompanying consolidated financial statements have been
prepared  assuming  the  Company  will  continue  as  a  going  concern,  which
contemplates,  among other things, the realization of assets and satisfaction of
liabilities in the normal course of business.  At June 30, 2006, the Company has
a negative working capital of $4,926,272, an accumulated deficit of $16,565,293,
a  stockholders' deficit of $4,792,876, and the Company is in default on several
notes  payable,  (see  Note 5).  In addition, through June 30, 2006, the Company
historically  had  losses  from  operations and a lack of profitable operational
history,  among other matters, that raise substantial doubt about its ability to
continue as a going concern.  The Company will attempt to increase revenues from
additional  revenue  sources,  such  as  the  introduction  of wireless services
through  Shine  Wireless, Inc., and/or increase profit margins through continued
negotiations  with Sprint (see Note 10) and other cost cutting measures, such as
payroll  cost  reductions.  In  the absence of significant increases in revenues
and  margins, the Company intends to fund operations through additional debt and
equity  financing  arrangements.  The  successful  outcome  of future activities
cannot  be determined at this time and there are no assurances that if achieved,
the  Company will have sufficient funds to execute its intended business plan or
generate  positive  operating  results.

These  circumstances  raise  substantial  doubt  about  the Company's ability to
continue as a going concern.  The accompanying consolidated financial statements
do  not  include  any  adjustments  that  might  result from the outcome of this
uncertainty.

PRINCIPLES OF CONSOLIDATION - The accompanying consolidated financial statements
include  the  accounts  of  GTC  Telecom  Corp.  and  its  subsidiaries,
CallingPlanet.com,  Inc.,  ecallingcards.com,  Inc.,  Shine  Wireless, Inc., and
Perfexa  Solutions, Inc.  All significant intercompany balances and transactions
have  been  eliminated  in  consolidation.

MINORITY  INTEREST  -  Minority  interest  represents the minority stockholders'
proportionate  share of the equity of Perfexa Solutions, Inc. and Perfexa India.
At  June  30,  2006  and  2005,  the  Company owned approximately 97% of Perfexa
Solutions, Inc.'s common stock. In addition, Perfexa owned approximately 96% and
100%  of  Perfexa  India's common stock at June 30, 2006 and 2005, respectively.
The  Company's  controlling interest requires that the operations of Perfexa and
Perfexa  India  be  included  in  the  consolidated  financial statements of the
Company.  The 3% equity interest of Perfexa Solutions, Inc. that is not owned by
the  Company at June 30, 2006 and 2005, respectively, and the 4% equity interest
of  Perfexa  India that is not owned by Perfexa is shown as minority interest in
consolidated subsidiaries in the accompanying consolidated financial statements.

USE  OF  ESTIMATES  - The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in  the


                                     F-7
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

United  States  of America requires management to make estimates and assumptions
that  affect  the  reported amounts of assets and liabilities and disclosures of
contingent  assets  and  liabilities at the date of the financial statements, as
well  as  the  reported  amounts  of  revenues and expenses during the reporting
periods.  Actual  results  could  differ  from  those  estimates.  Significant
estimates  made  by  management  are,  among others, the provision for losses on
accounts  receivable,  realizability  of long-lived assets, estimates for income
tax  valuations,  and  valuation  of  securities  options,  and warrants issued.

RISKS  AND UNCERTAINTIES - The Company operates in a highly competitive industry
that  is  subject  to  intense  competition,  government  regulation  and  rapid
technological changes.  The Company has limited operating history and is subject
to  the substantial business risks and uncertainties inherent to such an entity,
including  financial,  operational,  technological,  regulatory  and other risks
including  the  potential risk of business failure.  Additionally, the Company's
operations  in India are subject to various political, economic, and other risks
and  uncertainties  inherent  in  such  country.

CONCENTRATION OF CREDIT RISK - The Company currently maintains substantially all
of  its  cash with one major financial institution.  At times, cash balances may
be in excess of the amounts insured by the Federal Deposit Insurance Corporation
("FDIC").

The  Company  sells  its telephone and network services to individuals and small
businesses  throughout  the  United States and does not require collateral.  The
Company  performs  periodic  credit  evaluations  of its customers.  The Company
maintains  reserves  for  potential  credit  losses  based  upon  the  Company's
historical  experience  related  to  credit losses which management believes are
sufficient.  Although  the  Company  expects  to  collect  amounts  due,  actual
collections  may  differ  from  the  estimated  amounts.

ALLOWANCE  FOR  DOUBTFUL  ACCOUNTS  -  The  Company establishes an allowance for
doubtful  accounts  based  on  a  qualitative  and quantitative review of credit
profiles of customers, contractual terms and conditions, current economic trends
and  historical  payments.  The  Company  assesses  the  allowance  for doubtful
accounts  each  period.  If  the  Company  made  different judgments or utilized
different  estimates  for  any  period,  material  differences in the amount and
timing  of  revenue  recognized  could  result.

DEPENDENT ON KEY CUSTOMERS - The Company is not dependent on any single customer
or groups of affiliated customers for a significant portion of its annual sales.
The Company's customer base changes on a continuous basis as customers are added
or  removed.

MAJOR  SUPPLIERS  -  The  Company does not own its own long distance network and
currently depends primarily upon Sprint to provide for the transmission of phone
calls  by  its  customers  and to provide the call detail records upon which the
Company bases its customer's billings.  See Note 10 for details of the Company's
agreement  with  Sprint.

In  the  event  that  the  services  provided  by  Sprint  to  the  Company were
discontinued,  the  Company believes that it would be able to identify alternate
suppliers  which  would be able to provide it with sufficient levels of services
at  terms  similar  to  those  of Sprint.  Although the Company has the right to
switch  its  current customers to an alternate underlying carrier, the Company's
customers  have  the  right to discontinue their service with the Company at any
time.  Accordingly,  the  termination  or  non-renewal of the Company's contract
tariffs  with  Sprint or the loss of telecommunications services from Sprint may
have  a  material  adverse  effect  on  the  Company's results of operations and
financial  condition.

The  Company  provides  its  wireless telecommunications services pursuant to an
agreement with an outside company for the provisioning of the Company's wireless
telecommunications  service.  See Note 10 for details of the Company's agreement
with  its  wireless  telecommunications  provider.

The  Company  provides its Internet Service Provider Access services pursuant to
an  agreement  with  an  outside  company  for the provisioning of the Company's
Internet  Service  Provider  Access  service.  See  Note  10  for details of the
Company's  agreement  with  its  Internet  service  provider.

PROPERTY AND EQUIPMENT - Property and equipment is stated at cost.  Depreciation
is  computed using the straight-line method over the estimated useful lives of 3
to 5 years.  Leasehold improvements are amortized using the straight-line method
over  the  shorter of the lease term or the estimated useful life of the related
asset.  During  the  years  ended  June  30,  2006  and 2005, total depreciation
expense  and  amortization  was  $283,362  and  $303,467,  respectively.


                                     F-8
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

Betterments,  renewals,  and  extraordinary repairs that extend the lives of the
assets  are  capitalized;  other repairs and maintenance charges are expensed as
incurred.  The  cost  and  related accumulated depreciation applicable to assets
retired  are  removed  from the accounts, and the gain or loss on disposition is
recognized  in  current  operations.

LONG-LIVED ASSETS - Statement of Financial Accounting Standards ("SFAS") No. 144
("SFAS  144"),  "Accounting  for  the  Impairment  of  Long-Lived Assets and for
Long-Lived  Assets  to  be  Disposed  Of  "  addresses  financial accounting and
reporting  for  the  impairment  of  disposal  of  long-lived  assets.  SFAS 144
requires  that  long-lived  assets be reviewed for impairment whenever events or
changes  in  circumstances  indicate  that  their  carrying  amounts  may not be
recoverable.  If  the  cost  basis  of  a  long-lived  asset is greater than the
projected  future  undiscounted  net  cash  flows  from  such  asset  (excluding
interest),  an  impairment loss is recognized.  Impairment losses are calculated
as  the  difference  between  the  cost basis of an asset and its estimated fair
value.  As  of  June 30, 2006, management has determined that no such impairment
exists  and  therefore,  no adjustments have been made to the carrying values of
long-lived  assets.  There  can be no assurance, however, that market conditions
or  demand  for  the  Company's  products  or services will continue which could
result  in  impairment  of  long-lived  assets  in  the  future.

REVENUE AND RELATED COST RECOGNITION - The Company recognizes revenue during the
month  in  which  services  or  products  are  delivered,  as  follows:

     TELECOMMUNICATIONS  RELATED  SERVICES

     The  Company's  telecommunications service revenues are generated primarily
     when  customers  make wireless and long distance telephone calls from their
     business  or  residential telephones for wireless or long distance service,
     and  monthly  recurring  charges  for  wireless  service.

     Telecommunication  services  cost  of  sales  consists  of the cost of long
     distance  service  provided  by  Sprint  and  our wireless carrier based on
     usage.

     INTERNET  RELATED  SERVICES

     Internet  service  revenues  consist of monthly fees charged to subscribers
     for  Internet  access  and  are  recognized in the period service access is
     provided.  Internet service cost of sales consists of the cost of providing
     Internet  access.

     BPO  SERVICES

     BPO service revenues consist of amounts billed each month based on a client
     contract  that  provides  for  either a dedicated or per minute rate as the
     services  are rendered. BPO service cost of sales consists of labor and its
     related  support  costs  directly  associated  with  a  service  contract.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin  101  ("SAB  101"),  "Revenue  Recognition,"  which  outlines the basic
criteria  that  must  be  met  to  recognize  revenue  and  provide guidance for
presentation  of  revenue  and  for  disclosure  related  to revenue recognition
policies  in  financial  statements  filed  with  the  Securities  and  Exchange
Commission.  SAB 101 was amended and superceded by SAB 104.  Management believes
the  Company's  revenue  recognition  policies  conform  to  SAB  104.

DEFERRED INCOME - Deferred income represents when cash is received as an advance
payment  from  one Perfexa contract .  The Company recognizes the revenue in the
period  when  the  services  are  performed.


                                     F-9
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

ADVERTISING  COSTS  -  Advertising  costs are expensed as incurred.  Advertising
expense  was  approximately  $34,000  and  $22,000  for  fiscal  2006  and 2005,
respectively.

INCOME  TAXES  - The Company accounts for income taxes under SFAS No. 109 ("SFAS
109"),  "Accounting  for Income Taxes."  Under SFAS 109, deferred tax assets and
liabilities  are  recognized  for  the  future  tax consequences attributable to
differences  between the financial statement carrying amounts of existing assets
and  liabilities  and  their  respective  tax  bases.  Deferred  tax  assets and
liabilities  are  measured  using enacted tax rates expected to apply to taxable
income  in  the  years  in  which those temporary differences are expected to be
recovered  or  settled.  A  valuation  allowance  is  provided  for  significant
deferred tax assets when it is more likely than not that such assets will not be
recovered.

STOCK-BASED  COMPENSATION  -  The  Company accounts for stock-based compensation
issued  to  employees  using  the  intrinsic value based method as prescribed by
Accounting  Principles  Board  Opinion  No. 25 ("APB 25"), "Accounting for Stock
Issued  to  Employees."  Under the intrinsic value based method, compensation is
the  excess,  if  any, of the fair value of the stock at the grant date or other
measurement  date  over  the  amount  an employee must pay to acquire the stock.
Compensation, if any, is recognized over the applicable service period, which is
usually  the  vesting  period.

SFAS  No.  123 ("SFAS 123"), "Accounting for Stock-Based Compensation," if fully
adopted,  changes the method of accounting for employee stock-based compensation
plans  to  the  fair  value  based method.  For stock options and warrants, fair
value  is  determined  using an option pricing model that takes into account the
stock  price  at  the  grant  date, the exercise price, the expected life of the
option  or  warrant  and  the  annual rate of quarterly dividends.  Compensation
expense,  if  any,  is  recognized  over the applicable service period, which is
usually  the  vesting  period.

SFAS No. 148 ("SFAS 148"), "Accounting for Stock-Based Compensation - Transition
and  Disclosure, an amendment of FASB Statement No. 123," was issued in December
2002  and is effective for fiscal years ending after December 15, 2002. SFAS 148
provides  alternative  methods  of transition for a voluntary change to the fair
value  method  of accounting for stock-based employee compensation. In addition,
this  Statement  amends  the  disclosure  requirements  of  SFAS  123 to require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method  used  on  reported  results.

The  adoption  of  the  accounting  methodology  of SFAS 123 is optional and the
Company  has  elected to continue accounting for stock-based compensation issued
to  employees  using  APB  25; however, pro forma disclosures, as if the Company
adopted  the  cost  recognition  requirements under SFAS 123, are required to be
presented.

In  December  2004, the FASB issued SFAS No. 123-R, "Share-Based Payment," which
requires that the compensation cost relating to share-based payment transactions
(including  the  cost  of  all  employee  stock  options)  be  recognized in the
financial  statements.  That  cost  will be measured based on the estimated fair
value  of  the  equity or liability instruments issued.  SFAS No. 123-R covers a
wide  range  of  share-based  compensation arrangements including share options,
restricted share plans, performance-based awards, share appreciation rights, and
employee share purchase plans.  SFAS No.123-R replaces SFAS No. 123, "Accounting
for  Stock-Based  Compensation,"  and  supersedes  Accounting  Principles  Board
("APB")  Opinion  No.  25,  "Accounting  for  Stock  Issued  to  Employees."  As
originally  issued,  SFAS  No.  123 established as preferable a fair-value-based
method  of  accounting  for  share-based  payment  transactions  with employees.
However,  that  pronouncement  permitted  entities  to  continue  applying  the
intrinsic-value  model of APB Opinion 25, provided that the financial statements
disclosed  the  pro  forma net income or loss based on the preferable fair-value
method.

Small  Business Issuers are required to apply SFAS No. 123-R in the first annual
reporting  period  that  begins  after  December  15, 2005.  Thus, the Company's
consolidated  financial  statements  will  reflect  an  expense  for  (a)  all
share-based  compensation  arrangements  granted  after July 1, 2006 and for any
such  arrangements that are modified, cancelled, or repurchased after that date,
and  (b)  the  portion  of  previous  share-based awards for which the requisite
service has not been rendered as of that date, based on the grant-date estimated
fair value. Management estimates that the adoption of SFAS No. 123-R will result
in  increased  compensation expense of  $49,000, $43,000, and $43,000 for fiscal
2006,  2007  and  2008,  respectively,  related  to  the  portion  of  previous
share-based  awards  for which the requisite service has not been rendered as of
June  30,  2006.

At  June  30,  2006, the Company has two stock-based employee compensation plans
(see  Note  6).  For  fixed awards with pro-rata vesting, the Company recognizes
compensation  cost  ratably  over  the  vesting  period.  Stock-based  employee
compensation  cost  totaling  $110,249  is  reflected in net income for the year
ended  June  30,  2005,  as  certain  options  granted  under  those  plans  had


                                      F-10
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

an  exercise  price less than the market value of the underlying common stock on
the date of grant. No compensation expense was recorded in the fiscal year ended
June  30,  2006.  The  following  table illustrates the effect on net income and
earnings  per  share  if  the  Company  had  applied  the fair value recognition
provisions  of  SFAS  123  to  stock-based  employee  compensation.

<TABLE>
<CAPTION>
                                                                     Years Ended June 30
                                                                        2006        2005
                                                                   ------------  -----------
<S>                                                                <C>           <C>
     Net income (loss)                                             $(3,284,394)  $3,697,674
       As reported
       Add: stock-based employee compensation incurred
         determined under intrinsic value based method                      --      110,249
       Deduct: total stock-based employee compensation expense
         determined under fair value based method for all awards       (72,700)    (219,200)
                                                                   ------------  -----------

       Pro-forma                                                   $(3,357,084)  $3,588,723
                                                                   ============  ===========

     Basic and diluted net income (loss) per share:
     Basic
       As reported                                                 $     (0.11)  $     0.16
                                                                   ============  ===========
       Pro-forma                                                   $     (0.11)  $     0.15
                                                                   ============  ===========
     Diluted
       As reported                                                 $     (0.11)  $     0.15
                                                                   ============  ===========
       Pro-forma                                                   $     (0.11)  $     0.15
                                                                   ============  ===========
</TABLE>

The  Company  follows  SFAS  No.  123 (as amended by EITF 96-18, "Accounting for
Equity  Instruments That Are Issued To Other Than Employees for Acquiring, or in
Conjunction  with  Selling,  Goods  or  Services")  to  account for transactions
involving  goods and services provided by third parties where the Company issues
equity instruments as part of the consideration. Pursuant to paragraph 8 of SFAS
No.  123,  the  Company  accounts for such transactions using the estimated fair
value of the consideration received (i.e. the value of the goods or services) or
the  estimated  fair  value  of the equity instruments issued, whichever is more
reliably  measurable. The Company applies EITF 96-18 when the value of the goods
and/or  services  are  not  readily  determinable  and (1) the fair value of the
equity instruments is more reliably measurable and (2) the counterparty receives
equity  instruments in full or partial settlement of the transactions, using the
following  methodology:

     a.   For  transactions  where goods have already been delivered or services
          rendered,  the  equity instruments are issued on or about the date the
          performance  is  complete  (and  valued  on  the  date  of  issuance).
     b.   For  transactions  where the instruments are issued on a fully vested,
          non-forfeitable  basis,  the equity instruments are valued on or about
          the  date  of  the  contract.
     c.   For any transactions not meeting the criteria in (a) or (b) above, the
          Company  re-measures the consideration at each reporting date based on
          its  then  current  stock  value.

EARNINGS (LOSS) PER SHARE - Statement of Financial Accounting Standards ("SFAS")
No. 128 ("SFAS 128"), "Earnings Per Share," requires basic earnings per share to
be  computed  by  dividing  income  available  to  common  shareholders  by  the
weighted-average  number  of  common  shares  outstanding  during  the period of
computation.  Diluted  earnings  per share is computed similar to basic earnings
per  share  except  that  the  denominator is increased to include the number of
additional  common  shares  that  would  have  been outstanding if the potential
common  shares had been issued and if the additional common shares were dilutive
(see  Note12).  Pro  forma  per  share data has been computed using the weighted
average  number  of  common shares outstanding during the periods.  For the year
ended  June  30,  2006,  because  the Company had incurred net losses, basic and
diluted  loss per share are equal since additional potential common shares would
be  anti-dilutive  (see  Note  12).

FAIR  VALUES  OF FINANCIAL INSTRUMENTS - SFAS 107, "Disclosures About Fair Value
of  Financial  Instruments," requires disclosure of fair value information about
financial  instruments  when  it  is  practicable  to  estimate that value.  The
carrying  amount  of  the  Company's cash, accounts receivables, trade payables,
accrued  expenses,  and  notes payables approximates their estimated fair values
due to the short-term maturities of those financial instruments.  The fair value
of  long  term  debts  approximates  its  carrying  value because their rates of
interest  approximate  current  market rates.  In the opinion of management, the
fair  value  of  the  note  receivable  from officer cannot be estimated without
incurring  excessive  costs;  for that reason, the Company has not provided such
disclosure.  Other  information about such related-party receivable (such as the
carrying amount, the interest rate, and maturity) is provided elsewhere in these
notes  to  consolidated  financial  statements.

DERIVATIVE  FINANCIAL INSTRUMENTS - The Company records all derivative financial
instruments in its consolidated balance sheet at estimated fair value regardless
of  the  purpose or intent for holding the instrument. Changes in the fair value
of  derivative  financial  instruments are either recognized periodically in the
results  of  operations  or  in stockholders' equity (deficit) as a component of
accumulated  other  comprehensive  income,  depending  on whether the derivative
instrument  qualifies  for  hedge  accounting  as  defined  by  SFAS  No.  133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities" and related
interpretations.  Changes  in  the  fair value of derivatives not qualifying for
hedge  accounting  are  included  in  the  results  of operations as they occur.

COMPREHENSIVE  INCOME  - SFAS 130, "Reporting Comprehensive Income," establishes
standards  for  reporting and display of comprehensive income and its components
in a full set of general-purpose financial statements.  Total comprehensive loss
represents  the  net change in stockholders' equity during a period from sources
other  than  transactions  with stockholders and as such, includes net earnings.
For  the  Company, the components of other comprehensive loss are the changes in
the  cumulative  foreign  currency  translation  adjustments and are recorded as
components  of  stockholders'  deficit.

SEGMENTS  OF  AN ENTERPRISE AND RELATED INFORMATION - SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," changes the way public
companies  report  information  about segments of their business in their annual
financial statements and requires them to report selected segment information in
their  annual  reports  issued  to  shareholders.  It  also requires entity-wide
disclosures  about  the  products  and services an entity provides, the material
countries  in which it holds assets and reports revenues and its major customers
(see  Note  13).


                                      F-11
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

TRANSLATION  OF  FOREIGN CURRENCIES - GTC uses the U.S. dollar as its functional
and  reporting  currency  while the Company's foreign subsidiary uses the Indian
Rupee  as its functional currency.  Assets and liabilities of foreign subsidiary
are  translated  into  U.S. dollars at year-end exchange rates, and revenues and
expenses  are  translated  at  average rates prevailing during the year or other
period  presented.  In  accordance  with  SFAS  No.  52,  "Foreign  Currency
Translation",  net  exchange gains or losses resulting from such translation are
excluded  from  net loss, but are included in comprehensive loss and accumulated
in  a separate component of stockholders' deficit.  For the years ended June 30,
2006  and 2005, the Company recorded a foreign translation loss of $40,078 and a
gain  of  $162,829,  respectively.

CASH  AND  CASH  EQUIVALENTS - The Company considers all highly liquid financial
instruments  with  an  original  maturity  of  three  months  or less to be cash
equivalents.  The  Company  had  no  cash  equivalents  at  June  30,  2006.

SIGNIFICANT  RECENT  ACCOUNTING  PRONOUNCEMENTS

In September 2006, the FASB issued SFAS No.157, "Fair Value Measurements," which
defines  fair  value,  establishes  a  framework  for  measuring  fair  value in
generally  accepted  accounting principles (GAAP), and expands disclosures about
fair  value  measurements. SFAS No. 157 simplifies and codifies related guidance
within GAAP, but does not require any new fair value measurements.  The guidance
in  SFAS No. 157 applies to derivatives and other financial instruments measured
at  estimated  fair  value  under  SFAS  No.  133  ("Accounting  for  Derivative
Instruments  and  Hedging Activities") and related pronouncements.  SFAS No. 157
is  effective  for  financial statements issued for fiscal years beginning after
November  15,  2007,  and interim periods within those fiscal years.  Management
does not expect the adoption of SFAS No. 157 to have a significant effect on the
Company's  financial  position  or  results  of  operation.

In  June 2006, the FASB issued FIN No. 48, "Accounting for Uncertainty in Income
Taxes,  an  interpretation  of  FASB  Statement  No.  109."  This interpretation
clarifies  the  accounting  for  uncertainty  in  income  taxes recognized in an
enterprise's  financial  statements in accordance with SFAS No. 109, "Accounting
for  Income  Taxes."  FIN  No.  48 prescribes a more-likely-than-not recognition
threshold  and  a  measurement attribute for the financial statement recognition
and  measurement  of  tax positions taken (or expected to be taken) in an income
tax  return.  It  also  provides  guidance  on  de-recognition,  classification,
interest  and  penalties,  accounting  in  interim  periods,  disclosure  and
transition.  The requirement to assess the need for a valuation allowance on net
deferred  tax  assets  is  not  affected  by  FIN No. 48.  This pronouncement is
effective  for fiscal years beginning after December 31, 2006.  Management is in
the  process  of  evaluating this guidance, and therefore has not yet determined
the  impact  (if  any)  that  FIN  No.  48  will have on the Company's financial
position  or  results  of  operations  upon  adoption.

See  Stock  Based  Compensation  above for information regarding SFAS No. 123-R.

In  May  2005,  the  FASB  issued  SFAS  No.  154, "Accounting Changes and Error
Corrections  -  A  Replacement  of APB Opinion No. 20 and FASB Statement No. 3."
SFAS  No. 154 replaces APB Opinion No. 20, "Accounting Changes," and FASB No. 3,
"Reporting  Accounting Changes in Interim Financial Statements," and changes the
requirements  for  the  accounting  for  and reporting of a change in accounting
principle.  SFAS  No.  154  applies  to  all  voluntary  changes  in  accounting
principle. It also applies to changes required by an accounting pronouncement in
the unusual instance that the pronouncement does not include specific transition
provisions.  SFAS  No.  154 requires retrospective application to prior periods'
financial  statements  of  changes  in  accounting  principle,  unless  it  is
impracticable  to determine either the period-specific effects or the cumulative
effect  of the change. When it is impracticable to determine the period-specific
effects  of  an  accounting  change  on  one  or  more  individual prior periods
presented, SFAS No. 154 requires that the new accounting principle be applied to
the  balances  of  assets  and  liabilities  as of the beginning of the earliest
period  for  which  retrospective  application  is  practicable  and  that  a
corresponding adjustment be made to the opening balance of retained earnings for
that  period  rather  than  being  reported  in  an income statement. When it is
impracticable  to  determine  the  cumulative  effect  of  applying  a change in
accounting  principle  to  all prior periods, SFAS No. 154 requires that the new
accounting  principle  be  applied  as if it were adopted prospectively from the
earliest  date  practicable.  SFAS  No.  154  also  requires  that  a  change in
depreciation,  amortization,  or  depletion  method for long-lived, nonfinancial
assets  be accounted for as a change in accounting estimate effected by a change
in  accounting  principle.  SFAS  No.  154  carries  forward  without change the
guidance  contained in APB Opinion No. 20 for (i) reporting the correction of an
error  in  previously  issued  financial statements, (ii) a change in accounting
estimate,  and (iii) requiring justification of a change in accounting principle
on  the basis of preferability. SFAS No. 154 is effective for accounting changes
and  corrections  of  errors  made  in fiscal years beginning after December 15,
2005.  Early  adoption  is  permitted  for accounting changes and corrections of
errors  made  in  fiscal  years beginning after the date SFAS No. 154 is issued.
SFAS  No.  154  does  not  change  the  transition  provisions  of  any existing
accounting  pronouncements, including those that are in a transition phase as of
the  effective  date  of  SFAS  No.  154.


                                      F-12
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

In  February 2006, the FASB issued SFAS No. 155 entitled "Accounting for Certain
Hybrid  Financial  Instruments,"  an  amendment of SFAS No. 133 ("Accounting for
Derivative  Instruments  and  Hedging Activities") and SFAS No. 140 ("Accounting
for  Transfers  and  Servicing  of  Financial  Assets  and  Extinguishments  of
Liabilities").  In this context, a hybrid financial instrument refers to certain
derivatives  embedded in other financial instruments.  SFAS No. 155 permits fair
value  re-measurement  of  any  hybrid  financial  instrument  which contains an
embedded derivative that otherwise would require bifurcation under SFAS No. 133.
SFAS No. 155 also establishes a requirement to evaluate interests in securitized
financial  assets  in  order  to identify interests that are either freestanding
derivatives  or  "hybrids"  which  contain  an  embedded  derivative  requiring
bifurcation.  In  addition,  SFAS  No.  155  clarifies  which interest/principal
strips  are  subject to SFAS No. 133, and provides that concentrations of credit
risk  in  the  form of subordination are not embedded derivatives.  SFAS No. 155
amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose
entity  from  holding  a  derivative  financial  instrument  that  pertains to a
beneficial  interest  other  than  another  derivative.  When  SFAS  No.  155 is
adopted, any difference between the total carrying amount of the components of a
bifurcated  hybrid  financial  instrument  and  the  fair  value of the combined
"hybrid"  must  be  recognized  as  a  cumulative-effect adjustment of beginning
deficit/retained  earnings.

SFAS No. 155 is effective for all financial instruments acquired or issued after
the  beginning  of an entity's first fiscal year that begins after September 15,
2006.  Earlier  adoption is permitted only as of the beginning of a fiscal year,
provided  that  the  entity  has  not yet issued any annual or interim financial
statements  for  such  year.  Restatement  of  prior  periods  is  prohibited.

Other  recent  accounting  pronouncements  issued  by  the  FASB  (including its
Emerging  Issues  Task  Force),  the  American  Institute  of  Certified  Public
Accountants,  and  the  Securities  and  Exchange  Commission did not or are not
believed  by  Management  to  have a material impact on the Company's present or
future  consolidated  financial  statements.

NOTE  2  PROPERTY  AND  EQUIPMENT

Property  and  equipment  consist  of  the  following  at  June  30,  2006:

<TABLE>
<CAPTION>
<S>                                             <C>
Computer equipment                              $   558,717
Furniture and office equipment                      222,108
Telephone equipment                                 292,358
Leasehold improvements                              234,180
Automobiles                                         254,683
                                                ------------
                                                  1,562,046
Less accumulated depreciation and amortization   (1,222,152)
                                                ------------
                                                $   339,894
                                                ============
</TABLE>

NOTE  3  OBLIGATION  UNDER  CAPITAL  LEASES

The  Company  is  a lessee of certain property and equipment under capital lease
obligations  that expire on various dates through August 2008.  The terms of the
capital  lease  obligations  provide  for  monthly  lease  payments ranging from
approximately $200 to $865.  The assets and liabilities under capital leases are
recorded  at the lower of the present value of the minimum lease payments or the
fair  market  value  of  the related asset.  The assets are depreciated over the
shorter  period  of  the  lease  term  or  the  estimate  useful  life.

Future  minimum  annual  commitments  under  lease  arrangements are as follows:


                                      F-13
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
     Years Ending
     June 30,
<S>                                               <C>
     2007                                         $11,859
     2008                                          10,380
     2009                                           1,730
                                                  --------

     Total minimum future lease payments           23,969

     Less: Amounts representing interest           (2,816)
                                                  --------

     Present value of net minimum lease payments  $21,153
                                                  ========
</TABLE>

The  following is an analysis of the leased equipment under capital leases as of
June  30,  2006,  which  is  included  in  property  and equipment (see Note 2).

<TABLE>
<CAPTION>
<S>                                       <C>
          Computer equipment              $ 17,438
          Telephone equipment               27,180
                                          ---------
                                            44,618
          Less: Accumulated depreciation   (39,967)
                                          ---------
                                          $  4,651
                                          =========
</TABLE>

Interest  incurred  pursuant  to  the  capital  lease obligations was $3,261 and
$4,694  for  fiscal  years  2006  and  2005,  respectively.

NOTE  4  RELATED  PARTY  TRANSACTIONS

NOTE  RECEIVABLE  OFFICER

As  of June 30, 2006, the Company has net advances to an officer of $60,306. The
advances  were  made  prior  to enactment of the Sarbanes-Oxley Act of 2002. The
advances  accrue interest at 10% (no interest income has been charged as of June
30,  2006 and 2005) and are due on demand. The Company has reclassified the note
receivable  as  an  increase  to  stockholders'  deficit  in  the  accompanying
consolidated  balance  sheet  at  June  30,  2006.

Other  related  party transactions are discussed elsewhere in these notes to the
consolidated  financial  statements.

NOTE  5  NOTES  PAYABLE

On  May  9,  2006,  the  Company borrowed $100,000, bearing no interest, from an
unrelated  third party, for working capital purposes.  The note provides for the
Company  to  repay  $25,000  on  May  19, 2006, $25,000 on May 26, 2006, and the
balance  of $50,000 on August 5, 2006.  We are currently in discussions with the
noteholder  to  restructure  the  remaining  payments.  As  of  the date of this
filing,  there  is  $75,000  outstanding  under  the  note.

In  March 2006, the Company converted $140,000 of a payable due to a third party
into  a  term  note  payable.  The note provides for the Company to make monthly
payments  of  $6,500, including interest at a rate of 9.1%, until repaid.  As of
the  date  of  this  report, we have made all payments as required in this note.

In  May 2005, the Company entered into subscription agreements, as amended, with
certain  third  party  investors  for  the sale of convertible notes, $1,088,235
principal  amount  along  with 2,176,470 shares of our common stock (see Note 8)
and  11,970,585  warrants (see Note 7), resulting in gross proceeds of $925,000,
less  offering  costs  of  $78,563.  The notes accrue simple interest of 12% per
annum  and may be converted into shares of our common stock at $0.135 per share.
Such  conversion price was deemed to be a beneficial conversion feature ("BCF"),
as  defined  in  Emerging  Issues  Task  Force  ("EITF")  Issue  No.  98-5.


                                      F-14
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

"Accounting  for  Convertible  Securities with Beneficial Conversion Features or
Contingently  Adjustable Conversion Ratios," and EITF No. 00-27, "Application of
Issue  No.  98-5  to Certain Convertible Instruments."  As such, the proceeds of
the  notes  were  allocated,  based  on  relative  fair  values,  as  follows:
approximately $95,000 to the common shares issued; approximately $480,000 to the
warrants  granted;  and  approximately  $350,000 to the BCF, resulting in a debt
discount  to  such notes of $925,000.  Under the terms of the notes, the Company
must  begin repayment of principal and interest in September 2005 and all unpaid
principal  and interest are due on November 23, 2006.  In July 2005, the Company
entered  into  additional  subscription  agreements  with the same investors for
principal  of  $911,765.  Such  borrowings have terms that are substantially the
same  as  those described above and included the issuance of 1,823,530 shares of
the  Company's  common  stock  to the lenders.  In May 2006, the Company entered
into  an  additional subscription agreement with a member from the same investor
group  for  principal  of  $117,647.  This  borrowing  has  terms  that  are
substantially  the  same  as  those described above and included the issuance of
235,294  shares  of  the  Company's common stock to the lenders.  Currently, the
Company is in default under the terms of some of these convertible notes.  Under
these notes in default, as a result of our default, the holder has the option to
make all sums of principal and interest then remaining unpaid under the note and
all other amounts payable thereunder immediately due and payable by the Company.
For  the notes that the Company is currently in default, the holders have orally
agreed  to  defer payments due under those notes while the Company y attempts to
renegotiate  the  repayment  terms  of  the  notes with the holder.  However, in
exchange  for  agreeing to defer these payments, two of the holders will require
that  all  amounts  in arrears will bear interest at 18%, in accordance with the
terms  of  the  note.

The  Company  evaluated  the  debt  and  equity  securities  issued  under  the
aforementioned subscription agreements in accordance with the provisions of EITF
No.  00-19,  "Accounting  for  Derivative  Financial Instruments Indexed to, and
Potentially  Settled  in,  a Company's Own Stock," and SFAS No. 133, as amended.
Because  of  registration  rights related to the May 2006 borrowing, the Company
has  bifurcated  the embedded conversion feature and recorded it as a derivative
at  fair  value.  At  the  time  of  the  borrowing, fair value was estimated to
approximate $73,000. The remaining proceeds from the debt were allocated between
the BCF, warrants and common stock on the relative fair value basis. The Company
has  estimated  that  the  fair  value  of  such  derivative at June 30, 2006 to
approximate  $43,000,  which  is  included  in  accounts  payable  and  accrued
liabilities  on the accompanying consolidated balance sheets. The change in fair
value  of  $30,000  has  been  included  in  other  income  on  the accompanying
consolidated  statements  of  operations  for  the  year  ended  June  30, 2006.

On  June  7,  2005,  the  Company borrowed $20,000, bearing no interest, from an
employee  of the Company for working capital purposes.  The borrowing was repaid
on  July  22,  2005.

In August 2004, the Company restructured $725,000 in total principal on two past
due  notes  payable  plus  corresponding  interest  into  a  new short term note
payable,  principal  of  $816,395. Such note required principal plus interest of
$73,350 be repaid by November 30, 2004, and the Company issued 250,000 shares of
its  restricted  common  stock  to  the  lender, valued at approximately $17,000
(based on the grant date fair value). In May 2005, the Company restructured such
$816,395 past-due note payable plus corresponding accrued interest and penalties
into  a  new  long term note payable, principal amount $1,200,000. In connection
with  the  new  debt,  the  Company issued 2,400,000 shares of restricted common
stock  to  the lender. The new note accrues simple interest in the amount of 12%
per  annum.  The  Company is obligated to pay accrued interest monthly, but then
only  if, after deducting all then current obligations, the Company at that time
has  at  least $300,000 in available cash. The $1,200,000 debt is convertible at
$0.13  per  share,  which resulted in a BCF of $185,000, which is amortized over
the  life  of  the debt. In accordance with EITF No. 96-19, "Debtor's Accounting
for  a  Modification  or  Exchange  of  Debt Instruments," the $816,395 debt was
considered  extinguished  in this restructuring, and a loss on extinguishment of
approximately  $670,000  was  recorded.

In  February  2005,  the Company negotiated the settlement of all amounts due to
MCI  WorldCom,  its  former  underlying network provider, totaling approximately
$7,700,000  in  exchange  for  the  payment  of  $769,000.  On May 23, 2005, the
Company  paid  the  settlement  amount and satisfied the terms of the settlement
agreement.

On  June 8, 2004, the Company borrowed $50,000 for working capital purposes from
an unrelated third party.  The note was originally to be repaid plus interest of
$7,500 on September 7, 2004.  On November 18, 2005, the Company restructured the
note.  Under  the new terms of the note, the Company is required to make monthly
payments  of  $1,000 plus simple interest of 10% until all principal and accrued
interest  is  repaid.  As  of  the  date  of  this  report,  the  Company  has
approximately  $16,000  outstanding  under  the  note.


                                      F-15
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

On  December 9, 2003, the Company borrowed $200,000 for working capital purposes
from  an  unrelated  third  party.  The  note  was to be repaid plus interest of
$21,333  on  April 8, 2004.  On May 17, 2004, the note, as amended, was extended
to  July  19,  2004.  On  July  1,  2005,  the  Company  agreed  to  resolve all
outstanding  amounts  owed  under  the  note  via  the  payment  of $30,000 plus
bi-weekly  payments  of $8,000.  The outstanding principal and accrued interest,
which, at the time of the agreement totaled $167,000 will accrue simple interest
at  the  rate  of 10% per annum until fully repaid.  The borrowing was repaid on
May  4,  2006.

On  October  2, 2002, the Company borrowed $100,000 for working capital purposes
from  an  unrelated third party.  In November 2005, the Company restructured the
note.  Under  the revised terms, the Company is required to make weekly payments
of  $1,000  until  the  outstanding  balance  is repaid.  As of the date of this
filing,  there  is  $1,000  outstanding  under  the  note.

The  Company  maintains  a  revolving  line  of credit of $45,000 to finance the
purchase of computer equipment.  The revolving line of credit provides for us to
make  monthly  payments  of  $669, including interest at a rate of approximately
14.9%.  The  total  outstanding  balance  on  the  revolving  line of credit was
$25,412  and  is  included  in  notes  payable  in the accompanying consolidated
balance  sheet at June 30, 2006.  As of the date of this report, the Company has
made  all  payments  as  required  in  the  revolving  line  of  credit.

The  Company  from time to time borrows funds from the Company's Chief Executive
Officer  ("CEO")  for  working capital purposes.  Amounts accrue no interest and
are payable on demand.  On April 15, 2004, the Company borrowed $12,000 from its
CEO.  As  of  June  30,  2006,  the  Company  has  repaid  this  borrowing.

Future minimum principal payments on notes payable approximate the following for
the  years  ending  June  30:

<TABLE>
<CAPTION>
<S>                       <C>
          2007            $3,264,297
          2008               236,805
                          ----------

                          $3,501,102
                          ==========
</TABLE>

NOTE  6  STOCK  OPTIONS

From  time  to  time,  the  Company  issues  stock  options  pursuant to various
agreements  and  other compensatory arrangements to employees and third parties.

2001  Stock  Incentive  Plan
----------------------------

On  October  17,  2001, the Company's Board approved the GTC Telecom Corp. Stock
Incentive  Plan  (the  "SIP Plan"), effective January 1, 2002.  The SIP Plan was
approved  and ratified by the shareholders on December 13, 2001 at the Company's
2001  annual  shareholder's  meeting.  The  SIP  Plan  provides for the grant of
various  types of equity based incentives, including qualified and non-qualified
stock  options,  stock appreciation rights, restricted stock, bonuses, and other
awards.  A  maximum  of  5,000,000  shares  of the Company's common stock may be
issued  pursuant  to the SIP Plan.  The SIP plan is administered by the Board of
Directors.

On  December  21,  2004,  the Company's Board granted, pursuant to the SIP Plan,
Incentive  Stock  Options (as defined by the SIP Plan), to purchase an aggregate
of  1,375,000 shares of the Company's common stock at an exercise price of $0.10
per  share  (the  fair  market value of the Company's common stock on the day of
grant), to certain employees of the Company.  In addition, on December 21, 2004,
the  Company's  Board  granted  to  the Company's CEO, pursuant to the SIP Plan,
options  to purchase 925,000 shares of the Company's common stock at an exercise
price  equal  to  110%  of the fair market value on the date of grant ($0.11 per
share).  The  options  vest equally over a period of five years from the date of
grant  and  are  exercisable  through  December  2013.

No  employee compensation expense was recognized under APB 25 for options issued
to  employees  under  the  SIP  Plan  during  the  year  ended  June  30,  2006.


                                      F-16
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

1999  Stock  Option  Plan
-------------------------

On  September  20, 1999, the Company's Board approved the GTC Telecom Corp. 1999
Omnibus  Stock  Option  Plan, effective October 1, 1999.  The exercise price for
each option shall be equal to 25% to 100% of the fair market value of the common
stock  on the date of grant, as defined, and shall vest over a five-year period.
Upon  the  approval  and  ratification  of  the SIP Plan, the Company elected to
terminate  the  1999  Omnibus  Stock  Option  Plan.

Non-Plan  Issuances

The  Company  recorded compensation expense for the vesting of previously issued
"in  the  money" fixed options to employees of $110,249 in the fiscal year ended
June  30,  2005.  No  compensation expense was recorded in the fiscal year ended
June  30,  2006.

A  following  is  a status of the stock options outstanding at June 30, 2006 and
2005  and  the  changes  during  the  years  then  ended:

<TABLE>
<CAPTION>
                                                      2006                        2005
                                             --------------------------------------------------------
                                                            Weighted                     Weighted
                                                             Average                      Average
                                              Options    Exercise Price    Options    Exercise Price
                                             --------------------------------------------------------
<S>                                          <C>         <C>              <C>         <C>
     Outstanding, beginning of year          4,221,200   $          0.28  2,264,000   $          0.62
         Granted                                    --                --  2,300,000              0.10
         Exercised (see Note 8)                     --                --         --                --
         Expired/Forfeited                    (369,200)             0.40   (342,800)             1.30
                                             ----------  ---------------  ----------  ---------------
     Outstanding, end of year                3,852,000   $          0.27  4,221,200   $          0.28
                                             ==========  ===============  ==========  ===============
     Exercisable at end of year              2,415,600   $          0.37  1,962,560   $          0.46
                                             ==========  ===============  ==========  ===============
     Wtd avg fair value of options granted               $            --              $          0.10
                                                         ---------------              ---------------
</TABLE>

The  following table summarizes information concerning currently outstanding and
exercisable  options  at  June  30,  2006:

<TABLE>
<CAPTION>
                                WEIGHTED      WEIGHTED                WEIGHTED
                NUMBER OF       AVERAGE        AVERAGE    NUMBER OF    AVERAGE
   EXERCISE      OPTIONS       REMAINING      EXERCISE     OPTIONS    EXERCISE
 PRICE RANGE   OUTSTANDING  CONTRACTUAL LIFE    PRICE    EXERCISABLE    PRICE
-------------  -----------  ----------------  ---------  -----------  --------
<S>            <C>          <C>               <C>        <C>          <C>

0.01 - $1.00    3,499,200        6.27 years  $    0.18    2,062,800  $    0.23
1.01 - $2.00      345,600        3.47 years  $    1.15      345,600  $    1.15
2.94                7,200        3.30 years  $    2.94        7,200  $    2.94
               -----------                               -----------

                 3,852,000        4.73 years  $    0.27    2,415,600  $    0.37
               ===========                               ===========
</TABLE>

Other  Information:
------------------

No  options  were  granted  in fiscal 2006. The fair market value of each option
granted  in  2005 was estimated using the Black-Scholes option pricing model per
SFAS  123.  The  Black-Scholes  option-pricing model used the following weighted
average assumptions for the year ended June 30, 2005 (i) no dividend yield, (ii)
volatility  of  341  percent, (iii) risk-free interest rate of 4.15 percent, and
(iv)  expected  life  of  5.0  years.

NOTE 7 WARRANTS

From  time  to  time, the Company issues warrants pursuant to various consulting
agreements.


                                      F-17
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

In  May  2005,  in connection with certain subscription agreements (See Note 5),
the  Company  granted  Class  A  and  Class  B warrants to acquire 6,529,410 and
5,441,175  shares,  respectively,  of  the  Company's common stock.  The Class A
warrants  are  immediately  exercisable,  have a term of four years, and have an
exercise  price  of  $0.22  per  share.  The  Class  B  warrants are immediately
exercisable,  have  a  term of 120 days, and have an exercise price of $0.20 per
share.  Additionally,  the broker involved with such subscription agreements was
granted  warrants  to acquire 65,000 shares of the Company's common stock.  Such
warrants  are  immediately  exercisable,  have a term of five years, and have an
exercise  price  of  $0.20  per  share.

During fiscal year 2006, pursuant to additional subscription agreements with the
same  investors  for  $1,029,412  in  note  principal  under  the same terms and
conditions  of  the  original  subscription  agreements,  the  Company issued an
additional  6,176,472  Class  A  warrants  and  4,558,825  Class  B  warrants.

In  December  2004, the Company issued warrants to purchase up to 250,000 shares
of  the  Company's  restricted  common  stock  in  connection  with  the sale of
1,000,000  shares  of  Company's  restricted  common  stock  (see  Note  8).

The  following represents a summary of the warrants outstanding at June 30, 2006
and  2005  and  changes  during  the  years  then  ended:

<TABLE>
<CAPTION>
                                                   2006                         2005
                                         -----------------------------------------------------------
                                                          Weighted                      Weighted
                                                           Average                       Average
                                           Warrants    Exercise Price    Warrants    Exercise Price
                                         -----------------------------------------------------------
<S>                                      <C>           <C>              <C>          <C>
     Outstanding, beginning of year       13,050,585   $          0.21   1,040,000   $          0.22
            Granted                       10,790,297              0.21  12,285,585              0.21
            Exercised                             --                --          --                --
            Expired/Forfeited            (10,165,000)             0.20    (275,000)             0.39
                                         ------------  ---------------  -----------  ---------------
     Outstanding, end of year             13,675,882   $          0.21  13,050,585   $          0.21
                                         ============  ===============  ===========  ===============
     Exercisable at the end of the year   13,675,882   $           021  13,050,585   $           021
                                         ============  ===============  ===========  ===============
</TABLE>

The outstanding and exercisable warrants above have prices ranging between $0.11
and  $0.28,  with  a  weighted  average remaining contractual life of 3.2 years.

The  fair  value of each warrant granted during 2006 and 2005 is estimated using
the  Black-Scholes  option-pricing model on the date of grant. The Black-Scholes
option-pricing  model  used  the  following weighted average assumptions for the
years  ended June 30, 2006 and 2005 respectively: (i) no dividend yield for each
year,  (ii)  volatility  of  366  percent  and  362 percent, respectively, (iii)
risk-free interest rate of 5.21 percent and 3.73 percent, respectively, and (iv)
expected  life  of  3.2  years  and  2.3  years,  respectively.

NOTE  8  COMMON  STOCK  ISSUANCES

In  January  2006,  the  Company  entered  into  an  agreement  with  an outside
consultant  for  investor  and  public  relations  services.  Pursuant  to  the
agreement, the Company agreed to issue to the investor relations company 350,000
shares  of  our  restricted  common  stock  valued at $44,625 (based on the fair
market  value  on  the  date  of  grant) according to the following schedule: i)
150,000 shares upon the signing of the agreement, ii) 100,000 shares on the date
six  months  after  the  date of the agreement, and iii) 100,000 on the date one
year  after  the  date  of  the  agreement.  The  value of the stock, subject to
adjustments required by EITF Issue No. 96-18, "Accounting for Equity Instruments
That  Are  Issued  to Other Than Employees for Acquiring, or in Conjunction with
Selling,  Goods  or  Services,"  will  be  amortized  and  recorded  as investor
relations  expense  under selling, general, and administrative expenses over the
12  months  of  the agreement.  At June 30, 2006, the Company estimated that the
fair  value  of  the  issued  shares  had  not  materially  changed;  therefore
approximately  $22,000  has  been recorded as investor relations expense for the
year  ended  June  30,  2006.

In  November 2005, the Company issued 58,824 shares to attorneys in exchange for
legal  services provided to the Company valued at approximately $4,705 (based on
the  fair  market  value  on  the  date  of  grant).


                                      F-18
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

During  fiscal  year  2006, the Company issued 2,058,824 shares of the Company's
restricted  common  stock  in  connection with the issuance of convertible notes
(see  Note  5).

NOTE  9  INCOME  TAXES

The  tax effects of temporary differences that give rise to deferred taxes as of
June  30,  2006  are  as  follows:

<TABLE>
<CAPTION>
Deferred tax asset:
<S>                                  <C>
    Net operating loss carryforward  $ 6,650,000
    Allowance for doubtful accounts        3,000
    Accrued Expenses                      48,000
    Other                                 47,000
                                     ------------

    Total gross deferred tax asset     6,748,000

    Less valuation allowance          (6,748,000)
                                     ------------

    Net deferred tax asset           $        --
                                     ============
</TABLE>

There  is no significant provision for income taxes for the years ended June 30,
2006  and  2005  since  the Company fully offset taxable income in 2006 with net
operating  losses  from  prior  years  and  incurred  taxable  losses  in  2005.

The  provision  for income taxes for fiscal 2006 and 2005differs from the amount
computed  by  applying  the  U.S.  Federal income tax rate of 34% to loss before
income  taxes  as  a  result  of  the  following  for  the  year  ending:

<TABLE>
<CAPTION>
                                                          June 30,
                                                --------------------------
                                                    2006          2005
                                                --------------------------
<S>                                             <C>           <C>
Computed tax benefit at federal statutory rate  $(1,130,000)  $ 1,257,000
  State income tax expense (benefit), net of
federal effect                                     (200,000)      222,000
  Change in valuation allowance                   1,312,000    (1,438,000)
  Other                                              27,674       (31,784)
                                                --------------------------
                                                $     9,674   $     9,216
                                                ==========================
</TABLE>

As  of  June  30,  2006, the Company had tax net operating loss carryforwards of
approximately  $18,000,000  and  $8,900,000  for  federal  and  state income tax
reporting  purposes,  respectively,  which  begin  expiring  in  2017  and 2007,
respectively.  Effective  September 11, 2002, pursuant to California revenue and
tax  code  section 24416.3, no net operating loss deduction would be allowed for
any  taxable  year  beginning on or after January 1, 2002, and before January 1,
2004.  For  any  suspended losses, the carryover period would be extended by one
year for losses incurred in tax years beginning on or after January 1, 2002, and
before  January  1,  2003; and by two years for losses incurred in taxable years
beginning  before  January  1,  2002.

In  2006 and 2005, the Company concluded that a full valuation allowance against
its net deferred tax assets was appropriate.  SFAS 109 requires that a valuation
allowance  must  be  established  when  it is more likely than not that all or a
portion  of  deferred  tax  assets  will  not  be  realized.  In  making  such
determination,  a review of all available positive and negative evidence must be
considered,  including scheduled reversal of deferred tax liabilities, projected
future  taxable  income,  tax  planning  strategies,  and  recent  financial
performance.  Accounting  guidance further states that forming a conclusion that
a valuation allowance is not needed is difficult when there is negative evidence
such  as cumulative losses in recent years.  As a result of the Company's recent
cumulative  losses  prior  to  the  gain  on extinguishment of debt, the Company
concluded  that  a full valuation allowance should be recorded in 2006 and 2005.
As  of  June  30,  2006,  the  Company  has  provided  a  valuation allowance of
$6,748,000  to  fully  reduce  the  deferred  tax assets.  The net change in the
valuation  allowance  for  fiscal  year  2006  was  an  increase  of $1,312,000.

On  October 22, 2004, the American Jobs Creation Act of 2004 ("AJCA") was signed
into  law.  The  AJCA  provides  several


                                      F-19
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

incentives  for  US multinational corporations and US manufacturers.  Subject to
certain  limitations,  the incentives include an 85% dividend received deduction
for  certain  dividends  from  controlled  foreign  corporations that repatriate
accumulated  income  abroad,  and  a deduction for domestic qualified production
activities  taxable  income.  The  US  Treasury  Department is expected to issue
additional  guidance  with  regards  to these provisions.  In December 2004, the
FASB  issued  FSP  109-2,  "Accounting  and  Disclosure Guidance for the Foreign
Repatriation  Provision  within  the  American  Jobs Creation Act of 2004."  FSP
109-2  states  that an enterprise is allowed time beyond the financial reporting
period  of  enactment  to  evaluate  the  effect  of  the  Act  on  its plan for
reinvestment  or  repatriation  of foreign earnings for the purposes of applying
FASB  Statement  No.  109.We  are  in  the  process of analyzing whether to take
advantage  of  this  opportunity  or  the  potential  impact  on  our income tax
provision,  if  any.

In  the  event  the  Company  was  to  experience  a  greater than 50% change in
ownership  as  defined  in  Section  382  of  the  Internal  Revenue  Code,  the
utilization  of the Company's net operating loss carryforwards could be severely
restricted.

NOTE  10  COMMITMENTS  AND  CONTINGENCIES

OPERATING  LEASES  -  The  Company leases a total of 5,137 square feet of office
space  for  its  headquarters  and  customer  service  operations in Costa Mesa,
California  at  a  monthly  rental  rate of $10,440 pursuant to a one-year lease
agreement  ending  February  28,  2007.

Effective  October  1,  2002  and renewed in January 2006, Perfexa-U.S.'s Indian
subsidiary,  Perfexa  Solutions  Pvt.  Ltd.  ("Perfexa-India"),  is  leasing
approximately  15,422 square feet of office space in Gurgaon, India, a suburb of
New  Delhi,  at a monthly rate of Rs. 629,218 (approximately $13,700) per month.
This  facility serves as Perfexa-India's call center, IT development center, and
administrative  offices.  The  lease is for a term of three years with an option
to  renew  for an additional three year term with an increase in the rental rate
of  20%.  Effective  October  1, 2002 and renewed in January 2006, Perfexa-India
also  entered into a maintenance agreement for its New Delhi facility.  Pursuant
to  the  terms of the agreement, the monthly fee will be calculated based on the
actual  costs  of  maintenance  (including  electricity  and  water)  plus a 20%
mark-up.  Perfexa believes that the monthly maintenance fee should be Rs. 96,316
(approximately  $2,100)  and  are in the process of negotiating this amount (see
Note  11  for  contingent  liability).

Future  minimum  annual  commitments under long-term facility lease and supplier
arrangements  (see  below)  approximate  the  following:

<TABLE>
<CAPTION>
                        Facility Leases
          Years Ending        and Other     Telecom
          June 30,          Commitments    Supplier     Total
          ------------  ----------------  ---------  --------
<S>                     <C>               <C>        <C>
          2007          $        284,000  $  66,000  $350,000
          2008                   190,000         --   190,000
          2009                    95,000         --    95,000
                        ----------------  ---------  --------
                        $        569,000  $  66,000  $635,000
                        ================  =========  ========
</TABLE>

Rent  expense for the fiscal years ended June 30, 2006 and 2005 was $392,376 and
$405,146,  respectively.

CONTRACTS  AND  AGREEMENTS  -  The  Company  does  not own its own long distance
network and currently depends upon third parties to provide for the transmission
of  phone  calls  by  its  customers and to provide the call detail records upon
which  the  Company bases its customer's billings.  Pursuant to the terms of its
agreement with Sprint, as amended, the Company is obligated to a monthly minimum
of $25,000 through July 26, 2006.  For any period during which the Company fails
to  meet  its  monthly  minimum,  the  Company  would  be  liable for 25% of the
difference  between  the  Company's  actual  usage  and  the stated minimum. The
Company  may  terminate  the  agreement  upon  ninety  (90)  days written notice
provided  that  the Company pays a termination fee equal to 50% of the aggregate
minimum  revenue  requirement  for  the  remaining  term  of the contract if the
Company  terminates  for  convenience  or by default of the Company prior to the
expiration date which was $50,000 as of June 30, 2006.  Sprint may terminate the
agreement  upon  thirty (30) days written notice and then only in the event that
the  Company  is  in  material  breach  of  the agreement.  However, in cases of
nonpayment,  Sprint  may  elect  to  immediately  terminate  the Agreement.  Our
contract  with  Sprint expired August 31, 2006.  We are currently in discussions
with Sprint to negotiate a new contract.  While we negotiate a new contract with
Sprint,  the  terms  and  pricing  of our service remain the same as the expired


                                      F-20
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

contract.

GTC  does  not  currently  own its own wireless network.  Currently, the Company
provides  its wireless telecommunications services pursuant to an agreement with
a  third  party  company  for  the  provisioning  of  the  Company's  wireless
telecommunications  service.  The  Company  is  not  obligated  to  any  monthly
minimums  under  its  agreement  with its underlying wireless telecommunications
provider.

GTC  does  not  currently have its own Internet Network.  Currently, the Company
provides  its Internet Service Provider Access services pursuant to an agreement
with  a  third  party  company  for  the  provisioning of the Company's Internet
Service  Provider  Access  service.  The Company is not obligated to any monthly
minimums  under  its  agreement  with  its underlying Internet service provider.

NOTE  11  PERFEXA  SUBSIDIARY

In  November  2005,  the Company's foreign subsidiary, Perfexa Solutions Private
Limited ("Perfexa India"), completed a private offering of 530,000 shares of its
common  stock  to  third-party  investors  at  the  price of 2 Rupees per share,
resulting  in  gross  proceeds  of  $24,315.

In  September  2005,  Perfexa  India, initiated a private offering of its common
stock  to  third-party  investors  at  a  price of 12 Rupees per share.  250,000
shares  were  sold,  resulting  in  gross  proceeds  of  $69,000.

CONTINGENT  LIABILITY

Office  Maintenance  -  Perfexa India is in dispute with its landlord contending
that  the contractual amount for maintenance services is excessive to the actual
amount  the  landlord incurred for these services.  Per the building maintenance
agreement,  the  landlord  is required to supply audited financial statements to
support the amounts charged for maintenance services.  To date, the landlord has
not  provided this support.  The difference between what we have been billed and
what  we  have  paid  and recorded amounts to approximately $75,000.  We believe
that  it  is  more  likely than not that we will not have to pay this additional
amount,  so  we  have  not included this liability in the accompanying condensed
consolidated  financial  statements.

NOTE  12  EARNINGS  PER  SHARE

The  following  is  a  reconciliation  of  the  number  of  shares  used  in the
calculation  of  basic earnings per share and diluted earnings per share for the
years  ended  June  30,  2006  and  2005:

<TABLE>
<CAPTION>
                                                                     2006         2005
                                                                 ------------  -----------
<S>                                                              <C>           <C>
Net income (loss)                                                $(3,284,394)  $ 3,697,674
                                                                 ============  ===========

Weighted average number of common shares outstanding              29,498,483    23,320,094
Incremental shares from the assumed exercise of dilutive stock
  options and warrants                                                    --     1,002,500
                                                                 ------------  -----------
Dilutive potential common shares                                  29,498,483    24,322,594
                                                                 ============  ===========

Net income (loss) per share:
  Basic                                                          $     (0.11)  $      0.16
                                                                 ============  ===========
  Diluted                                                        $     (0.11)  $      0.15
                                                                 ============  ===========
</TABLE>

For  the  year ended June 30, 2006, potentially dilutive incremental shares were
not  included  in  the  computation  of  diluted  net loss per share because the
Company  had a net loss, which would make their inclusion antidilutive.  Options
and  warrants  to  purchase  17,527,882  and  14,010,645 shares of the Company's
common stock that were outstanding at June 30, 2006 and 2005, respectively, were
not  considered  potentially  dilutive because the exercise price of the options
and warrants was greater than the average market price of the common shares and,
therefore,  the  effect  of  their  inclusion  would  be  antidilutive.

                                      F-21
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

NOTE  13  BUSINESS  SEGMENT  INFORMATION

Segment and geographical information is assigned by region based upon management
responsibility  for  such items.  The following table presents information about
the  Company's operations by geographical area for the years ended June 30, 2006
and  2005.

<TABLE>
<CAPTION>
                                         2006          2005
                                     --------------------------
<S>                                  <C>           <C>
             Revenues
             --------
    Telecommunications and Internet  $ 6,171,982   $ 8,842,541
    BPO
      Perfexa-U.S.                       504,118       180,309
      Perfexa-India                           --            --
                                     ------------  ------------
        Total                        $ 6,676,100   $ 9,022,850
                                     ============  ============

          Cost of Sales
          -------------
    Telecommunications and Internet  $ 2,645,686   $ 3,945,239
    BPO
      Perfexa-U.S.                       298,416       119,700
      Perfexa-India                           --            --
                                     ------------  ------------
        Total                        $ 2,944,102   $ 4,064,939
                                     ============  ============

          Operating Loss
          --------------
    Telecommunications and Internet  $   506,255   $   794,384
    BPO
      Perfexa-U.S.                      (535,066)     (952,842)
      Perfexa-India                   (1,391,046)   (1,356,649)
                                     ------------  ------------
        Total                        $(1,419,857)  $(1,515,107)
                                     ============  ============

       Capital Expenditures
       --------------------
    Telecommunications and Internet  $     6,074   $    43,733
    BPO
      Perfexa-U.S.                            --         1,293
      Perfexa-India                       43,865       217,839
                                     ------------  ------------
        Total                        $    49,939   $   262,865
                                     ============  ============
</TABLE>

Identifiable assets are assigned by region based upon management responsibility.
The following table presents information about the Company's identifiable assets
by geographic region:

<TABLE>
<CAPTION>
                                      June 30, 2006
                                      --------------
<S>                                   <C>
               Assets
               ------
     Telecommunications and Internet  $      517,827
     BPO
       Perfexa-U.S.                           67,254
       Perfexa-India                         393,191
                                      --------------
         Total                        $      978,272
                                      ==============
</TABLE>

NOTE  14  SUBSEQUENT  EVENTS  (UNAUDITED)

On  August 22, 2006, the Company borrowed $50,000 from an unrelated third party,
for  working  capital  purposes.  The  note  provides for the Company to repay a
total of $60,000 by making eight weekly payments of $7,500 beginning the week of
September 18, 2006.  As of the date of this report, we have made all payments as
required  in  this  note.


                                      F-22
<PAGE>
                       GTC TELECOM CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE YEARS ENDED JUNE 30, 2006 AND 2005
--------------------------------------------------------------------------------

On  August 28, 2006, Shine Wireless, Inc. ("Shine Wireless") initiated a private
placement  offering  of  1,000,000  shares of Shine Wireless's restricted common
stock  at  a  price  of  $1.00  per  share.  Subsequent  to June 30, 2006, Shine
Wireless  has sold 50,000 shares pursuant to this offering, resulting in cash of
$44,000,  net  of  offering  costs  of  $6,000,  which was transferred to GTC as
partial  repayment of accrued advances.  The offering is being conducted without
general  solicitation  or advertising and offered only to "accredited" investors
pursuant  to  Rule  506  of  Regulation  D  of  the  Securities  Act  of  1933.


                                      F-23